146 T.C. 6
Tax Ct.2016Background
- Petitioner filed Form 211 seeking a nondiscretionary whistleblower award under I.R.C. § 7623(b) for information leading to recovery from “Taxpayer 1,” who pleaded guilty and agreed to pay a multi‑million dollar FBAR civil penalty plus modest restitution.
- § 7623(b)(5)(B) conditions nondiscretionary awards on the $2,000,000 threshold: "the tax, penalties, interest, additions to tax, and additional amounts in dispute exceed $2,000,000."
- FBAR civil penalties are imposed under the Bank Secrecy Act (31 U.S.C. § 5321) (Title 31), not under the Internal Revenue Code (Title 26).
- The IRS Office of Chief Counsel opined FBAR payments are not ‘‘collected proceeds’’ under § 7623(b)(1); the Office denied petitioner’s claim partly because FBAR payments do not count toward the § 7623(b)(5)(B) dollar threshold.
- Petitioner sued; respondent moved for summary judgment arguing FBAR penalties are not “additional amounts” under § 7623(b)(5)(B). The Tax Court decided the question as a pure issue of law and granted summary judgment for respondent.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether FBAR civil penalties count as "additional amounts" under I.R.C. § 7623(b)(5)(B) for meeting the $2,000,000 threshold | "Additional amounts" should be read broadly to include other sums like FBAR penalties; FBARs are tax‑related, administered by IRS, and thus should count toward the threshold | "Additional amounts" is a term of art in the Internal Revenue Code referring to the civil penalties enumerated in chapter 68, subchapter A (Title 26); FBAR penalties arise under Title 31 and are not assessed/collected in the same manner as taxes | The Court held FBAR penalties are not "additional amounts" within § 7623(b)(5)(B) and thus are excluded when determining the $2,000,000 amount in dispute. |
Key Cases Cited
- Greyhound Corp. v. Mt. Hood Stages, Inc., 437 U.S. 322 (statutory interpretation presumes established meaning for terms of art)
- Morissette v. United States, 342 U.S. 246 (courts give established meaning to borrowed terms of art)
- Bregin v. Commissioner, 74 T.C. 1097 (term "additional amount" refers to penalties in chapter 68)
- Pen Coal Corp. v. Commissioner, 107 T.C. 249 (same: ‘‘additional amounts’’ tied to chapter 68 items)
- Williams v. Commissioner, 131 T.C. 54 (FBAR penalties are Title 31 penalties and not within Tax Court’s deficiency/CDP jurisdiction; FBARs are not ‘‘additional amounts")