SCOTUS Reports

Tag: Internal Revenue Code Section 7623(b)

  • Whistleblower 769-16W v. Commissioner, 159 T.C. No. 2 (2022): Judicial Discretion in Remanding Whistleblower Cases

    Whistleblower 769-16W v. Commissioner, 159 T. C. No. 2 (U. S. Tax Court 2022)

    In a significant ruling, the U. S. Tax Court affirmed its discretion to remand whistleblower claims to the IRS Whistleblower Office without retaining jurisdiction. The decision, stemming from a joint motion by the parties, allows for further evaluation of the whistleblower’s contribution to IRS actions against targeted taxpayers. This ruling clarifies the court’s role in whistleblower cases and enhances flexibility in handling such claims.

    Parties

    Whistleblower 769-16W, as the Petitioner, brought this case against the Commissioner of Internal Revenue, the Respondent. Throughout the litigation, the Petitioner was represented by Jason D. Wright, T. Barry Kingham, and Kaitlyn T. Devenyns, while the Respondent was represented by Jadie T. Woods and Eric R. Skinner.

    Facts

    The case originated in 2016 and involved the application of Internal Revenue Code section 7623(b), which governs whistleblower awards. In 2019, the Tax Court had previously remanded the case to the Whistleblower Office (WBO) to supplement an incomplete record and address specific questions. Upon remand, the WBO issued a supplemental determination, but the Petitioner remained unsatisfied. Following further proceedings, the parties narrowed their dispute and jointly moved for another remand to evaluate the whistleblower’s contribution to ongoing IRS actions against certain targets. This motion requested the court to vacate prior WBO determinations and remand the case without retaining jurisdiction.

    Procedural History

    The case was initially remanded in 2019 to the WBO for further consideration with the court retaining jurisdiction (Whistleblower 769-16W v. Commissioner, 152 T. C. 172 (2019)). After the WBO’s supplemental determination, the case returned to the Tax Court. Following additional pretrial proceedings and conferences, the parties filed a Joint Motion to Remand on August 4, 2022, seeking to vacate prior determinations and remand without jurisdiction. The court granted this motion, vacating the prior determinations and remanding the case to the WBO without retaining jurisdiction.

    Issue(s)

    Whether the U. S. Tax Court has discretion to remand a whistleblower case to the IRS Whistleblower Office without retaining jurisdiction?

    Rule(s) of Law

    The court applied principles of judicial discretion in remanding cases, drawing from precedents like Jacobson v. Commissioner, 148 T. C. 68 (2017), which allowed for voluntary dismissal of whistleblower cases. The court also relied on the Administrative Procedure Act (APA) standards for judicial review of agency actions, as discussed in cases such as Am. Bioscience, Inc. v. Thompson, 269 F. 3d 1077 (D. C. Cir. 2001).

    Holding

    The U. S. Tax Court held that it has the discretion to remand whistleblower claims to the IRS Whistleblower Office without retaining jurisdiction. The court exercised this discretion and granted the parties’ Joint Motion to Remand, vacating prior determinations and remanding the case without jurisdiction.

    Reasoning

    The court’s reasoning focused on the discretion afforded to appellate courts in remanding cases to lower courts or agencies. It distinguished the present case from previous remands under section 7623(b), noting that the joint motion by the parties and the unique circumstances of the case supported remand without jurisdiction. The court cited Jacobson v. Commissioner for its discretion to permit voluntary dismissals, and highlighted the norm of vacating agency action deemed arbitrary and capricious, followed by remand without retaining jurisdiction, as seen in cases like Burlington Resources, Inc. v. FERC, 513 F. 3d 242 (D. C. Cir. 2008). The court also noted that retaining jurisdiction is not necessary when the timeline for IRS actions is uncertain and not under the control of the WBO, and when there is no history of agency noncompliance or resistance to legal duties. The court emphasized that section 7623(b) does not limit whistleblowers to one proceeding before the WBO, thus supporting the decision to remand without jurisdiction.

    Disposition

    The U. S. Tax Court granted the parties’ Joint Motion to Remand, vacating the prior determinations of the Whistleblower Office and remanding the case without retaining jurisdiction.

    Significance/Impact

    This decision clarifies the Tax Court’s discretion in managing whistleblower cases, particularly in remanding claims to the IRS Whistleblower Office without retaining jurisdiction. It provides flexibility in handling whistleblower claims, allowing for more thorough evaluation by the WBO of the whistleblower’s contribution to ongoing IRS actions. The ruling may influence future whistleblower cases by setting a precedent for remands without jurisdiction when circumstances warrant, potentially affecting the procedural approach to whistleblower litigation and the efficiency of the IRS in evaluating claims.

  • Whistleblower 12568-16W v. Commissioner of Internal Revenue, 148 T.C. No. 7 (2017): Balancing Anonymity and Public Interest in Whistleblower Actions

    Whistleblower 12568-16W v. Commissioner of Internal Revenue, 148 T. C. No. 7, 2017 U. S. Tax Ct. LEXIS 8 (U. S. Tax Ct. 2017)

    In a significant ruling on whistleblower anonymity, the U. S. Tax Court allowed a whistleblower to proceed anonymously in an action concerning a taxpayer’s alleged $3 billion tax fraud. The court weighed the whistleblower’s risks of retaliation and harm against the public’s right to know who uses the courts, granting anonymity at this stage but leaving open the possibility of future disclosure if circumstances change. This decision underscores the delicate balance between protecting whistleblowers and maintaining transparency in judicial proceedings.

    Parties

    Whistleblower 12568-16W, the Petitioner, sought review of the Commissioner of Internal Revenue’s denial of a whistleblower award. The Commissioner of Internal Revenue was the Respondent in this action before the United States Tax Court.

    Facts

    The Petitioner, previously employed by an entity related to the taxpayer, filed a whistleblower action claiming the taxpayer had engaged in tax fraud resulting in an unpaid tax liability exceeding $3 billion. The Petitioner sought to proceed anonymously, asserting that disclosure of their identity would expose them to retaliation, physical harm, social and professional stigma, and economic distress. The Petitioner supported their motion with a declaration detailing their employment history, the nature of the taxpayer’s violations, and the potential consequences of identity disclosure.

    Procedural History

    The Petitioner filed a motion to proceed anonymously under Rule 345(a) of the U. S. Tax Court Rules of Practice and Procedure, concurrent with the filing of the petition. The Respondent did not object to the motion. The court held a telephone conference to discuss the motion and subsequently considered the Petitioner’s supplemental declaration and exhibits. The court granted the motion to proceed anonymously, subject to potential future review.

    Issue(s)

    Whether the Petitioner’s interest in anonymity outweighs the public’s interest in knowing the identity of persons using the courts, given the risks of retaliation, harm, and stigma asserted by the Petitioner?

    Rule(s) of Law

    The U. S. Tax Court’s Rule 345(a) allows petitioners in whistleblower actions to move for permission to proceed anonymously. A whistleblower may proceed anonymously if they present a sufficient showing of harm that outweighs counterbalancing societal interests in knowing the whistleblower’s identity. The court’s discretion includes the ability to condition anonymity on appropriate conditions and to reconsider the balance as the case progresses.

    Holding

    The court held that, at this early stage of the action, the Petitioner’s interest in anonymity outweighed the public’s interest in knowing the Petitioner’s identity. The court granted the Petitioner’s motion to proceed anonymously, subject to potential future reconsideration as the case develops.

    Reasoning

    The court’s reasoning focused on balancing the Petitioner’s asserted risks of harm against the public’s interest in judicial transparency. The court accepted the Petitioner’s claims of potential retaliation, physical harm, and professional and personal consequences as credible for the purposes of the motion. The court cited prior cases, such as Whistleblower 14106-10W v. Commissioner, to establish the legal framework for assessing anonymity requests. The court noted that the balance between anonymity and public interest may shift as the case progresses, particularly given the significant tax liability and potential whistleblower award involved. The court drew parallels to other federal courts’ approaches to pseudonymity in civil complaints, emphasizing the need for flexibility in balancing these interests. The court’s decision to grant anonymity was provisional, acknowledging that future developments in the case could necessitate reconsideration.

    Disposition

    The court granted the Petitioner’s motion to proceed anonymously, with the caveat that the court may revisit this decision as the case progresses.

    Significance/Impact

    This case underscores the U. S. Tax Court’s approach to balancing the competing interests of whistleblower protection and public access to judicial proceedings. The decision reaffirms the court’s authority to grant anonymity in whistleblower actions while maintaining the flexibility to reassess this balance as cases evolve. The case also highlights the potential for significant whistleblower awards to influence the court’s consideration of anonymity, particularly in cases involving substantial tax fraud allegations. The decision may encourage whistleblowers to come forward in tax fraud cases, knowing that their identities can be protected at least initially, while also serving as a reminder that such protection is not absolute and may be subject to future review based on changing circumstances.