Bittner v. United States
Oral argument transcript · No. 21-1195 · October Term 2022 · argued November 2, 2022 · the petitioner won
Decision: votes, opinion and citations · Official transcript (PDF) · Argument audio at the Supreme Court
Advocates
- Daniel L. Geyser, Dallas, Texas, for the petitioner
- Matthew Guarnieri, Assistant to the Solicitor General, for the respondent
Transcript
From the Court's official transcript; speaker labels as in the transcript, with advocates' full names from its list of appearances.
Chief Justice Roberts: We will hear argument this morning in Case 21-1195, Bittner versus United States. Mr. Geyser. ORAL ARGUMENT OF DANIEL L. GEYSER ON BEHALF OF THE PETITIONER
Daniel L. Geyser: Thank you, Mr. Chief Justice, and -- (Interruption.)
Daniel L. Geyser: -- may it please the Court: The Bank Secrecy Act instructs the Secretary of the Treasury to require parties to keep records, file reports, or keep records and file reports. The question here is whether the failure to file a report leads to one violation of the Act or potentially dozens, in this case, over 270 violations of federal law for each account not listed on five annual forms. Under the Act's plain text, context, history, and purpose, the answer is clear: The Act requires parties to file reports, not report individual accounts. Any failure to file a Official 1 report thus gives rise to a single statutory violation -- (Interruption.)
Daniel L. Geyser: -- no matter how many accounts a person has or how many mistakes a person might make on a single form. Because there is no independent duty to report each account, there is no independent violation every time an account is not reported. (Interruption.)
Daniel L. Geyser: According to the government, Petitioner violated the Act 272 times for unintentionally failing to file five annual forms. If Congress wanted to expose innocent parties to potentially dozens of violations of federal law for a single unintentional annual misstep, Congress would have said so expressly. Because the government's contrary position is wrong, this Court should reverse. I welcome the Court's questions.
Justice Thomas: Mr. Geyser, you make -- you put quite an emphasis on the report versus the account. What if the IRS simply said every account has to be on a separate report, Official 1 and so, rather than having just a handful of reports, you had one per account? What would your argument be?
Daniel L. Geyser: I think our argument would be that would still be a single violation because the -- the -- the way the Act is structured, it says that parties shall file reports as required by the Secretary. So, if the Secretary says I want a separate report for each account and you fail to do that, then the answer is -- did you follow the Secretary's instructions? The answer would be, no, you didn't. So, if you have 10 accounts and you file five reports and you should have filed all 10, you violated the Act, but you violated it once because the only way to violate the Act is to -- is to fail to file the reports as required by the Secretary. Now, to be very clear, in this case, the Court doesn't need to decide that here because the regulation in question only imposes a single annual reporting requirement. Parties have to file a single report. That's the way it's been for decades. That's the way the law stood when Congress added the non-willful Official 1 penalty in 2004. And I think it would be very unusual for the Secretary to go and change that -- that regulation after decades of practice to suddenly impose a -- an individual report requirement for each separate account.
Justice Kavanaugh: Mr. Geyser, one of the contextual points that you raise and that I think has some force is that it's unusual for the government to impose draconian penalties on someone who is not willful, in other words, does not even perhaps know of the reporting obligation. And that's a powerful contextual point in your favor, I think. But the government comes back and says, well, but the statute has a reasonable cause provision that, in essence, takes care of people who have reasonable cause for not knowing of the obligation or failing to file the report with the accounts listed. Doesn't that reasonable cause provision take care of some of the concerns that you raise about people being penalized who didn't know about the reporting requirement or otherwise didn't know about their legal obligation? Official
Daniel L. Geyser: Your Honor, it may take care of it to some extent but obviously not entirely because there are still non-willful violators of the Act. And the --
Justice Kavanaugh: True -- sorry to interrupt -- but, in that -- those instances, what I think the government will say is that in this case, the lower court said as well, it's in those instances where someone did -- was unreasonable in failing to make further inquiry to understand their legal obligations. So there's a kind of gray area between willful and someone who didn't know at all and was -- reasonably didn't know at all and someone who didn't know but should have known because they should have done more to find out their legal obligations.
Daniel L. Geyser: Your Honor, I think saying it's a gray area is -- is exactly right. And the problem is these -- these are truly draconian punishments for someone who does fit within that gray area. Petitioner here raised a reasonable cause defense. Now he lost. But the -- the penalty for losing shouldn't be increasing the potential statutory maximum -- Official
Justice Kavanaugh: But -- but --
Daniel L. Geyser: -- by an order of 50.
Justice Kavanaugh: -- maybe you have a good -- have a good argument that he should have prevailed on the reasonable cause, that's not the issue before us, but the point is, I think, that that is available for those people who reasonably or -- didn't know about the legal obligation.
Daniel L. Geyser: But, again, Your Honor, there are lots of ways that someone can make a mistake in submitting these forms, including, you know, in order to qualify the reasonable cause exception, you have to report the balance on the accounts. And so it is possible that someone simply forgot that they had an account, so they submitted an incomplete or incorrect FBAR. And that happens often. We're talking about checking accounts, savings account, potentially investment accounts. You could have retirement accounts. You could even have safety deposit boxes. It's very easy for someone to think that they've complied and it turns out they Official 1 haven't, they haven't submitted each account as they were required to do to qualify for the reasonable cause exception, and suddenly they're being penalized at an order of $10,000 a clip for every single account that was accidentally not reported.
Justice Kagan: But, on the other hand, I mean, one might say that your version forces the -- the government to treat equally somebody who has a $10,000 account and somebody who, like your client, has extreme wealth and many, many accounts and where he is depriving the government of much more information than, you know, the small I have a checking account for $12,000 person does.
Daniel L. Geyser: Well, Your Honor, the -- I -- I think, here, though, the relevant criteria, though, is what is the culpable conduct. And the culpable conduct under the Act is not filing a report. Now, if you're doing that non-willfully, someone who accidentally doesn't file a report because they don't know that that reporting requirement even exists, whether they have five accounts or 500 accounts, they are -- Official 1 they're engaged in the same conduct that Congress is targeting. And I think increasing the punishment, especially for non-willful actors and especially those actors that aren't even aware that the FBAR requirement is a thing, you know, they don't know what they don't know. Those are people who I think it would be pretty extreme to say suddenly it's a $10,000 penalty per account, and especially taking a step back and looking at the Act and what Congress was doing. 5314 is -- is a recordkeeping and reporting requirement. The Secretary has to come up with the regulations, and Congress framed this as a violation of the statute. So the real question is, if Congress is looking at that, what are they thinking? And what they're thinking is, if you fail to do what the Secretary has required you to do, you're subject to a penalty that shall not exceed $10,000. If Congress wanted to impose a separate penalty for each individual account, Congress would have said that. And if we look Official 1 at other sections of 5321 --
Justice Kagan: Well, the government has an argument that Congress did say that, I mean, starting with 5321, which speaks over and over again with respect to individual accounts. And the government's primary argument in its brief is that this shows that that's exactly what Congress was thinking of. When you have the reasonable cause provision and it speaks of specific accounts and the willful provision and it speaks of specific accounts and it's all in the structure of a statute which is speaking of a single violation and then trying to calibrate mens rea with respect to that violation, it would be very odd not to think that Congress meant for the basic provision, without reasonable cause, without willfulness, also to be speaking of individual accounts.
Daniel L. Geyser: Your Honor, I -- I actually read it the -- exactly the opposite way.
Justice Kagan: I know.
Daniel L. Geyser: And if I can explain why, though. (Laughter.) Official
Daniel L. Geyser: So, when -- because Congress was focused about account-specific issues -- now, again, these aren't single account-specific issues, it could be multiple accounts that they were focusing on -- Congress naturally would have said in defining the violation there's a separate violation for each account or each transaction not reported. If -- if Your Honor would look at Section (a)(1) of the statute, you can find this on 4A of the appendix to the government's brief, the very last sentence of section -- subsection (a)(1) says specifically, for a violation of that section, a separate violation occurs for each day, and then it goes on and defines what a separate violation is. If Congress really were thinking of an account itself giving rise to a separate $10,000 penalty, I think you'd see identical language here in (a)(5). You'd say as support for a violation of Section 5314 a separate violation occurs each time an account is not reported or each time a transaction is not reported. Congress didn't use that language despite referencing accounts for other purposes Official 1 in the neighboring provision.
Justice Jackson: Counsel, could that possibly be because we're assuming that Congress was focused on accounts when it's possible that they were actually focused on the person? So the -- the thing that I'm trying to get my mind around is the fact that in 5314 I don't even see the word "account." It -- it says -- you know, it refers to persons who make a transaction or maintain a relation. So, first of all, we have no account word in this statute, and then, when I look at the history of it, it appears to me, and you might correct me if I'm wrong, that Section 5314 originally directed the Secretary to require any resident or citizen who engages in any transaction or maintains any relationship to file this record. And, when they amended the statute, they said -- they changed it to the language that exists here but said this is really not a material change. So, if that's kind of how we're looking at it, then I think maybe we're not even being directed by the statute to care so much Official 1 about the accounts because what Congress was trying to do is give the Secretary information about who was engaged in these kinds of activities, and then the Secretary could go afterwards and ask them for -- for more information. There's that provision about the 25 accounts or whatever, you don't even have to give the information. So, as long as the Secretary knows who is involved in this, then they have the essential nub of information that they need to do further investigation. That's how I'm looking at it. Am I wrong?
Daniel L. Geyser: Yeah, I -- I -- I don't think you are, and I actually think that the -- the points Your Honor has made, I think, support our theory exactly. So the original version of the Act talked about who needs to file a report. It didn't say what you have to file. So Congress is not trying to say in that -- in that language -- the only language, by the way, even in the old version or the current version that even debatably references "account" is that "maintains a relation" Official 1 language. That -- that's -- that's what they're referring to for the account. But, when Congress did that, they didn't say you need to report each account. They're simply telling the Secretary there, by the way, Secretary, you figure this out, you figure out what rules we need. This is the regulated class. This is who you're regulating. It's not what that regulated class has to do. And when Congress --
Justice Alito: Go ahead, finish your thought.
Daniel L. Geyser: I'm sorry. When -- when Congress said it premises the violation on the statute and it's not on the regulation, so -- and, again, when -- when -- when the Secretary did make these regulations, it -- it's very odd to think that this was an account-specific focus when they're activated by an aggregate account balance. You could have a hundred accounts that are under -- that's under the $10,001 threshold. You don't have to report anything. And if -- for people who have lots of accounts, you don't have to report what those accounts are. Official 1 So I think it shows the Secretary also understood the statute as effectively looking at money in -- in foreign bank accounts and foreign transactions and not necessarily focused specifically on each individual account as giving rise to a separate $10,000 violation.
Justice Alito: May I take you back to Justice Thomas's question? He asked you whether there would be multiple violations if the Secretary went back to requiring a separate report for each account. And you said no, that wouldn't, that's not what the statute provides, and then you made a second argument about the regulations. But, to take you to the first part of that argument, aren't you reading into the statute there an annual reporting requirement? The statute, 5314, says nothing about the -- how many times per year or how many years. Doesn't say anything about when -- temporally when you have to file a report. So suppose the Secretary said you have to file a report every six months or every quarter. Would -- would -- would -- under your theory, would those be multiple violations? Official
Daniel L. Geyser: I -- I think, in that case, depending on the wording of the -- of the regulation, which is key, I think there would be multiple violations precisely because you -- you asked what requirements did the Secretary impose. I have to file reports as required by the Secretary. What are those requirements? So you can pull out a list, write down every requirement, and you can just go and check it off. And if you check off every box, you're fine. If you miss a box, you violate the statute. But I don't think you can violate the statute more than once. The -- the question is did you do what you were instructed to do. If the Secretary says, I want this quarterly, then every quarter you do need to file a separate report. That's the focus of the Secretary.
Justice Kavanaugh: Could --
Chief Justice Roberts: Counsel, if you -- am I right that under your view, if you don't file any report at all, say you have 10 -- 10 accounts, that's a $10,000 fine?
Daniel L. Geyser: That -- that's correct, Your Honor. Official
Chief Justice Roberts: And if you file a report but list only one account, that's also a $10,000 fine?
Daniel L. Geyser: That -- that is also a $10,000 fine.
Chief Justice Roberts: Well, doesn't that seem -- I would think the failure to file at all is -- is more egregious. I mean, the Secretary doesn't even know, the Commissioner, that you have accounts or that you're out there, and yet the -- the listing only one account would seem to me to be, you know, a -- mistaken under your view, but at least the Secretary is aware that you're out there and -- and have foreign accounts. Don't you think it's a -- a problem that not filing at all and filing incomplete have the same fine?
Daniel L. Geyser: No, Your Honor, and I actually think the government might flip it around and say the problem is in the reverse. And this is why. If you fail to file the report, the most likely explanation is you didn't know you had to file a report at all. You don't even know what an FBAR is. You didn't Official 1 know you need to file anything. If you filed a report, it at least shows that you're aware that the report is there. And if you do fail to list multiple accounts, this is where the government tends to get aggressive and say now this is a willful violation, where you're subject to even greater penalties because you knew about the FBAR requirement and, for some reason, you didn't manage to report all your accounts. Now the reason that a lot of people don't report all their accounts is this is tricky stuff. When you read the statute, again, it doesn't even say "account." It says "maintains a relation." When you -- when people use software like TurboTax -- and the -- the Center for Taxpayer Rights points this out in their amicus brief -- if you -- in TurboTax, when you're filling out the tax return and you check the box saying that you have a foreign account, it doesn't prompt you to file the FBAR form. If you are not aware of the FBAR requirement that you have to file a separate form and you go and independently hit the prompts to -- to file that report, you don't Official 1 even file the report. So it shows it's very common for people not to file these things, not because they're -- they're reckless or lawbreakers; they simply don't know that this is something they have to do.
Justice Barrett: What --
Justice Alito: What if they do it willfully? What -- is it your position that the willful failure to file a report by a person with multiple accounts is one violation per year?
Daniel L. Geyser: Yes, Your Honor, it's -- it's the same definition of violation, I think, carries throughout the statute, both in 5321 and in 5322, by the way, which is why, in our case, had Petitioner acted willfully in a criminal sense, under the government's reading, he would be exposed to a prison sentence of 1300 years in jail, which seems pretty egregious for what is really a prophylactic paperwork error.
Justice Barrett: What if --
Daniel L. Geyser: Now --
Justice Barrett: Sorry.
Daniel L. Geyser: No. It -- it -- it -- it's -- it's -- it is a requirement that serves Official 1 important functions, but this isn't a malum in se offense. There's nothing inherently wrong with not filing a document listing your accounts. This is only to prevent other criminal conduct or other substantive misconduct. And it's pretty unusual to see a draconian punishment of millions of dollars of fines for not filing, accidentally in our case, and even in a willful violation doing it on purpose, you know, a single document. Now I will point out that for a willful violation, given the way that the penalty is structured, it's still a single violation, but the penalty can go up based on the balances in the accounts that you didn't report.
Justice Gorsuch: Well, that's what I wanted to explore with you and to follow up on the Chief Justice's question. I -- I just want to make sure I understand how you read -- is it 3521? Right. So we have a violation for failing to file or for misreporting one account, many accounts, whatever. And if -- if we're in willful land, as I understand your position, in (C), then the government may look at the amount Official 1 in the accounts and take a considerable portion of the balance of those accounts, is that right?
Daniel L. Geyser: That -- that is right, Your Honor.
Justice Gorsuch: Okay. And if we're in non-willful land, then we're in (5)(A), and it's the $10,000, and there's an opportunity, that's (a)(1), but then there's a reasonable cause exception, and this one got me a little tripped up, and I just want to make sure I understand your response because there the willful cause exception does reference the amount in accounts again. We go back to that. But the -- as I understand your position for -- and the American College helped me a little bit here, I think -- is that the -- that the balance in the account might become relevant as part of an affirmative defense that the taxpayer has to present if it wishes to avoid the non-willful violation on the basis of a reasonable excuse. Is -- is that -- have I got about right?
Daniel L. Geyser: That is about right.
Justice Gorsuch: Okay.
Daniel L. Geyser: And so, in -- in order to Official 1 take advantage of the reasonable cause exception, a taxpayer has to report correctly the balances in the accounts that they have. So, if they have 10 accounts and they report nine of those accounts and they fail to report one, they cannot take advantage of --
Justice Gorsuch: They still get --
Daniel L. Geyser: -- the reasonable cause.
Justice Gorsuch: -- they still get zapped for the non-willful violation?
Daniel L. Geyser: Exactly.
Justice Gorsuch: Okay. All right. And, again, for the willful violation, whether it's one, zero, or 50, you go account by account, and the government can take a whole lot of it?
Daniel L. Geyser: They -- they can. Now -- now, again, unless you reported those accounts.
Justice Gorsuch: Sure.
Daniel L. Geyser: So it's --
Justice Gorsuch: Sure. No.
Daniel L. Geyser: -- it's just accounts and not --
Justice Gorsuch: But it's the willful violation -- Official
Daniel L. Geyser: Yes.
Justice Gorsuch: -- portions? Okay.
Justice Barrett: And that's how you would answer because, presumably, this section applies if you file a timely report. I mean, I think your -- your reading has more force if you're thinking of someone who just didn't file a report at all, like your client, and then filed it later. What about somebody who files a timely report but omits some of the account information on it? I assume that you would say that then that's evidence of a willful violation and so we're in willful land, as Justice Gorsuch calls it?
Daniel L. Geyser: Well, not -- not -- not -- you're not necessarily in willful land. It -- it depends on the circumstances. Now the government will often say that's a willful violation because they -- they'll go and say, why were you reckless in not finding each of your accounts? You're in the best position to know that --
Justice Barrett: So, if I timely file -- file an FBAR and report only three of my 25 Official 1 accounts, 24 accounts, so I haven't triggered the -- the other more lenient reporting method, so I have 24 accounts, I only report three, you say $10,000 as long as it's non-willful?
Daniel L. Geyser: As long as it's non-willful, it's a $10,000 violation. You have once, in a binary on/off way, failed to file reports as required by the Secretary. And even if it's willful, you have still violated that statute once. You failed to file a report that's compliant. Now the penalty can go up, and in -- when you're in willful land, you're facing a potential $100,000 minimum penalty. So the question is just, will it go even higher based on the accounts that you didn't report? But, again, that's -- that's why this is a $10,000 hit when you're looking at someone who's acting innocently. They're -- they're not doing this on purpose. Maybe they -- they didn't know the -- the requirement existed. They made a mistake.
Justice Kavanaugh: But doesn't --
Daniel L. Geyser: Well --
Justice Kavanaugh: -- doesn't -- I -- Official 1 I come back to Justice Gorsuch's question and my earlier question. Doesn't the reasonable cause provision take care of that? And then I had one question specifically on the reasonable cause provision. I understand the first clause of it, "such violation was due to reasonable cause," and then it says "the amount of the transaction or the balance in the account at the time of the transaction was properly reported." I didn't really understand in context what that's getting at.
Daniel L. Geyser: I -- I --
Justice Kavanaugh: And I didn't find a lot of help in the briefs. So I want both sides to tell me what that's talking about.
Daniel L. Geyser: I -- I think the best reading of this language is they're saying that if you have correctly reported the balances in the account, then --
Justice Kavanaugh: Where?
Daniel L. Geyser: On --
Justice Kavanaugh: And when?
Daniel L. Geyser: On your annual FBAR. Now I think that the most common scenario, and it's -- actually, it's hard for me to think of Official 1 ordinary cases where this would otherwise apply -- is where you fail to file an FBAR and then you file a corrected FBAR that then eventually gets it right, but then it's untimely, or you don't file anything and you file a late FBAR that correctly lists your accounts.
Justice Kavanaugh: Let me just ask my concern. If you fail to file at all, are you eligible for the reasonable cause provision?
Daniel L. Geyser: If -- if you never file, then, no, you're not because you haven't reported, properly reported, the balances in the accounts. So it's only when you have actually gotten around to filing something, and, again, I think it normally will apply for a correct submission that is untimely, so -- but, again --
Justice Kavanaugh: If you haven't filed originally, you say because you didn't know, you file later and you file correctly later in terms of the amounts and accounts, you're eligible then for the reasonable cause provision?
Daniel L. Geyser: You -- you are if, again, you can -- you can convince the IRS that you Official 1 have acted reasonably in not filing on time.
Justice Kavanaugh: Right. And -- and you would say it's reasonable -- if I didn't know about it and, you know, I'm a immigrant to the country, I didn't know about this requirement, I guess that's one class of people who often are caught up in this, then you get the reasonable cause --
Daniel L. Geyser: You do --
Justice Kavanaugh: -- you would say?
Justice Jackson: Maybe. Maybe. I mean, if --
Justice Kavanaugh: Yeah. Well, that's the question.
Justice Jackson: Right. Isn't -- and isn't -- and isn't that the problem, that the safety valve that you're pointing to in this case to get the person out of the obligation is in -- still in the control of the government.
Daniel L. Geyser: It's --
Justice Jackson: Right?
Daniel L. Geyser: -- it's in control of the IRS, who often says, you know, maybe unsurprisingly, I don't think this was reasonable cause. Official
Justice Jackson: Exactly.
Daniel L. Geyser: So --
Justice Kagan: Well, on the other hand -- (Laughter.)
Daniel L. Geyser: Yeah.
Justice Kagan: -- I mean, willfulness is an awfully hard standard in contexts like this for the government to meet, and we know that in -- in -- in countless contexts. Now we're dealing here with a statute -- I mean, I sort of suggested what -- that I think 5321 is very clear in its account-specific nature. I think 5314 is also pretty clear in its account-specific nature. And you're coming in and you're making an equitable argument, and the equitable argument has a kind of force. But I think the questions here are: Is that force mitigated when one realizes that there is a reasonable cause exception? And that, on the other hand of this equitable argument, is that there is a real difference between a person with not much wealth, not knowing that he should be filing something about his checking account, and a Official 1 person who's -- has hundreds of millions of dollars in many, many accounts, is constantly making transactions, is constantly opening and closing them, maybe doing it to evade taxes, maybe doing it to finance terrorism. And, you know, in that case, the equities go against you, and that suggests, well, let's just look at the statute, and the statute, as I said, is very account-specific.
Daniel L. Geyser: Well, Your Honor, first, I want to be clear. Our -- our primary argument is not equitable; it's textual. We just read the statute in a -- in a very different way. And -- and I would like to try to convince you of that textual reading because, again, there is nothing in the statute that says you have to report each account. It says you have to file reports as required by the Secretary. If the Secretary doesn't promulgate a regulation, you don't have to do anything at all. The only obligation imposed on anyone that's regulated under this provision is to do whatever the Secretary has told you to do.
Justice Kagan: I don't know how that helps you because, obviously, you're saying that Official 1 there is an obligation on the account holder anyway, so whether the obligation has to do with a particular account or not, you run into that same problem.
Daniel L. Geyser: Oh, I -- I don't think so, Your Honor, because the problem you run into is you haven't filed the proper report. That's one violation. The government's trying to say there is an independent --
Chief Justice Roberts: You can finish.
Daniel L. Geyser: Thank you. That there's an independent stand-alone obligation to report each individual account grounded in the statute itself, because, remember, 5321 is specifically limited to statutory violations. It's not a violation of the regulation. And when Congress wanted to extend this to not doing what the regulation says, they said so expressly. They do that in (a)(2) and (a)(3) of 5321.
Chief Justice Roberts: Thank you, counsel. Justice Thomas?
Justice Thomas: Mr. Geyser, I am Official 1 still not understanding how, if you conflate the obligation to file a report with the account, that it's one account, one report, how that doesn't change your argument, because if you say you have to do what the Secretary says to, the Secretary said file a report, and it's one account per report, and now you violated that by not filing the report on that specific account. And what I hear you arguing now is that all of the accounts are on several reports and simply not filing the report is a problem. I don't know why, if you file one report per account, each failure is not a violation.
Daniel L. Geyser: Well, Your Honor, I think, first, just to be very clear, the -- the regulation we have requires a single report that lists all your accounts, so the --
Justice Thomas: No, this was -- I understand that, but I'm -- I'm saying -- what I'm asking you, the Secretary tomorrow morning can change the regulation and say one report per account.
Daniel L. Geyser: And -- and I think, if the Secretary tomorrow morning departed from decades of settled practice of requiring an Official 1 annual report where all the accounts are listed specifically to try to multiply the statutory violations, I'd be very curious how an APA challenge would come out to that change. But, to answer your question directly, I -- the reason we think that it is still a single violation is Congress did not write account-specific rules directly in the statute. They basically delegated this problem to the Secretary. They said you figure out what reporting requirements are -- are there, you figure out what people are required to do. And then they turned around and said to the regulated parties in 5321, did you comply with whatever the Secretary required? So, if the Secretary says, here's a piece of paper, list all your accounts, if you list seven of 10, that's a violation. If they said here's a stack of paper, I want you to write down each account on a different piece of paper, and you turn in seven pieces instead of 10 pieces, you have again not followed the Secretary's instructions. But it really is a question sort of at a higher level of generality based on the way the statute is Official 1 structured. But, again, you can disagree with every single thing I've just said and still reverse because, in this case, the regulation is a single annual report and all you need to do as a regulated party is to file reports as required by the Secretary. It does not say to report each account.
Chief Justice Roberts: Justice Alito? Justice Sotomayor?
Justice Sotomayor: You know, the problem I'm having is that you seem to be equating report with a form. And my problem is that as I read everything in the statute, the report, you say it's not as to an account, and -- and Justice Jackson says not to an account either. But the whole structure says every time you make a transaction or maintain a relationship for any person with a foreign financial agency, you have to tell the government about that. That's what the word "report" means. Whether you do it on one form or 10 forms is irrelevant to me. I think the essence Official 1 as set forth in the plain language of the statute is, if you have a relationship, an account, tell me about it. That's what the government -- I thought that was the whole purpose of this Act, was that wealthy people were squirreling away millions of dollars in foreign accounts all over the world and the government wanted to know where these accounts were. That's the whole purpose of the statute. All of the transactions that are being set are in the singular, in the case of a -- of a violation involving a failure to report the existence of an account. I'm taking out things that are irrelevant. The amount of the penalty is the balance in that account. So, to me, where am I missing your argument?
Daniel L. Geyser: So I -- I --
Justice Sotomayor: Yours seem to be equating report with a form. I'm equating report with what the statute talks about, the transaction.
Daniel L. Geyser: Well, Your --
Justice Sotomayor: The account.
Daniel L. Geyser: -- a few -- a few points, Official 1 Your Honor. First, what -- what the statute actually says, the only thing that -- that is imposed on the regulated party is to file reports. Now file, I think, there is a very important verb. That -- that is -- that is a formal submission, you're taking a report and you are filing it. Now the only reference to accounts is in that triggering conditional language, and, again, it -- it does not say that you need to report each account. That's not the statutory language. The statute defines when the Secretary -- and, again, this is directed ultimately to the Secretary -- Secretary, you figure out what reporting requirements are necessary. And then the regulated party has to file reports as the Secretary requires. The Secretary could say, I'm not going to have reporting requirements at all. I'm just going to have recordkeeping requirements. It's entirely up to the Secretary how to frame this. But the violation is of the statute, and the only statutory duty is to file reports. Official 1 And I think this is especially clear going back to the original version of the Act, which -- which is framed in terms of who -- who needs to file reports. It's identifying the class that the Secretary's supposed to regulate. That who clause in the original version is the only reference to specific accounts or specific transactions. And, again, the targeted conduct is filing reports. Now, as for the -- the part about Congress trying to prevent people from -- from doing bad things with foreign accounts and doing money laundering and tax evasion, Congress originally was focused on the willful violator, which is why for decades under the Act there was no penalty whatsoever for a non-willful violation. So it'd be -- it'd be pretty extraordinary in 2004 if Congress went after decades of no penalty to suddenly millions and millions of dollars for -- for failing to file, again, non-willfully a single report that happened to list multiple accounts. So I -- I -- I hope I'm answering Your Honor's question.
Justice Sotomayor: I'm not sure, but Official 1 that's okay.
Daniel L. Geyser: All right. (Laughter.)
Chief Justice Roberts: Justice Kagan? Justice Gorsuch?
Justice Gorsuch: Two things that haven't come up that I -- I just want your -- an opportunity to -- to react to. One was that -- that on the form, as I understand it, if an individual has 25 or more accounts, they don't have to disclose anything about the accounts. They just ticks -- tick a box saying I have 25 or more. How does that influence your argument?
Daniel L. Geyser: I -- I -- I think it influences it positively because it suggests, first, the Secretary really isn't concerned about seeing every individual account because you would think that someone who has even more accounts would be the person who you're most concerned about doing something that might be otherwise nefarious. And I think the other way that it really does help us is it's pretty extraordinary to say, I filed -- let's say you file that Official 1 report and it's accurate. You list -- you check the box correctly. You say, I have 30 accounts, but you file it a day late. Under the government's view, you've just committed 30 separate violations of federal law by filing a single form one day late because you didn't report those 30 accounts in a timely fashion. I think that is an extraordinary reading of the statute, especially when it has nothing at all that says there is a specific requirement to report each account.
Justice Gorsuch: Then, secondly, there was some discussion in the briefs about the government's guidance documents in this area, which seemed to favor your position. The government isn't asking for Chevron deference for its interpretations of the statute and argues that you shouldn't be allowed to use them to estop the government either. What do we make of all of that?
Daniel L. Geyser: Well, I -- I think there are a couple things you can make of it. The first is that when the government itself is reading the statute, even if they're doing it as Official 1 they suggest kind of in a casual way, they come to our interpretation of the statute. They've said repeatedly over time that the failure to file an FBAR is subject to a maximum $10,000 penalty. Now the government's correct that they didn't go on and say, oh, by the way, if you have multiple accounts, it's the same rule. But the fact that they're reading the statute when they're simply giving notice to the regulated stakeholders the same way that we're reading the statute, I think that's a point in our favor on the plain text. I think it's certainly a suggestion that it's a reasonable construction that would be entitled to the rule of lenity if the Court thinks that our -- our readings are actually in equipoise, although I -- I'd like to say that we have a better textual reading than they do.
Justice Gorsuch: Thank you.
Chief Justice Roberts: Justice Kavanaugh?
Justice Kavanaugh: Two -- two questions. First, the hypothetical asked by Justice Thomas is a problem for you, as you're Official 1 aware, and in your reply brief, page 7, Footnote 3, you say we don't necessarily -- you don't necessarily have to answer that question. Can you win this case if you lose Justice Thomas's hypothetical, or is that it?
Daniel L. Geyser: We -- we absolutely win this case.
Justice Kavanaugh: How?
Daniel L. Geyser: Well, because Justice --
Justice Kavanaugh: Even if the -- under the new reg, hypothetical reg -- go ahead.
Daniel L. Geyser: So -- well, I -- I -- I just want to make sure I -- I -- I -- I'm answering the question correctly. The -- under the current regulation, the -- the regulation that actually exists, we can win the case even if you disagree with my analysis of the hypothetical future regulation that doesn't exist, and that's because the current regulatory scheme requires a single report where you list all the accounts. So Justice Thomas's hypothetical is dealing with the scenario where you actually have to file multiple reports. Now I admit that that's a slightly harder case for us because, in the statute -- Official
Justice Kavanaugh: Analytically, how would we draw the line between that hypothetical case and this case? Just write the sentence for us.
Daniel L. Geyser: Well, I -- I think the easiest way to write it is that hypothetical case would only apply because there's a requirement to file multiple reports.
Justice Kavanaugh: Got it.
Daniel L. Geyser: So each time you fail to file a report, you violate the statute. Here, you file a single report. That's it. So --
Justice Kavanaugh: Got that. So second question is you talked about the original Act, but, of course, the broad context of this is September 11, the post-September 11 efforts to ferret out terrorist financing, and the government's and Congress -- the PATRIOT Act, and then this Act in terms of going after terrorist financing. Not surprisingly, therefore, the statute is -- has substantial penalties and is very broad and puts the duty, in essence, on people to know their legal obligations. You want to respond at all to that Official 1 context? It's not a surprise it changes after September 11, 2001.
Daniel L. Geyser: I -- I agree, Your Honor, it's not a surprise, but I would say that a $10,000 penalty for most people for a paperwork error that they've done unwittingly, they haven't done -- they're not trying to hide anything, it's not accompanied by any substantive misconduct, a $10,000 hit for the average person who's unaware of the FBAR requirement is a pretty substantial hit. And, again, this is -- the change there is from zero, no penalty whatsoever for a non-willful violation.
Justice Kavanaugh: Right. So unaware but should have known, I think, on the reasonable cause. But I've explored that, so I'll let you go. Thank you.
Daniel L. Geyser: Okay. Thank you.
Chief Justice Roberts: Justice Barrett?
Justice Barrett: Yes. So we're talking about the reporting requirement in the case, but I just want to focus for a moment on 5314's requirement. It says to keep records, Official 1 file reports, or keep records and file reports. So, on recordkeeping, is it your position that the recordkeeping requirement is account-specific?
Daniel L. Geyser: No, Your Honor. I think we would say it's the same thing. You either comply with the -- you've either kept the records the Secretary has required you to keep or you haven't. And so I --
Justice Barrett: So, if I have 20 accounts and I only keep records on one, I've only violated it once?
Daniel L. Geyser: Well, you -- you've only violated it once for -- for the recordkeeping and, again, in a non-willful way. So, if we're talking about a non-willful violation, you didn't keep records because you didn't know you should have kept records. Now, if Congress is concerned about that, they can use language in (5) -- in (a)(5) that mimics the language in (a)(1) and say, for -- for a violation of 5314, there is a separate violation for each record not kept. That's the kind of language I think you would expect to see, especially when Congress is using other Official 1 account-specific language. They're thinking about it in some cases as I'm going to look at an individual account and how it complies with whether there's a heightened penalty or not. But yet, when it comes to the basic violation, I'm looking at a statute that -- that tells the Secretary: You figure this out. You impose whatever requirements you think are appropriate in the manner and to the extent that you see fit. And I'm --
Chief Justice Roberts: Justice Jackson? Justice Alito?
Justice Alito: In answer, following up on Justice Barrett's question, is there a temporal requirement for the reporting, failure to -- to -- I'm sorry, not reporting -- recordkeeping?
Daniel L. Geyser: There -- there is a five-year requirement under the regulation, and so I -- I think that for that five-year period you could have a single violation. I think the alternative under the government's view would, I guess, be an infinite number of violations for every minute or every second that you haven't Official 1 kept a record, which I -- I think is obviously an unworkable standard.
Chief Justice Roberts: Thank you, counsel. Mr. Guarnieri. ORAL ARGUMENT OF MATTHEW GUARNIERI ON BEHALF OF THE RESPONDENT
Matthew Guarnieri: Mr. Chief Justice, and may it please the Court: The Bank Secrecy Act authorizes the Secretary of the Treasury to assess a separate civil penalty for each foreign financial account that a U.S. person fails to report. Petitioner violated the Act 272 times, not just five times, when he failed to report dozens of foreign financial accounts in each of five years. That understanding of the statutory scheme flows straightforwardly from the text. As Justice Kagan illustrated this morning, Section 5321(a)(5) sets up a one-to-one correspondence in which each undisclosed account is a separate violation. We know that because the rules in Section 5321(a)(5) for determining the maximum penalty for a given violation involving an undisclosed account turn on the Official 1 balance in that particular account. Petitioner's reliance on the Dictionary Act is therefore misplaced. The background rules in that Act don't apply if the context of a particular statute indicates otherwise. Here, the text of Section -- of Section 5321(a)(5) demonstrates that Congress used the singular precisely and with care to establish a one-to-one relationship, the relationship I just described: one account, one violation, one potential civil penalty. Reading the statute's references to a single account to mean one or more accounts would defeat Congress's deliberate design. And there is a good reason that Congress set the penalty scheme up this way. Each time a U.S. person maintains an account with a foreign bank, that relationship is a matter of distinct concern to the United States. That is why the text of Section 5314 directs the Secretary to adopt recordkeeping and recording -- reporting requirements that capture account-specific information, such as the account number. When a U.S. person fails to report multiple qualifying accounts, the person Official 1 violates Section 5314 multiple times. And that remains true even if the Secretary permits the required reports about each account to be consolidated on a single annual form. I welcome the Court's questions.
Justice Thomas: One of the things that -- that seemed problematic to me is you cite 5314, but it doesn't mention accounts.
Matthew Guarnieri: Well, Justice Thomas, Section 5314 is phrased in terms of filing reports and keeping records about a relation between a U.S. person and a foreign financial institution. The relation the statute is discussing is an account relationship, and so --
Justice Thomas: Well, it doesn't say that, though.
Matthew Guarnieri: It's true that it does not use the precise word "relation" -- "account" -- excuse me -- but we have always understood it that way. The -- the implementing regulations demonstrate that the -- the relationships that we are concerned here are banking relationships. It's your customer or depository relationship --
Justice Jackson: Can I ask you --
Matthew Guarnieri: -- with a foreign bank Official 1 --
Justice Jackson: -- why -- why -- why isn't that relationship established by the existence of a single account? In other words, you -- you know if a person has one account that they have a relationship for foreign purposes, and there's nothing in the statute that makes clear that Congress intended this statutory provision to be the mechanism by which the United States would get all of the information about the full extent of that person's relationship with any bank. And let me just while I have a moment tell you what really concerns me about your position. You said it's a matter of distinct concern that the United States has with respect to any particular transaction. But it's not illegal, as far as I can understand, for people to have foreign bank accounts. It's not an independent legal problem. And they can structure those accounts in any way they want. So they can put their million dollars in a single account, they can have 10 accounts with, right, of -- of -- of however much, you know, $100,000 apiece or whatever, but you're Official 1 extracting different penalties from them for this purpose based on this totally lawful behavior. It -- it seems to me to make more sense that Congress was talking about wanting to just know who was doing this kind of thing for the purpose of this statute.
Matthew Guarnieri: Well, Justice Jackson, I think the statutory text in 5314 directly answers your question about whether we care just about the fact that you have a relationship with a financial institution, even if that encompasses multiple accounts, or whether we care about each account individually. And it answers that in the enumerated list of information that is at the end of 5314(a), which is reproduced at page 2a of the gray brief. And if you look at that enumerated list of information, this is an -- a list that dates to the original Bank Secrecy Act of 1970. It is a list that Congress said, look, the reports and records that we are going to require -- we are directing the Secretary to -- to require should address this information, and the information there --
Justice Jackson: Yeah, but this Official 1 information doesn't say specifically accounts. In fact, three of the four things are exactly what I'm talking about, the identity and address of the participants, the capacity in which the participant is acting, the identity of the parties in interest -- we just want to know who you're involved with -- and a "description of the transaction."
Matthew Guarnieri: Well, I -- Justice Jackson, respectfully, I disagree, particularly subparagraph (2), the legal capacity in which a participant is acting. The -- the capacity in which you hold these accounts can vary. You may be the beneficial owner of one account at a financial institution. You may be -- you may have signatory authority over a second account --
Justice Jackson: But that doesn't compel the list that you say is required. You -- why couldn't you just have a paragraph that says that? I have a number of accounts, and here is the capacity in which I hold them. And the description of them is they're all bank accounts. It doesn't say give me an enumerated list of each account or transaction. Official
Matthew Guarnieri: Well, I -- I think -- I think the text here is specific enough to convey that Congress was concerned about each one of these accounts. I would also point out, Justice Jackson, the question before this Court is not about whether the Secretary should have implemented this in a different manner to require reporting your relationship with a given foreign financial institution as distinct from the various accounts you have with that financial institution. Certainly, this list illustrates that the per-form approach that Petitioner has championed can't be correct --
Justice Alito: Suppose someone --
Matthew Guarnieri: -- because the identity -- excuse me.
Justice Alito: -- suppose someone reports multiple accounts, lists all that person's accounts but messes up the address as to each account. How many violations?
Matthew Guarnieri: Well, the -- the violation here is the failure to report the account as required by the Secretary in the Official 1 regulations in the form. So, if you misstate the address of the bank for each one of 10 accounts, you've committed 10 violations. Now, of course, the reasonable cause exception would probably operate in those circumstances to prevent the Secretary from actually assessing a penalty, but we would -- we would think about that as 10 accounts if you've made 10 errors would -- excuse me, 10 violations if you made 10 errors for 10 accounts.
Justice Alito: What is the government's position as to whether reasonable cause includes ignorance of the law?
Matthew Guarnieri: No. And we wouldn't accept that in this circumstance or -- or -- or -- or ordinarily in -- in terms of, you know, parties aren't excused from satisfying their legal obligations merely by claiming that they're ignorant of them.
Justice Alito: Well, we are told -- maybe you'll dispute this fact -- that many, many people who have foreign bank accounts of over -- over $10,000 are unaware of this regulation, unaware of this law and these regulations and, even if they're aware of it, Official 1 they're pretty hard to parse. So all those people are committing violations, and they -- if they come in and they say I didn't know anything about this, doesn't matter. That's not reasonable cause.
Matthew Guarnieri: I -- that could be an important part of the reasonable cause analysis. It's not sufficient standing alone. The standard for reasonable cause that the agency applies and that the lower courts have adopted is that you have reasonable cause for your failure to report an account if you fail to report it despite exercising ordinary business care and prudence. Now, though, if -- if you can really demonstrate that you were wholly unaware of these obligations and also that if you had been acting prudently you wouldn't have discovered these obligations, I think that's a powerful case for reasonable cause.
Chief Justice Roberts: Counsel --
Matthew Guarnieri: Now Petitioner in this case tried to make that case, and his view was roundly rejected by the lower courts.
Chief Justice Roberts: Counsel, does Official 1 the United States agree, as the Fifth Circuit put it, that there is a longstanding canon of construction that if the words of a tax statute are doubtful, the doubt must be resolved against the government and in favor of the taxpayer?
Matthew Guarnieri: No, Mister --
Chief Justice Roberts: Now I know your position is that you dispute that this is a tax statute, but --
Matthew Guarnieri: Mr. Chief Justice, I -- I don't think that there is a legitimate sort of pro tax avoidance canon. This Court hasn't applied a canon like that in -- in decades.
Chief Justice Roberts: Your -- your friends --
Matthew Guarnieri: Again, of course, our first line --
Chief Justice Roberts: Oh.
Matthew Guarnieri: -- our first line response here is that, you know, this is not a tax case anyway. These penalties are authorized by the Bank Secrecy Act. So, even if there were such a canon, it wouldn't apply to this case.
Justice Kavanaugh: In response to Official 1 Justice Alito's question, you were initially, I thought, a little blasé about the ignorance of the law is no defense if you truly don't know a legal requirement given the numerous regulatory requirements imposed on someone, and it's true, I believe, that a significant percentage of people who have these accounts have no idea they're supposed to do a reporting. That's a -- that's a little bit problematic. Now you then said the reasonable cause provision can take care of that. And I think you said, if someone truly did not know about their legal obligation and had exercised prudent care, I suppose, in trying to be aware of their legal obligations, you -- you said that's a powerful case. That should be a definitive case, shouldn't it?
Matthew Guarnieri: It -- it is -- it is a very powerful case certainly. I -- I -- you know, it's -- it's a --
Justice Kavanaugh: You added "a very," that's good. (Laughter.)
Matthew Guarnieri: Well, Justice Official 1 Kavanaugh, I -- I don't -- it's hard to give categorical answers because this is a fact-specific test, so, you know, we would want to sort of take the facts as given in a -- in -- in a particular case. The other thing that, you know, you just talk about --
Justice Kavanaugh: Can you just help me on the second paragraph of the reasonable cause provision? Because I had trouble.
Matthew Guarnieri: Sure.
Justice Kavanaugh: I spent a lot of time trying to parse that and had trouble finding an answer to that in the briefs, what -- what that's getting at.
Matthew Guarnieri: Sure. And, candidly --
Justice Kavanaugh: Top of -- top of 6a there.
Matthew Guarnieri: Yeah. Candidly, Justice Kavanaugh, I tripped over that language too when I first read the statute.
Justice Kavanaugh: Good.
Matthew Guarnieri: So we understand that to mean that the balance in the account has to Official 1 have been properly reported at the time the reasonable cause exception is being invoked. And so, ordinarily, what would happen in these cases --
Justice Kavanaugh: Got it.
Matthew Guarnieri: -- is that you would file a delinquent FBAR that accurately reports the balance in a particular account and that would satisfy that. I think it was written that way because there's some suggestion in the history that, you know, at -- at the time, legislators contemplated that the balance in these accounts might be reported in other ways as well, for example, through the income tax system.
Justice Gorsuch: Why -- why --
Matthew Guarnieri: That's not true, but --
Justice Gorsuch: -- why isn't that a strike against your interpretation? That when we talk about penalties for failing to file the report, in -- in 5321, (5)(a) talks about non-willful violations and it's any violation, period, no account mentioned, $10,000. And then willful violations down in Official 1 (c), which is what you've -- your brief really heavily focuses on, does talk heavily about accounts and says that it's $100,000 or 50 percent of the account, whichever is greater. And it goes on and on and on about accounts. That isn't mentioned in the non-willful violation. That language doesn't appear. The only place it appears was the reasonable cause exception, which is, as -- as was pointed out to me in -- in -- in -- in the American College brief, an affirmative defense. It's not what the government has to prove to establish a violation. So the one place where you need it you don't seem to have it. What do we do about that?
Matthew Guarnieri: Justice Gorsuch, I think, certainly, the language in subparagraph (c), the willful violations, I think --
Justice Gorsuch: Yeah. But we -- we -- we're not in will -- we're not in willful land, okay?
Matthew Guarnieri: Sure. I --
Justice Gorsuch: So we put that aside. Official
Matthew Guarnieri: Well --
Justice Gorsuch: And one could easily understand --
Matthew Guarnieri: -- I -- I am -- I --
Justice Gorsuch: Let me just finish.
Matthew Guarnieri: Sure.
Justice Gorsuch: One could easily understand that Congress would say with respect to willful violations, we're really going to whack you, right, and we're going to take 50 percent of every account where there's a willful violation, and -- and that was the law as originally drafted. But, with respect to non-willful violations, that language just doesn't appear.
Matthew Guarnieri: Well, Justice Gorsuch, two points. First, all of these subparagraphs are talking about the exact same violation. Subparagraph (a) is --
Justice Gorsuch: Right. But if we --
Matthew Guarnieri: -- the only provision in this statute --
Justice Gorsuch: -- accept the view that 5314, the violation is the failure to file the report, that's the violation. Spot me that, Official 1 okay? Now you may disagree with that, but spot me that for purposes of understanding 5321's penalty provision. Shouldn't -- shouldn't the absence of the word "account" in the very provision where you need it count for something?
Matthew Guarnieri: I -- I -- I don't think that's right, Justice Gorsuch, because all of these are talking about the exact same violation. So there is only one part of 5321(a)(5) that authorizes the Secretary to assess a civil penalty for a violation. That's subparagraph (a). Everything that comes after subparagraph (a) is a set of rules for determining the penalty that may apply for that particular violation. And we know that the rules in subparagraphs (c) and (d) for willful violations are explicitly account-specific because they turn on the balance in the account.
Justice Gorsuch: Everything below the --
Matthew Guarnieri: The other thing, Justice --
Justice Gorsuch: Sorry. Go ahead. Official
Matthew Guarnieri: Well, Justice Gorsuch, the other thing I -- I think might be relevant here to -- to help get -- convey our -- our reading of the statute, if you look at subparagraph (c), it also says that --
Justice Gorsuch: I -- I'm -- I'm -- put -- put (c) aside. That's willful.
Matthew Guarnieri: Well, I -- I --
Justice Gorsuch: And I'm trying to ask you --
Matthew Guarnieri: Sure. I'm trying to make a --
Justice Gorsuch: -- about the non-willful.
Matthew Guarnieri: -- I'm trying to make a point about how the different paragraphs relate to one another.
Justice Gorsuch: All right.
Matthew Guarnieri: Subparagraph (c) says that you can't get the reasonable cause exception if it's a willful violation. And so what that means is that the reasonable cause exception only applies in cases of non-willful violations.
Justice Gorsuch: Right. Official
Matthew Guarnieri: And the reasonable cause exception is itself account-specific. It uses language that refers to balances in the account.
Justice Gorsuch: Yes. Again, I think that what was pointed out to me -- maybe you have a response to this, I'd like to hear it if you do -- is that's a defense that the taxpayer then has to come forward with. That's not what the government has to prove to establish a non-willful violation.
Matthew Guarnieri: Well, I -- I agree with that, but we're making a point about the way the text is written, Justice Gorsuch.
Justice Gorsuch: Okay. All right.
Matthew Guarnieri: And in certain --
Justice Gorsuch: If I can -- if I can shift then. I -- I think I understand your point. What do we do with the government's guidance documents, which I would -- if it -- if it favored the government, I would fully expect the government to have an argument about Chevron deference before us, or maybe it wouldn't these days, I don't know. But we would at least be Official 1 asked to give it Skidmore deference. And -- and, here, you -- you're -- you're -- they're like garlic to a vampire for the government. You don't want to -- you don't want to touch them. What do we do with that?
Matthew Guarnieri: Well, I -- there's a -- there's a logical explanation for that, Justice Gorsuch, and that is that, you know, the -- the penalty -- the -- the specific question this Court is being asked to resolve in this case is what is the meaning of the phrase "violation of Section 5314" --
Justice Gorsuch: But if the government's telling taxpayers --
Matthew Guarnieri: -- as that phrase is used in Section 5321(a)(5). The Secretary has not promulgated a regulation interpreting --
Justice Gorsuch: It's -- it's going to lead -- no -- nobody promulgates regulations anymore. It's too troublesome. They issue guidance documents. And so the government has issued legions of guidance documents. We've got them all over the briefs, and -- and I -- I just want to hear on the merits what's your response to Official 1 them.
Matthew Guarnieri: Sure. The -- the -- the critical guidance document here is the Internal Revenue Manual, which is the guidance document that IRS examiners apply in assessing penalties in these cases. It is publicly available to taxpayers. If you look at the Internal Revenue Manual, it expresses the same per-account view that we are defending in this case.
Justice Gorsuch: What about --
Matthew Guarnieri: The documents that Petitioner --
Justice Gorsuch: -- what about all the other materials?
Matthew Guarnieri: -- and his amici are pointing to are some other places in which, in isolated statements, the IRS has said things like, if you fail to file the FBAR, the penalty can be up to $10,000.
Justice Gorsuch: Up to 10,000.
Matthew Guarnieri: There is -- there is no -- he -- the Petitioner has not identified a single instance in which the government has ever endorsed his view that you -- if you fail to Official 1 report multiple accounts, you can only be liable for a single penalty. And I'd just -- I'd -- I'd also like to talk a little bit about exactly what Petitioner's view is. Petitioner asks this Court --
Justice Alito: Well, before you move off that, the -- the March 2011 version of Letter 3709 says, "For the failure to file TDF 90-22.1 due on or after June 30, 20" -- "2005, the penalty cannot exceed $10,000." Do you think that's unclear?
Matthew Guarnieri: It -- I think it was not precisely phrased. I think it would have been more helpful if the agency had gone on to say that, actually, if you fail to report more than one account, the penalty per unreported account is $10,000. That has been the agency's institutional position for many years. This is not a case in which there is any legitimate suggestion the agency has shifted positions over time. This is at best a kind of attack on the agency's messaging to the public, which maybe could have been better, but I don't think that that should decide the question here. Official
Justice Alito: Well, your -- your messaging to the public has certainly changed over time, hasn't it?
Matthew Guarnieri: Well, the -- the -- as I said, the key document here is the Internal Revenue Manual, which has not changed over time. Since 2008, that has articulated the -- the same view that -- that we are defending in this Court.
Justice Alito: What about criminal violations? Do you have the same reading?
Matthew Guarnieri: Yes, we do. We think that each -- if you satisfy the other elements of the criminal offense in -- in Section 5322(a), that each failure -- or each willful failure to disclose to the United States one of your foreign bank accounts could be the basis for a separate criminal prosecution. I -- I -- I know, you know, Petitioner has made a big deal about that, including this morning repeating this fantastical figure about 1300 years in prison. I think the Court should be assured that there are other significant constraints on the scope of the criminal prohibition in the Bank Secrecy Act, including, Official 1 in particular, this Court's decision in Ratzlaf against the United States, which interpreted that provision and construed it to require willfulness in the heightened criminal law sense. We can only bring a Bank Secrecy Act criminal prosecution if we can prove beyond a reasonable doubt that the defendant knew that when he was acting what he was doing was unlawful. So those are rare cases, and that's certainly not this case. We're not making an allegation in this case that Petitioner had satisfied that -- that heightened willfulness. This is a -- a non-willful case, and -- and I don't think the criminal statute really has anything to do with the question before this Court.
Chief Justice Roberts: Well, you're not making the allegation here, but your brief recites facts that suggest that you think you could.
Matthew Guarnieri: That's right, Mr. Chief Justice. I -- I think this case came pretty close to the line, and I -- I think that's why the agency chose to go up to the Official 1 maximum available civil penalty in this case. I mean, Petitioner earned more than $70 million in his time in Romania. He filed multiple Form 1040s that -- multiple individual income tax returns during the period that he was living in Romania. If you had read carefully the instructions to the Form 1040 during the years in which he filed those forms, there are instructions in -- in the Form 1040 process about your foreign account reporting requirements. There is a question on Schedule B of 1040 that asks, do you have foreign bank accounts? And I'm paraphrasing here, but in substance, it says, if you have foreign bank accounts, please see Treasury Department Form 90-22.1 for your FBAR filing obligations. And I -- I think that's actually another piece of -- of the puzzle here in terms of the equities of the case. We are not trying to trip people up in the 10 -- Form 1040 individual income tax return filing process. There is -- there are instructions there about the FBAR. We are trying to bring it to people's attention so that they are aware of these filing Official 1 requirements and they can comply with them. Petitioner was -- has -- had tried to make the case that his violations here were -- were inadvertent. But there was substantial evidence to the contrary. The district court rejected his reasonable cause -- his assertion of the reasonable cause defense. The Fifth Circuit affirmed that on de novo review. And -- and he didn't seek this Court's review on that issue.
Justice Kavanaugh: That's -- that all makes sense as to this case. The amicus briefs make a point that there are a number of different categories of people who are not going to fit that -- that description of this case, immigrants in the United States and Americans abroad who don't have this kind of knowledge. And the statistics were, at least in the amicus briefs, that there's a sizable percentage of people who still don't know about this reporting obligation. Do you just want to respond to that and try to explain who -- who the populations are who are not reporting and the knowledge that they might have about the requirement? Official
Matthew Guarnieri: Sure. We don't have precise figures or data about the current rates of compliance with -- with the foreign account reporting obligation, so I can't tell the Court what percentage of Americans living abroad actually have a reportable foreign account, meaning they have accounts outside the United States that have an aggregate balance that exceeds $10,000. I know that's actually a significant amount of money for many Americans. So you're talking about the small slice of people who have that much money in their aggregate accounts and those accounts are abroad. You know, certainly, I don't think adopting Petitioner's view in this case will solve that problem. I mean, the whole Congress authorized the Secretary to adopt -- excuse me -- to assess penalties for non-willful violations of the Act in 2004 after amassing abundant evidence that, in the absence of those penalties, the rates of compliance with these foreign account reporting obligations were relatively anemic. And that was a problem, and that was a problem that Congress solved by Official 1 authorizing the penalties to assess -- excuse me -- authorizing the Secretary to assess penalties for non-willful violations. In that same 2004 enactment, Congress also created the reasonable cause exception, which I think, again, speaks to an effort to sort of make sure that the truly blameless have an out here. And Congress also -- also increased the penalties for willful violations in that 2004 law.
Justice Alito: Well, I didn't understand --
Matthew Guarnieri: So I -- I think the whole history here demonstrates that this is really a serious matter. And --
Justice Alito: No. Could you return once again to your understanding of the relationship between the reasonable cause requirement and ignorance of the law? Your first answer, when I asked that, was ignorance of the law is not reasonable cause. But then you -- you seemed to say, if someone isn't aware of -- of the -- of the reporting requirement, that makes a powerful case, a very powerful case, for reasonable cause. So what is the Official 1 relationship exactly?
Matthew Guarnieri: Sure. The -- the standard here is that you -- whether you were acting with ordinary business care and prudence. If you fit -- if you -- if you were, in fact, aware of your FBAR reporting obligations, you're out. There is no way you can qualify for the reasonable cause. So ignorance -- it's sort of a -- you know, you're -- you're only talking about people who have a colorable claim to not knowing about their filing obligations. And then, with respect to that group of individuals, the question is, well, should they have known about their filing obligations? And the conclusion of the lower courts here was that Petitioner should have known about his filing obligations.
Justice Alito: No, I understand -- I -- I understand the -- the facts of this case, but I'm -- I'm thinking of other cases.
Matthew Guarnieri: Sure. Well -- and it's hard to generalize because whether you should have known about your filing obligations is going to depend on lots of factors that might vary from one American to the next living Official 1 abroad. You know, were you a person of business sophistication? Did you have the means to retain professional tax and accounting advisors? Were you filing the Form 1040, in which, if you had read the instructions, you would have been informed about your foreign bank account reporting obligations? Is this your first violation? You know, is it really credible to say that you had 50 or 60 foreign bank accounts with millions of dollars in them, you had numbered accounts in Switzerland and Liechtenstein, you were paying professional Romanian tax lawyers and accountants, but you made no inquiry into your obligations in the United States? I -- that -- that's not plausible in this case, but, you know, the reasonable cause exception remains available to those individuals who -- who would like to seek to invoke it. The -- the other part of that, I -- you know, I -- I understood from some of the Court's questions earlier there was some skepticism that the reasonable cause exception is -- is a -- sort of a sufficient answer here because it's applied by the agency in the first Official 1 instance. But judicial review is also available. If a -- if the agency determines that you lacked reasonable cause and you disagree with that, you can obtain judicial review of the agency's determination. And -- and this case again illustrates that. The Petitioner sought that.
Justice Kavanaugh: Am I right that you can get judicial review before you're forced to pay, unlike in some tax situations?
Matthew Guarnieri: That's absolutely correct, Justice Kavanaugh. There is no requirement in this scheme that you fully pay the penalties before you get review in federal district court. And that's an important difference between these penalties and tax penalties.
Justice Kagan: Can I --
Justice Jackson: But, presumably, you would have to have a lawyer to do so. So there is some cost to seeking to -- to get out of this, right?
Matthew Guarnieri: That -- that's absolutely true, Justice Jackson, although we're talking about the small portion of people who Official 1 have foreign bank accounts abroad with a balance greater than $10,000, and the question presented here really only impacts those individuals who have more than one foreign bank account. So, you know, I --
Justice Jackson: But, realistically, that's anybody who's living overseas? I mean, you -- this applies to people who are living overseas and have more than $10,000 in a bank account, a foreign bank -- it's a foreign bank account because they're living there, but --
Matthew Guarnieri: Yes, I agree, with -- with the slight amendment it's -- it's U.S. citizens. It's a --
Justice Jackson: Right. So any U.S. citizen --
Matthew Guarnieri: -- it's an obligation incumbent on U.S. citizens. That's right.
Justice Jackson: -- any U.S. citizen living abroad who has more than $10,000 in a bank account, wherever they're living, is subject to this?
Matthew Guarnieri: That's correct.
Justice Gorsuch: Counsel, I -- I'd like to just understand your -- how -- how it -- Official 1 the form interacts with -- with -- with your understanding of the penalties. As I understand it, on the form, if -- if you have 25 or more bank accounts, and we're talking about in aggregate $10,000, not one bank account, in aggregate. But, if -- if -- if it's over 25, you -- you tick a box and you're done. Is that right?
Matthew Guarnieri: No, Justice Gorsuch. Under the 25 account rule, you have -- there is a -- a box that you would check saying that you satisfy the 25 account rule. You also have to list the precise number of accounts that you have.
Justice Gorsuch: Okay. The number, okay.
Matthew Guarnieri: Under the current regulation --
Justice Gorsuch: So -- so -- so long as I tick the box and say I have 25, it would seem pretty hard to accumulate non-willful violation -- non-willful violations, whereas, if it's under 25 and you have the wrong address of the bank 12 times, that's a $120,000 fine. Is there some incongruity there that Official 1 people with more bank accounts are actually less susceptible to penalty than those with fewer?
Matthew Guarnieri: Well, I -- I take the point, Justice Gorsuch, you -- you certainly have to provide less information in the first instance if you qualify for one of these 25 account rules. You are under a continuing obligation to provide that information to the Secretary, and in that sense, if you misstate the information when the Secretary requests it, you are in the same position as the individual who is required to provide that information up front on the form. As we've explained in our brief, the Financial Crimes Enforcement Net -- Network has published a Notice of Proposed Rulemaking to eliminate the 25 account rule. It is a vestige of an era before word processing and electronic filing in which, you know, the -- the agency's judgment at the time was that individuals who had a very large number of accounts, the administrative burden of reporting all of those accounts in the first instance rather than just providing information when requested exceeded Official 1 the value to the department of receiving that information on the form itself. I -- I think we might strike a different balance now, but, again, that -- there's an ongoing rulemaking addressing that. And I certainly don't think the 25 account rules helps Petitioner in this case because it doesn't undermine our position that each one of these accounts is a matter of distinct concern, and if you fail to report any one of them, you have committed a distinct violation.
Justice Sotomayor: There is some basic information besides just checking the box, isn't there?
Matthew Guarnieri: That's absolutely right, Justice Sotomayor. You are required to fill out the other portion of the form identifying information about the filer of the form. Also, to -- to be precise, there are -- there are two 25 account rules in the current regulations, and they require you to account -- to -- to report the -- the relationship that you have to the accounts, so Official 1 do you have a financial interest in those accounts or do you have signatory or other authority over the accounts but not a financial interest. That information is provided even if you invoke one of these rules. If you have signatory authority over one of these accounts, you are required to identify the beneficial owner of the account even if you qualify for one of these 25 account rules. So -- so there is certainly additional information.
Justice Sotomayor: I guess the question is, you don't have to identify the account number?
Matthew Guarnieri: You don't have to provide some of the granular information that would have otherwise been required if you don't qualify, like the account number and the address and things like that.
Chief Justice Roberts: Thank you, counsel. Anything further here? Okay. Anything further? Okay. Thank you. Official
Matthew Guarnieri: Thanks, Chief Justice.
Chief Justice Roberts: Mr. Geyser, rebuttal? REBUTTAL ARGUMENT OF DANIEL L. GEYSER ON BEHALF OF THE PETITIONER
Daniel L. Geyser: Thank you, Mr. Chief Justice. A -- a few short points. First, for the reasonable cause exception, I think, when my friend says that ignorance of the law is no excuse, what this is showing is exactly what Justice Jackson pointed out. This is inviting regulated parties to have to spend money on lawyers to litigate first at the agency level, hope they win, and then, if they lose, litigate in court to try to establish, as my friend suggested, is a fact-specific defense. That is quite the burden on the average person, especially with the cudgel of per-account penalties hanging over their head if they lose. Anyone with 10 or 20 accounts could be facing massive fines if it turns out that they can't prevail on the reasonable cause defense, and yet, just so you know how extreme this can be, if you look to pages 104 and 106 of Official 1 the Joint Appendix, you'll see that some of these $10,000 penalties in this case were premised on accounts that had $24 in them for the year, $31, $25. This is -- this is very unlikely what Congress would have actually been thinking, is this isn't an appropriate calibrated punishment for a non-willful violation. Now, for the avoidance canons, I think it's interesting that my friend concedes that 5322 defines "violation" the same way as 5321. And I know he said that it -- it is, in fact, a fantastical number to suggest that Congress thought that there would be a 1,300-year prison sentence for a -- a -- a reporting error. And I know my friend says, well, willfulness is a very high bar, and it certainly is, but the point -- that misses the point. Was Congress in looking at this saying, if you willfully violate a reporting requirement with no other criminal misconduct, a prison sentence in the -- in the thousands is an appropriate punishment? I think that casts doubt that what Congress was thinking a violation is really a Official 1 per-account measure as opposed to a per-report measure. And I think that follows specifically when the language of the actual statute talks about filing reports. It does not say reporting accounts. It uses the word "file." You have to submit the document. And under the current regulations, which is all that really matters for this case, you file a single annual report listing all of your accounts. Just to correct a minor factual point which I know isn't really critical to the statutory question, but just to be clear for this case, Petitioner did file some U.S. tax returns while he was living abroad. He did so because he had invested in a relative's restaurant in California. The relative prepared the tax returns for him. And the reason he thought those were required is because the money was earned in the United States. He misunderstood United States tax law, which I think a lot of people do. And when you're dealing with -- my friend says too it's very unusual to have foreign accounts with $10,000 or more. Again, not for people living Official 1 abroad. Any U.S. resident or U.S. citizen living abroad is subject to these requirements. For those U.S. citizens, this isn't a foreign bank account, this is your bank account or it could be your investment account or your retirement account or your safety deposit box or your checking account. And you need to find an accountant in -- in wherever you're living that's knowledgeable in U.S. Bank Secrecy Act law that knows you need to -- need to file an FBAR. To even know to ask that question is pretty extraordinary when accountants in the U.S., as the Center For Taxpayer Rights pointed out, were -- in the United States accounts were unaware of these requirements dating back about a decade ago. So, again, the question really in this case is what was Congress thinking when they imposed a specific requirement to file reports or keep records. And they did not say do this by account. As Justice Gorsuch pointed out, there is no language in (a)(5) defining the violation that is phrased in account-specific language even though Congress took care to Official 1 specify what a separate violation is in other sections of 5321. I think, when they didn't do that with (a)(5) and when you look at the extraordinary consequences of adopting the government's approach, where you're effectively giving the IRS discretion to decide between a range of zero and many multiples of the statutory ceiling, I think it becomes pretty clear what Congress had in mind.
Chief Justice Roberts: Thank you, counsel. The case is submitted. (Whereupon, at 11:15 a.m., the case was submitted.)