The Tax Court held that providing information to federal agencies and an operating division of the IRS before filing Form 211, Application for Award for Original Information, did not render husband and wife whistleblowers ineligible for awards under Sec. 7623(b). As a result, the claims were allowed to proceed after the IRS had originally denied them.
Facts: A government informant referred to in the court's opinion only as "petitioner husband" to protect his anonymity was arrested for participating in a money laundering conspiracy. He pleaded guilty and agreed to cooperate with the U.S. Justice Department by providing information and testifying. The informant told the government that a foreign business was helping U.S. taxpayers evade federal income tax. Through a sting operation, the informant and his wife lured a senior officer of the foreign business into the United States, which led to that person's arrest. The foreign business was subsequently indicted, which led to its guilty plea and a $74 million recovery by the United States. The informant became aware of the IRS whistleblower program after he started to assist the government.
Approximately three months after the targeted business pleaded guilty, the informant and his wife each submitted Form 211 to the IRS Whistleblower Office. The IRS denied the award claims, stating that the proceeds had been collected before the Forms 211 were filed, thereby rendering the claims ineligible.
Issue: The sole issue was whether, to qualify for awards under Sec. 7623(b), the plaintiffs were required as a matter of law to file Form 211 with the Whistleblower Office before providing information to another operating division of the IRS and other federal agencies.
The IRS claimed that Section 406(b) of the Tax Relief and Health Care Act of 2006 (TRHCA), P.L. 109-432, gave the Whistleblower Office the exclusive discretion either to investigate a taxpayer or refer the information to an IRS operating division. The IRS also asserted that whistleblowers are ineligible for an award if they submit the information to an IRS operating division before submitting it to the Whistleblower Office via Form 211.
Holding: The Tax Court held that the Whistleblower Office does not have the exclusive authority to investigate an individual or entity that is the subject of a whistleblower award application. The court noted that Section 406 of the TRHCA does not require a whistleblower to first bring information to the Whistleblower Office. The court stated that nothing prevents the Whistleblower Office from pursuing the whistleblower's information even after another IRS office receives it. Accordingly, the court ordered the Whistleblower Office to further consider the couple's claims.
- Whistleblower 21276-13W, 144 T.C. No. 15 (2015)
—By Maria M. Pirrone, CPA, LL.M., assistant professor of taxation, St. John's University, New York City.