The Internal Revenue Service, or IRS, has demanded that an 82-year-old woman whose family fled Nazi Germany in the 1930s hand over $2.1 million in fines after she failed to report the money her father left her after he passed away.
Monica Toth’s father escaped Nazi Germany in the mid-1930s, fleeing to Argentina. When Toth was 22, she moved to the United States and worked as a homemaker. By 1980, Toth was a naturalized U.S. citizen.
Her father, who had become a successful businessman in Argentina, died in 1999, leaving her a Swiss bank account with about $4.2 million. Still fearful for his daughter’s safety, Toth’s father reportedly left the funds in a Swiss account in case she needed to flee persecution as he had done.
A U.S. law requires any national or permanent resident with a foreign bank account holding more than $10,000 to fill out a Foreign Bank and Financial Accounts Report (FBAR) and submit it to the IRS annually.
Toth, a current resident of the Boston area, was allegedly unaware of this law until 2010. Once she found out about the requirement, she retroactively filed five years of reports and, following an IRS audit, paid almost $40,000 in back taxes.
However, the government circled back on her case, deeming Toth’s failure to file her reports on time to be a “reckless” and “willful” violation of the Bank Secrecy Act of 1970. In 2013, the IRS demanded she pay the maximum civil penalty of $2.1 million, or 50% of Toth’s bank account.
The 82-year-old refused to pay the fine and is now suing the federal government on the claim that the fee is excessive and violates the Eighth Amendment of the Constitution, which states that “Excessive bail shall not be required, nor excessive fines imposed, nor cruel and unusual punishments inflicted.”
On Friday, the Institute for Justice, which now represents Toth, filed a petition with the Supreme Court, arguing that Toth’s violation of this law was not “willful.” In the petition, the Supreme Court is asked to determine whether federal “civil monetary penalties” imposed by the federal government for violating regulations count as “fines.”
In a statement, Institute for Justice Attorney Sam Gedge said, “The Eighth Amendment’s Excessive Fines Clause is a key check on the government’s power to punish. That is why the Excessive Fines Clause is part of the Bill of Rights, and that is why the federal courts need to take it seriously.”
However, the federal government has argued that since this was a “civic penalty,” the Eighth Amendment’s protections don’t apply.
Andrew Wimer, the Director of Media Relations for the Institute of Justice, pushed back on this claim, insisting that the government’s interpretation of the Amendment is “profoundly wrong,” and that Toth’s case is “precisely the sort of punishment the Excessive Fines Clause serves to check.”
