Kyle Niewoehner, Feigning Willfulness: How Williams and McBride
Extend the Foreign Bank Accounts Disclosure Willfulness Requirement and
Why They Should Not Be Followed, 68 Tax Lawyer 251 (2014), here.
and DOJ and IRS Use “Carrot ‘n Stick” to Enforce Global Tax Laws, 29 Criminal Justice 4 (2014), here.
In Williams, the court held that failing to file an FBAR after signing a tax return constitutes “a conscious effort to avoid learning” about the FBAR requirement, which satisfies the willfulness requirement. In McBride, the court held that signing a tax return constitutes knowledge of the duty to comply with FBAR, which satisfies the willfulness requirement. By holding that taxpayers willfully violate the FBAR statute simply by signing a tax return and then failing to file, both Williams and McBride construe the willfulness requirement more broadly than applicable precedent would have dictated.
This Comment argues that the current text of the statute and precedent require a more narrow reading of the FBAR willfulness requirement. It argues that taxpayers should not be charged with constructive knowledge after signing a tax return. Instead, a court should have to find that the taxpayer is aware of the existence of the FBAR requirement in order to find a willful violation. In addition to being consistent with the text of the statute and precedent, this approach would avoid the liability nightmare created by a combination of the Williams–McBride strict liability standard and the ill-defined “other financial account” language in the law.
Using the Williams–McBride standard of willfulness, it is difficult to conceive of how a violation could be nonwillful.
The Williams–McBride interpretation of the willfulness requirement in 31 U.S.C. § 5321(a)(5) is flawed because it imposes a strict liability standard where both the statute and the case law indicate otherwise.
The proper use of willful blindness is not to compel a finding of willfulness from facts from which a jury could infer the defendant willfully blinded himself, but to permit
a finding of willfulness from such facts. In other words, the jury
must still find willfulness an intentional violation of a known legal
duty -- but only as an inference which it makes applying the proper
standard (preponderance, clear and convincing or beyond a reasonable
doubt). This test would then let the trier of fact determine
willfulness. The trier of fact's factual determination or willfulness
or nonwillfulness could be reversed under the appropriate appellate
standing -- clearly erroneous in a bench trial or no reasonable juror
could find willfulness or nonwillfulness in a jury trial. That is not
the standard the Williams court applied and instead applied a
legal conclusion that compelled the determination from the fact that the
defendant did not read the 1040 and, for that reason, was willfully
blind.
The solution for future courts is to look past the flawed Williams–McBride reasoning and adhere to the Sturman
standard, which looked for an actual intent to violate the FBAR
requirement or a course of conduct that would allow a court to infer
willfulness. This would clearly avoid the liability problems created by
the strict liability of Williams–McBride while upholding the relevant Supreme Court precedent and the current version of the statute.
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