A Conversation with UVA Law’s Brandon Garrett About the DOJ’s Swiss Bank Program

Brandon L. GarrettRecently I had the opportunity to speak with my former law professor, Brandon Garrett, about the DOJ’s Swiss bank program. Professor Garrett is the Justice Thurgood Marshall Distinguished Professor of Law at the University of Virginia School of Law, and author of the recent book Too Big to Jail: How Prosecutors Compromise with Corporations. Professor Garrett has written and spoken extensively about white collar corporate prosecutions and the use of non-prosecution and deferred prosecution agreements in the corporate prosecution context.

A little background to our conversation. The DOJ’s Swiss bank program provides in part a path for Swiss banks that believe that they may have committed tax-related criminal offenses in connection with undeclared bank accounts held by U.S.… Read More

Whistleblowers: The Tax Court Holds that I.R.C. § 7623(b) Applies Where An Informant Continued To Provide Information After its Effective Date.

The IRS has long had discretionary authority to reward whistleblowers under Section 7623 of the Code. Historically, the process was highly arbitrary and judicial review was not available. In an effort to fix the problem, Congress added Section 7623(b) to the Code which added standards for awards, as well as Tax Court jurisdiction over appeals. This provision went into effect on December 20, 2006.
So what happens if a whistleblower provides information both before and after the effective date? The Tax Court addressed that question earlier this week. Whistleblower 11332 13W v. Commissioner, 2014 U.S. Tax Ct. LEXIS 22 (June 4, 2014).… Read More

Whistleblower Awards Are Ordinary Income, Not A Capital Gain.

While whistleblower cases attract significant attention, the tax treatment of the awards is less well-known.

A whistleblower (technically the relator in a qui tam case) is generally entitled to receive a percentage of the recovery from a successful action under the False Claims Act. A variety of other federal statutes have similar whistleblower provisions modeled on the False Claims Act.

Prior case law has established that the award received by the relator is taxable as a “reward” under Treas. Reg. 1.-61-2(a)(1). See Campbell v. Comm’r, 658 F.3d 1255, 1259 (11th Cir. 2011); see also Brooks v. United States, 383 F.3d 521, 525 (6th Cir.Read More

The Tax Court Concludes that a Whistleblower’s Identity Should Be Protected.

The Secretary of the Treasury has long had authority to make payments to informants that aid in the detection of underpayments of taxes and tax fraud. In 2006, Congress enacted Section 7623(b) of the Internal Revenue Code, which provided explicit parameters on the amounts of whistleblower awards and provided for Tax Court review in cases when a whistleblower award is sought.

While 7623(b) of the Code provides for significant recoveries of up to thirty percent, whistleblowers may take significant professional risks in coming forward, raising the question whether their identity can be protected. On December 8th, the Tax Court decided that a whistleblower could proceed anonymously to protect his identity.Read More