942 F.3d 1111
Fed. Cir.2019Background:
- In 1999 Norman opened a numbered UBS Swiss bank account (balances ~$1.5–2.5M from 2001–2008) and actively managed it (gave investment instructions, withdrew cash in 2002).
- She took steps that inhibited U.S. disclosure: a numbered account, a directive preventing UBS from buying U.S. securities for the account, and a cash withdrawal.
- Norman did not timely file FBARs, including for 2007, and signed a 2007 tax return under penalty of perjury falsely stating she had no foreign accounts after receiving an accountant questionnaire about foreign accounts.
- After UBS decided to cooperate with U.S. authorities in 2008, Norman closed the UBS account and moved funds; an amended return and late FBARs were later filed and the IRS audited her.
- During the audit Norman initially made false statements (claimed she first learned of the account in 2009), later admitted long-standing knowledge but denied control of the funds; the IRS assessed an $803,530 willful FBAR penalty under 31 U.S.C. § 5321, which she paid and sought to recover in the Court of Federal Claims; that court upheld the penalty and Norman appealed.
Issues:
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Norman's failure to file an FBAR for 2007 was willful | Norman: Willfulness requires actual knowledge of the FBAR obligation; her conduct was not willful | Govt: Willfulness includes reckless disregard; facts show concealment and false statements | Willfulness includes recklessness; CFC's finding of willfulness affirmed (not clearly erroneous) |
| Whether a 1987 Treasury regulation caps willful FBAR penalties at $100,000 | Norman: 31 C.F.R. § 1010.820(g) limits willful penalties to $100,000 | Govt: 2004 amendment to 31 U.S.C. § 5321 supersedes the regulation and mandates a larger maximum (greater of $100,000 or 50% of account) | 2004 statutory amendment controls; the 1987 regulation is void to the extent it conflicts with the statute |
| Whether the assessed penalty violates the Eighth Amendment (excessive fine) | Norman: $803,530 is an excessive fine | Govt: Argument was not timely raised below | Court declines to address merits because the Eighth Amendment claim was waived for failure to preserve |
Key Cases Cited
- Safeco Ins. Co. of Am. v. Burr, 551 U.S. 47 (2007) (willfulness for civil liability covers knowing and reckless violations)
- Bedrosian v. United States, 912 F.3d 144 (3d Cir. 2018) (FBAR willfulness analysis treating recklessness as sufficient)
- Home Sav. of Am. v. United States, 399 F.3d 1341 (Fed. Cir. 2005) (clear-error standard for bench-trial factual findings)
- R & W Flammann GmbH v. United States, 339 F.3d 1320 (Fed. Cir. 2003) (a regulation that conflicts with a later statute is invalid)
- Barseback Kraft AB v. United States, 121 F.3d 1475 (Fed. Cir. 1997) (regulation cannot override a clear statutory requirement)
- Aerolineas Argentinas v. United States, 77 F.3d 1564 (Fed. Cir. 1996) (same principle on statute/regulation conflict)
- Chevron U.S.A., Inc. v. Nat. Res. Def. Council, Inc., 467 U.S. 837 (1984) (framework for judicial deference to agency interpretations)
- Greer v. Comm'r of Internal Revenue, 595 F.3d 338 (6th Cir. 2010) (taxpayer who signs return is charged with constructive knowledge of its contents)
- Farrell v. United States, 313 F.3d 1214 (9th Cir. 2002) (later-enacted statute controls over inconsistent regulation)