It’s All In The Name

Some events are so seminal that they need no explanation. When someone says “Holocaust” or “9/11” or “Hindenburg,” no further explanation is needed. Some sports stars share similar fame. There is only one Michael, one LeBron, and one Wilt. While he admittedly does not rise to that level – some scouts shake their heads and say his left-handed layup needs work – James Moore’s rather commonplace name may someday reach that upper echelon.

Part I

A few months ago, I posted on the curious case of Moore v. United States. That article has an exhaustive discussion of the facts and also of FBAR. In a nutshell, Mr. Moore did not file an FBAR for 2003-2008; he filed late in 2009. The IRS conducted an investigation and sent Mr. Moore a memo in 2011 which curtly informed him that, after due consideration, the Service decided that he must pay the maximum $10,000 civil penalty for each year.

The problem is that, under the Administrative Procedures Act, the IRS must give taxpayers a rationale for the civil penalties that it imposes. This procedure is different from a criminal case, because the punishments involved in those matters are essentially presumed to be reasonable under the Eighth Amendment.

Although an agent prepared an extensive FBAR Penalty Summary Memo, Mr. Moore never saw it until after the case was filed and so, as far as he was concerned, the IRS basically threw darts at a board and sent him a bill. Furthermore, in a bit of “in your face,” an agent told Mr. Moore that there would be an appeals conference before the penalty was assessed, but that meeting never took place. Ultimately, Mr. Moore agreed to pay the tax but balked at paying the penalties.

At trial, Judge Richard Jones refused to uphold the $40,000 penalty because there was no evidence in the record to support it. So, he gave the IRS more time to comply with the APA and Due Process Clause and come up with some explanation for its action. The law doesn’t require much: there just had to be some explanation for the penalties that was shared with Mr. Moore at some point in time.

Most observers – myself included – expected the IRS to come forth with the scintilla of evidence required (more on that in a minute), and that would be the end of that. Then, in a decision that frankly surprised me, Judge Jones ruled that he was not satisfied with the IRS’ explanation and that these penalties were invalid. Wow.

Part II

Judge Jones reviewed supplemental briefs from both sides and had another look at the evidence in the record. The IRS only needed to produce a scintilla of evidence, which is basically a tiny scrap. So, if an agent had uttered the words “penalty,” “maximum,” and “your” in the same sentence during a conversation with Mr. Moore, the Service probably would have met its burden of proof.

The IRS did produce the Penalty Summary Memo during discovery, but the court noted that it was only produced after litigation commenced. That will not do, because taxpayers should not be required to file suit to get an explanation of the charges. Judge Jones also chastised the Service for its conduct during the case; viz, fighting the disclosure of the Penalty Summary Memo tooth and nail (Mr. Moore had to file a motion to compel) and “disregarding its own promise” with regard to the Appeals conference.

Reading between the lines, the judge seemed a bit miffed about the whole thing, so much of the ruling is very much fact-based. But the key takeaway is that, if the IRS sends an FBAR penalty notice, you can legitimately ask “says who?”

Original Post By:  Michael DeBlis


As a former public defender, Michael has defended the poor, the forgotten, and the damned against a gov. that has seemingly unlimited resources to investigate and prosecute crimes. He has spent the last six years cutting his teeth on some of the most serious felony cases, obtaining favorable results for his clients. He knows what it’s like to go toe to toe with the government. In an adversarial environment that is akin to trench warfare, Michael has developed a reputation as a fearless litigator.

Michael graduated from the Thomas M. Cooley Law School. He then earned his LLM in International Tax. Michael’s unique background in tax law puts him into an elite category of criminal defense attorneys who specialize in criminal tax defense. His extensive trial experience and solid grounding in all major areas of taxation make him uniquely qualified to handle any white-collar case.


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