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Strange lineup of justices limits penalties for failure to file reports about foreign bank accounts

Tuesday’s 5-4 ruling in Bittner v. United States sharply divided the justices, with an odd lineup supporting Justice Neil Gorsuch’s opinion: Chief Justice John Roberts and Justices Samuel Alito, Brett Kavanaugh, and Ketanji Brown Jackson. The case involves provisions of the Bank Secrecy Act that obligate citizens to file a form each year (known as an FBAR) that identifies their foreign bank accounts. The problem is what happens when a taxpayer (like the petitioner, a businessman named Alexandru Bittner) has many accounts that should be described in each annual filing. The majority held that the maximum $10,000 penalty applies for each nonwillful failure to make the annual filing (five, in this case, for a maximum fine of $50,000). The dissent, from Justice Amy Coney Barrett, with Justices Clarence Thomas, Sonia Sotomayor, and Elena Kagan, agreed with the government that the $10,000 penalty applies for each nonwillful failure to disclose an account (272 in this case, for a total fine of $2.72 million).

For Gorsuch, the key to the case is the absence from the key provisions of any reference to “accounts or their number.” Rather, in those provisions “the relevant legal duty is the duty to file reports.” So, he reasons, “the statutory obligation is binary. … Multiple willful errors about specific accounts in a single report may confirm a violation …, but even a single nonwillful mistake is enough to pose a problem.” A related provision authorizes a civil penalty of up to $10,000 for “any violation” of the reporting requirement, even if it is not willful, but “again [it] is immediately apparent [that t]he law does not speak of accounts or their numbers. … [I]n all cases, penalties for nonwillful violations accrue on a per-report, not a per-account, basis.”

Gorsuch acknowledges that other provisions of the statute – the more onerous penalties for willful violations – do “tailor penalties to accounts.” For Gorsuch, though, those provisions “cu[t] against the government,” because of the common principle (emphasized just last week by Barrett in Bartenwerfer) that “[w]hen Congress includes particular language in one section of a statute but omits it from a neighbor, we normally understand that difference in language to convey a difference in meaning.”

Gorsuch ridicules the inconsistency of the government’s position, pointing to various statements by the IRS in proposed rulemakings and taxpayer guidance indicating that the penalties for nonwillful failure to file were limited to $10,000 per omitted filing. Gorsuch notes that those “documents do not control our analysis and cannot displace our independent obligation to interpret the law.” But he finds it “one more reason yet to question [the government’s] current position” that “the government has repeatedly issued guidance to the public at odds with [that] interpretation.”

Gorsuch closes with a brief passage (joined only by Jackson) relying on the rule of lenity, under which, as earlier cases repeatedly explain, “statutes imposing penalties are to be ‘construed strictly’ against the government and in favor of individuals.” Gorsuch explains that a major purpose of the rule of lenity is to ensure that taxpayers have “a fair warning … in language that the common world will understand, of what the law intends to do,” an ideal that he contrasts with the absence of any “discuss[ion of] per-account penalties for non-willful violations” in the statute, together with the government’s “own public guidance documents [that] have seemingly warned of per-report, not per-account, penalties.” Most tellingly, Gorsuch notes the criminal consequences of the government’s reading, which would change the criminal exposure in this case from a $250,000 fine and five years in prison to a $68 million fine and 1,360 years in prison – all for nonwillful violations of the Bank Secrecy Act.

As I suggested in my preview, this is a relatively slight case. Bloggers and commentators will delight in the division of Thomas from Alito, and of Jackson from Kagan and Sotomayor. But the routine textual interpretation offered in Gorsuch’s opinion is unlikely to play any substantial role in altering the expectations for future cases. Nor is it likely to have any major effect on the government’s efforts to limit money-laundering. Even in these partisan times, it is safe to expect that the IRS could obtain from Congress any amendments to the Bank Secrecy Act that are truly necessary to its mission in that area.

Recommended Citation: Ronald Mann, Strange lineup of justices limits penalties for failure to file reports about foreign bank accounts, SCOTUSblog (Feb. 28, 2023, 6:54 PM),