The US Court of Appeals for the District of Columbia Circuit on August 14 rejected on procedural grounds a challenge to IRS regulations that impose a penalty if a bank fails to furnish information to the US government about interest earned by nonresident account holders.
The regulation is designed to allow the US government to meet its obligations to provide information on the bank accounts to foreign governments under FATCA anti-tax evasion agreements.
According to the Court, the lawsuit challenging the penalty brought by the Florida Bankers Association and the Texas Bankers Association is barred on procedural grounds because of the Anti-Injunction Act of 26 U.S.C.§ 7421(a), which prohibits lawsuits restraining the assessment and collection of tax. The penalty imposed under the regs is deemed to be a tax, the Court said.
The Court noted that the bankers can still challenge the regulation. To do so, they must decline to submit a report required by the regulation, pay the penalty, and then sue for a refund, the Court said.
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