[00:00:00] Speaker 01:
Good morning.

[00:00:01] Speaker 02:
Whenever you're ready, Ms.

[00:00:02] Speaker 02:
Furlough.

[00:00:06] Speaker 01:
The court below erred in holding that the maximum penalty that could be imposed was 50% of the account and not the 100% provided in the statute.

[00:00:17] Speaker 01:
However, even if the IRS could impose a 50% willfulness penalty, it erroneously did so here.

[00:00:24] Speaker 01:
And the court below erred in affirming it, especially on your first point.

[00:00:28] Speaker 02:
Is your argument that even though there was clearly what I think is a clear statutory change in 2004, that because there were earlier regulations by the IRS, those earlier regulations, which are not consistent with the statutory change, trump the statute?

[00:00:48] Speaker 01:
Yes, Your Honor, that is precisely right.

[00:00:51] Speaker 04:
Wait a minute.

[00:00:52] Speaker 04:
Why can't Congress supersede a regulation by passing a law?

[00:00:56] Speaker 04:
Your argument seems to fly in the face of the whole concept of Chevron analysis, for example, where we look at the statute to see if it has meaning before we do anything else.

[00:01:10] Speaker 04:
And if the right complies with that meaning, how on earth can a regulatory entity refuse to obey a law passed by Congress?

[00:01:22] Speaker 01:
I think the regulatory entity in this case had to pass a regulation that would enact this and chose not to do so.

[00:01:33] Speaker 02:
So Congress lives at the behest of what agencies do.

[00:01:38] Speaker 02:
In other words, what if bureaucrats at the IRS didn't like what Congress did?

[00:01:43] Speaker 02:
They could be issuing regulations all the time or not changing regulations.

[00:01:48] Speaker 02:
That's not my understanding of how the system works.

[00:01:51] Speaker 02:
Congress was in its authority to make this change.

[00:01:56] Speaker 02:
I don't think you're disputing that.

[00:01:57] Speaker 02:
And I'm not understanding how on any theory of administrative law or whatever we're looking at, an earlier regulation that was based on a different statutory provision would inhibit or impair Congress from being able to change.

[00:02:16] Speaker 01:
except that Congress didn't make it self-actuating, the agency had to pass a regulation.

[00:02:23] Speaker 01:
And I'm going to refer this court to one of its cases, which is cited as my reply brief at page four.

[00:02:30] Speaker 04:
Refer to the language in the law where it's not self-actuating.

[00:02:34] Speaker 01:
It says the secretary may impose a penalty.

[00:02:39] Speaker 01:
And then it gives the maximum penalty that the secretary may impose.

[00:02:44] Speaker 01:
But the secretary, in this case, by not changing the statute.

[00:02:47] Speaker 04:
Wait, wait, wait, wait, wait.

[00:02:49] Speaker 04:
The secretary did actuate by imposing the penalty.

[00:02:54] Speaker 01:
The secretary originally actuated by imposing the penalty of $100,000 and never changed that.

[00:03:08] Speaker 01:
because the penalty remained as it was in the regulations.

[00:03:11] Speaker 04:
Wait, wait, wait, wait, wait.

[00:03:12] Speaker 04:
Are you saying that there was no 800 and something thousand dollar penalty imposed?

[00:03:18] Speaker 01:
In the regulations I'm talking about, they imposed an 800 and something thousand dollar penalty.

[00:03:21] Speaker 04:
And what I'm saying is, when they imposed that 843 or whatever it was, 50% of the amount that was hidden,

[00:03:29] Speaker 04:
then the secretary effectuated the statute, didn't they?

[00:03:36] Speaker 01:
They did, but they did not follow their regulations.

[00:03:39] Speaker 02:
So you're saying that the statute has no force in effect.

[00:03:44] Speaker 02:
as long until they issue superseding regulations with regard to the newsroom.

[00:03:50] Speaker 02:
Correct.

[00:03:50] Speaker 02:
What's your case on that?

[00:03:52] Speaker 01:
Colliat and Wadham.

[00:03:55] Speaker 04:
Do you have something above the district court level?

[00:03:58] Speaker 01:
No.

[00:03:58] Speaker 01:
This is a case of first impression here, Your Honor, on the appellate.

[00:04:05] Speaker 02:
Well, maybe because, I mean, sometimes cases don't come up for adjudication because parties think the result is self-evident.

[00:04:12] Speaker 02:
And so maybe, I mean, you know, it seems to me, I mean, there are numerous cases.

[00:04:17] Speaker 02:
Congress is always passing new statutes.

[00:04:21] Speaker 02:
I haven't seen someone argue that that statute has no force in effect because there were previous regulations that were inconsistent.

[00:04:30] Speaker 04:
Let me put it this way.

[00:04:32] Speaker 04:
Is there any stat, any case, in any court of appeals in which the court of appeals has said that when Congress passes a law which has a clear holding that a regulatory entity may trump that statute by not passing an appropriate regulation?

[00:04:52] Speaker 01:
I'm going to refer, Your Honors, to mid-continental mail, which is cited at page four of my reply brief, in which an agency attempted to repeal a regulation on the ground that it was not consistent with the statute.

[00:05:10] Speaker 01:
And this court said that even though the agency wanted to repeal the regulations conformed to the statute, it still had to follow

[00:05:19] Speaker 01:
the notice and comment procedure and that the regulation would not be effective until it was put into effect in the proper way.

[00:05:29] Speaker 01:
There was no notice and comment procedure followed here and I don't believe that any change in the regulation was effective.

[00:05:42] Speaker 01:
May I move along to another point here?

[00:05:47] Speaker 04:
Sure, you may move along.

[00:05:50] Speaker 04:
of the reply brief.

[00:05:56] Speaker 01:
In the case of United States versus Khan, which the appellee provided to the court

[00:06:03] Speaker 01:
A few days ago, Judge Masamoto gave a cogent explanation as to why the statute regarding failure to file FBARs had an increased penalty.

[00:06:14] Speaker 01:
And that had to do with 9-11 and money laundering.

[00:06:19] Speaker 01:
Although all taxpayers were obligated to file FBARs, the maximum penalty for

[00:06:24] Speaker 01:
failure to file should have been reserved to those criminally derived proceeds, those who were engaged in complex tax evasion schemes, or money... So now we're assuming that we're under the statute.

[00:06:39] Speaker 02:
Correct.

[00:06:39] Speaker 02:
And you're saying that the Secretary has discretion within that maximum penalty fitting.

[00:06:47] Speaker 02:
And what's our standard of review?

[00:06:50] Speaker 01:
Your standard of review

[00:06:54] Speaker 01:
is clear error, basically, because there was clearly erroneous findings of fact.

[00:07:01] Speaker 01:
And I'm stating that these were clearly erroneous findings of fact and a clearly erroneous exercise of discretion.

[00:07:08] Speaker 02:
OK, so why don't you bring us back to where you were, where you were talking about those findings that were clearer.

[00:07:14] Speaker 01:
Mrs. Norman received the money in the bank account

[00:07:17] Speaker 01:
as a gift from her mother.

[00:07:19] Speaker 01:
The bank account itself was a gift from her mother.

[00:07:22] Speaker 01:
Her mother presented her with the forms.

[00:07:24] Speaker 04:
She signed them.

[00:07:28] Speaker 01:
She signed the opening forms, but she did not put any money into the account.

[00:07:34] Speaker 01:
In other words, her mother basically.

[00:07:37] Speaker 01:
I'm not arguing semantic or lawyer's arguments.

[00:07:41] Speaker 01:
I don't think that she opened the account because the money in the account did not originate with her.

[00:07:47] Speaker 01:
The forms didn't even originate with her.

[00:07:49] Speaker 01:
Why does that make any difference?

[00:07:50] Speaker 02:
I mean, she's the one that conducted herself.

[00:07:53] Speaker 02:
She was in charge of the account.

[00:07:54] Speaker 02:
There's no question about that.

[00:07:56] Speaker 01:
She was in charge of the account and she managed it in the way that her mother, as her mother managed the parallel account that her mother held, which was basically the same money.

[00:08:07] Speaker 01:
So, she did basically what her mother did.

[00:08:11] Speaker 01:
Is that a parallel case with her mom?

[00:08:14] Speaker 01:
There was, but her mom is deceased and did not elect to sue regarding the penalty.

[00:08:24] Speaker 01:
Her state paid the penalty, and they moved on.

[00:08:27] Speaker 02:
So I don't understand why there's clear error, because if you're doing something that someone else did, then it should excuse it, or mitigate it, or what?

[00:08:42] Speaker 01:
We're speaking about willfulness.

[00:08:44] Speaker 01:
And that is part of the issue.

[00:08:47] Speaker 04:
Is there any evidence that the appellant was mentally incapable or under undue influence by her mother?

[00:09:00] Speaker 01:
Not undue influence by her mother, but basically she was beyond unsophisticated, somewhat ditzy.

[00:09:10] Speaker 04:
Really?

[00:09:11] Speaker 04:
Yes.

[00:09:14] Speaker 04:
Despite that dissiness, she found enough moxie to instruct the Swiss account not to buy U.S.

[00:09:24] Speaker 04:
securities because they'd be reported.

[00:09:26] Speaker 01:
She denies that she understood that she did, as her mother did, again, not buy U.S.

[00:09:33] Speaker 01:
securities.

[00:09:34] Speaker 01:
They were not buying U.S.

[00:09:35] Speaker 01:
securities, Mindy, so they didn't buy U.S.

[00:09:37] Speaker 01:
securities.

[00:09:39] Speaker 01:
And basically,

[00:09:42] Speaker 01:
The formulation of willfulness in the district court was, if you knew that you had to file an FBAR and you didn't file an FBAR, you were willful.

[00:09:52] Speaker 01:
If you recklessly failed to read your tax return and you didn't file an FBAR, you were willful.

[00:09:57] Speaker 01:
Or if you should have read your tax return and know that you're supposed to file an FBAR, you're willful.

[00:10:02] Speaker 02:
And which of those do you think is wrong?

[00:10:04] Speaker 02:
You just listed three things that constitute willfulness.

[00:10:07] Speaker 01:
What's not willful?

[00:10:09] Speaker 01:
None of them.

[00:10:10] Speaker 01:
All of what I'm saying is that if there isn't more required than basically you didn't check the box and you didn't file the FBAR, then why is there a distinction between willfully failing to file an FBAR and not willfully failing to file an FBAR?

[00:10:24] Speaker 03:
Because she was sufficiently involved, according to the fact findings below,

[00:10:30] Speaker 03:
in the account, in the hiding of the money, the avoiding detection, when there's a note from the banker that when he informed her they were going to have to have a new policy and they're going to have to start disclosing.

[00:10:48] Speaker 03:
There's a note that she supposedly said, well, I'm not pleased with that.

[00:10:51] Speaker 03:
There's all kinds of evidence.

[00:10:53] Speaker 03:
She may dispute all of that.

[00:10:55] Speaker 03:
She may claim, I never spoke to any of those people.

[00:10:57] Speaker 03:
There are bank records.

[00:10:58] Speaker 03:
They were introduced into evidence.

[00:10:59] Speaker 03:
And the question isn't, I'm not going to hold a new hearing and decide whether I believe Mindy or not.

[00:11:04] Speaker 03:
I mean, it's a question of what the lower court did and whether there's substantial evidence for it.

[00:11:09] Speaker 03:
And in light of all the evidence, I'm hard pressed to find that there isn't.

[00:11:18] Speaker 04:
Again, Your Honor, I believe that there is sufficient question as to why, and I also believe that... What you seem to really believe is that there's sufficient evidence that if the Court had ruled the other way, you would be able to say there's enough to support the Court.

[00:11:34] Speaker 01:
Excuse me, I'm sorry, I don't understand the question.

[00:11:36] Speaker 04:
What you're saying is that there's an argument the other way.

[00:11:40] Speaker 01:
No, I'm saying more than that, that the argument the other way is substantially more persuasive, and that the court's argument is not properly supported by the evidence.

[00:11:52] Speaker 02:
You're into your rebuttal.

[00:11:54] Speaker 02:
I'm here on the other side.

[00:11:54] Speaker 02:
Thank you.

[00:12:01] Speaker 00:
Good morning.

[00:12:01] Speaker 00:
May it please the court?

[00:12:02] Speaker 00:
Deborah Snyder for the United States of America.

[00:12:06] Speaker 00:
The Court of Federal Claims correctly upheld.

[00:12:10] Speaker 00:
Sure.

[00:12:11] Speaker 02:
We get the first point first, which is, can you explain to us a little administrative law?

[00:12:17] Speaker 02:
Can the agency not act, even if there's a change in the statute, in order to effectuate that change?

[00:12:25] Speaker 02:
Is the IRS required to promulgate rules, do notice and comment rulemaking?

[00:12:32] Speaker 02:
And can the statute not be implemented in the absence of those rules?

[00:12:36] Speaker 00:
No, of course not.

[00:12:37] Speaker 00:
When Congress changes the law, as it did in this case in 2004 in the face of poor FBAR compliance, it changed the law to significantly increase the penalties.

[00:12:48] Speaker 00:
When it did that, it superseded the old statute with a lower penalty.

[00:12:53] Speaker 00:
And it also superseded the 1987 regulation

[00:12:57] Speaker 00:
that simply mirrored the language of the old statute.

[00:13:01] Speaker 02:
Now, your friend cited, and you didn't respond.

[00:13:03] Speaker 02:
It was cited in gray, I think, for the first time, a case called Mid-Continent Nail Corporation in her gray brief in four that she alluded to.

[00:13:12] Speaker 02:
And that seems to suggest that you probably.

[00:13:17] Speaker 04:
I read the gray brief after it was cited again.

[00:13:22] Speaker 04:
I didn't see that it was on point in the slightest.

[00:13:24] Speaker 00:
I can reply to that.

[00:13:26] Speaker 00:
So in Mid-Continent Nail, there was no intervening statutory change.

[00:13:32] Speaker 00:
So there, I guess, I think it was the Department of Commerce, and they had issued

[00:13:38] Speaker 00:
a limiting regulation, where they had explicitly said, even though the statute allows us to do certain things, we're normally not going to exercise our discretion to do that.

[00:13:48] Speaker 00:
And then they, I guess, without notice and comment, went to withdraw that regulation.

[00:13:56] Speaker 00:
And they were saying, well, that was a logical outgrowth of a prior notice that we issued.

[00:14:01] Speaker 00:
And this court held that it was not.

[00:14:03] Speaker 00:
But that was not a situation like we have here, where there's an intervening statutory

[00:14:08] Speaker 00:
change, which is what happened.

[00:14:11] Speaker 00:
You have this regulation, and Congress changed the law.

[00:14:15] Speaker 02:
I know how many regulations on all the papers that the IRS has out there.

[00:14:21] Speaker 02:
It would have been nice, as a housekeeping matter, for them to withdraw a regulation that was no longer in effect because it was superseded by a different statutory provision.

[00:14:31] Speaker 02:
Don't they normally do some sort of cleanup?

[00:14:34] Speaker 02:
Was this just something that fell through the cracks, or is this

[00:14:38] Speaker 02:
plenty of regulations out there that are no longer have any force in effect because the statute's been amended.

[00:14:45] Speaker 00:
Well, I don't know how many there are in total, but I do know certainly that FinCEN must have a lot of priorities.

[00:14:51] Speaker 00:
They have announced a plan to withdraw the regulation, but they have not completed the process yet.

[00:14:59] Speaker 00:
I think that this argument

[00:15:02] Speaker 00:
Like, nobody actually saw this as a problem until very recently, within the last year or two, when you had account holders in cases mentioned, Colleo and Waddon, who were saying, wait a minute, there's this other... Is there other cases the other way that you've supplemented with?

[00:15:18] Speaker 00:
Since then, of course, right, and I think the last time I counted there were nine district courts in our favor as opposed to the two that were against.

[00:15:25] Speaker 00:
But I guess the point I'm trying to make is that before recently when this argument started getting a little bit of traction in the district court,

[00:15:33] Speaker 00:
Everybody understood that when Congress changed the law in 2004, that was the law.

[00:15:40] Speaker 00:
So this didn't necessarily appear to be a priority.

[00:15:44] Speaker 00:
But I mean, further to the point about not withdrawing the regulation, the fact is that new statutes trump old regulations to the extent of the conflict.

[00:15:53] Speaker 03:
I find the argument bewildering.

[00:15:56] Speaker 03:
I mean, in that,

[00:16:02] Speaker 03:
A regulation, the Secretary is only authorized to adopt regulations consistent with the law.

[00:16:09] Speaker 03:
This regulation is now inconsistent with the law, so it's just invalid.

[00:16:14] Speaker 03:
It became invalid when the law changed.

[00:16:18] Speaker 03:
It's just invalid.

[00:16:19] Speaker 03:
I can understand some sort of reliance, a stop-all argument possibly.

[00:16:23] Speaker 03:
I don't see how you do that, because the law is the law.

[00:16:26] Speaker 03:
maybe there could be some sort of reliance.

[00:16:28] Speaker 00:
I can respond to that also because it's very clear in this case that Ms.

[00:16:33] Speaker 00:
Norman did not rely on the old regulation and was not misled by it.

[00:16:38] Speaker 00:
How do we know that?

[00:16:39] Speaker 00:
We know that because she didn't raise this issue.

[00:16:42] Speaker 00:
at any point in her complaint, in her summary judgment papers, or even at trial, she didn't say, or her counsel didn't say, there's an old regulation.

[00:16:51] Speaker 00:
What happened is that after the first district court held that the regulation trumped the statute, her counsel sent a letter to the court after trial saying,

[00:17:03] Speaker 00:
Here's this case called Coleo.

[00:17:05] Speaker 00:
Assuming Coleo is correct, the cap is limited to $100,000.

[00:17:09] Speaker 00:
So I don't know how there could be reliance either.

[00:17:13] Speaker 00:
But I mean, in this case, we know for a fact, based on the record, that there was not.

[00:17:18] Speaker 04:
Well, I've got a question for the government.

[00:17:21] Speaker 04:
At JA 350, it indicates that the monthly balance in 2007 was $2 million.

[00:17:27] Speaker 04:
Now, I know that the statute says up to 50%.

[00:17:33] Speaker 04:
But I'm curious why the penalty wasn't a million instead of only 803,000.

[00:17:38] Speaker 00:
I don't know the answer to that.

[00:17:42] Speaker 00:
I mean, I think the penalty that was imposed is approximately 50% of the account balance that was reported on the belated F bar.

[00:17:52] Speaker 00:
So I guess, based on the record, I can't speak.

[00:17:54] Speaker 04:
You took our word for it?

[00:17:55] Speaker 00:
I can't speak.

[00:17:56] Speaker 00:
Well, it's in there.

[00:17:57] Speaker 00:
The belated F bar is in the record.

[00:18:00] Speaker 04:
I understand that.

[00:18:01] Speaker 00:
That's actually at page 338, 337 to 38 of the appendix.

[00:18:07] Speaker 00:
So I don't know exactly what it was 50% of, but I can say that at no point has Ms.

[00:18:15] Speaker 00:
Norman raised the issue that it should be 50% of something else.

[00:18:21] Speaker 04:
My point is it should be higher.

[00:18:23] Speaker 00:
I take your point.

[00:18:25] Speaker 03:
Given that it can be up to 50%,

[00:18:29] Speaker 03:
Why 50% in this case?

[00:18:31] Speaker 03:
What are the factors that the Secretary would consider in assessing what the amount should be?

[00:18:38] Speaker 00:
I mean, it's just not a default of 50%, right?

[00:18:41] Speaker 00:
Right, and I can answer that.

[00:18:42] Speaker 00:
First, I'd preface the answer by saying that Ms.

[00:18:44] Speaker 00:
Norman has not raised

[00:18:47] Speaker 00:
an APA claim in this case.

[00:18:49] Speaker 00:
She is not saying that the Secretary abused his discretion by not considering mitigating factors and imposing 40% or 25%.

[00:18:58] Speaker 00:
Her argument is that the penalty legally cannot be what it is.

[00:19:03] Speaker 00:
But that said, there is

[00:19:06] Speaker 00:
a great deal of evidence in this case that Ms.

[00:19:09] Speaker 00:
Norman's failure to report her account was, in fact, willful.

[00:19:14] Speaker 03:
First, the Court of Federal — But it being willful is what gets you to the statute that allows you to impose up to a maximum of 50 percent.

[00:19:22] Speaker 03:
So the very fact that it's willful doesn't mean 50 percent automatically.

[00:19:28] Speaker 03:
For people who are willful, you will compose up to 50%.

[00:19:31] Speaker 03:
That's right.

[00:19:32] Speaker 03:
The fact that there's a lot of evidence that proves it is, in fact, willful just gets you under the umbrella of the statute.

[00:19:38] Speaker 03:
What factors, if any, are you aware of that the Secretary looks at once there is a willfulness determination to assess where the penalty should be in the up to 50% range?

[00:19:50] Speaker 00:
So there is a process that the IRS applies.

[00:19:54] Speaker 00:
A willfulness penalty has to go through several levels of approval.

[00:20:00] Speaker 00:
So there is that.

[00:20:01] Speaker 00:
And then there are also internal guidelines that the IRS can look to to see if there are any mitigating factors.

[00:20:10] Speaker 00:
And again, that's not an argument that's been raised in this case.

[00:20:13] Speaker 04:
So you start with 50 and then lower it, depending on mitigating?

[00:20:17] Speaker 00:
Is that what you're saying?

[00:20:19] Speaker 00:
Not necessarily.

[00:20:21] Speaker 00:
I mean, I don't know the order that it followed here.

[00:20:23] Speaker 00:
I mean, I do know that there is a process.

[00:20:25] Speaker 00:
There are layers of review.

[00:20:26] Speaker 00:
And I also know that, in fact, Ms.

[00:20:28] Speaker 00:
Norman challenged it internally at the IRS and went to the IRS Office of Appeals.

[00:20:34] Speaker 00:
So there's certainly a robust process that was followed here.

[00:20:37] Speaker 00:
And the other thing is mitigating factors.

[00:20:40] Speaker 00:
I mean, in order to have those mitigating factors apply, one thing that the person has to do is cooperate with the examination.

[00:20:47] Speaker 00:
And one of the

[00:20:49] Speaker 00:
very prominent features of this case is that Ms.

[00:20:53] Speaker 00:
Norman made repeated statements to the IRS when it started to examine her return and caught on to this account.

[00:21:04] Speaker 00:
First, she said that, oh, well, I was shocked to first learn of this account in 2009 when my mother told me I didn't know anything about it before then.

[00:21:12] Speaker 03:
No, I know.

[00:21:13] Speaker 03:
She made a lot of lives in the process.

[00:21:16] Speaker 03:
lied herself into a hole.

[00:21:18] Speaker 03:
But I guess one of the factors I would hope that the Secretary is considering and assessing this is overall net worth.

[00:21:25] Speaker 03:
We're dealing with a substitute school teacher.

[00:21:28] Speaker 03:
I don't know what she may have otherwise inherited from her mother's estate, or I don't know what her overall, I mean, I actually did see her tax return, and it was different than I expected.

[00:21:38] Speaker 03:
But I would hope that the Secretary would take into account, he would not start at 50%, because the statute says up to 50%.

[00:21:45] Speaker 03:
but that he would take into account things like, you know, the overall net worth because this is a penalty.

[00:21:53] Speaker 03:
So the idea is to deter others from doing it and things like that.

[00:21:57] Speaker 00:
I do take your point.

[00:21:59] Speaker 00:
And I honestly don't know.

[00:22:02] Speaker 00:
I mean, I haven't looked behind the process in this case.

[00:22:06] Speaker 03:
Well, it wasn't an issue on appeal and it's not in front of us.

[00:22:08] Speaker 03:
It was more a matter of

[00:22:10] Speaker 03:
me sort of not understanding how the process works and I don't know wanting to make some sort of minimal record about the fact that I have a few concerns about how it might be that if it's going to be an automatically 50 percent every time I don't think that's consistent with the statute and I do think that could be an APA violation because then the secretary wouldn't be

[00:22:30] Speaker 03:
actually evaluating each case and deciding where to assess a penalty.

[00:22:34] Speaker 03:
That's not in front of me.

[00:22:35] Speaker 00:
That's not in front of us and I guess I would speak to the point.

[00:22:37] Speaker 00:
I mean we recognize that it's a large penalty but Congress intentionally imposed a large penalty.

[00:22:45] Speaker 00:
When Congress enacted the Bank Secrecy Act in 1970, there was language in the legislative history to the effect that secret offshore bank accounts are the largest single loophole in American tax law.

[00:22:57] Speaker 00:
And when it raised the penalty to the current level in 2004, it did so in the face of very poor compliance that was reported by the Treasury Department and said that improving compliance was vitally important to tax administration and to other issues.

[00:23:15] Speaker 00:
And another point is, and I don't know if this goes to your concern, but that Congress actually authorized 50% penalties per year.

[00:23:27] Speaker 00:
And the Secretary in this case did not do that.

[00:23:31] Speaker 00:
We're only dealing with one 50% penalty for one account for one year.

[00:23:35] Speaker 03:
So you're saying that they could have done what, like 50% of 1.6 million?

[00:23:41] Speaker 03:
then 50% of 800,000, then 50% of 400,000?

[00:23:43] Speaker 00:
No, it wouldn't work that way.

[00:23:46] Speaker 00:
It would be per year that the F-bar filing wasn't done.

[00:23:49] Speaker 00:
But that said, that would be exceedingly rare.

[00:23:54] Speaker 00:
Congress has authorized it.

[00:23:55] Speaker 02:
That's the point I'm trying to make, is that because of the serious- Wait, but you're not talking about a calculation in which the amount due exceeds the total amount invested, right?

[00:24:06] Speaker 02:
I don't understand what calculation you're talking about.

[00:24:08] Speaker 02:
You have 50% per year.

[00:24:08] Speaker 03:
We don't understand how you're adding that up.

[00:24:10] Speaker 03:
What does that mean?

[00:24:11] Speaker 00:
It means, in theory, that Congress has authorized the Secretary to impose cumulative penalties in that manner.

[00:24:21] Speaker 03:
Give me an example.

[00:24:22] Speaker 03:
Say she had $1.6 million for three years, and that Congress could have dinged her for three years of improper FBAR compliance.

[00:24:32] Speaker 03:
That is what the statute says, but that is not... So tell me how it would apply.

[00:24:37] Speaker 00:
So it could conceivably, if they were to do that, it could equal the balance in the account.

[00:24:44] Speaker 00:
But it will exceed the balance.

[00:24:46] Speaker 02:
Right.

[00:24:47] Speaker 02:
I mean, if they were going to take 50% of that 1.6 three years, that exceeds the balance of 1.6.

[00:24:56] Speaker 03:
Again, I feel like I need to make a record.

[00:24:57] Speaker 03:
That can't possibly be the way it works.

[00:24:59] Speaker 03:
I mean, simple mathematics.

[00:25:00] Speaker 03:
50% in 1983 would then leave the account at $800,000.

[00:25:04] Speaker 03:
So they can't ding her for 50% of $1.6 million the next year, because she wouldn't have had $1.6 million the next year.

[00:25:11] Speaker 03:
She would have had $800,000.

[00:25:12] Speaker 03:
seems to me the most they could dinger for in that second year would be 400,000.

[00:25:16] Speaker 03:
And then similarly, 200,000.

[00:25:18] Speaker 03:
It would blow my mind if Congress came in and said, 1.6 million, we want 800 a year for each of three years, so you now owe us the whole 1.6 million plus another 800,000.

[00:25:30] Speaker 03:
I can't fathom.

[00:25:31] Speaker 03:
That wouldn't make any sense to me.

[00:25:34] Speaker 03:
Is that how you think it actually works?

[00:25:36] Speaker 00:
That is how the statute reads.

[00:25:38] Speaker 00:
And what I'm saying is that the IRS

[00:25:40] Speaker 00:
generally exercises its discretion not to do that.

[00:25:44] Speaker 03:
I'll be clear, I don't think the statute reads that way and I don't think the IRS has the discretion to do that.

[00:25:49] Speaker 03:
So that's totally advisory.

[00:25:51] Speaker 04:
We don't do that.

[00:25:53] Speaker 03:
Well, I'm just chatting.

[00:25:55] Speaker 00:
Right, yeah.

[00:25:56] Speaker 00:
And we would disagree with that.

[00:25:57] Speaker 00:
But I guess the point that I'm making is that, given that's how the statute reads, that the IRS does not automatically jump to the highest thing and did not do so in this case.

[00:26:07] Speaker 03:
Well, I don't think the statute reads that way.

[00:26:09] Speaker 03:
So you don't really get any credit for me for not doing something that I don't think you had a right not to do, never right to do.

[00:26:14] Speaker 03:
But anyway, do you have anything else that you can guess to know?

[00:26:18] Speaker 00:
I guess, does the court have any further questions?

[00:26:20] Speaker 00:
I know there are other issues.

[00:26:22] Speaker 00:
There's an Eighth Amendment, which we believe was waived by not raising it below.

[00:26:27] Speaker 00:
There's an Eighth Amendment claim.

[00:26:29] Speaker 00:
Does the court have any further questions for me?

[00:26:31] Speaker 02:
No.

[00:26:32] Speaker 00:
We ask for affirmance.

[00:26:33] Speaker 00:
Thank you.

[00:26:41] Speaker 04:
Judge Moore raised an interesting question about which I hadn't thought.

[00:26:45] Speaker 04:
You've painted this picture of this innocent, naive school teacher and yet her tax forms show a lot of other income in addition to the hidden Swiss accounts.

[00:27:11] Speaker 04:
Substantial

[00:27:14] Speaker 04:
capital gains and so on.

[00:27:17] Speaker 04:
Was this just...

[00:27:19] Speaker 04:
out there?

[00:27:20] Speaker 01:
I think these were, I think, I'm speculating because it's not in the record, but I believe they were other gifts from her mother.

[00:27:27] Speaker 01:
Because the way Ms.

[00:27:29] Speaker 01:
Norman lived was she worked multiple jobs.

[00:27:33] Speaker 01:
She was a substitute teacher.

[00:27:34] Speaker 01:
She taught summer school.

[00:27:36] Speaker 01:
She tutored SAT students.

[00:27:38] Speaker 01:
She did not live as a wealthy woman.

[00:27:42] Speaker 01:
She lived as a kind of a person living hand to mouth.

[00:27:47] Speaker 01:
And all of this money was out there, but aside from one withdrawal whose size is disputed, this money was untouched.

[00:27:58] Speaker 01:
And I don't think it was to hide it from the government.

[00:28:00] Speaker 01:
I think that was just basically the way she lived.

[00:28:04] Speaker 01:
And I think that what we're discussing here in a lot of senses is that Mindy Norman was obligated to understand the vagaries of the tax law, but the IRS is not obligated to understand the vagaries of the statute that they are enforcing, which kind of seems to me to be somewhat backwards.

[00:28:26] Speaker 01:
She's being penalized for not understanding what an F-bar is.

[00:28:30] Speaker 01:
They are not being penalized for not understanding

[00:28:33] Speaker 01:
that they have to amend their regulations.

[00:28:36] Speaker 04:
Anything else?

[00:28:40] Speaker 01:
Not unless the court has any other questions.

[00:28:42] Speaker 01:
Thank you.

[00:28:42] Speaker 02:
We thank both sides and the case is submitted.