Tax Court Denies Award in Recent Whistleblower Tax Case

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Tax Court Denies Award in Recent Whistleblower Tax Case

Kennedy v. Comm’r, T.C. Memo. 2021-3 | January 12, 2021 | Copeland, E. | Dkt. No. 5687-17W

Short SummaryPetitioner appealed, pursuant to § 7623(b)(4), three determinations of the Whistleblower Office (WBO) of the Internal Revenue Service (IRS) that declined to make awards to him.  Petitioner filed a single whistleblower claim, but the WBO split it into three distinct claims. Petitioner’s whistleblower claim alleged that three taxpayers and related subsidiaries owed $150,103,245 in unpaid excise taxes, penalties, and interest. The IRS processed the claims, and it took no action against two of the taxpayers, and no change resulted from the examination of the third taxpayer.  Petitioner challenged the WBO’s determinations. The Tax Court held that the WBO did not abuse its discretion in declining any awards to Petitioner.

Key Issue:  Whether the WBO abused its discretion in declining to award the Petitioner any amount under his whistleblower claims when it took no action against two taxpayers and issued no changes after the examination of the third taxpayer.

Primary Holdings

Key Points of Law:

InsightThe Kennedy decision demonstrates the basic process for appealing WBO decisions on whistleblower claims.  Of important note, the Tax Court pointed out that it will not review specific actions of the WBO and IRS, such as a decision not to audit a targeted taxpayer. All that the Tax Court will do is review the WBO’s final determination of the award for an abuse of discretion—generally a high standard to meet as the petitioner.

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