SCOTUS Reports

Tag: Whistleblower Award

  • Whistleblower 8391-18W v. Commissioner of Internal Revenue, 161 T.C. No. 5 (2023): Whistleblower Award Determination under I.R.C. § 7623(b)

    Whistleblower 8391-18W v. Commissioner of Internal Revenue, 161 T. C. No. 5 (U. S. Tax Ct. 2023)

    The U. S. Tax Court upheld a 22% whistleblower award under I. R. C. § 7623(b), finding no abuse of discretion by the IRS Whistleblower Office (WBO). The whistleblower sought a 30% award for information provided on a dividend withholding tax scheme, but the court affirmed the WBO’s decision based on the administrative record and applicable legal standards. The ruling clarifies the discretion afforded to the WBO in determining award percentages and reinforces the procedural requirements for whistleblower awards.

    Parties

    Whistleblower 8391-18W (Petitioner) v. Commissioner of Internal Revenue (Respondent).

    Facts

    In 2006, an IRS audit team began examining the tax returns of Redacted 4 and Redacted 5. In 2008, the Petitioner submitted a claim to the WBO, identifying Redacted 2 as a participant in a dividend tax withholding scheme. The audit team, already investigating Redacted 4 and Redacted 5, received Petitioner’s information in 2009. This information was used during the ongoing examination, leading to the collection of proceeds. In 2018, the WBO determined that Petitioner was entitled to a 22% mandatory award of the collected proceeds. The Petitioner challenged this decision, seeking a 30% award and asserting additional claims related to the timing of payment, interest, and sequestration reduction.

    Procedural History

    The WBO issued a preliminary award recommendation of 22% in 2018, followed by a final determination. The Petitioner filed a petition with the U. S. Tax Court in 2018, challenging the award percentage and other issues. Both parties moved for summary judgment. The Tax Court reviewed the administrative record under the abuse of discretion standard and denied the Petitioner’s motions while granting the Respondent’s motion for summary judgment.

    Issue(s)

    Whether the WBO abused its discretion in determining a 22% award percentage under I. R. C. § 7623(b)?

    Whether the WBO should have paid the 22% award while the Petitioner challenged the remaining 8%?

    Whether the Petitioner is entitled to interest on the award under I. R. C. § 7623(b)?

    Whether the WBO properly applied a sequestration reduction to the award?

    Rule(s) of Law

    I. R. C. § 7623(b) authorizes mandatory awards for whistleblowers whose information leads to collected proceeds, with awards ranging from 15% to 30% based on the whistleblower’s substantial contribution. Treasury Regulation § 301. 7623-4(c)(1)(i) specifies that awards depend on the extent of the whistleblower’s substantial contributions. The Tax Court reviews WBO determinations under an abuse of discretion standard, confined to the administrative record (Kasper v. Commissioner, 150 T. C. 8 (2018)).

    Holding

    The Tax Court held that the WBO did not abuse its discretion in determining a 22% award for the Petitioner. The court further held that I. R. C. § 7623(b) does not provide for the payment of interest on a mandatory award. The WBO’s application of a sequestration reduction was upheld as not constituting an abuse of discretion.

    Reasoning

    The court reasoned that the WBO’s discretion in determining award percentages is broad, guided by positive and negative factors outlined in Treasury Regulation § 301. 7623-4(b). The WBO considered the administrative record, including the fact that the audit was already underway when the Petitioner’s information was used, which justified the 22% award. The court rejected the Petitioner’s argument for a higher award based on other claims involving the same scheme, noting that each claim’s circumstances can differ. The court also found no basis for immediate payment of the 22% award while the Petitioner challenged the remaining 8%, as the regulations require final determination of all appeals before payment. The absence of an explicit statutory provision for interest on whistleblower awards, combined with the no-interest rule, led the court to deny the Petitioner’s claim for interest. The court upheld the application of the sequestration reduction, citing prior precedent.

    Disposition

    The Tax Court denied the Petitioner’s motions for partial and full summary judgment and granted the Respondent’s motion for summary judgment, affirming the WBO’s determination of a 22% award.

    Significance/Impact

    This decision reinforces the discretion afforded to the WBO in determining award percentages under I. R. C. § 7623(b), emphasizing the importance of the administrative record in such determinations. It clarifies that whistleblowers are not entitled to interest on awards and that sequestration reductions are applicable. The ruling underscores the procedural requirements for whistleblower awards, impacting how whistleblowers and the IRS approach such claims and reinforcing the Tax Court’s limited scope of review under the abuse of discretion standard.

  • Berenblatt v. Commissioner, 160 T.C. No. 14 (2023): Discovery Standards in Whistleblower Award Cases

    Berenblatt v. Commissioner, 160 T. C. No. 14 (2023)

    In Berenblatt v. Commissioner, the U. S. Tax Court established stringent discovery standards for whistleblower award cases under I. R. C. § 7623. The court ruled that discovery is limited to the administrative record, and only upon a significant showing of bad faith or an incomplete record can additional materials be sought. This decision underscores the court’s adherence to the record rule and clarifies the scope of permissible discovery in whistleblower appeals, impacting future cases by setting a high bar for expanding the record beyond what the IRS designates.

    Parties

    Jeremy Berenblatt (Petitioner) v. Commissioner of Internal Revenue (Respondent). Berenblatt was the appellant in the Tax Court, challenging the IRS Whistleblower Office’s (WBO) denial of his whistleblower award claim.

    Facts

    Jeremy Berenblatt, a stock trader, was interviewed by the IRS in November 2007 regarding a tax shelter involving digital foreign exchange options known as Short Options Strategies (SOS). Berenblatt alleged that the transaction lacked economic substance and was potentially fraudulent. He later claimed that his information led to the IRS’s successful use of the economic substance theory in related litigation. In July 2015, Berenblatt filed Form 211 with the WBO, seeking an award based on his 2007 interview. The WBO denied his claim, citing that the IRS had already known the relevant information before Berenblatt’s interview. Berenblatt then appealed to the Tax Court under I. R. C. § 7623(b)(4).

    Procedural History

    Berenblatt filed a petition with the U. S. Tax Court to review the WBO’s denial of his award claim. He sought discovery from the IRS, filing motions to compel the production of documents and responses to interrogatories. The IRS produced a 765-page administrative record, asserting it was complete. The court reviewed Berenblatt’s motions under the standard of review set by the Administrative Procedure Act and the scope of review limited to the administrative record. The court granted a stay of proceedings to address the discovery disputes and issued its ruling on the motions to compel.

    Issue(s)

    Whether a whistleblower can compel discovery beyond the administrative record designated by the IRS in an appeal of a whistleblower award denial, and if so, under what circumstances?

    Rule(s) of Law

    In whistleblower award appeals under I. R. C. § 7623, the Tax Court’s review is governed by the standard of review under the Administrative Procedure Act, which permits reversal of agency action found to be “arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law. ” The scope of review is generally confined to the administrative record, as articulated by the D. C. Circuit’s record rule. Discovery beyond the administrative record is permissible only upon a significant showing of bad faith or an incomplete record by the IRS. Treasury Regulation § 301. 7623-3(e) lists materials that must be included in the administrative record.

    Holding

    The Tax Court held that Berenblatt’s motions to compel discovery were largely unsupported by a significant showing of bad faith or an incomplete record. The court denied most of Berenblatt’s document and interrogatory requests, except for a request related to notes taken during his 2007 interview, which the court ordered the IRS to clarify.

    Reasoning

    The court reasoned that the IRS’s designation of the administrative record enjoys a presumption of correctness. Berenblatt’s requests for documents and interrogatory responses largely sought materials outside the administrative record and before his involvement with the IRS. The court emphasized that discovery in whistleblower cases must be limited to materials directly or indirectly considered by the WBO or those falling under categories listed in Treasury Regulation § 301. 7623-3(e). Berenblatt’s contention that the WBO should have reviewed certain documents was rejected, as there was no evidence that the WBO negligently excluded documents that could have been adverse to its decision. The court noted that the IRS had already developed the economic substance argument before Berenblatt’s interview, as evidenced by an expert report dated before the interview. The court allowed limited discovery only regarding notes from Berenblatt’s interview, as they were part of the complete record under the regulation.

    Disposition

    The court denied Berenblatt’s motions to compel discovery, except for compelling the IRS to clarify whether notes were taken during his 2007 interview and, if so, their current status.

    Significance/Impact

    This case sets a precedent for the standards governing discovery in whistleblower award appeals, reinforcing the record rule and the presumption of correctness for the IRS’s administrative record designation. It clarifies that whistleblowers must make a significant showing of bad faith or an incomplete record to obtain discovery beyond the designated record. The decision impacts future whistleblower cases by limiting the scope of discovery and emphasizing the importance of the administrative record in judicial review. It also highlights the Tax Court’s adherence to the D. C. Circuit’s precedent in whistleblower matters, affecting how such cases are litigated and the evidence considered by the court.

  • Michael Lissack v. Commissioner of Internal Revenue, 157 T.C. No. 5 (2021): Interpretation of Whistleblower Award Eligibility under I.R.C. § 7623(b)

    Michael Lissack v. Commissioner of Internal Revenue, 157 T. C. No. 5 (2021)

    In a significant ruling on whistleblower awards, the U. S. Tax Court upheld the IRS’s denial of a whistleblower award to Michael Lissack, who alleged unreported income by a group of entities. The court ruled that Lissack was not eligible for an award because the IRS did not collect proceeds based on the information he provided. This decision clarifies the scope of IRS actions that qualify for whistleblower awards under I. R. C. § 7623(b), emphasizing the need for a direct link between the whistleblower’s information and the IRS’s collection of proceeds.

    Parties

    Michael Lissack, as the Petitioner, sought a whistleblower award under I. R. C. § 7623(b) from the Commissioner of Internal Revenue, the Respondent. The case was adjudicated at the U. S. Tax Court.

    Facts

    Michael Lissack filed a Form 211 with the IRS, alleging that a group of entities (collectively referred to as “Target”) had failed to report millions of dollars in membership fees as gross income for the year 2008. The IRS initiated an examination based on Lissack’s claim, which concluded that the membership fees were properly treated as nontaxable deposits. However, during the examination, the IRS discovered an unrelated issue concerning an erroneous deduction claimed by Target for intercompany bad debt. The IRS expanded the examination to include this issue, ultimately disallowing the deduction and assessing a $60 million adjustment. Lissack’s claim for a whistleblower award was denied because the adjustment was unrelated to the information he had provided about the membership fees.

    Procedural History

    The IRS Whistleblower Office processed Lissack’s Form 211 and referred it to a revenue agent for examination. After determining that the membership fees were properly treated, the agent discovered the unrelated bad debt issue. The IRS assessed additional taxes based on this issue but denied Lissack’s claim for a whistleblower award. Lissack petitioned the U. S. Tax Court for review, and both parties filed cross-motions for summary judgment. The Tax Court reviewed the case under the administrative record and granted the Commissioner’s motion for summary judgment.

    Issue(s)

    Whether a whistleblower is entitled to an award under I. R. C. § 7623(b) when the IRS collects proceeds from an administrative action that was expanded to include issues unrelated to the information provided by the whistleblower?

    Rule(s) of Law

    I. R. C. § 7623(b)(1) provides that a whistleblower is eligible for an award only if the IRS proceeds with an administrative or judicial action “based on information” supplied by the whistleblower and collects proceeds “as a result of the action. ” Treasury Regulation § 301. 7623-2(b)(1) defines “proceeds based on” as an action where the whistleblower’s information “substantially contributes” to the action. The regulation also clarifies that an IRS examination may comprise multiple “administrative actions,” and only the portion of the examination directly linked to the whistleblower’s information qualifies for an award.

    Holding

    The U. S. Tax Court held that Michael Lissack was not eligible for a whistleblower award under I. R. C. § 7623(b) because the IRS did not collect any proceeds “as a result of the action” based on the information he provided. The examination of the erroneous deduction issue constituted a separate administrative action not initiated on the basis of Lissack’s claim.

    Reasoning

    The court applied the Chevron two-step test to evaluate the validity of the Treasury Regulations. At Chevron Step One, the court found that Congress had not directly spoken to the precise question of what constitutes an “administrative or judicial action” under I. R. C. § 7623(b), leaving room for the Secretary to define the term through regulation. At Chevron Step Two, the court determined that the regulations were a reasonable interpretation of the statute, defining an “administrative action” as a portion of an IRS examination and requiring a substantial contribution from the whistleblower’s information to qualify for an award. The court rejected Lissack’s argument that the IRS’s expansion of the examination to include the bad debt issue constituted a “related action” under the regulations, as it was not against a different person and did not involve substantially the same facts as his original claim. The court emphasized that the IRS did not proceed based on Lissack’s information in disallowing the bad debt deduction, and thus, he was not entitled to an award.

    Disposition

    The U. S. Tax Court granted the Commissioner’s motion for summary judgment and denied Lissack’s cross-motion, affirming the IRS’s denial of the whistleblower award.

    Significance/Impact

    This case significantly clarifies the scope of whistleblower awards under I. R. C. § 7623(b), emphasizing that a whistleblower’s information must directly contribute to the IRS’s collection of proceeds to qualify for an award. The decision upholds the validity of Treasury Regulations defining “administrative action” and “proceeds based on,” providing guidance for future whistleblower claims. It also highlights the importance of the whistleblower’s information in triggering and contributing to the specific IRS action that leads to collected proceeds. This ruling may influence how whistleblowers frame their claims and how the IRS evaluates eligibility for awards, potentially affecting the incentives for reporting tax noncompliance.

  • Pulcine v. Commissioner, T.C. Memo. 2020-29: Whistleblower Award Requirements under Section 7623

    Pulcine v. Commissioner, T. C. Memo. 2020-29 (U. S. Tax Court 2020)

    In Pulcine v. Commissioner, the U. S. Tax Court upheld the IRS Whistleblower Office’s denial of a whistleblower award to Charles Stuart Pulcine. The court ruled that since no additional tax, penalties, interest, or other amounts were collected from the taxpayer based on Pulcine’s information, he was not entitled to an award under Section 7623(b). This decision underscores the necessity of collected proceeds for whistleblower awards and clarifies the court’s limited review scope over IRS tax liability determinations.

    Parties

    Charles Stuart Pulcine, the petitioner, filed a pro se whistleblower award claim against the Commissioner of Internal Revenue, the respondent, represented by Richard Hatfield.

    Facts

    Charles Stuart Pulcine submitted a Form 211 to the IRS Whistleblower Office on September 16, 2013, alleging that a corporate taxpayer had failed to file certain Forms 1120 and pay income tax. He claimed that $4 million in expenses should have been capitalized rather than deducted. The Whistleblower Office referred Pulcine’s claim to the IRS Large Business & International (LB&I) Division, which conducted an examination. Meanwhile, the taxpayer filed delinquent returns and made payments. The LB&I team found that the expenses in question were properly deducted, and no audit adjustments were warranted, except for a $9,966 refund issued after an amended return. The Whistleblower Office subsequently denied Pulcine’s claim for an award, stating that his information did not result in any additional tax, penalties, interest, or amounts.

    Procedural History

    Pulcine timely filed a petition with the U. S. Tax Court after receiving the final determination letter from the Whistleblower Office. Both parties filed motions for summary judgment. The court reviewed the motions under the standard of no genuine dispute as to any material fact and entitlement to judgment as a matter of law, as outlined in Rule 121(b) of the Tax Court Rules of Practice and Procedure.

    Issue(s)

    Whether the IRS abused its discretion in denying Charles Stuart Pulcine a whistleblower award under Section 7623(b) when no additional tax, penalties, interest, or other amounts were collected based on his information.

    Rule(s) of Law

    Under Section 7623(a), the Secretary has discretion to pay an award for detecting underpayments of tax or violations of internal revenue laws. Section 7623(b) mandates an award if the Secretary proceeds with an administrative or judicial action based on the whistleblower’s information and collects proceeds. The award ranges from 15% to 30% of collected proceeds. The court reviews the Secretary’s determination under an abuse-of-discretion standard, as established in Kasper v. Commissioner, 150 T. C. 8 (2018).

    Holding

    The U. S. Tax Court held that the IRS did not abuse its discretion in denying Charles Stuart Pulcine a whistleblower award under Section 7623(b) because no additional tax, penalties, interest, or other amounts were collected based on his information.

    Reasoning

    The court reasoned that for a whistleblower to qualify for an award under Section 7623(b), the IRS must proceed with an action based on the whistleblower’s information and collect proceeds from that action. In this case, the IRS examined the specific expenses Pulcine identified and determined they were properly substantiated and deducted, resulting in no additional tax liability. The court emphasized that it lacked jurisdiction to review the IRS’s determinations of tax liability or to direct the IRS to proceed with further actions, as established in Cohen v. Commissioner, 139 T. C. 299 (2012) and Cooper v. Commissioner, 136 T. C. 597 (2011). The court found no abuse of discretion by the IRS, as the decision to deny the award was based on a sound factual and legal basis.

    Disposition

    The court granted the Commissioner’s motion for summary judgment and denied Pulcine’s motion for summary judgment.

    Significance/Impact

    Pulcine v. Commissioner reinforces the requirement that collected proceeds are necessary for a whistleblower to receive an award under Section 7623(b). It also clarifies the limited scope of judicial review over IRS determinations regarding tax liability and the discretion afforded to the IRS in handling whistleblower claims. This decision may affect future whistleblower claims by emphasizing the importance of tangible results from the information provided.

  • Christian Bernd Alber v. Commissioner of Internal Revenue, T.C. Memo. 2020-20: Whistleblower Award Claims and IRS Discretion

    Christian Bernd Alber v. Commissioner of Internal Revenue, T. C. Memo. 2020-20 (U. S. Tax Court 2020)

    In Christian Bernd Alber v. Commissioner, the U. S. Tax Court upheld the IRS Whistleblower Office’s (WBO) decision to reject a whistleblower claim. Alber, a German resident, alleged illegal actions by the German court system and unidentified individuals but failed to provide specific or credible information about U. S. tax law violations. The court ruled that the WBO did not abuse its discretion in summarily rejecting the claim, emphasizing the need for clear, actionable information in whistleblower submissions. This decision reinforces the WBO’s authority to evaluate and reject claims that do not meet statutory thresholds.

    Parties

    Christian Bernd Alber, Petitioner, represented himself. Commissioner of Internal Revenue, Respondent, represented by Ryan Z. Sarazin, Bartholomew Cirenza, and Shari A. Salu.

    Facts

    Christian Bernd Alber, a non-U. S. citizen residing in Germany, filed a whistleblower claim with the IRS Whistleblower Office (WBO) alleging illegal actions by the German court system and unspecified violations by 17 individuals or entities. Alber’s Form 211 claimed that the German government had treated him illegally, stealing his assets through invalid tax laws and other means. However, he provided no specific information linking these allegations to U. S. internal revenue laws or identifying any U. S. tax violations. The WBO reviewed Alber’s claim and, finding it speculative and lacking specific or credible information about U. S. tax underpayments or violations, rejected it without referral to an IRS operating division for further investigation.

    Procedural History

    Alber filed his whistleblower claim on December 11, 2018. The WBO acknowledged receipt on December 19, 2018, and after review, formally rejected the claim on February 8, 2019, citing a lack of specific or credible information regarding U. S. tax violations. Alber petitioned the U. S. Tax Court for review on March 8, 2019. The Commissioner moved for summary judgment, asserting that the WBO’s decision was not an abuse of discretion. The Tax Court, applying an abuse of discretion standard, granted the Commissioner’s motion on January 30, 2020.

    Issue(s)

    Whether the IRS Whistleblower Office abused its discretion in summarily rejecting Alber’s whistleblower claim under section 7623 of the Internal Revenue Code?

    Rule(s) of Law

    Under section 7623 of the Internal Revenue Code, the IRS Whistleblower Office evaluates whistleblower claims to determine their eligibility for an award. The WBO’s regulations at 26 C. F. R. sec. 301. 7623-1(c)(4) require claims to contain specific, credible information about a violation of U. S. internal revenue laws. The Tax Court reviews WBO decisions for abuse of discretion, which occurs if the decision is arbitrary, capricious, or without sound basis in fact or law (Kasper v. Commissioner, 150 T. C. 8 (2018); Murphy v. Commissioner, 125 T. C. 301 (2005)).

    Holding

    The U. S. Tax Court held that the IRS Whistleblower Office did not abuse its discretion in rejecting Alber’s whistleblower claim. The court found that the WBO’s decision was supported by Alber’s failure to provide specific or credible information about violations of U. S. internal revenue laws, as required by the applicable regulations.

    Reasoning

    The court’s reasoning focused on the WBO’s authority to evaluate whistleblower claims for threshold eligibility under section 7623 and the regulations. The court noted that Alber’s claim was speculative and did not provide the necessary specific or credible information about U. S. tax violations. The WBO’s decision to reject the claim without referral to an IRS operating division was within its discretion, as it was based on a reasonable evaluation of the claim’s content. The court emphasized that its review was limited to determining whether the WBO’s decision was an abuse of discretion, not whether the court would have reached the same decision. The court found that the WBO’s decision had a sound basis in fact and law, given Alber’s failure to meet the statutory and regulatory requirements for a whistleblower claim. The court also considered the policy behind allowing the WBO to reject claims that do not meet minimum standards, to prevent the unnecessary expenditure of IRS resources on meritless claims.

    Disposition

    The U. S. Tax Court granted the Commissioner’s motion for summary judgment, affirming the IRS Whistleblower Office’s rejection of Alber’s whistleblower claim.

    Significance/Impact

    This case reinforces the IRS Whistleblower Office’s authority to evaluate and reject whistleblower claims that do not meet statutory and regulatory thresholds. It underscores the importance of providing specific and credible information about U. S. tax violations in whistleblower submissions. The decision may deter frivolous or speculative claims and encourage whistleblowers to ensure their allegations are well-founded and clearly related to U. S. tax laws. Subsequent courts may cite this case to support the WBO’s discretion in evaluating the sufficiency of whistleblower claims at the initial stage.

  • Jacobson v. Commissioner, 148 T.C. 4 (2017): Voluntary Dismissal in Whistleblower Award Cases

    Jacobson v. Commissioner, 148 T. C. 4 (2017)

    In Jacobson v. Commissioner, the U. S. Tax Court allowed Elizabeth M. Jacobson to voluntarily dismiss her petition for review of the IRS’s denial of her whistleblower award claim. The court applied principles from Wagner v. Commissioner, finding no prejudice to the IRS from the dismissal. This ruling underscores the court’s discretion to grant voluntary dismissals in whistleblower cases, ensuring that the IRS’s original decision to deny the award remains binding on the petitioner.

    Parties

    Elizabeth M. Jacobson was the petitioner at the trial level in the United States Tax Court. The respondent was the Commissioner of Internal Revenue.

    Facts

    Elizabeth M. Jacobson, a Maryland resident, filed a Form 211 with the IRS Whistleblower Office in October 2011, seeking a whistleblower award. On May 11, 2015, the IRS issued a preliminary decision denying her claim, to which Jacobson responded with comments on July 10, 2015. Following review of her comments, the IRS issued a final determination on July 17, 2015, denying her claim on the grounds that no action was taken based on the information provided by Jacobson. Subsequently, on August 17, 2015, Jacobson filed a timely petition for review under I. R. C. sec. 7623(b)(4). On November 18, 2016, she moved to withdraw her petition, which the court treated as a motion for voluntary dismissal.

    Procedural History

    Jacobson filed her petition for review in the United States Tax Court on August 17, 2015, following the IRS’s final determination on July 17, 2015. On November 18, 2016, she filed a motion to withdraw her petition, which was treated as a motion for voluntary dismissal. The Commissioner did not object to this motion. The court, applying the principles from Wagner v. Commissioner, 118 T. C. 330 (2002), and considering the lack of prejudice to the Commissioner, granted Jacobson’s motion for voluntary dismissal on February 8, 2017.

    Issue(s)

    Whether the United States Tax Court should grant the petitioner’s motion for voluntary dismissal of her whistleblower award case, where the respondent does not object and would suffer no prejudice from such dismissal.

    Rule(s) of Law

    The court applied the principle established in Wagner v. Commissioner, 118 T. C. 330 (2002), which allows for voluntary dismissal of cases where no prejudice to the respondent would result. Specifically, the court noted that under Fed. R. Civ. P. 41(a)(2), dismissal is permitted at the discretion of the court unless the defendant will suffer clear legal prejudice.

    Holding

    The United States Tax Court held that because the Commissioner would suffer no prejudice from the dismissal of Jacobson’s petition for review of her whistleblower award claim, the court would grant her motion for voluntary dismissal.

    Reasoning

    The court’s reasoning was grounded in the principle established in Wagner v. Commissioner, which allows for voluntary dismissal when no prejudice to the respondent would result. The court considered that the IRS would not face duplicative litigation, as the time for seeking judicial review of the IRS’s determination had expired. Additionally, the court noted that the IRS’s original determination to deny Jacobson’s claim would remain binding on her post-dismissal. The court also referenced Davidson v. Commissioner, 144 T. C. 273 (2015), which extended Wagner’s logic to other types of cases, reinforcing the court’s discretion in granting voluntary dismissals. The court weighed the equities and found no clear legal prejudice to the Commissioner, thus exercising its discretion to grant the dismissal.

    Disposition

    The United States Tax Court granted Jacobson’s motion for voluntary dismissal, and an appropriate order of dismissal was entered.

    Significance/Impact

    The Jacobson case reaffirms the United States Tax Court’s discretion to grant voluntary dismissals in whistleblower award cases, aligning with precedents set in Wagner and Davidson. This ruling clarifies that petitioners may withdraw their petitions without prejudice to the respondent, provided the respondent does not object and would suffer no legal prejudice. The decision has practical implications for legal practitioners and whistleblowers, as it underscores the importance of considering the timing and implications of filing petitions for review of IRS determinations. It also highlights the binding nature of the IRS’s original decision upon dismissal, ensuring that petitioners are aware of the consequences of withdrawing their claims.

  • Ringo v. Commissioner, 143 T.C. 297 (2014): Jurisdiction Over Whistleblower Award Determinations

    Ringo v. Commissioner, 143 T. C. 297 (2014)

    In Ringo v. Commissioner, the U. S. Tax Court established that it retains jurisdiction over whistleblower award determinations once a timely petition is filed, even if the IRS later claims the determination was made in error. This ruling clarifies the court’s authority under I. R. C. § 7623(b)(4), ensuring whistleblowers can seek judicial review of IRS decisions denying their claims for awards based on information provided leading to tax collections.

    Parties

    Mica Ringo, the Petitioner, filed a claim for a whistleblower award against the Commissioner of Internal Revenue, the Respondent, in the United States Tax Court. Ringo was the whistleblower seeking judicial review of a determination by the IRS Whistleblower Office, while the Commissioner represented the IRS in defending the determination.

    Facts

    On February 17, 2011, Mica Ringo filed a Form 211, Application for Award for Original Information, with the IRS Whistleblower Office. He filed an amended Form 211 on October 6, 2011. On November 7, 2012, the Whistleblower Office mailed Ringo a letter stating he was ineligible for a whistleblower award under I. R. C. § 7623 because his information did not result in the collection of any proceeds. Ringo timely petitioned the Tax Court on December 7, 2012, invoking jurisdiction under I. R. C. § 7623(b)(4). On June 11, 2013, the Whistleblower Office sent another letter to Ringo, stating the November 7, 2012, letter was sent in error and that they were still considering his application.

    Procedural History

    After receiving the November 7, 2012, letter denying his eligibility for an award, Ringo filed a petition with the Tax Court on December 7, 2012, invoking jurisdiction under I. R. C. § 7623(b)(4). The Commissioner subsequently moved to dismiss the case for lack of jurisdiction, arguing that the November 7, 2012, letter was not a definitive determination because the Whistleblower Office later claimed it was still considering Ringo’s application. The Tax Court reviewed the motion to dismiss and ruled on the issue of jurisdiction.

    Issue(s)

    Whether the November 7, 2012, letter from the IRS Whistleblower Office constituted a “determination” under I. R. C. § 7623(b)(4), thereby conferring jurisdiction on the Tax Court, despite the subsequent June 11, 2013, letter stating the November 7 letter was sent in error?

    Rule(s) of Law

    I. R. C. § 7623(b)(4) states that “[a]ny determination regarding an award under paragraph (1), (2), or (3) may, within 30 days of such determination, be appealed to the Tax Court (and the Tax Court shall have jurisdiction with respect to such matter). ” The court’s jurisdiction is determined by the facts as they exist at the time the jurisdiction is invoked, and once jurisdiction is established, it generally continues unimpaired until the court’s decision or termination by the court.

    Holding

    The Tax Court held that the November 7, 2012, letter was a determination under I. R. C. § 7623(b)(4), and thus, the court had jurisdiction over the matter. The court’s jurisdiction was not terminated by the subsequent June 11, 2013, letter stating that the November 7 letter was sent in error.

    Reasoning

    The court reasoned that a determination for purposes of I. R. C. § 7623(b)(4) was made in the November 7, 2012, letter, which explicitly stated Ringo was ineligible for a whistleblower award. The court relied on precedent such as Cooper v. Commissioner, 135 T. C. 70 (2010), which held that a letter not labeled as a determination but stating the applicant was not entitled to an award and providing an explanation was sufficient to invoke the court’s jurisdiction. The court also emphasized that jurisdiction depends on facts at the time it is invoked and is not affected by subsequent events or the IRS’s later reconsideration of its determination. The court analogized to deficiency cases, where a notice of deficiency, even if erroneous or conceded, continues to provide a basis for jurisdiction. The court concluded that the June 11, 2013, letter did not nullify the jurisdiction already established by the timely filing of the petition in response to the November 7, 2012, letter.

    Disposition

    The Tax Court denied the Commissioner’s motion to dismiss for lack of jurisdiction, affirming that the court had jurisdiction over the matter based on the November 7, 2012, letter and Ringo’s timely petition.

    Significance/Impact

    Ringo v. Commissioner clarifies the jurisdiction of the Tax Court under I. R. C. § 7623(b)(4), ensuring that whistleblowers have access to judicial review once a determination denying an award is made, regardless of the IRS’s subsequent actions or reconsiderations. This ruling is significant for whistleblower law, as it solidifies the rights of whistleblowers to challenge IRS determinations and ensures the integrity of the judicial process in reviewing such claims. Subsequent cases have followed this precedent, reinforcing the court’s authority in whistleblower disputes and the importance of timely petitions in preserving jurisdiction.

  • Comparini v. Commissioner, 143 T.C. No. 14 (2014): Jurisdiction in Whistleblower Award Cases

    Thomas M. Comparini and Vicki Comparini v. Commissioner of Internal Revenue, 143 T. C. No. 14 (U. S. Tax Court 2014)

    The U. S. Tax Court ruled it had jurisdiction over a whistleblower award case based on a 2013 letter from the IRS Whistleblower Office, despite earlier denials in 2012. The court clarified that multiple determinations can be made on a claim, allowing petitioners to seek judicial review within 30 days of the most recent determination. This decision resolves confusion over when a whistleblower may appeal to the Tax Court and underscores the court’s broad jurisdiction under Section 7623(b)(4).

    Parties

    Thomas M. Comparini and Vicki Comparini, petitioners, filed a claim for a whistleblower award with the IRS Whistleblower Office. The Commissioner of Internal Revenue was the respondent in the case before the U. S. Tax Court.

    Facts

    In 2012, Thomas and Vicki Comparini submitted a whistleblower claim to the IRS Whistleblower Office using Form 211, which the office processed as four separate claims. The Whistleblower Office denied the claims in four letters sent in October and November 2012, stating that the information provided did not result in the collection of any proceeds, making the Comparinis ineligible for an award. In January 2013, the Comparinis sent additional information and made additional claims to the Whistleblower Office. In response, the Whistleblower Office sent a letter on February 12, 2013, stating that the claim still did not meet the criteria for an award, and it was closing the claim. The Comparinis filed a petition with the U. S. Tax Court on March 19, 2013, within 30 days after receiving the 2013 letter.

    Procedural History

    The Comparinis filed a whistleblower award claim under Section 7623(b) in 2012, which was denied by the Whistleblower Office. After submitting additional information in January 2013, they received a further denial in February 2013. They then filed a timely petition with the U. S. Tax Court within 30 days of the 2013 letter. The Commissioner moved to dismiss the case for lack of jurisdiction, arguing that the petition was untimely because it was not filed within 30 days of the 2012 letters. The Tax Court denied the motion to dismiss, finding jurisdiction based on the 2013 letter.

    Issue(s)

    Whether the February 12, 2013, letter from the IRS Whistleblower Office constitutes a “determination” for purposes of Section 7623(b)(4), thereby conferring jurisdiction on the U. S. Tax Court to review the denial of the Comparinis’ whistleblower award claim?

    Rule(s) of Law

    Section 7623(b)(4) of the Internal Revenue Code provides that “[a]ny determination regarding an award under paragraph (1), (2), or (3) may, within 30 days of such determination, be appealed to the Tax Court (and the Tax Court shall have jurisdiction with respect to such matter). ” The court has jurisdiction when the IRS makes a determination regarding an award under Section 7623(b), and a petition is filed timely within 30 days of that determination.

    Holding

    The U. S. Tax Court held that the February 12, 2013, letter from the IRS Whistleblower Office constitutes a “determination” for purposes of Section 7623(b)(4). Consequently, the court had jurisdiction over the petition filed by the Comparinis within 30 days of receiving that letter, despite the earlier denials in 2012.

    Reasoning

    The court reasoned that the 2013 letter contained a statement on the merits of the whistleblower claim, referred to a “determination,” and did not indicate that further administrative procedures were available. The court emphasized the statutory language of Section 7623(b)(4), which allows jurisdiction over “any” determination. The court also distinguished this case from the Friedland cases, which involved subsequent letters that merely reaffirmed prior determinations without considering new information. The court noted that the Comparinis had submitted additional documentation in 2013, which the Whistleblower Office considered before issuing its determination. The court concluded that the 2013 letter represented a new determination, thus allowing the Comparinis to file a timely petition based on this letter. The court’s decision also highlighted the potential for confusion caused by the IRS’s communication practices and sought to avoid creating traps for whistleblowers trying to invoke the court’s jurisdiction.

    Disposition

    The U. S. Tax Court denied the Commissioner’s motion to dismiss for lack of jurisdiction and retained the case for further proceedings.

    Significance/Impact

    This decision clarifies the scope of the U. S. Tax Court’s jurisdiction in whistleblower award cases under Section 7623(b)(4), emphasizing that the court can review multiple determinations on the same claim if they are distinct. The ruling provides guidance on the timing of petitions and the significance of subsequent communications from the IRS Whistleblower Office. It also underscores the importance of clear communication from the IRS to whistleblowers and the potential for the court to exercise jurisdiction over later determinations that follow additional submissions or claims. The decision may influence how the IRS processes and communicates decisions on whistleblower claims and how claimants approach the filing of petitions to the Tax Court.

  • Cohen v. Commissioner, 139 T.C. 299 (2012): Whistleblower Award Eligibility under I.R.C. § 7623(b)

    Cohen v. Commissioner, 139 T. C. 299 (2012)

    The U. S. Tax Court dismissed Raymond Cohen’s petition seeking to compel the IRS to reopen his whistleblower claim under I. R. C. § 7623(b). The court held that it lacked jurisdiction to order the IRS to pursue an action or collect proceeds based on Cohen’s information. This ruling clarifies that a whistleblower award is contingent upon the IRS taking action and collecting proceeds, emphasizing the limited judicial oversight of IRS whistleblower claim decisions.

    Parties

    Raymond Cohen, the petitioner, filed his claim pro se. The respondent, the Commissioner of Internal Revenue, was represented by Jonathan D. Tepper. The case was heard by Judge Kroupa of the United States Tax Court.

    Facts

    Raymond Cohen, a certified public accountant, submitted a whistleblower claim to the IRS based on information he obtained while his wife served as executrix for an estate. The estate held uncashed stock dividend checks from a public corporation. Cohen suspected the corporation retained unclaimed assets, including uncashed dividends and unredeemed bonds. He gathered information through a state Freedom of Information Law request and reviewed allegations from a civil lawsuit against the corporation, asserting that the corporation possessed unclaimed assets worth over $700 million. Cohen claimed these assets should have been turned over to the state and constituted unreported income for federal tax purposes. The IRS Whistleblower Office denied Cohen’s claim, stating that no proceeds were collected and the information was publicly available. Cohen requested reconsideration, which was also denied.

    Procedural History

    Cohen filed a petition and an amended petition in the United States Tax Court, requesting the court to order the IRS to reopen his claim. The Commissioner moved to dismiss the petition for failure to state a claim under Rule 40 of the Tax Court Rules of Practice and Procedure. Cohen opposed the motion and filed a motion for summary judgment under Rule 121. The Tax Court granted the Commissioner’s motion to dismiss and denied Cohen’s motion for summary judgment as moot.

    Issue(s)

    Whether the Tax Court has jurisdiction under I. R. C. § 7623(b) to order the IRS to reopen a whistleblower claim where no administrative or judicial action has been initiated and no proceeds have been collected.

    Rule(s) of Law

    Under I. R. C. § 7623(b), a whistleblower is entitled to an award only if the provided information leads the Commissioner to proceed with an administrative or judicial action and collect proceeds. The Tax Court’s jurisdiction is limited to reviewing the Commissioner’s award determination after these prerequisites are met.

    Holding

    The Tax Court held that it lacks jurisdiction to grant relief under I. R. C. § 7623(b) when the IRS has not initiated an administrative or judicial action or collected proceeds based on the whistleblower’s information. The court dismissed Cohen’s petition for failure to state a claim upon which relief can be granted.

    Reasoning

    The court’s reasoning focused on the statutory requirements of I. R. C. § 7623(b), which explicitly link a whistleblower award to the IRS’s action and collection of proceeds. The court emphasized that its jurisdiction is limited to reviewing the Commissioner’s award determination after these events occur. The court rejected Cohen’s arguments that the IRS should be compelled to act on his information or provide detailed explanations for its decision, citing the absence of such authority in the statute. The court also dismissed Cohen’s reliance on the Administrative Procedure Act and equitable grounds, noting that these do not expand the court’s jurisdiction or create new rights of action under I. R. C. § 7623(b). The court acknowledged Cohen’s frustration but stressed that Congress has assigned the responsibility of evaluating whistleblower claims to the IRS, without providing judicial remedies until the statutory prerequisites are satisfied.

    Disposition

    The Tax Court granted the Commissioner’s motion to dismiss the petition for failure to state a claim and denied Cohen’s motion for summary judgment as moot.

    Significance/Impact

    Cohen v. Commissioner clarifies the scope of judicial review under I. R. C. § 7623(b), emphasizing that courts cannot compel the IRS to act on whistleblower information or reopen claims without an administrative or judicial action and collection of proceeds. This decision reinforces the IRS’s discretion in handling whistleblower claims and limits judicial intervention to post-action review of award determinations. It may influence future whistleblower cases by setting a clear threshold for judicial involvement, potentially affecting the strategies of whistleblowers and their expectations regarding IRS responses to their claims.

  • Cooper v. Commissioner, 136 T.C. 597 (2011): Whistleblower Award Jurisdiction and Threshold Requirements

    Cooper v. Commissioner, 136 T. C. 597 (U. S. Tax Ct. 2011)

    In Cooper v. Commissioner, the U. S. Tax Court clarified its jurisdiction in whistleblower cases, ruling that it does not extend to initiating tax liability investigations. The court upheld the IRS’s decision not to pursue action based on William Prentice Cooper’s whistleblower claims, denying him an award under I. R. C. § 7623(b) because no tax proceeds were collected. This decision underscores the limitations of judicial oversight in whistleblower disputes and the necessity for actual tax collection to trigger an award.

    Parties

    William Prentice Cooper, III, as the petitioner, filed two claims for whistleblower awards with the Commissioner of Internal Revenue, the respondent. The case progressed through the U. S. Tax Court, where Cooper sought review of the Commissioner’s denial of his claims.

    Facts

    William Prentice Cooper, III, an attorney from Nashville, Tennessee, submitted two whistleblower claims to the Internal Revenue Service (IRS) in 2008. The claims alleged substantial underpayments in federal estate and generation-skipping transfer taxes related to the estate of Dorothy Dillon Eweson, claiming an omission of a trust valued at over $102 million and the improper modification of trusts worth over $200 million. Cooper obtained this information while representing the guardian of a trust beneficiary and supported his claims with public records and client records. The IRS Whistleblower Office reviewed the claims and forwarded them to the appropriate IRS office, which concluded that no administrative or judicial action would be taken against the taxpayer involved. Consequently, the Whistleblower Office informed Cooper that no award determination could be made under I. R. C. § 7623(b) because his information did not lead to the detection of any tax underpayments.

    Procedural History

    Following the IRS’s denial of his whistleblower claims, Cooper filed two petitions in the U. S. Tax Court. The Commissioner moved to dismiss for lack of jurisdiction, arguing that no award determination notices were issued. The court denied this motion, ruling that the Whistleblower Office’s letters constituted determination notices (Cooper v. Commissioner, 135 T. C. 70 (2010)). The Commissioner then filed answers to the petitions, attaching a memorandum summarizing the rationale for denying the claims. Subsequently, the Commissioner moved for summary judgment, asserting that Cooper had not met the threshold requirements for a whistleblower award. Cooper objected, requesting a full re-evaluation of the facts and a new investigation into the tax liability.

    Issue(s)

    Whether the U. S. Tax Court has jurisdiction to direct the IRS to initiate an administrative or judicial action to determine tax liability in a whistleblower case under I. R. C. § 7623(b)?

    Whether the petitioner met the threshold requirements for a whistleblower award under I. R. C. § 7623(b)?

    Rule(s) of Law

    Under I. R. C. § 7623(b)(1), a whistleblower is entitled to an award equal to a percentage of the collected proceeds resulting from an administrative or judicial action initiated based on the whistleblower’s information. The Tax Court’s jurisdiction in whistleblower cases, as per I. R. C. § 7623(b), is limited to reviewing the Commissioner’s award determination, not the underlying tax liability (Cooper v. Commissioner, 135 T. C. 70 (2010)).

    Holding

    The U. S. Tax Court held that it does not have jurisdiction to direct the IRS to open an administrative or judicial action to predetermine tax liability in whistleblower cases. Furthermore, the court found that Cooper failed to meet the threshold requirements for a whistleblower award under I. R. C. § 7623(b) because no tax proceeds were collected as a result of his information.

    Reasoning

    The court reasoned that the statutory framework of I. R. C. § 7623(b) clearly delineates the Tax Court’s jurisdiction to review only the Commissioner’s award determination, not to delve into the merits of the underlying tax liability. This limitation was emphasized by the court’s earlier decision in Cooper v. Commissioner, 135 T. C. 70 (2010), which established that the court’s role in whistleblower disputes is strictly to review the Commissioner’s actions regarding awards. The court further noted that a whistleblower award is contingent upon the IRS’s decision to pursue an administrative or judicial action and the subsequent collection of tax proceeds. Since no such action was initiated based on Cooper’s claims, and no proceeds were collected, he was not entitled to an award. The court addressed Cooper’s objections by clarifying that while he might disagree with the IRS’s legal conclusions, the absence of an IRS action meant there could be no basis for a whistleblower award. The court’s cautious approach to granting summary judgment was also noted, ensuring that all procedural and substantive requirements were met before deciding in favor of the Commissioner.

    Disposition

    The U. S. Tax Court granted the Commissioner’s motions for summary judgment in both dockets, affirming the denial of whistleblower awards to Cooper.

    Significance/Impact

    Cooper v. Commissioner is significant for delineating the scope of the Tax Court’s jurisdiction in whistleblower cases, emphasizing that it does not extend to directing the IRS to investigate potential tax liabilities. This ruling clarifies the threshold requirements for whistleblower awards under I. R. C. § 7623(b), reinforcing that an award is contingent upon the IRS taking action and collecting proceeds. The decision has implications for future whistleblower litigation, underscoring the necessity of actual tax collection for an award and the limited judicial oversight in such disputes. It also highlights the procedural and substantive hurdles whistleblowers must overcome to successfully claim an award, potentially impacting the incentives and strategies of potential whistleblowers.