H Street Law: Advocating for You at SCOTUS

H Street Law is proud to have worked in partnership with the National Whistleblower Center and the law firm of Zerbe, Miller, Fingeret, Frank & Jadav, on “the first amicus in support of the United States in Bittner v. United States,” as the National Whistleblower Center announced on October 7, 2022. The issue focuses on whether a “violation” under the Bank Secrecy Act is the failure to file an annual Report of Foreign Bank and Financial Accounts (known as an “FBAR”) (no matter the number of foreign accounts), or whether there is a separate violation for each individual account that was not properly reported.

Bittner v. United States

So, what should the penalty look like when a taxpayer doesn’t report foreign bank accounts?

Alexandru Bittner, the plaintiff in this case, was born in Romania and became a naturalized citizen of the United States by 1988. He lived in the United States for eight years and then moved back to Romania, where he engaged in a number of business and investment ventures and opened foreign bank accounts—while still retaining his U.S. citizenship.

Under the Bank Secrecy Act, 31 U.S.C. 5311 and corresponding regulations, taxpayers are required to file an annual report, known as the “FBAR,” if they hold “an aggregate balance over

$10,000 in foreign bank accounts.” In other words, taxpayers simply declare such foreign holdings once a year with the filing of an FBAR.

Mr. Bittner did not file FBARs in a timely manner between the years of 1996–2011; as a U.S. citizen, he was therefore in violation of the reporting requirements under the Bank Secrecy Act.

The question on which this case turns, as we mentioned above, is whether Mr. Bittner was in violation of the Bank Secrecy Act for failing to file an FBAR, or whether he was in violation of the Bank Secrecy Act for each account he failed to report. The statute as written “authorizes a $10,000 maximum penalty for any non-willful violation” of the FBAR requirement, which has been interpreted in two different ways:

1. The taxpayer would be subject to a maximum penalty of $10,000 per This interpretation is referred to as the “per form” approach.

2. The taxpayer would be subject to a maximum penalty of $10,000 per year per foreign account held. This interpretation is referred to as the “per account” approach.

In June of 2017, the IRS assessed a $2,720,000 penalty against Mr. Bittner under the “per account” approach because, between 2007 and 2011, Mr. Bittner failed to disclose a total of 272 accounts (a few more than 50 per year over the course of those five years); the IRS assessed each of these violations a $10,000 penalty.

Mr. Bittner, disputing the $2,720,000 penalty, argued for a “per form” approach.

The Fifth Circuit and the Ninth Circuit hold contradictory positions (a “circuit split”) as to the interpretation of the violations under the Bank Secrecy Act: the Fifth Circuit ruled that the Bank Secrecy Act implies a “per account” approach; the Ninth Circuit “held the failure to file an annual FBAR constitutes a single violation, ‘no matter the number of accounts’ [italics original].”

The Amicus: The IRS Whistleblower Program

H Street Law teamed up to file the first amicus in support of the position of the United States, arguing for a “per account” approach. We took this action on behalf of the whistleblower interests at stake in the decision to be rendered by the Supreme Court.

Like many U.S. government agencies, the IRS relies heavily on information from whistleblowers to detect, identify and document fraud; these whistleblowers are incentivized to come forward in part because of the award programs, such as the IRS Whistleblower Program. It’s important to understand that the awards granted under this program are based in large part on the proceeds collected. The larger the penalty assessed by the IRS, then, the larger the corresponding whistleblower award can be.

The Goal: Increased Protections for Whistleblowers

The brief we filed articulated the relationship between interpretation of the Bank Secrecy Act and whistleblower interest before the Supreme Court. We argued that, for any whistleblower program to be successful, “the awards benefit must balance with or even outweigh the financial, social, and personal risks that whistleblowers face when reporting unlawful conduct to the U.S. government.”

Thus far, the IRS whistleblower program has been extremely successful: the U.S. Government Accountability Office reported that “tax whistleblowers who report on the underpayment of taxes by others have helped the IRS collect $3.6 billion since 2007.” This whistleblower program, in assisting government efforts to collect taxes owed, is an important tool that protects the interests of all U.S. taxpayers.

We also argued that the specific language of the Bank Secrecy Act as written by Congress contemplates a “per-account” approach: “the penalty structures written by Congress give the Secretary of the Treasury authority and discretion to penalize violators in a manner that appropriately discourages absorbing penalties, which encourage compliance by U.S. persons.” The language of the Bank Secrecy Act importantly grants discretion to the Secretary of the Treasury—fining non-willful violators of the Bank Secrecy Act as it sees fit.

Incentivizing Whistleblowers: Congressional Intent meets U.S. Interests

A “per-account” approach under the Bank Secrecy Act is both consistent with what Congress was aiming to achieve under the Bank Secrecy Act—more reporting of taxable accounts worldwide in pursuit of U.S. economic and national security interests—but also incentivizes whistleblowers by increasing potential awards.

We will continue to report as Bittner v. United States develops at the Supreme Court. At this point, rest assured that we are advocating rigorously for Whistleblower interests as this important decision is made.