Update: 11th Circuit Agrees Tax Court Can’t Hear FBAR Penalty Cases

Knowing where to file your tax challenge and which procedure to follow is essential to getting timely and effective relief when the IRS imposes incorrect assessments, penalties, or collections. A recent United States Circuit Court decision from the Eleventh Circuit shows that the United States Tax Court can’t hear FBAR penalty cases because those penalties are not technically taxes. Filing your complaint in the wrong court could end up getting your case dismissed.

Collection Due Process Hearing vs IRS Appeal

According to the IRS, Stephen and Judy Jenner didn’t report their foreign financial accounts as required by the Bank Secrecy Act between 2005 and 2009. After the penalties were assessed, the Jenners contacted the IRS Independent Office of Appeals, but the IRS upheld the assessment. Then, in November 2022, the IRS notified the Jenners that it would be collecting the unpaid penalties using an administrative offset to collect 15% of their monthly social security benefits. The Jenners objected and filed a form requesting a Collection Due Process (CDP) hearing.

There is a difference between an IRS appeal and a collection due process hearing. After the IRS assesses a tax deficiency or civil penalty, taxpayers have the ability to appeal that decision to the IRS Office of Independent Office of Appeals. This is what the Jenners did after their initial FBAR penalty was assessed.

But a CPD doesn’t apply in as many cases as an IRS administrative appeal. Instead, it only applies to unpaid taxes, including penalties imposed for the failure to withhold income, Social Security and Medicare taxes by employers. After the Jenners tried to challenge the collection of their Social Security benefits, in May 2023, the IRS Appeals Office notified them that they were not entitled to a CDP hearing on the collection of FBAR penalties, and would need to challenge the penalties in federal district court. Instead, the Jenners filed a complaint in the United States Tax Court.

11th Circuit Agrees Tax Court Can’t Hear FBAR Penalty Cases

This blog previously reviewed the United States Tax Court’s decision in Jenner v IRS. There, the Tax Court dismissed the Jenners’ complaint for lack of jurisdiction, saying it did not have the legal authority to hear challenges to the IRS’s FBAR penalty assessments.

On December 8, 2025, the Eleventh Circuit weighed in on the case. In considering the Jenners’ appeal, the United States Court of Appeals affirmed the U.S. Tax Court’s decision ruling that FBAR penalty cases are not within the category of cases assigned to the Tax Court. The 11th Circuit said the Tax Court’s jurisdiction is “strictly limited” to tax assessments issued under Title 26 of the Internal Revenue Code. FBAR penalties are part of the Bank Secrecy Act, located in Title 31, so they are beyond the reach of the United States Tax Court.

In addition, the 11th Circuit said FBAR penalties are civil penalties, not taxes. As the United States Supreme Court explained in United States vs La Franca:

"A 'tax' is an enforced contribution to provide for the support of government; a 'penalty[ ]' . . . is an exaction imposed by statute as punishment for an unlawful act. The two words are not interchangeable one for the other.”

An earlier Eleventh Circuit case, United States v Rum, stated that FBAR penalties are penalties, not taxes. Since the US Tax Court only has jurisdiction over tax assessments, it did not have jurisdiction over the Jenners’ case, and the only thing the Court could do was dismiss the case.

Unpaid Tax Levies vs Administrative Offsets

The Jenners argued that they had satisfied the prerequisites for Tax Court jurisdiction under Title 26 section 6330. That section grants the Tax Court jurisdiction to review unpaid tax liability and tax levies issued by the IRS. To do so, the IRS must issue a notice of intent to levy, and provide a Collections Due Process hearing upon timely request. But section 6330 only applies to assessments and levies for unpaid taxes, not other penalties or assessments. Administrative offsets used to collect nontax debts are controlled by a different section of the Internal Revenue Code, Title 31, section 3716. The 11th Circuit said this difference meant that, like the IRS had previously stated, there was no CDP hearing available for the Jenners’ FBAR penalties, and the prerequisites for Tax Court jurisdiction had not been met.

U.S. District Court vs U.S. Tax Court

However, just because the Tax Court did not have jurisdiction over the Jenners’ case doesn’t mean they never had an opportunity to have their issues heard. In their request for a CDP hearing, the Jenners asserted that the statute of limitations for the IRS to file an action on their unpaid FBAR penalties had passed. The 11th Circuit called this “a colorable defense” to future collections efforts, meaning it may have been successful, but it was filed in the wrong court. The Circuit Court said “if the Jenners wish to press this defense, they must raise it in a U.S. district court or in the U.S. Court of Federal Claims” not the United States Tax Court. The IRS informed them of this back in May 2023, when it said they were not entitled to a CDP hearing, but the Jenners chose to file their complaint in the wrong court and as a result, their complaint had to be dismissed.

Attorney Joseph R. Viola is a tax attorney in Philadelphia, Pennsylvania with over 35 years experience. If you have questions about challenging FBAR penalties, contact Joe Viola to schedule a free consultation.