Court of Federal Claims Rejects the Holding in Colliot and holds that the FBAR Penalties are not limited to $100,000

The United States Court of Federal Claims recently rendered an opinion, see link below, holding that the FBAR Penalties are not limited to $100,000 for wilful failure to file FBAR reports.  

Taxpayers can bring suit against the United States in the Court of Federal Claims under the Tucker Act. In order to bring an action against the United States, the taxpayer will need to pay the tax, request a refund and bring suit after the refund was denied by the United States. 

In Norman v. United States, see link below, the taxpayer paid the FBAR penalty in the amount of $803,530 and filed suit, requesting a refund. 

The court held that the taxpayer is liable for 50% penalty, which is 50% of the highest account balance at the time of the violation. 

The taxpayer argued that the recent holdings in United States v. Colliot and United States v. Wadhan, two cases where the courts held that the FBAR penalties are limited to $100,000, should be applicable to the case before the court.

The court rejected the reasoning of the Colliot and Wadhan rulings and reasoned that Colliot “mischaracterizes the language of 5321(a)(5)(C), by ignoring the mandate created by the amendment in 2004.”  The court basically argued that the maximum penalty shall be increased to the greater of $100,000 or 50% of the account balance at the time of the violation. 

​This case is important in the development of the FBAR penalties because a court of nationwide jurisdiction expressly rejects the ruling in United States v. Colliot. The decision rendered in Norman does not mean that the IRS' interpretation of the applicable penalties are correct, but the IRS' can prevent a flood of litigation concerning the applicable penalty standard by addressing the regulations concerning the FBAR penalties. 

Norman Court Opinion