updated 2:28 PM CEST, May 24, 2023

Richardson, La Torre Jeker podcast: 'The morning after the U.S. Supreme Court FBAR decision in Bittner'

Few recent U.S. Supreme Court rulings have hit American expat taxpayers, and the experts who advise them on tax matters, as powerfully as last Tuesday's decision in a long-running FBAR case involving a "non-willful" dual citizen named Alexandru Bittner.

For those who've been asleep since last Tuesday – or otherwise unable to access any kind of media reports – five of the nine justices found in favor of Bittner, by declaring that the US$10,000 maximum penalty for failing to file Foreign Bank Account Reports should be based on the number of FBAR forms that weren't filed during the tax years in question, and not on the basis of the number of accounts held. 

Not surprisingly, two regular commentators on U.S. expat tax issues posted their thoughts on the matter within hours of the 32-page decision having been made public...

Quick as they were off the mark, Toronto-based lawyer and U.S. expat advocate John Richardson and Dubai-based U.S. tax expert Virginia La Torre Jeker both said that however positive the decision appeared to be, on the surface, to American expats who accidentally fall afoul of little-known-about regulations involving offshore assets, there were several reasons for concern about what it could mean going forward. 

Such as, they agreed, not just the fact that the FBAR has brought substantial revenues into the U.S. Treasury over the years, and often, from wealthy American citizens who had been found to have hidden significant assets offshore. 

The two FBAR aficionados also seemed to agree that at least four of the Supreme Court justices appeared not to "get" the fact that the defendant in the case was Romanian by birth, and although a dual citizen during the five years that he failed to file FBARs pertaining to his 272 non-U.S. financial accounts, he was living in Romania at the time, and overseeing a business there, which many of the accounts in question were related to. 

"And the [FBAR] penalties [against him] were assessed after he tried to come into compliance!" Richardson says pointedly, at one point during his and La Torre Jeker's conversation.

"In contrast [to the written comments of Justice Neil M. Gorsuch, who wrote the majority opinion], Justice [Amy Coney] Barrett – [who] was not writing [just] for herself but for Justices Sotomoyor, Kagan and Thomas [as well] – completely bypasses the fact that this guy was living outside of the United States, [was] a Romanian [citizen as well as an American], and [at one point she says] 'and he had as much as 16 million dollars.'

"None of these things had anything to do with the issue that the court was trying to decide, but it suggests a rather insular view of the context in which these FBAR situations arise."

Richardson and La Torre Jeker also call attention to the fact that Tuesday's written decision fails to highlight one of the main reasons that so many people, like Bittner, even today are getting caught out with having failed to file FBAR reports, decades after the regulations requiring them to came into force:  that the FBAR-filing requirement is virtually un-publicized, both within the U.S. as well as outside of it, and always has been.

While the lack of awareness of the FBAR regulations is clearly a major issue for Americans abroad in particular, some critics suggest that the IRS could be unwilling to risk losing a major source of income – derived from FBAR penalties – by publicizing the regulations' existence.  (As Richardson says to La Torre Jeker at one point during their talk, "from the point of view of the U.S. Treasury, the FBAR – like FATCA – really is the gift that keeps on giving...") 

'Rule of Lenity' 

While Richardson and La Torre Jeker didn't seem to have much positive to say about certain of the other Supreme Court justices, they both seemed particularly impressed with Justice Gorsuch, and his willingness to, as Richardson put it, "dig into the purpose, the history of this [subject]." 

La Torre Jeker noted that Justice Gorsuch had called attention in his opinion to a legal principle known as "the rule of lenity," under which, "whenever you have a statute that's imposing penalties against the individual, you need to construe the statute strictly against the government and in favor of the individual."

Added La Torre Jeker: "I think...that he's telling us [here] that in his view there's a problem with this FBAR statute.

"But no one seems to want to agree with him on that, [or to] look a little bit deeper, like, to widen their view."

To listen to the Richardson and La Torre Jeker podcast in full, on PrepPodbean.com, click here.

To view the Supreme Court's decision in Bittner v. United States, click here.

Virginia La T low resVirginia La Torre Jeker (pictured left) is a Dubai-based U.S. expat tax law practitioner and well-known blogger on American tax issues, whose U.S. Tax Talk website may be viewed by clicking here.  

John Richardson  (pictured right) is a Toronto, Canada-based lawyer who is originally from Boston, Massachusetts. When he's not  campaigning on behalf of U.S. expat issues, he assists U.S. citizens and Green Card holders living outside of the United States with various mostly citizenship-related matters, including U.S. citizenship renunciation and Green Card abandonment (including 877A Exit Tax consulting). His website may be found by clicking here.