Tax Procedure: The Tax Court Clarifies its Scope and Standard of Review for Whistleblower Cases

whistleblower, false claimsOn January 9, 2018, the Tax Court issued an important decision on the scope and standard of review in whistleblower cases, ruling that the record rule (limiting review to the agency record) would apply and then delineating specific exceptions that may apply in whistleblower cases; the court also held that IRS whistleblower determinations would be reviewed for abuse of discretion. Kasper v. Comm’r, 150 T.C. No. 2, 2018 U.S. Tax Ct. LEXIS 2 (Jan. 9, 2018).

In 2006, section 7623 of the Internal Revenue Code was amended to make changes to the regime for whistleblower awards in tax cases. Prior to the amendments, the IRS had essentially unfettered discretion, as there was no mechanism for judicial review of awards.… Read More

Criminal Fines, Civil Forfeitures and Collected Proceeds; More on Mandatory Whistleblower Awards Under the Internal Revenue Code

whistleblower, taxThis will provide further analysis of the Tax Court’s opinion in Whistleblower 21276-13W v. Comm’r, 147 T.C. No. 4, 2016 U.S. Tax Ct. LEXIS 20 (Aug. 3, 2016). As discussed previously, the court held that in calculating a mandatory whistleblower award under section 7623(b)(1) of the Code, criminal fines and civil forfeitures count, even though they cannot be used to pay an award because they are committed to other purposes. This result rested upon the court’s construction of the term “collected proceeds” in section 7623(b)(1), which drives the determination of a mandatory award. The relevant portion of the Code provides for a mandatory award to be calculated as “at least 15 percent but not more than 30 percent of the collected proceeds (including penalties, interest, additions to tax, and additional amounts) resulting from the action (including any related actions) or from any settlement in response to such action .… Read More

Whistleblowers: Criminal Fines and Civil Forfeitures are Included in The “Collected Proceeds” Used to Calculate a Mandatory Award Under the Internal Revenue Code

whistleblower, taxThe Secretary of the Treasury has long had discretionary authority to provide awards to whistleblowers. This authority, which dates to the nineteenth century, is currently codified in Section 7623(a) of the Internal Revenue Code, I.R.C. § 7623(a). Congress became dissatisfied with the discretionary program and added provisions for mandatory awards in December 2006. See I.R.C. § 7623(b). Whistleblowers will qualify for a mandatory award “if the tax, penalties, interest, additions to tax, and additional amounts in dispute exceed $2,000,000.” I.R.C. § 7623(b)(5)(B). If the target is an individual, then his taxable income must also exceed $200,000 for each taxable year at issue.… Read More

Whistleblowers: Exploring the Link Between Increased Tax Collection and an Award under Section 7623 of the Internal Revenue Code

whistleblower, tax, award, causationDiscovery disputes are often dull as they rarely raise cutting edge legal issues concerning the substantive rights of the litigants. But when they do, they can be very interesting.

Last week, the Tax Court issued a precedential decision in a discovery dispute. It was interesting (and presumably precedential) because it raised a complex issue concerning a whistleblower’s right to an award under Section 7623 of the Code: if the target ceases to engage in a tax evasion scheme because of IRS scrutiny resulting from a whistleblower’s submission and additional tax is collected, is an award warranted? Whistleblower 11099-13W, 147 T.C.… Read More