A Pair of Tax Whistleblower Cases From the Past Week

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A Pair of Tax Whistleblower Cases From the Past Week

The Internal Revenue Service’s Whistleblower Office oversees the IRS’s Whistleblower Program. It is responsible for processing thousands of tax whistleblower claims every year.   The IRS Whistleblower Program is designed to offer financial incentives and rewards to individuals—“whistleblowers”—who help the government collect taxes by providing information that assists in detecting violations of the internal revenue laws.  The IRS Whistleblower Program provides a reward to qualifying whistleblowers of between 15 to 30% of the amount recovered as a result of the whistleblower’s report.  This past year, the Whistleblower Office made awards to whistleblowers totaling more than $120,000,000.

For additional information on The IRS Whistleblower Program, click here.

For more on the past week’s tax whistleblower cases, see below for a summary of the opinions:

 

Whistleblower v. Comm’r, 155 T.C. No. 2| August 26, 2020 | Toro, E.

Dkt. Nos. 21276-13W, 21277-13W

 Short SummaryPetitioner originally filed a suit against the IRS asking the Tax Court to consider whether they could be eligible for a whistleblower award, when they had not approached the Whistleblower Office until after the Government had collected approximately $74 million from a targeted business pursuant to a plea agreement and which the Petitioner asserted they had contributed to the Government’s recovery.   The Tax Court held that Petitioner could be considered for the whistleblower award and instructed the IRS to consider the merits of Petitioner’s claim.  The IRS and Petitioner agreed that Petitioner was eligible for a total award of 24% of the collected proceeds, however the parties could not agree whether certain amounts were collected proceeds for the purposes of the award.  The parties also agreed that any award would be reduced by a sequester reduction percentage.  The Tax Court then issued a second opinion determining the total amount of the collected proceeds for the purposes of the whistleblower award.  After Petitioner had received all the payments by the Government, it filed motions with the Tax Court asking the court to enforce its previous two decisions without the sequester reductions.  The IRS denied Petitioner’s motions finding that the Petitioner was not entitled to the relief requested.

Key Issue:  Does the Tax Court have the jurisdiction over whistleblower decisions with respect to appeals of the amount awarded, and does it have the authority to enforce such decisions.

Primary Holdings

Key Points of Law:

InsightThis case highlights and solidifies the Tax Court’s jurisdiction over whistleblower actions with respect to appeals of award determinations.  It also illustrates that the Tax Court has authority to enforce its decisions.


Van Bemmelen v. Comm’r, 155 T.C. No. 4 | August 27, 2020 | Thornton, J. | Dkt. No. 19787-18W

Short SummaryOn March 12, 2018, Dr. Van Bemmelen’s attorney submitted to the IRS Whistleblower Office (WO) a completed Form 211, Application for Award for Original Information.  The IRS reviewed the claim and determined that the allegations were “not specific, credible or . . . [were] speculative[.]”  Accordingly, the IRS issued a letter entitled “FINAL DECISION UNDER SECTION 7623(a)” which denied any award to Dr. Van Bemmelen.

Dr. Van Bemmelen timely filed a petition with the Tax Court in response to the IRS’ determinations in the letter.  The IRS filed a motion for summary judgment, which was opposed by Dr. Van Bemmelen.  Later, Dr. Van Bemmelen filed a motion to supplement the record, in addition to a first supplement to motion to supplement the record, requesting that the administrative record be supplemented with two items that were not included in the materials the IRS certified as the administrative record:  a 2012 document and a 2019 docuement.  The IRS filed an opposition to the motions.

Key Issue:  Whether:  (1) the administrative record should be supplemented; and (2) the IRS’ motion for summary judgment should be granted.

Primary Holdings

Key Points of Law:

InsightThe Van Bemmelen decision shows the significance of ensuring the administrative record is complete and also the hardship tax whistleblowers have in receiving an award where the IRS refuses to act on the whistleblower information.

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