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1 1 (March 20, 2023)

handle is hein.crs/govekyc0001 and id is 1 raw text is: Congressional_______ Aa Research Service Supreme Court Rules Against IRS on Foreign Account Reporting Penalties March 20, 2023 Federal law requires U.S. persons with a financial interest in or signature or other authority over foreign financial accounts totaling more than $10,000 to report these accounts by filing a Report of Foreign Bank and Financial Accounts, commonly known as an FBAR, each year. The IRS may levy civil penalties of up to $10,000 for each non-willful violation of the reporting requirement. On February 28, 2023, the U.S. Supreme Court held that this maximum penalty applies to each untimely or inaccurate annual FBAR form, rather than to each foreign account not properly reported. In the case before the Court, the IRS had assessed $2.72 million in per-account penalties based on five years of untimely FBAR forms. The Court's holding limits the maximum total penalty that may be assessed for those five untimely filings to $50,000, or $10,000 for each untimely annual report. This Legal Sidebar discusses the relevant penalty provisions and analyzes the Court's decision. Reporting Requirements Congress enacted the Bank Secrecy Act (BSA) in part to address the serious and widespread use of foreign financial institutions to evade domestic criminal, tax, and regulatory requirements. The BSA requires U.S. citizens, residents, and entities to report-independent of any tax obligations-certain foreign financial transactions, relationships, and accounts. One provision of the BSA, 31 U.S.C. § 5314, establishes the reporting requirements, empowering the Secretary of the Treasury to adopt implementing regulations. One of the regulations adopted by the Secretary, 31 C.F.R. § 1010.350, requires U.S. persons with a financial interest in or signature or other authority over foreign financial accounts totaling more than $10,000 to file an FBAR each year listing details regarding all foreign accounts. For individuals with more than 25 foreign accounts, Section 1010.350 requires them to provide more limited information on the FBAR and have the detailed information concerning each account available on request. Congress amended the BSA in 1986, giving the Secretary of the Treasury authority to impose civil penalties for willful violations of Section 5314, including foreign account reporting requirements. In the American Jobs Creation Act of 2004, Congress expanded the available penalties to reach non-willful violations. Congressional Research Service https://crsreports.congress.gov LSB10938 CRS Legal Sidebar Prepared for Members and Committees of Congress

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