TAXLITIGATOR – Tax Controversy (Civil & Criminal) Report

This author has previously argued that under the Tucker Act, 28 USC §1491(a)(1), the Court of Federal Claims has jurisdiction over suits to recover FBAR penalty payments.  The Court of Federal Claims recently held that it has jurisdiction over suits for the refund of FBAR penalties in Norman v. United States, Docket No. 15-872T (April 11, 2016), but suggested that the Government may want to appeal its order.

The facts of the case are simple. Mindy Norman paid an FBAR willful penalty that had been assessed against her and sued for a refund of what she had paid.  The United States moved to dismiss on the ground that, under 28 USC § 1355(a), the district courts have exclusive jurisdiction over suits to recover penalties paid to the Government.  Sec. 1355(a) provides:

The district courts shall have original jurisdiction, exclusive of the courts of the States, of any action or proceeding for the recovery or enforcement of any fine, penalty, or forfeiture, pecuniary or otherwise, incurred under any Act of Congress, except matters within the jurisdiction of the Court of International Trade under section 1582 of this title.

The Government argued under Crocker v. United States, 125 F.3d 1475 (Fed. Cir. 1997), the district courts alone have jurisdiction in cases involving penalties. In Crocker, the plaintiff sued to recover funds held forfeit to the Government and the Court dismissed on the ground that it lacked jurisdiction.  The Court rejected the Government’s argument that Crocker was controlling.  The Court noted that one year after deciding Crocker, the Federal Circuit held that the Court of Federal Claims had jurisdiction over a suit to recover a penalty imposed by a Government agency in San Huan New Materials High Tech, Inc. v. Int’l Trade Comm’n, 161 F.3d 1347 (Fed. Cir. 1998).

The Court recognized that where there is a specific and comprehensive statutory scheme for administrative and judicial review, its Tucker Act jurisdiction is preempted. The Bank Secrecy Act, of which the FBAR penalty is a part, does not contain a scheme for such review.  The Court distinguished the case before it from cases where it lacked jurisdiction since there was a comprehensive scheme, such as forfeiture cases and cases to recover fines imposed pursuant to a criminal conviction.

Although the Court denied the Government’s motion to dismiss, it recognized that “substantial” grounds existed for disagreement over the question of its jurisdiction and indicated that an interlocutory appeal may be appropriate.

ROBERT S. HORWITZ – For more information please contact Robert S. Horwitz – horwitz@taxlitigator.com or 310.281.3200   Mr. Horwitz is a principal at Hochman, Salkin, Rettig, Toscher & Perez, P.C., a former Assistant United States Attorney of the Tax Division of the Office of the U.S. Attorney (C.D. Cal) and represents clients throughout the United States and elsewhere involving federal and state, administrative civil tax disputes and tax litigation as well as defending criminal tax investigations and prosecutions. Additional information is available at http://www.taxlitigator.com