Tax Court in Brief | Lewis v. Commissioner | Appealable Determination of Whistleblower Award

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Tax Litigation:  The Week of May 9th, 2022, through May 13th, 2022

Lewis v. Commissioner, TC Memo. 2022-47| May 9, 2022 | Greaves, J. | Dkt. No. 10007-20W

Opinion

Summary: Timothy J. Lewis submitted Form 211, Application for Award for Original Information, to the IRS’s Whistleblower Office (WBO) alleging underpayments in income tax by a closely held corporation. The WBO sent a letter to Lewis, stating that Lewis was entitled to a “mandatory” whistleblower award under 26 U.S.C. § 7623(b). The letter specified the total amount of the award and stated that, in accordance with law, the award would automatically be reduced by what is referred to as a sequestration reduction. Lewis appealed the final determination letter to the Tax Court and argued that it was inappropriate for the WBO to apply the sequestration reduction to the award. The Tax Court upheld the sequestration reduction. The WBO then issued Lewis a whistleblower award check, which included the applicable sequestration reduction. Lewis thereafter again petitioned the Tax Court, challenging the appropriateness of the sequestration reduction and arguing that the award check constitutes a section 7623(b)(4) “determination” that confers jurisdiction on the Tax Court. The IRS disagreed, contending that the Court lacks jurisdiction to adjudicate Lewis’s petition.

Key Issue:

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Key Points of Law:

Insights: Section 7623(b)(1) authorizes the IRS to pay mandatory whistleblower awards if certain requirements are met. Once the IRS issues what the Tax Court considers a final determination letter with respect to the whistleblower effort, that determination may, within 30 days of such determination, be appealed to the Tax Court. If the Tax Court adjudicates a challenge to the IRS’s Whistleblower Office’s final determination letter, and if the WBO issues an award check in conformity with the Tax Court’s decision on the issue, the Tax Court likely lacks jurisdiction to adjudicate the same challenge based on the award check itself because the issuance of the check is not a separate determination that is appealable to the Tax Court.