UNITED STATES OF AMERICA v. JANE BOYD
No. 19-55585
United States Court of Appeals for the Ninth Circuit
March 24, 2021
D.C. No. 2:18-cv-00803-MWF-JEM
FOR PUBLICATION
Appeal from the United States District Court for the Central District of California
Michael W. Fitzgerald, District Judge, Presiding
Argued and Submitted September 1, 2020
Pasadena, California
Filed March 24, 2021
Before: Sandra S. Ikuta and Mark J. Bennett, Circuit Judges, and Douglas Woodlock,* District Judge.
Opinion by Judge Bennett;
Dissent by Judge Ikuta
* The Honorable Douglas P. Woodlock, United States District Judge for the District of Massachusetts, sitting by designation.
SUMMARY**
Tax
The panel reversed the district court‘s judgment and remanded for further proceedings in an action by the United States for tax penalties and interest involving a taxpayer‘s failure to report foreign financial accounts.
Taxpayer had a financial interest in multiple financial accounts in the United Kingdom. She received interest and dividends from these accounts but did not report the interest and dividends on her 2010 federal income tax return, or disclose the account to the Internal Revenue Service. In 2012, taxpayer participated in the Internal Revenue Service‘s Offshore Voluntary Disclosure Program and submitted a Report of Foreign Bank and Financial Accounts (FBAR) listing her fourteen foreign accounts for 2010, and amended that year‘s tax return to include the interest and dividends from those accounts. The IRS concluded that taxpayer had committed thirteen non-willful violations of the reporting requirements under
Examining the statutory and regulatory scheme for reporting a relationship with a foreign financial agency under
Judge Ikuta dissented because the panel‘s interpretation of the statutes is contrary to the language of the relevant statutes and regulations, and is implausible in context. In Judge Ikuta‘s view, the majority interprets the statutes and regulations in a manner that unfairly favors the tax evader.
COUNSEL
A. Lavar Taylor (argued) and Jonathan T. Amitrano, Law Offices of A. Lavar Taylor LLP, Santa Ana, California, for Defendant-Appellant.
Francesca Ugolini (argued), Deborah K. Snyder, and Kathleen E. Lyon, Attorneys; Richard E. Zuckerman, Principal Deputy Assistant Attorney General; Tax Division, United States Department of Justice, Washington, D.C.; for Plaintiff-Appellee.
David Michaels, DTMtax, Placentia, California, for Amici Curiae Laxman, Jashu, Hiten, and Anita Patel.
Caroline D. Ciraolo and Caroline Rule, Kostelanetz & Fink LLP, Washington, D.C., for Amicus Curiae American College of Tax Counsel.
BENNETT, Circuit Judge:
Defendant Jane Boyd did not timely file a Report of Foreign Bank and Financial Accounts form (“FBAR“) disclosing her foreign financial accounts in the United Kingdom.1 The Internal Revenue Service (“IRS“) found that she violated the reporting requirements of
I.
The relevant facts are undisputed. Jane Boyd, an American citizen, had a financial
Boyd was granted permission by the IRS to opt out of the program in 2014. The IRS then examined Boyd‘s income tax return and concluded that she committed thirteen FBAR violations—one violation for each account she failed to timely report for calendar year 2010.2 The late-submitted FBAR was complete and accurate. The IRS concluded that Boyd‘s violations were non-willful, and it assessed a total penalty of $47,279. In 2018, the government sued Boyd seeking to obtain a judgment against her for the $47,279 plus additional late-payment penalties and interest.
Boyd argued before the district court that she had committed only one non-willful violation, not thirteen, and that the maximum penalty allowed by the statute for that single non-willful violation was $10,000. The government contended that the relevant statutes and regulations authorized the IRS to assess one penalty for each non-reported account. The district court agreed with the government. Boyd timely appealed.
We have jurisdiction under
II.
This case presents an issue of first impression for this court. We must decide whether
Boyd argues that the statutory language does not support a separate penalty for each account she should have listed on the FBAR she failed to timely file. Rather, according to Boyd, the statutory and regulatory schemes provide that a non-willful, untimely but accurate FBAR filing constitutes a single violation subject to a maximum penalty of $10,000. Boyd also contends that the rule of lenity applies to statutes imposing penalties and, therefore,
The government argues that multiple non-willful violations may spring from a single late but accurate FBAR, because
We agree with Boyd. The statute, read with the regulations, authorizes a single
A.
We review de novo both the “district court‘s grant of summary judgment,” Bradley v. United States, 817 F.2d 1400, 1402 (9th Cir. 1987), and its interpretation of the statute, see United States v. Town of Colo. City, 935 F.3d 804, 807 (9th Cir. 2019). Summary judgment here is appropriate if there is “no genuine dispute as to any material fact and the [government] is entitled to judgment as a matter of law.”
B.
Section 5321 authorizes the government to “impose a civil money penalty on any person who violates, or causes any violation of, any provision of section 5314.”
Section 5321(a)(5)(A) provides for imposition of “a civil money penalty on any person who violates, or causes any violation of, any provision of section 5314.” Congress did not define “provision.” We therefore apply the ordinary and plain meaning of that word. See Metro One Telecomms., Inc. v. Comm‘r, 704 F.3d 1057, 1061 (9th Cir. 2012) (“[I]n the absence of an indication to the contrary, words in a statute are assumed to bear their ordinary, contemporary, common meaning.” (quoting Walters v. Metro. Educ. Enters., Inc., 519 U.S. 202, 207 (1997))). A provision is “an article or clause (as in a contract) that introduces a condition” or “a condition, requirement, or item specified in a legal instrument.” Provision, Merriam-Webster.com, https://www.merriam-webster.com/dictionary/provision (last visited Nov. 9, 2020) (defining provision as “proviso” or “stipulation“).5
Section 5314 contains several provisions, including:
(a) Considering the need to avoid impeding or controlling the export or import of monetary instruments and the need to avoid burdening unreasonably a person making a transaction with a foreign financial agency, the Secretary of the Treasury shall require a resident or citizen of the United States or a person in, and doing business in, the United States, to keep records, file reports, or keep records and file reports, when the resident, citizen, or person makes a transaction or maintains a relation for any person with a foreign financial agency. The records and reports shall contain the following information in the way and to the extent the Secretary prescribes:
(1) the identity and address of participants in a transaction or relationship.
(2) the legal capacity in which a participant is acting.
(3) the identity of real parties in interest.
(4) a description of the transaction.
The Supreme Court in California Bankers Association v. Shultz, 416 U.S. 21 (1974) explained that “the Act‘s civil and criminal penalties attach only upon violation of regulations promulgated by the Secretary; if the Secretary were to do nothing, the Act itself would impose no penalties on anyone.” Id. at 26. Consequently, our focus must be on the directives the Secretary had in place at the time of Boyd‘s reporting of her foreign financial accounts. There are two relevant regulations.
Because Boyd‘s late-filed FBAR was accurate, she could not have violated
We are unpersuaded by the government‘s arguments that Boyd committed multiple violations. First, the government‘s reliance on
Second, the government argues that the use of the word “any” before “violation” in
In sum, under the statutory and regulatory scheme, Boyd‘s conduct amounts to one violation, which the IRS determined was non-willful. Section 5321(a)(5)(B)(i) authorizes one penalty per non-willful violation of
III.
Despite the clear language of
Before 2004,
The government contends that the willful violation penalty provision,
“Congress generally acts intentionally when it uses particular language in one section of a statute but omits it in another.” Dep‘t of Homeland Sec. v. MacLean, 574 U.S. 383, 391 (2015). Thus, we presume that Congress purposely excluded the per-account language from the non-willful penalty provision in subparagraph (B)(i) because it included such language in the willful penalty provision in subparagraph (D). See United States v. McDuffy, 890 F.3d 796, 800 (9th Cir. 2018) (“[W]here Congress includes particular language in one section of a statute but omits it in another section of the same Act, it is generally presumed that Congress acts intentionally and purposely in the disparate inclusion or exclusion.” (alteration in original) (quoting Dean v. United States, 556 U.S. 568, 573 (2009))), cert. denied, 139 S. Ct. 845 (2019); see also Fortney v. United States, 59 F.3d 117, 120 (9th Cir. 1995) (applying this presumption to the Internal Revenue Code). Indeed, Congress could very easily have written, using the language of the willful violations penalty provision, something like: “Except as provided in subparagraph (C) [dealing with willful violations], the amount of any civil penalty imposed under subparagraph (A) shall not exceed $10,000 for each failure to timely report the existence of an account or any identifying information required to be provided with respect to an account.” Instead, Congress wrote the statute it did: “Except as provided in subparagraph (C) [dealing with willful violations], the amount of any civil penalty imposed under subparagraph (A) shall not exceed $10,000.”
The government also contends that the per-account language in the reasonable cause exception to non-willful violations (which Congress created with the same set of amendments that established non-willful violations) supports its interpretation. But contrary to the government‘s argument, the inclusion of per-account language in the reasonable cause exception supports that Congress intentionally omitted per-account language from the non-willful penalty provision. Since we know Congress was aware of that language during the amendment process and left it out of the non-willful penalty provision, we think the better view is that Congress acted intentionally when it drafted the non-willful civil penalty with no reference to “account” or “balance in the account.” See MacLean, 574 U.S. at 391; see also Bittner, 469 F. Supp. 3d at 719; Kaufman, 2021 WL 83478, at *9 (agreeing with Bittner “that Congress intentionally omitted reference to ‘account’ or ‘balance in the account’ when drafting the penalty provision for non-willful violations“).
The non-willful penalty provision allows the IRS to assess one penalty not to exceed $10,000 per violation, and nothing in the statute or regulations suggests that the penalty may be calculated on a per-account basis for a single failure to file a timely FBAR that is otherwise accurate. Thus, the IRS may impose only one penalty not to exceed $10,000 for Boyd‘s single failure to file a timely FBAR.
IV.
Starting with the language of the statute and the regulations as a whole, and using normal tools of statutory construction, we have no difficulty concluding that the government cannot assess multiple penalties for the non-willful violation here—failing to timely file an FBAR. But even if the statute were ambiguous in its treatment of non-willful penalties, we must strictly construe a “tax provision which imposes a penalty . . . ; [it] cannot be assessed unless the words of the provision plainly impose it.” Bradley, 817 F.2d at 1402–03. While the rule of lenity ordinarily applies only to criminal statutes, see Kasten v. Saint-Gobain Performance Plastics Corp., 563 U.S. 1, 16 (2011), our circuit strictly construes
Even if the government‘s reading of the statutory scheme were reasonable (and we think it is not), that reading does not arise from the plain words of either the statute or the regulations. And Boyd‘s reading, even if it is not compelled, is reasonable. Thus, the rule we enunciated in Bradley would come into play, and we would strictly construe the statute against the government. The district court found the rule inapplicable because “that is not exactly the issue here—there‘s no question that the civil penalty exists; that‘s the basis for this dispute.” United States v. Boyd, No. 18-803-MWF (JEMx), 2019 WL 1976472, at *5 (C.D. Cal. Apr. 23, 2019). We disagree. The precise issue here is not whether the statute authorizes a non-willful penalty; it is whether the statute plainly authorizes a non-willful penalty for each account under the facts here, and it does not.13 Thus, the government‘s position would also be unavailing under Bradley.
V.
Boyd was required to file one FBAR for the 2010 calendar year by June 30, 2011. She failed to do so. Accordingly, she committed one violation, and the IRS concluded that her violation was non-willful. Thus, the maximum penalty for such a violation “shall not exceed $10,000.”
REVERSED and REMANDED.
IKUTA, Circuit Judge, dissenting:
When the Bank Secrecy Act¹ was enacted by Congress in 1970, it was a cutting edge vehicle to combat “a serious
and widespread use of foreign financial institutions, located in jurisdictions with strict laws of secrecy as to bank activity, for the purpose of violating or evading domestic criminal, tax, and regulatory enactments. Cal. Bankers Ass‘n v. Shultz, 416 U.S. 21, 27 (1974). The use of foreign accounts led to the loss of “hundreds of millions in tax revenues,” and had “debilitating effects” on the American economy. Id. at 28. Similar issues are facing law enforcement today. In recent years, Americans have poured billions of dollars into undeclared accounts in jurisdictions like Switzerland and the British Virgin Islands. See, e.g., Laura Saunders, The IRS Reels in a Whale of an Offshore Tax Cheat - and Goes for Another, Wall St. J., Oct. 23,
The Bank Secrecy Act gives the IRS multiple statutory tools for combating these offshore tax evasion techniques. See Shultz, 416 U.S. at 27. One tool that has remained essentially unchanged since 1970 is the power to impose penalties on Americans who fail to keep records and file reports on transactions or accounts with foreign financial agencies, e.g.,
Instead of providing an evenhanded interpretation of these statutes, the majority strains to interpret them narrowly. The majority rejects the most natural reading of the statutory language, which requires Americans to report each foreign account and imposes a penalty for each failure to do so. Rather, the majority focuses on the procedure for complying with the law. Because the regulations direct taxpayers to aggregate their reports of foreign accounts on a single reporting form,3 the majority concludes that it is the failure to provide the reporting form (not the failure to report the individual foreign financial accounts) that constitutes the statutory violation, and that the IRS may impose only single penalty for failure to provide the reporting form. Maj. at 11-12.
Because this interpretation is contrary to the language of the relevant statutes and regulations-as well as being implausible in context-I dissent.
I
The facts of this case are undisputed. From 2004 to 2011, Jane Boyd had a financial interest in multiple financial accounts in the United Kingdom. Boyd did not report these accounts to the IRS as required by law. After a state government discovered her foreign accounts, Boyd entered into the IRS‘s limited-amnesty program, which allowed persons to voluntarily report previously undisclosed offshore financial accounts to the IRS in exchange for lower penalties. As part of her participation in this program, Boyd submitted her delinquent reports in October 2012. For unknown reasons, Boyd subsequently opted out of the amnesty program, and so became subject to full assessment of penalties. The IRS ruled that Boyd‘s failure to report her foreign accounts was not willful, and it assessed a penalty for each of thirteen unreported accounts for a total penalty of $47,279. The government subsequently brought a civil action against her when she failed to pay the penalty amount. The district court granted summary judgment in favor of the government, and this appeal followed.
II
On appeal, the only issue is whether the IRS may assess a penalty for Boyd‘s failure
The IRS assessed civil penalties against Boyd under
As required, the Secretary promulgated regulations to implement the statute. The relevant regulation,
The first clause of
The second clause of
Section 1010.306 confirms that
For violations that are not committed willfully, subparagraph (B)(i) provides that the penalty “shall not exceed $10,000.” Subparagraph (B)(ii) includes an exception for “any violation” if it was due to “reasonable cause” and if “the amount of the transaction or the balance in the account at the time of the transaction was properly reported.” This language indicates that the failure to report a single transaction, or the balance in a single account, constitutes a violation.
For violations committed willfully, subparagraph (C)(i) provides that the maximum penalty is the greater of $100,000 or 50 percent of an amount determined in subparagraph (D). Subparagraph (D) sets out two different amounts. Subparagraph (D)(i) provides that “in the case of a violation involving a transaction” the relevant amount is “the amount of the transaction.” Subparagraph (D)(ii) provides that “in the case of a violation involving a failure to report the existence of an account or any identifying information required to be provided with respect to an account” the relevant amount is “the balance in the account at the time of the violation.” This language makes clear that a violation may involve “a failure to report the existence of an account” or may involve a single transaction.
Reading these provisions together in a straightforward manner, a “violation” of
In other words, the applicable statute and regulations make clear that any failure to report a foreign account is an independent violation, subject to independent penalties.
III
The majority‘s arguments to the contrary do not comport with the language of the relevant statutes and regulations.
The majority‘s primary argument appears to be as follows. A penalty under
The majority‘s analysis is wrong because the majority conflates the “report” that a person must make, with the “reporting form” required by the regulations. Contrary to the majority, there is no language in the relevant statutes or regulations providing that it “is the failure to file an annual FBAR that is the violation contemplated and that triggers the civil penalty provisions of
The majority attempts to explain away the language in
This reasoning fails. The “normal rule of statutory construction” is that “identical words used in different parts of the same act are intended to have the same meaning.” Sullivan v. Stroop, 496 U.S. 478, 484 (1990) (citation omitted). Nothing in the language of
The majority acknowledges that the word “violation” in
Finally, the majority makes the last-ditch argument that we must strictly construe a tax provision that imposes a penalty. Maj. at 18-19 (citing Bradley v. United States, 817 F.2d 1400, 1402-03 (9th Cir. 1987) (stating that “a penalty cannot be assessed unless the words of the provision plainly impose it,” but affirming a penalty assessed against an individual who had no legal obligation to pay taxes)). The majority‘s construction of the relevant statutes and regulations is not “strict“; rather, it is strained and unpersuasive. Under the most natural reading of the relevant statutes and regulations, each failure to report a foreign account is a separate violation. “We are not impressed by the argument that [any doubtful question] should be resolved in favor of the taxpayer.” Fang Lin Ai v. United States, 809 F.3d 503, 506-07 (9th Cir. 2015) (internal citations and quotation marks omitted). Rather, “where the rights of suitors turn on the construction of a [tax] statute . . . it is our duty to decide what that construction fairly should be,” and “doubts which may arise upon a cursory examination of [tax statutes may] disappear when they are read, as they must be, with every other material part of the statute, and in the light of their legislative history.” Id. at 507. Therefore, “we do not mechanically resolve doubts in favor of the taxpayer but instead resort to the ordinary tools of statutory interpretation.” Id.
***
Boyd violated
APPENDIX A
APPENDIX B
Appendix
(a)Considering the need to avoid impeding or controlling the
- the identity and address of participants in a transaction or relationship.
-
the legal capacity in which a participant is acting. - the identity of real parties in interest.
- a description of the transaction.
(b)The Secretary may prescribe-
- a reasonable classification of persons subject to or exempt from a requirement under this section or a regulation under this section;
- a foreign country to which a requirement or a regulation under this section applies if the Secretary decides applying the requirement or regulation to all foreign countries is unnecessary or undesirable;
- the magnitude of transactions subject to a requirement or a regulation under this section;
- the kind of transaction subject to or exempt from a requirement or a regulation under this section; and
- other matters the Secretary considers necessary to carry out this section or a regulation under this section.
(c)A person shall be required to disclose a record required to be kept under this section or under a regulation under this section only as required by law.
(a)
(5)Foreign financial agency transaction violation.-
(A)Penalty authorized.-
The Secretary of the Treasury may impose a civil money penalty on any person who violates, or causes any violation of, any provision of section 5314.
(B)Amount of penalty.-
(i)In general.-
Except as provided in subparagraph (C) [willful violations], the amount of any civil penalty imposed under subparagraph (A) shall not exceed $10,000.
(ii)Reasonable cause exception.-No penalty shall be imposed under subparagraph (A) with respect to any violation if-
(I)such violation was due to reasonable cause, and
(II)the amount of the transaction or the balance in the account at the time of the transaction was properly reported.
(C)Willful violations.-In the case of any person willfully violating, or willfully causing any violation of, any provision of section 5314-
(i)the maximum penalty under subparagraph (B)(i) shall be increased to the greater of-
(I)$100,000, or
(II)50 percent of the amount determined under subparagraph (D), and
(ii)subparagraph (B)(ii) shall not apply.
(D)Amount.-The amount determined under this subparagraph is-
(i)in the case of a violation involving a transaction, the amount of the transaction, or
(ii)in the case of a violation involving a failure to report the existence of an account or any identifying information required to be provided with respect to an account, the balance in the account at the time of the violation.
(c) Reports required to be filed by
(d) Reports required by
(e) Forms to be used in making the reports required by
(a) In general. Each United States person having a financial interest in, or signature or other authority over, a bank, securities, or other financial account in a foreign country shall report such relationship to the Commissioner of Internal Revenue for each year in which such relationship exists and shall provide such information as shall be specified in a reporting form prescribed under
Notes
Fact Sheet, Offshore Income and Filing Information for Taxpayers with Offshore Accounts, FS-2014-7 (June 2014) (hereinafter, “2014 Fact Sheet“) (emphasis added), available at https://www.irs.gov/newsroom/Separately, taxpayers with foreign accounts whose aggregate value exceeds $10,000 any time during the year must file a[n FBAR] . . . . The FBAR is not filed with a federal tax return and must be filed by June 30 each year.
. . . .
For the FBAR, the penalty may be up to $10,000, if the failure to file is non-willful; if willful, however, the penalty is up to the greater of $100,000 or 50 percent of account balances; criminal penalties may also apply.