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Abstract: 

The American Jobs Creation Act of 20041 amended 31 USC 5321(a)(5), which provides a civil money penalty for violation of 31 USC 5314, Records and Reports on Foreign Financial Agency Transactions. Prior to amendment, section 5321(a)(5) provided a maximum amount for a civil money penalty for willful violation of the greater of (1) the amount of the transaction (not to exceed $100,000), or (2) $25,000. If the violation involved failure to report the existence of an account or required identifying information concerning the account, the fine was to be the greater of (1) the account balance (not to exceed $100,000), or (2) $25,000. As amended, section 5321 provides that the civil money penalty is not to exceed $10,0002 unless there has been a willful violation, in which case the maximum penalty is to be increased to the greater of (1) $100,000, or (2) 50% of the amount of the transaction (if the violation consisted of a transaction), or the balance of an account (for a failure to report the existence of an account or required identifying information). Also, the amended section contains a reasonable cause exception under which no penalty is to be imposed if the violation was due to reasonable cause and the amount of the transaction or the balance in the account at the time of the transaction was properly reported. Thus, the new provision does not require willful violation for imposition of a penalty, relieving Treasury of the requirement of proving anything about the mental state of the violator. The requirements regarding foreign financial transactions and accounts are satisfied by answering questions in Part III of Schedule B of IRS Form 1040. Taxpayer who answer “yes” to the question regarding foreign financial accounts must file form TD F 90-22.1. In addition to the civil penalties of 31 USC 5321, there are criminal penalties in 31 USC 5322. The effective date of the amendment is the date of the Jobs Creation Act, October 22, 2004.

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