United States v. Bittner ( 2021 )

Case: 20-40597 Document: 00516110544 Page: 1 Date Filed: 11/30/2021
United States Court of Appeals
for the Fifth Circuit United States Court of Appeals
Fifth Circuit
FILED
November 30, 2021
No. 20-40597 Lyle W. Cayce
Clerk
United States of America,
Plaintiff—Appellee/Cross-Appellant,
versus
Alexandru Bittner,
Defendant—Appellant/Cross-Appellee.
Appeal from the United States District Court
for the Eastern District of Texas
USDC No. 4:19-CV-415
Before Owen, Chief Judge, and Clement and Duncan, Circuit Judges.
Stuart Kyle Duncan, Circuit Judge:
Alexandru Bittner non-willfully failed to report his interests in foreign
bank accounts on annual FBAR forms, as required by the Bank Secrecy Act
of 1970 (BSA) and regulations thereunder. See 31 U.S.C. § 5314; 31 C.F.R.
§§ 1010.306, 1010.350. The government assessed $2.72 million in civil
penalties against him—$10,000 for each unreported account each year from
2007 to 2011. The district court found Bittner liable and denied his
reasonable-cause defense. But it reduced the assessment to $50,000, holding
that the $10,000 maximum penalty attaches to each failure to file an annual
FBAR, not to each failure to report an account.
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We affirm the denial of Bittner’s reasonable-cause defense but reverse
with respect to application of the $10,000 penalty. We hold that each failure
to report a qualifying foreign account constitutes a separate reporting
violation subject to penalty. The penalty therefore applies on a per-account,
not a per-form, basis. On this point, we part ways with a recent Ninth Circuit
panel, which split on this issue. See United States v. Boyd, 991 F.3d 1077,
1080–86 (9th Cir. 2021) (adopting per-form interpretation). But see id. at
1086–91 (Ikuta, J., dissenting) (taking per-account view). 1 Accordingly, we
affirm in part, reverse in part, vacate, and remand.
I.
A.
In 1970, Congress enacted the BSA “to require certain reports or
records where such reports or records have a high degree of usefulness in
criminal, tax, or regulatory investigations or proceedings.” Currency and
Foreign Transactions Reporting Act of 1970, Pub. L. No. 91-508, § 202, 84
Stat. 1114 (codified as amended at 31 U.S.C. § 5311). A primary purpose of
the BSA was to curb the “serious and widespread use” of foreign financial
accounts to evade taxes. Cal. Bankers Ass’n v. Shultz, 416 U.S. 21, 27 (1974).
1
District courts have taken diverging views on this issue. Compare United States v.
Giraldi, No. 20-2830 (SDW) (LDW), 2021 WL 1016215 (D.N.J. Mar. 16, 2021) (taking per-
form view), and United States v. Kaufman, No. 3:18-CV-00787 (KAD), 2021 WL 83478 (D.
Conn. Jan. 11, 2021) (same), with United States v. Solomon, No. 9:20-82236-CIV, 2021 WL
5001911 (S.D. Fla. Oct. 27, 2021) (taking per-account view), and United States v. Stromme,
No. 1:20-cv-24800-UU (S.D. Fla. Jan. 25, 2021) (same on default judgment). The Fourth
Circuit has suggested it would take a per-form view. See United States v. Horowitz, 978 F.3d
80, 81 (4th Cir. 2020) (observing but not holding, in a case concerning willful violations,
that “[a]ny person who fails to file an FBAR is subject to a maximum civil penalty of not
more than $10,000” (citing 31 U.S.C. § 5321(a)(5))). For the reasons explained infra, we
find the decisions taking the per-form view unpersuasive.
2
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The BSA, as amended, provides in relevant part, “the Secretary of the
Treasury shall require a resident or citizen of the United States . . . to keep
records, file reports, or keep records and file reports, when the . . . person
makes a transaction or maintains a relation for any person with a foreign
financial agency.” 31 U.S.C. § 5314(a). The BSA requires that the records
and reports contain specific information “in the way and to the extent the
Secretary prescribes.” Ibid. It directs the Secretary to consider “the need to
avoid burdening unreasonably a person making a transaction with a foreign
financial agency” when prescribing reporting and record-keeping
procedures. Ibid.As directed, the Secretary promulgated several regulations. Two are
relevant here. The first provides that each person with a “financial interest
in . . . [a] financial account in a foreign country shall report such relationship
to the Commissioner of Internal Revenue for each year in which such
relationship exists and shall provide such information as shall be specified in
a reporting form prescribed under 31 U.S.C. 5314 to be filed by such
persons.” 31 C.F.R. § 1010.350(a). A person is treated as having a “financial
interest” in any foreign account that the person owns or that is owned by a
corporation in which the person has an ownership interest greater than fifty
percent. Id. § 1010.350(e)(1), (2)(ii). The prescribed reporting form is a
Report of Foreign Bank and Financial Accounts, or “FBAR.” Id.
§ 1010.350(a). The second regulation provides: “Reports required to be filed
by § 1010.350 shall be filed . . . on or before June 30 of each calendar year with
respect to foreign financial accounts exceeding $10,000 maintained during
the previous calendar year.” Id. § 1010.306(c).
A person generally is required to disclose on an FBAR specific
information about each qualifying foreign account. But when a person has a
financial interest in twenty-five or more qualifying accounts, the person need
only disclose the number of accounts. Id. § 1010.350(g)(1). Those who fall
3
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within this exception, however, are “required to provide detailed
information concerning each account when so requested by the Secretary.”
Ibid.
The BSA authorizes the Secretary to “impose a civil money penalty
on any person who violates, or causes any violation of, any provision of
section 5314.” 31 U.S.C. § 5321(a)(5)(A). Initially, only willful violations
were subject to penalty. See § 207, 84 Stat. 1114. Congress added penalties
for non-willful violations in 2004. See American Jobs Creation Act of 2004,
Pub. L. No. 108-357, § 821(a), 118 Stat. 1418 (codified at 31 U.S.C.
§ 5321(a)(5)).
Different penalties attach to non-willful and willful violations. For a
non-willful violation, “the amount of any civil penalty imposed . . . shall not
exceed $10,000.” 31 U.S.C. § 5321(a)(5)(B)(i). But no penalty attaches if the
“violation was due to reasonable cause” and “the balance in the
account . . . was properly reported.” Id. § 5321(a)(5)(B)(ii). For a willful
violation, the maximum penalty increases to the greater of $100,000 or fifty
percent of “the amount of the transaction” (when a violation involves a
transaction) or “the balance in the account at the time of the violation”
(when a violation involves “a failure to report the existence of an account”).
Id. § 5321(a)(5)(C)(i), (D). Willful violations are excluded from the
reasonable-cause exception. Id. § 5321(a)(5)(C)(ii).
B.
Bittner was born in Romania in 1957. After serving in the Romanian
army and earning a master’s degree in chemical engineering, he immigrated
to the United States in 1982. He was naturalized in 1987.
In 1990, Bittner returned to Romania, where he became a successful
businessman and investor. He earned millions of dollars and acquired
interests in a diverse array of companies, including real estate, hotels,
4
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restaurants, construction, aquaculture, logging, and manufacturing. He
negotiated purchases of Romanian government assets and transferred his
business assets, including title to several investment properties, to holding
companies in London and Geneva.
To manage his growing wealth, Bittner maintained dozens of bank
accounts in Romania, Switzerland, and Liechtenstein, using “numbered
accounts” “[t]o hide [his] name.” He used accountants to maintain financial
records and ensure compliance with Romanian tax laws. But Bittner was
unaware that as a United States citizen he had to report his interests in certain
foreign accounts. Consequently, Bittner never filed FBARs while living in
Romania.
Bittner returned to the United States in 2011. Upon learning of his
reporting obligations, he hired a CPA, who in May 2012 prepared and filed
his outstanding FBARs. But those FBARs were deficient: they listed only his
largest account and incorrectly stated he did not have an interest in twenty-
five or more qualifying accounts. Bittner hired a new CPA, who in September
2013 filed corrected FBARs for the years 2007 to 2011, as penalties for prior
years were time-barred. See 31 U.S.C. § 5321(b)(1). Although not required,
Bittner disclosed with his corrected FBARs all foreign bank account
information and balances. In June 2017, the IRS assessed $2.72 million in
penalties against Bittner for non-willful violations of section 5314—$10,000
for each unreported account from 2007 to 2011, specifically 61 accounts in
2007, 51 in 2008, 53 in 2009, 53 in 2010, and 54 in 2011.
In June 2019, the government sued to reduce these penalty
assessments to judgment. Bittner pleaded in defense that his violations were
due to reasonable cause and therefore could not be penalized under 31 U.S.C.
§ 5321(a)(5)(B)(ii), that the maximum penalty allowed for a non-willful
reporting violation under 31 U.S.C. § 5321(a)(5)(B)(i) is $10,000 per annual
5
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FBAR form, and that the penalties as assessed violated the excessive fines
clause of the Eighth Amendment. During discovery, Bittner admitted he was
obligated to report 51 accounts in 2007, 43 in 2008, 42 in 2009, 41 in 2010,
and 43 in 2011.
The parties cross-moved for summary judgment on application of the
$10,000 maximum penalty, with Bittner arguing for a per-form basis and the
government arguing for a per-account basis. The government also moved for
summary judgment on Bittner’s liability for $1.77 million in penalties—
$10,000 for each admitted qualifying account from 2007 to 2010—arguing
that Bittner did not qualify for the reasonable-cause exception for these years.
The district court held that the $10,000 maximum penalty for a non-
willful violation applies on a per-form basis. United States v. Bittner, 469 F.
Supp. 3d 709, 717–26 (E.D. Tex. 2020). Having thus interpreted the statute,
it deemed Bittner’s Eighth Amendment defense moot. Id. at 726–27. The
court also granted summary judgment on Bittner’s liability for the years 2007
to 2010, rejecting his reasonable-cause defense. Id. at 727–29. Bittner
withdrew that defense as to the 2011 assessment, and the court entered
judgment of $50,000—$10,000 for each year from 2007 to 2011. Both parties
timely appealed.
II.
We review a summary judgment de novo. Ledford v. Keen, 9 F.4th 335,
337 (5th Cir. 2021) (citation omitted). Summary judgment is appropriate “if
the movant shows that there is no genuine dispute as to any material fact and
the movant is entitled to judgment as a matter of law.” Fed. R. Civ. P.
56(a). We view the evidence in the light most favorable to the nonmovant and
draw all reasonable inferences in its favor. Adams v. Alcolac, Inc., 974 F.3d
540, 543 (5th Cir. 2020) (per curiam) (citation omitted). We review issues of
6
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statutory interpretation de novo. Solorzano v. Mayorkas, 987 F.3d 392, 396 (5th
Cir. 2021) (citation omitted).
III.
We begin with Bittner’s argument that the district court erred in
denying his reasonable-cause defense.
A.
As stated above, the BSA imposes no penalty for a non-willful viola-
tion of section 5314 if “such violation was due to reasonable cause.” 31
U.S.C. § 5321(a)(5)(B)(ii)(I). 2 The BSA and the pertinent regulations do not
define “reasonable cause,” and so we must determine the phrase’s meaning.
To do so, we consult reasonable-cause exceptions in the Internal Revenue
Code (IRC). 3 Three cardinal principles of statutory interpretation support
this approach.
First, “reasonable cause” is a legal term of art. Denenburg v. United
States, 920 F.2d 301, 304 (5th Cir. 1991). “[W]e assume that when a statute
uses such a term, Congress intended it to have its established meaning.”
McDermott Int’l, Inc. v. Wilander, 498 U.S. 337, 342 (1991) (citing Morissette
v. United States, 342 U.S. 246, 263 (1952); and Gilbert v. United States, 370
U.S. 650, 658 (1962)). Specifically, “when Congress employs a term of art, it
2
The government does not dispute that Bittner properly reported the balances of
his accounts on his corrected FBARs, thus meeting the second prong of this exception. See
31 U.S.C. § 5321(a)(5)(B)(ii)(II).
3
Most, if not all, courts to address a claim of reasonable cause under 31 U.S.C.
§ 5321(a)(5)(B)(ii) have consulted the IRC for guidance. See, e.g., Kaufman, 2021 WL
83478, at *3–4; United States v. Hidy, 471 F. Supp. 3d 927, 932 (D. Neb. 2020); United
States v. Agrawal, No. 18-C-0504, 2019 WL 6702114, at *4 (E.D. Wis. Dec. 9, 2019); United
States v. Ott, No. 18-cv-12174, 2019 WL 3714491, at *2 (E.D. Mich. Aug. 7, 2019); Jarnagin
v. United States, 134 Fed. Cl. 368, 376–77 (2017); Moore v. United States, No. C13-2063RAJ,
2015 WL 1510007, at *4 (W.D. Wash. Apr. 1, 2015).
7
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presumably knows and adopts the cluster of ideas that were attached to each
borrowed word in the body of learning from which it was taken.” F.A.A. v.
Cooper, 566 U.S. 284, 292 (2012) (cleaned up) (quoting Molzof v. United
States, 502 U.S. 301, 307 (1992)).
Second, under the presumption of consistent usage, “a term generally
means the same thing each time it is used.” United States v. Castleman, 572
U.S. 157, 174 (2014) (Scalia, J., concurring). The presumption applies not
only to proximate terms but “also when different sections of an act or code
are at issue.” Antonin Scalia & Bryan A. Garner, Reading
Law: The Interpretation of Legal Texts 172 (2012) [Scalia
& Garner]. The presumption is particularly relevant “when Congress
uses the same language in two statutes having similar purposes.” Smith v.
City of Jackson, 544 U.S. 228, 233 (2005) (plurality opinion). The reasonable-
cause exceptions in the BSA and the IRC serve the same purpose: to provide
“grounds for avoiding penalties for admitted violations of federal tax law.”
Thomas v. UBS AG, 706 F.3d 846, 851 (7th Cir. 2013) (citing 26 U.S.C.
§ 6664(c), (d); and 31 U.S.C. § 5321(a)(5)(B)(ii)); see Tex. Workforce Comm’n
v. U.S. Dep’t of Educ., 973 F.3d 383, 388 (5th Cir. 2020) (finding “particularly
instructive” the interpretation of a term in a different statute with a
“strikingly similar” purpose).
Third, the prior-construction canon counsels that a term is to be
understood according to earlier, well-settled constructions of the same term.
See, e.g., Armstrong v. Exceptional Child Ctr., Inc., 575 U.S. 320, 330 (2015)
(discussing canon); see also Scalia & Garner, supra, at 323 (“[W]hen a
statute uses the very same terminology as an earlier statute—especially in the
very same field . . . —it is reasonable to believe that the terminology bears a
consistent meaning.”). Congress presumably was aware of settled judicial
and administrative constructions of “reasonable cause” in the IRC when it
amended the BSA in 2004 to add the non-willful penalty provision, including
8
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the reasonable-cause exception. See Huawei Techs. USA, Inc. v. FCC, 2 F.4th
421, 439 (5th Cir. 2021). Congress’s repetition of this term shows “the intent
to incorporate its administrative and judicial interpretations as well.”
Bragdon v. Abbott, 524 U.S. 624, 645 (1998) (citing Lorillard v. Pons, 434 U.S.
575, 580–81 (1978)).
Drawing on several reasonable-cause exceptions in the IRC and in reg-
ulations and caselaw interpreting these exceptions, we conclude that the rea-
sonable-cause exception in section 5321(a)(5)(B)(ii)(I) requires showing that
the individual exercised ordinary business care and prudence, considering all
pertinent facts and circumstances on a case-by-case basis. 4 This standard is
objective. Lawinger v. Comm’r, 103 T.C. 428, 440 (1994); DiCarlo v. Comm’r,
T.C. Memo. 1992-280, 1992 WL 101156 (May 14, 1992). The taxpayer bears
the “heavy burden” of establishing reasonable cause. United States v. Boyle,
4
See 26 U.S.C. §§ 6038(c)(4)(B), 6038A(d)(3), 6038D(g), 6651(a), 6664(c)(1),
6677(d); 26 C.F.R. § 1.6038-3(k)(4) (“reasonable cause” exception under 26 U.S.C.
§ 6038 “will be determined . . . under all the facts and circumstances”); id. § 1.6038A-
4(b)(2)(iii) (“reasonable cause” exception under 26 U.S.C. § 6038A “is made on a case-
by-case basis, taking into account all pertinent facts and circumstances”); id. § 1.6038D-
8(e)(3) (“reasonable cause” exception under 26 U.S.C. § 6038D “is made on a case-by-
case basis, taking into account all pertinent facts and circumstances”); id. § 301.6651-
1(c)(1) (“reasonable cause” exception under 26 U.S.C. § 6651 requires a showing taxpayer
“exercised ordinary business care and prudence,” considering “all the facts and
circumstances of the taxpayer’s financial situation”); id. § 1.6664-4(b)(1) (“reasonable
cause” exception under 26 U.S.C. § 6664 “is made on a case-by-case basis, taking into
account all pertinent facts and circumstances,” with “the most important factor [being]
the extent of the taxpayer’s effort to assess the taxpayer’s proper tax liability”); In re Wyly,
552 B.R. 338, 579 (Bankr. N.D. Tex. 2016) (because “there are no regulations that
specifically interpret the meaning of the phrase[] ‘reasonable cause’” in 26 U.S.C.
§ 6677(d), courts tend to adopt the “ordinary business care and prudence” definition); see
also Presley v. Comm’r, 790 F. App’x 914, 919 (10th Cir. 2019) (applying ordinary-business-
care-and-prudence standard to “reasonable cause” exception in 26 U.S.C.
§ 170(f)(11)(A)(ii)(II), which is not defined by statute or regulation).
9
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469 U.S. 241, 245 (1985); accord Klamath Strategic Inv. Fund ex rel. St. Croix
Ventures v. United States, 568 F.3d 537, 548 (5th Cir. 2009).
B.
Bittner argues, as a threshold matter, that a reasonable-cause defense
cannot be determined at summary judgment because it involves a “deeply
factual question.” We disagree. “[W]hether the elements that constitute
‘reasonable cause’ are present in a given situation is a question of fact, but
what elements must be present to constitute ‘reasonable cause’ is a question
of law.” Roberts v. Comm’r, 860 F.2d 1235, 1241 (5th Cir. 1988) (citing Boyle,
469 U.S. at 249 n.8). While a reasonable-cause defense depends on all
pertinent facts and circumstances, only disputed questions of material fact
will preclude summary judgment. See Anderson v. Liberty Lobby, Inc., 477 U.S.
242, 247–48 (1986); Smith v. Mobil Corp., 719 F.2d 1313, 1315–16 (5th Cir.
1983). We have not hesitated to affirm summary judgments rejecting claims
of reasonable cause based on undisputed facts. See Staff IT, Inc. v. United
States, 482 F.3d 792, 801–02 (5th Cir. 2007); Denenburg, 920 F.2d at 307. 5
Turning to the merits of Bittner’s defense, having considered all per-
tinent facts and circumstances, we conclude that Bittner did not exercise or-
dinary business care and prudence in failing to fulfill his reporting obligations.
We have emphasized that when assessing reasonable cause, “[t]he most im-
portant factor is the extent of the taxpayer’s effort to assess his proper liabil-
ity.” Brinkley v. Comm’r, 808 F.3d 657, 669 (5th Cir. 2015) (quoting Klamath,
5
See also, e.g., Baccei v. United States, 632 F.3d 1140, 1147–49 (9th Cir. 2011);
Diamond Plating Co. v. United States, 390 F.3d 1035, 1038–39 (7th Cir. 2004); Kaufman,
2021 WL 83478, at *6, *8 (granting summary judgment where there were “no triable issues
of fact concerning [defendant’s] reasonable cause defense” and noting that “several
courts, in the context of defendants who failed to file FBARs, have rejected a reasonable
cause defense at the summary judgment stage” (collecting cases)).
10
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568 F.3d at 548). Bittner conceded he put no effort into ascertaining and ful-
filling his reporting obligations. He testified he never even inquired about
them, and when asked why, he answered, “Why should I?,” “I didn’t feel
like it,” and “Why? We’re in Romania.” The onus was on Bittner to find out
what he was supposed to do, and yet he admittedly did nothing. Cf. Boyle, 469
U.S. at 249 (noting “Congress intended to place upon the taxpayer an obli-
gation to ascertain the statutory deadline and then to meet that deadline”).
As the district court observed, “Bittner was undoubtedly a
sophisticated business professional.” Bittner, 469 F. Supp. 3d at 729. He held
interests in dozens of companies, negotiated purchases of Romanian
government assets, transferred his assets into holding companies, and
concealed his earnings in “numbered accounts.” He even once inquired
about tax obligations “as a Romanian citizen . . . own[ing] property in
Brussels” before purchasing investment properties. Bittner’s business savvy
makes his failure to inquire about his reporting obligations even more
unreasonable. See, e.g., Jarnagin, 134 Fed. Cl. at 378 (“A reasonable person,
particularly one with the sophistication, investments, and wealth of the
[plaintiff], . . . would have sought advice regarding [his] obligation to file [an
FBAR].”).
Bittner claims there are factual disputes that preclude summary judg-
ment. We disagree. To be sure, he highlights undisputed facts he believes
establish reasonable cause: he spoke little English; he had lived in the United
States for only eight years; he had minimal contacts with the United States
while living in Romania; he complied with Romanian tax laws; he was una-
ware of his reporting obligations; and he promptly filed outstanding FBARs
upon learning of his obligations. While relevant, these facts do not alter the
conclusion that it was unreasonable for Bittner, a sophisticated businessman,
not to ascertain his reporting obligations. See Boyle, 469 U.S. at 252 (“It
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requires no special training or effort to ascertain a deadline and make sure
that it is met.”). 6
Bittner points to an IRS Fact Sheet, which provides that “[r]easonable
cause may be established if you show that you were not aware of specific
obligations to file returns or pay taxes, depending on the facts and
circumstances.” But “general statements of policy and rules governing
internal agency operations or ‘housekeeping’ matters,” like the fact sheet,
“do not have the force and effect of law, are not binding on the agency issuing
them[,] and do not create substantive rights in the public.” Capitol Fed. Sav.
& Loan Ass’n & Subsidiary v. Comm’r, 96 T.C. 204, 216–17 (1991) (collecting
cases).
Finally, Bittner argues that the district court “misunderstood” the
reasonable-cause standard by equating it with ordinary business care and
prudence. We disagree. As discussed above, the ordinary-business-care-and-
prudence definition of reasonable cause is derived from the IRC, regulations,
and case law. See supra Section III.A. The district court correctly applied that
standard in rejecting Bittner’s reasonable-cause defense.
IV.
We next consider the government’s argument that the district court
erred in applying the $10,000 penalty to Bittner’s reporting violations. As
explained above, section 5321(a)(5)(A) provides that the Secretary “may
6
See also, e.g., Hidy, 471 F. Supp. 3d at 933 (finding defendant failed to show
reasonable cause where she “admit[ted] she made no effort to learn” about her reporting
obligation, “research the issue,” or “seek professional advice or assistance”); Agrawal,
2019 WL 6702114, at *5 (rejecting argument that defendant’s “naivety excuses him from
exercising ordinary business care by seeking advice regarding his [reporting] obligation”
where he had “sufficient mental acuity” to work as a math teacher and “sufficient financial
savvy” to make specific requests regarding his investments).
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impose a civil money penalty on any person who violates, or causes any
violation of, any provision of section 5314.” 31 U.S.C. § 5321(a)(5)(A). The
maximum penalty is $10,000. Id. § 5321(a)(5)(B)(i). Properly assessing the
penalty hinges on what constitutes a “violation” of section 5314: the failure
to file an FBAR (as urged by Bittner) or the failure to report an account (as
urged by the government).
When interpreting a statute, we begin with the text. United States v.
Lauderdale County, 914 F.3d 960, 961 (5th Cir. 2019). “Interpretation of a
word or phrase depends upon reading the whole statutory text, considering
the purpose and context of the statute, and consulting any precedents or
authorities that inform the analysis.” Calogero v. Shows, Cali & Walsh, L.L.P.,
970 F.3d 576, 584–85 (5th Cir. 2020) (quoting Dolan v. U.S. Postal Serv., 546
U.S. 481, 486 (2006)).
A.
The government argues the district court erred in determining what
constitutes a “violation” under section 5314 by focusing on the regulations
under section 5314 to the exclusion of section 5314 itself. We agree.
The district court began its analysis by quoting a sentence from Shultz.
See Bittner, 469 F. Supp. 3d at 718. There, the Supreme Court noted that the
BSA’s “penalties attach only upon violation of regulations promulgated by
the Secretary; if the Secretary were to do nothing, the Act itself would impose
no penalties on anyone.” Shultz, 416 U.S. at 26. Relying on this statement,
the district court focused on the regulations and concluded “it is the failure
to file an annual FBAR that is the violation contemplated” by section
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5321(a)(5)(A). Bittner, 469 F. Supp. 3d at 718. 7 Bittner relies heavily on this
reasoning on appeal.
The Shultz snippet does not help define a “violation of[] any provision
of section 5314” under section 5321(a)(5)(A). Cf. Smith v. Shettle, 946 F.2d
1250, 1253 (7th Cir. 1991) (“We must not be mesmerized by judicial language
taken out of context and hardened into formula.”). Shultz did not interpret
any penalty provision of the BSA, as we do here. Rather, it addressed
constitutional challenges to the BSA and its regulations. Shultz, 416 U.S. at
25. The quoted sentence corrected the district court’s ripeness analysis—it
explained the analysis should be limited to reporting requirements the
Secretary actually imposed, not ones “[that] might have been imposed by the
Secretary under the broad authority given him in the Act.” Id. at 63–64.
Further, Congress amended section 5321(a)(5) to add penalties for non-
willful violations thirty years after Shultz. See § 821, 118 Stat. 1418. And as
we explain, a per-form interpretation is inconsistent with the text of the BSA
and corresponding regulations. See United States v. Yankowski, 184 F.3d 1071,
1074 (9th Cir. 1999) (rejecting the “contention that [a] single statement by
the Supreme Court, taken out of context, should be used . . . to reject the
clear and express provisions of the [statute]”).
Because section 5321(a)(5)(A) penalizes a “violation of[] any
provision of section 5314,” our analysis begins with section 5314, not the
regulations. “Congress generally acts intentionally when it uses particular
language in one section of a statute but omits it in another.” Dep’t of
Homeland Sec. v. MacLean, 574 U.S. 383, 391 (2015) (citing Russello v. United
States, 464 U.S. 16, 23 (1983)). Here, Congress did not refer to a “violation
7
The Ninth Circuit and the other courts taking a per-form view have relied on the
same statement from Shultz. See Boyd, 991 F.3d at 1081; Girardi, 2021 WL 1016215, at *5;
Kaufman, 2021 WL 83478, at *9.
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of a regulation prescribed under” section 5314 when it amended section
5321(a)(5)(A) in 2004, even though earlier-enacted penalty provisions in
section 5321 do. See 31 U.S.C. § 5321(a)(1) (specifying “a violation of section
5318(a)(2) of this title or a regulation prescribed under section 5318(a)(2)”);
id. § 5321(a)(3) (imposing liability for “not filing a report under a regulation
prescribed under section 5315”). This omission is instructive. We thus focus
on the text of section 5314.
Section 5314(a) “has both a substantive and procedural element.”
Boyd, 991 F.3d at 1088 (Ikuta, J., dissenting); see Solomon, 2021 WL 5001911,
at *7–8. Substantively, it directs the Secretary to require a person to “file
reports” when the person “makes a transaction or maintains a
relation . . . with a foreign financial agency.” 31 U.S.C. § 5314(a).
Procedurally, “reports shall contain [certain] information in the way and to
the extent the Secretary prescribes.” Id.The regulations themselves distinguish (1) the substantive obligation
to file reports disclosing each account from (2) the procedural obligation to
file the appropriate reporting form. Boyd, 991 F.3d at 1088 (Ikuta, J.,
dissenting); see Solomon, 2021 WL 5001911, at *7–8. Section 1010.350(a)
implements the two distinct requirements: each person with a “financial
account in a foreign country [1] shall report such relationship to the
Commissioner of Internal Revenue for each year in which such relationship
exists and [2] shall provide such information as shall be specified in a
reporting form prescribed under 31 U.S.C. 5314 to be filed by such persons.”
31 C.F.R. § 1010.350(a) (emphasis added). 8 Section 1010.306(d) likewise
8
Bittner reads section 1010.350(a) differently. He argues the requirement to report
a financial interest in a foreign account concerns “a Title 26 (income tax) obligation,” while
the obligation to provide certain information in a reporting form “is a Title 31 (banking)
requirement.” The district court similarly observed that the Secretary’s “implementing
regulations contain separate income tax reporting requirements that are independent of the
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provides that “[r]eports required by” section 1010.350 “shall be filed on
forms prescribed by the Secretary.” Id. § 1010.306(d). And the next
subsection specifies where a person may obtain “[f]orms to be used in making
the reports required by” section 1010.350. Id. § 1010.306(e). The regulations
thus consistently implement the distinction between the reports themselves
(substance) and the reporting forms (procedure).
Together, then, the text of the BSA and its regulations impose (1) a
statutory requirement to report each qualifying transaction or relation with a
foreign financial agency and (2) a regulatory requirement to file these reports
on an FBAR before a certain date each year (June 30). See id. § 1010.306(c);
see also Boyd, 991 F.3d at 1088 (Ikuta, J., dissenting); Solomon, 2021 WL
5001911, at *7–8. By authorizing a penalty for “any violation of[] any
provision of section 5314,” as opposed to the regulations prescribed under
section 5314, section 5321(a)(5)(A) most naturally reads as referring to the
statutory requirement to report each account—not the regulatory
requirement to file FBARs in a particular manner. Indeed, Schultz itself
supports this reading. There, the Supreme Court explained that “[v]iolations
of the reporting requirement of [section 5314] as implemented by the
regulations are also subject to civil and criminal penalties.” Shultz, 416 U.S.
at 37.
FBAR reporting requirements.” Bittner, 469 F. Supp. 3d at 722 n.6 (citing Shultz, 416 U.S.
at 37).
This understanding of section 1010.350(a) is flawed. The Secretary promulgated
section 1010.350(a) pursuant to her authority under 31 U.S.C. § 5314 and other sections of
the U.S. Code, none of which are in Title 26. See Amendment to the Bank Secrecy Act
Regulations—Reports of Foreign Financial Accounts, 76 Fed. Reg. 10234, 10245 (Feb. 24,
2011). Section 1010.350(a) does not interpret, apply, or otherwise correspond with any
section of Title 26. See Off. of the Fed. Reg., Nat’l Archives & Recs.
Admin., CFR Index and Finding Aids 973–78 (2021).
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The district court reasoned that a violation of section 5314 “attach[es]
directly to the obligation that the statute creates—the filing of a single re-
port.” Bittner, 469 F. Supp. 3d at 720. We disagree. Section 5314 does not
create the obligation to file “a single report.” Rather, it gives the Secretary
discretion to prescribe how to fulfill the statute’s requirement of reporting
qualifying accounts. 9 Moreover, the district court’s reading would lead to a
result unmoored from the text of section 5314: it would give the Secretary
discretion not only to define the reporting mechanism, but also to define the
number of violations subject to penalty. After all, the Secretary could require
multiple FBARs instead of allowing one FBAR to report multiple accounts
(as she has done). Streamlining the process in this way, however, cannot re-
define the underlying reporting requirement imposed by section 5314. See
Solomon, 2021 WL 5001911, at *7 (observing “the requirement to submit a
form to reflect [required] information does not alter the substantive nature of
the underlying duty to report financial interests/relationships”). It merely
honors Congress’s desire “to avoid burdening unreasonably a person making
a transaction with a foreign financial agency.” 31 U.S.C. § 5314(a).
Finally, Bittner argues there is no basis “to distinguish between the
obligation to report and the form created for that purpose.” Again, the
statute and its surrounding context refute this argument. As discussed, other
provisions expressly penalize violations of the BSA’s regulations. If, when it
amended section 5321(a)(5)(A), Congress meant to penalize a violation only
of the regulations under section 5314 (i.e., the failure to file an FBAR), as
9
See 31 U.S.C. § 5314(a) (emphasis added) (providing “reports shall contain
[certain] information in the way and to the extent the Secretary prescribes”); United States v.
Khan, No. 17-cv-7258(KAM) (VMS), 2019 WL 8587295, at *4 (E.D.N.Y. Sept. 23, 2019)
(“Congress did not specify the form and substance of the report to be made in satisfaction
of th[e] [reporting] requirement [but] vested the Secretary . . . with the authority to
prescribe these specifics.”).
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opposed to a violation of section 5314 itself (i.e., the failure to report an
account), “it could have done so clearly and explicitly.” Barnhart v. Sigmon
Coal Co., 534 U.S. 438, 454 (2002); see United States v. Lawrence, 727 F.3d
386, 392–93 (5th Cir. 2013) (considering disparate exclusion after statutory
amendment). It did the opposite.
B.
The use of the term “violation” in other parts of section 5321(a)(5)
confirms that the “violation” contemplated by section 5321(a)(5)(A) is the
failure to report an account, not the failure to file an FBAR.
We first consider the willful penalty provisions. Increased penalties
attach to a willful “violation of[] any provision of section 5314.” 31 U.S.C.
§ 5321(a)(5)(C). The maximum penalty for a willful violation is the greater of
$100,000 or fifty percent of “the amount of the transaction” (when a
violation involves a transaction) or “the balance in the account at the time of
the violation” (when a violation involves “a failure to report the existence of
an account”). Id. § 5321(a)(5)(C)(i), (D). This language plainly describes a
“violation” in terms of a failure to report a transaction or an account. See
Boyd, 991 F.3d at 1089 (Ikuta, J., dissenting).
It is a “basic canon of statutory construction that identical terms
within an Act bear the same meaning.” Lexon Ins. Co. v. Fed. Deposit Ins.
Corp., 7 F.4th 315, 324 (5th Cir. 2021) (quoting Est. of Cowart v. Nicklos
Drilling Co., 505 U.S. 469, 479 (1992)); see Scalia & Garner, supra, at
170–73 (discussing presumption of consistent usage). If a willful violation of
section 5314 in subsection (C) involves failing to report a transaction or an
account, then presumably so too does a non-willful violation of section 5314
in subsection (A). To be sure, the presumption of consistent usage yields
when “there is such variation in the connection in which the words are used
as reasonably to warrant the conclusion that they were employed in different
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parts of the Act with different intent.” Gen. Dynamics Land Sys., Inc. v. Cline,
540 U.S. 581, 595 (2004) (quoting Atl. Cleaners & Dyers, Inc. v. United States,
286 U.S. 427, 433 (1932)). But nothing in section 5321 suggests Congress
meant to define “violation” one way where a person acts willfully and
another way where a person does not. See Boyd, 991 F.3d at 1090–91 (Ikuta,
J., dissenting).
The district court drew the opposite inference, reading the willful
penalty provisions to support a per-form theory. See Bittner, 469 F. Supp. 3d
at 719–21. It reasoned that only the willful penalty provision references the
“account,” and so the penalty for non-willful violations could not relate to
specific accounts. Id. at 720–21. We disagree. There is a good reason for the
different phrasing of the respective penalties, and it has nothing to do with
the definition of a “violation.” The amount of a willful penalty may depend
on the “balance” in the unreported account, see 31 U.S.C. § 5321(a)(5)(C)(i),
(D), unlike a non-willful penalty, which is capped at $10,000, see id.§ 5321(a)(5)(B)(i). So, Congress had no reason to refer to the “account” in
the non-willful penalty provision. This different phrasing does not affect the
definition of “violation,” which, as already explained, means the same thing
whether willful or non-willful.
We next consider the reasonable-cause exception. No penalty attaches
to a non-willful violation if “such violation was due to reasonable cause” and
“the amount of the transaction or the balance in the account at the time of
the transaction was properly reported.” Id. § 5321(a)(5)(B)(ii). This lan-
guage equates a “violation” with failing to report the amount of the transac-
tion or the balance in an account. See Solomon, 2021 WL 5001911, at *9 (not-
ing “this exception speaks in account-specific terms—not form-specific
terms”). Specifically, the definite article “the” before the singular “transac-
tion” and “account” suggests that the “violation” excused for reasonable
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cause relates to a single transaction or account. 10 If “violation” in section
(a)(5)(B)(ii) is transaction- or account-based, then “violation” in section
(a)(5)(A) presumably is too. See Scalia & Garner, supra, at 170–73.
Nothing in the text suggests Congress intended otherwise.
Bittner argues that “the statutorily permissible excuse for non-com-
pliance is completely independent from the violation itself.” We disagree.
Neither the statute’s text nor its structure separates the excuse from the vi-
olation. To the contrary, if the exception for non-willful violations applies on
a per-account basis, then logically the violations the exception forgives must
arise on a per-account basis too. Framed in terms of “the transaction” and
“the account,” the reasonable-cause exception most naturally reads as ex-
cusing the failure to report a transaction or account, not the failure to file an
FBAR. This reading supports our view that the underlying “violation” in
section 5321(a)(5)(A) cannot be read on a per-form basis.
C.
Bittner’s remaining arguments lack merit. He claims that, as a penal
tax statute, section 5321(a)(5)(A) should be strictly construed against the
government. It is a “‘longstanding canon of construction’ that if ‘the words
of a tax statute are doubtful, the doubt must be resolved against the govern-
ment and in favor of the taxpayer.’” United States v. Marshall, 798 F.3d 296,
318 (5th Cir. 2015) (collecting cases); accord Comm’r v. Acker, 361 U.S. 87, 91
10
See Evanto v. Fed. Nat’l Mortg. Ass’n, 814 F.3d 1295, 1298 (11th Cir. 2016)
(“[S]ections 1638 and 1641 connote one particular document by using a definite article
(‘the’) and a singular noun (‘disclosure statement’).” (citing Rumsfeld v. Padilla, 542 U.S.
426, 434 (2004))); United States v. Grimes, 702 F.3d 460, 466 (8th Cir. 2012) (“Congress’s
use of the definite article ‘the’ followed by the singular noun ‘court’ suggests that the
phrase ‘the court’ refers to a single district court, rather than all ninety-four district
courts . . . .”); Renz v. Grey Advert., Inc., 135 F.3d 217, 222 (2d Cir. 1997) (“Placing the
article ‘the’ in front of a word connotes the singularity of the word modified.”).
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(1959). This canon, which has been amply criticized, 11 does not apply here
because the text of sections 5321(a)(5) and 5314 and of the regulations leaves
no doubt that each failure to report an account is a separate violation of sec-
tion 5314 subject to penalty.
In a similar vein, Bittner invokes the rule of lenity. This rule “requires
ambiguous criminal laws to be interpreted in favor of the defendants
subjected to them.” United States v. Santos, 553 U.S. 507, 514 (2008)
(collecting cases). It applies in civil cases where a law “has both criminal and
noncriminal applications.” Leocal v. Ashcroft, 543 U.S. 1, 11 n.8 (2004); see
United States v. Thompson/Ctr. Arms Co., 504 U.S. 505, 517–18 & n.10 (1992)
(plurality opinion). The rule does not apply here because the statute is not
ambiguous and the non-willful penalty provision has no criminal application.
Cf. 31 U.S.C. § 5322(a)–(b) (imposing criminal penalties only for willful
violations).
Additionally, Bittner maintains (and the district court agreed) that a
per-account reading would lead to “absurd results.” See Bittner, 469 F. Supp.
3d at 721–23. We disagree. Statutes generally should be construed to avoid
an absurd result, Martinez v. Mukasey, 519 F.3d 532, 544 (5th Cir. 2008)—
meaning, one “no reasonable person could intend,” Scalia & Garner,
11
See, e.g., White v. United States, 305 U.S. 281, 292 (1938) (noting “[i]t is the
function and duty of courts to resolve doubts,” and seeing “no reason why that function
should be abdicated in a tax case more than in any other [case]”); see also Anita S.
Krishnakumar, Reconsidering Substantive Canons, 84 U. Chi. L. Rev. 825, 826–27 (2017)
(noting “popular belief” that substantive canons of statutory interpretation “act as an
‘escape valve’ that helps textualist judges eschew, or ‘mitigate,’ the rigors of textualism”
and “reject statutory readings dictated by other tools of construction in favor of readings
based on external policy considerations”); Antonin Scalia, A Matter of
Interpretation: Federal Courts and the Law 27–29 (Amy Gutmann ed.,
1997) (decrying substantive canons as “dice-loading rules” and questioning “where the
courts get the authority to impose them”).
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supra, at 237. But we see no absurdity here. Congress’s central goal in
enacting the BSA was to crack down on the use of foreign financial accounts
to evade taxes. It is not absurd—it is instead quite reasonable—to suppose
that Congress would penalize each failure to report each foreign account. See
Shultz, 416 U.S. at 27–29 (noting the “debilitating effects” of secret offshore
accounts on the American economy, including hundreds of millions in lost
tax revenue). 12
As a last resort, Bittner turns to legislative history. But “mining
legislative history . . . is highly disfavored in the Fifth Circuit . . . .” Thomas
v. Reeves, 961 F.3d 800, 817 n.45 (5th Cir. 2020) (en banc) (Willett, J.,
concurring) (emphasis omitted) (collecting cases). In any event, the
legislative history Bittner cites is unilluminating.
* * *
The text, structure, history, and purpose of the relevant statutory and
regulatory provisions show that the “violation” of section 5314 contemplated
by section 5321(a)(5)(A) is the failure to report a qualifying account, not the
failure to file an FBAR. The $10,000 penalty cap therefore applies on a per-
account, not a per-form, basis.
12 Nor is there any absurdity, as Bittner supposes, in the fact that the FBAR filing
requirement is triggered not by how many foreign accounts someone has, but by whether
their aggregate value exceeds $10,000. See 31 C.F.R. § 1010.306(c); see also Bittner, 469 F.
Supp. 3d at 720 (agreeing with Bittner on this point). People holding less than $10,000
abroad are likely not using foreign accounts to evade taxes. Or so the government might
reasonably think. And so it makes sense for the government not to require those people to
file FBARs. The $10,000 aggregate threshold aims “to avoid burdening unreasonably”
people holding relatively small amounts of money abroad. 31 U.S.C. § 5314(a).
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V.
We AFFIRM the summary judgment on Bittner’s liability and failure
to establish a reasonable-cause defense under 31 U.S.C. § 5321(a)(5)(B)(ii);
REVERSE the summary judgment for Bittner on application of the $10,000
penalty cap to his non-willful violations of 31 U.S.C. § 5314; and VACATE
and REMAND for further proceedings consistent with this opinion.
23