4th DCA Reverses DC – Intent to Evade Taxes Does Not Makes sequent Violations of FBAR Rules Willful – Willful Blindness Does.
July 24, 2012
United States v. J.Bryan Williams; No. 10-2230 Decided: July 20, 2012 Reversed by unpublished opinion. Judge Shedd wrote the majority opinion, in which Judge Motzconcurred. Judge Agee wrote a dissenting opinion. Unpublished opinions are not binding precedent in this circuit.
The parties agree that Williams violated § 5314 by failing to timely file an FBAR for tax year 2000. The only question is whether the violation was willful.
The district court found that:
(1) Williams "lacked any motivation to willfully conceal the accounts from authorities" because they were already aware of the accounts and
(2) his failure to disclose the accounts "was not an act undertaken intentionally or in deliberate disregard for the law, but instead constituted an understandable omission given the context in which it occurred."5 J.A. 378-79.Therefore, the district court found that Williams's violation of § 5314 was not willful.
"Willfulness may be proven through inference from conduct meant to conceal or mislead sources of income or other financial information," and it "can be inferred from a conscious effort to avoid learning about reporting requirements." United States v. Sturman, 951 F.2d 1466, 1476 (6th Cir. 1991) (internal citations omitted) (noting willfulness standard in criminal conviction for failure to file an FBAR).
Similarly, "willful blindness" may be inferred where "a defendant was subjectively aware of a high probability of the existence of a tax liability, and purposefully avoided learning the facts point to such liability." United States v. Poole, 640 F.3d 114, 122 (4th Cir. 2011) (affirming criminal conviction for willful tax fraud where tax preparer "closed his eyes to" large accounting discrepancies).
Importantly, in cases "where willfulness is a statutory condition of civil liability, [courts] have generally taken it to cover not only knowing violations of a standard, but reckless ones as well." Safeco Ins. Co. of America v. Burr, 551 U.S. 47, 57 (2007) (emphasis added).Whether a person has willfully failed to comply with a tax reporting requirement is a question of fact. Rykoff v. United States, 40 F.3d 305, 307 (9th Cir. 1994); accord United States v. Gormley, 201 F.3d 290, 294 (4th Cir. 2000) ("[T]he question of willfulness is essentially a finding of fact.").
The opinion points out that there is evidence supporting the conclusion that Williams' failure to file the FBAR was willful, particularly where a "willful violation" can include "willful blindness to the FBAR requirement" or "intentional ignorance." Maj. Op. at 12.
"Thus, we are convinced that, at a minimum, Williams's undisputed actions establish reckless conduct, which satisfies the proof requirement under § 5314. Safeco Ins., 551 U.S. at 57.
Accordingly, we conclude that the district court clearly erred in finding that willfulness had not been established. For the foregoing reasons, we reverse the judgment of the district court and remand this case for proceedings consistent with this opinion."
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