United States District Court, W.D. Texas, Austin Division
SPARKS SENIOR UNITED STATES DISTRICT JUDGE
REMEMBERED on this day the Court reviewed the file in the
above-styled cause, and specifically, Defendant Dominique
Colliot's Motion for Summary Judgment [#52], the United
States of America (the IRS)'s Response [#57] in
opposition, Colliot's Reply [#58] in support, and the
IRS's Surreply [#59-2] in opposition as well as
Colliot's Unopposed Motion to Modify Order on Prejudgment
Writ of Garnishment to UBS [#61]. Having reviewed the
documents, the relevant law, and the case file as a whole,
the Court now enters the following opinion and orders.
December 2016, the Internal Revenue Service (IRS) initiated
this lawsuit to reduce to judgment outstanding civil
penalties assessed against Colliot. Compl. [#1] at 1. The
penalties were assessed for Colliot's repeated and
willful failures to timely file Form TD F 90-22.1, entitled
"Report of Foreign Bank and Financial Accounts" and
commonly referred to as an "FBAR, " from 2007 to
2010. Mot. Summ. J. [#52]. For 2007, the IRS assessed
penalties of $548, 773 for four separate FBAR violations.
Resp. Mot. Summ. J. [#57] at 15. For 2008, the IRS assessed
penalties of $196, 082 for another four FBAR violations.
Id. at 16. The IRS also assessed smaller penalties
in 2009 and 2010. Id. at 17. In forms provided to
Colliot in connection with the assessment of these penalties,
the IRS stated the penalties were authorized under 31 U.S.C.
§ 5321(a)(5) and 31 C.F.R. § 1010.820(g)(2). Mot.
Summ. J. [#52-12] Ex. L at 2.
underlying facts are not in dispute. Colliot now moves for
summary judgment on the ground the IRS incorrectly applied
the law when it calculated the monetary penalties assessed
against Colliot. Mot. Summ. J. [#52]. This pending motion is
ripe for review.
Motion for Summary Judgment
understand Colliot's argument, it is first necessary to
briefly review the history of the provision used to impose
civil penalties upon Colliot, 31 U.S.C. § 5321(a)(5). A
previous version of § 5321(a)(5) allowed the Secretary
of the Treasury to impose civil monetary penalties amounting
to the greater of $25, 000 or the balance of the unreported
account up to $100, 000. See Resp. Mot. Summ. J.
[#57] at 2. A related regulation promulgated by the
Department of the Treasury via notice-and-comment rulemaking,
31 C.F.R. § 103.57, reiterated that "[f]or any
willful violation committed after October 26, 1986 ... the
Secretary may assess upon any person, a civil penalty . . .
not to exceed the greater of the amount (not to exceed $100,
000) equal to the balance in the account at the time of the
violation, or $25, 000." Amendments to Implementing
Regulations Under the Bank Secrecy Act, 52 Fed. Reg. 11436,
2002, the Treasury delegated the authority to assess
penalties under § 5321(a)(5) to the Financial Crimes
Enforcement Network (FinCEN). Treasury Order 180-01, 67 Fed.
Reg. 64697 (2002). In addition to this delegation of
enforcement authority, Treasury Order 180-01 provided that
related regulations were unaffected by this transfer of power
and should continue in effect "until superseded or
revised." Id. Roughly six months later, FinCEN
redelegated the authority to assess penalties under §
5321(a)(5) and its related regulation, § 103.57, to the
IRS. Mot. Summ. J. [#52-5] Ex. E (Memorandum of Agreement and
Delegation of Authority for Enforcement of FBAR
2004, Congress amended § 5321 to increase the maximum
civil penalties that could be assessed for willful failure to
file an FBAR. 31 U.S.C. § 5321(a)(5); American Jobs
Creation Act of 2004, Pub. L. No. 108-357, § 821, 118
Stat. 1418 (2004). Under the revised statute, the civil
monetary penalties for willful failure to file an FBAR
increased to a minimum of $100, 000 and a maximum of 50
percent of the balance in the unreported account at the time
of the violation. 31 U.S.C. § 5321(a)(5)(C).
this change, the regulations promulgated in reliance on the
prior version of the statute remained unchanged. Thus, §
103.57 continued to indicate the maximum civil penalty for
willful failure to file an FBAR was capped at $100, 000.
FinCEN subsequently renumbered § 103.57-it is now 31
C.F.R. § 1010.820-as part of a large-scale
reorganization of regulatory provisions. It also amended part
of the regulation to account for inflation. Civil Monetary
Penalty Adjustment and Table, 81 Fed. Reg. 42503, 42504
(2016). FinCEN did not, however, revise the regulation to
account for the increased maximum penalty now authorized
under § 5321(a)(5). 31 C.F.R. § 1010.820.
Nevertheless, the IRS did not let § 103.57 (now §
1010.820) constrain its enforcement authority, and since
2004, the IRS has repeatedly levied penalties for willful
FBAR violations in excess of the $100, 000 regulatory cap.
Resp. Mot. Summ. J. [#57] at 3.
U.S.C. § 706(2), a court must hold unlawful and set
aside agency actions which are "arbitrary, capricious,
an abuse of discretion, or ...