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TAX MATTERS

Whistleblower allowed anonymity in Tax Court

 

March 2012

While denying a tax whistleblower’s appeal of an IRS award rejection, the Tax Court agreed to grant the whistleblower anonymity in court proceedings and to redact identifying information from the case record. The court said the requested relief was reasonably necessary to protect the petitioner’s privacy interests as a confidential informant and serve other social interests.

The whistleblower was a former senior executive of a company (also redacted), who filed a claim under Sec. 7623 alleging the company had significantly underpaid its taxes. The IRS notified the whistleblower that it would not take action on the submitted information, and the whistleblower appealed to the Tax Court as provided by Sec. 7623(b)(4). The whistleblower sought to have the court’s temporary seal of the record made permanent or, alternatively, to be allowed to proceed anonymously, citing possible retaliatory economic harm and professional ostracism from current and prospective employers.

The court granted summary judgment to the IRS on the whistleblower claim. In holding that the claim did not meet threshold requirements, the court quoted Cooper, 136 T.C. 597 (2011): “If the Secretary does not proceed, there can be no whistleblower award.” (See also Tax Matters coverage of Cooper, “Jurisdiction Not Limited to Award Amount, Tax Court Says,” Oct. 2010, page 81.)

The court also denied the whistleblower’s motion to seal the case record, saying anonymity should afford sufficient protection. In granting anonymity, the court determined the whistleblower was “especially vulnerable” to “professional stigma, retaliation, and economic duress.” Public interest in the whistleblower’s identity the court judged “relatively weak,” especially since the court was denying the claim. The court also noted that Sec. 7623 lacks antiretaliatory provisions like those for qui tam actions under the False Claims Act (31 U.S.C. Sections 3729–3733) and that the IRS has stated that its policy is to treat whistleblowers as confidential informants (IRM 25.2.2.11; Notice 2008-4).

Judge James S. Halpern concurred in a opinion, but only to give “fair notice.” He believes the court should not automatically grant anonymity in such cases. He said it was up to Congress to amend the statute to provide confidentiality for whistleblowers, given the legislative “choice of a public forum for such actions.”


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