Page 2 - Current Overview of the IRS’s Whistleblower Program

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Treasury Regulations section 301.7623- audit or examination, and when the tax- ing a whistleblower award. If the whistle-
4(b) provides positive and negative factors payer has made a tax payment with respect blower believes that the Whistleblower
to be considered when determining where to which the whistleblower’s information Office erred in evaluating the information
in the award range a whistleblower award relates. In addition, the Whistleblower provided, the whistleblower has 30 days
should fall. Positive factors include Office must respond to a whistleblower’s from the date the Whistleblower Office
whether 1) the whistleblower provided written request for information on 1) the sends the preliminary award recommen-
prompt notification of the noncompliance; status and stage, or action related to such dation to submit comments to the
2) the whistleblower identified an issue or information; or 2) the reason for the deter- Whistleblower Office. The preliminary
transaction of a type not previously known mination of the amount of any award recommendation letter is not appealable
to the IRS; 3) the whistleblower provided made under IRC section 7623(b). to the Tax Court or any other court.
the information in a clear and organized The Tax Court held in 2018 that appeals
manner, such that it saved the IRS work New Antiretaliation Protections of whistleblower awards are evaluated
and resources; 4) the information provided In July 2019, Congress again amended using an administrative record scope of
identified assets of the taxpayer that could the whistleblower statute to provide anti- review and an abuse of discretion standard
be used to pay liabilities; or 5) the infor- retaliation protections to tax whistleblowers. of review [Kasper v. Comm’r, 150 T.C.
mation provided identified taxpayer behav- Congress did so by creating a new subsec- No. 2 (2018)]. Although the Tax Court
ior that the IRS was unlikely to identify. tion (d) to the statute, which protects a ruled in Kasper that the scope of review is
Negative factors include whether the broad range of disclosures by employees the administrative record, it recognized that
whistleblower 1) delayed providing infor- about potential tax violations. The new sub- there are exceptions, such as when—
mation to the IRS; 2) was involved in the section protects not only disclosures to gov- n the IRS action is not adequately
tax noncompliance; or 3) directly or indi- ernment entities such as the IRS and the explained in the record,
rectly profited from the underpayment of Department of Justice, but also internal dis- n the IRS failed to consider relevant
tax or tax noncompliance identified. closures, including an employee’s disclo- factors,
The starting point for the whistleblower sure to “a person with supervisory authority n the IRS considered evidence that it failed
award analysis will be the statutory min- over the employee, or any other person to include in the record,
imum of 15% of collected proceeds. The working for the employer who has the n the case is so complex that a court needs
Whistleblower Office may increase the authority to investigate, discover, or termi- more evidence to understand the issues
award percentage to 22% or 30% based nate misconduct.” clearly,
on its analysis of the presence and signif- An employee has 180 days from the date n there is evidence that arose after the IRS
icance of positive factors, and it may the employee first learned of the retaliatory action showing the decision was correct or
decrease that enhanced award percentage action to file a complaint. The complaint not, and
based on its analysis of the presence and must initially be filed with the Occupational n the agency’s failure to take action is
significance of negative factors. Using this Safety and Health Administration (OSHA), under review.
approach, the Whistleblower Office will which will investigate the claim. To prevail, If one of these exceptions exists, the
determine awards, as a percentage of col- an employee must show that the protected court will allow the record to be supple-
lected proceeds, of 15%, 18%, 22%, 26%, whistleblowing activity was a “contributing mented.
or 30%. This analysis cannot be reduced factor” to the adverse action. The employer The Tax Court’s announcement of an
to a single mathematical equation, as fac- can avoid liability only if it proves by “clear abuse of discretion standard of review and
tors are not exclusive and not weighted, and convincing evidence” that it would have administrative record scope of review has
and an absence of negative factors does taken the same adverse action in the absence also led courts to conclude that the appro-
not necessarily mean that the award per- of the protected whistleblowing activity. If priate result in most whistleblower appeals
centage will be larger than 15%. OSHA determines there is reasonable cause in which the claimant has demonstrated
to believe a violation occurred, OSHA can errors made by the IRS or its
New Disclosure Requirements order relief, including reinstatement of the Whistleblower Office in denying an award
Recent amendments to the whistleblow- whistleblower, double back pay with interest, is for the court to simply remand the case
er statute outline disclosures that the IRS and compensation for any “special damages.” back for further consideration. q
must make to whistleblowers who have
submitted a claim. The Whistleblower New Case Law Defining the Standard Juliet L. Fink, JD, is an attorney at
Office will notify the whistleblower when of Review Kostelanetz & Fink, LLP in New York,
a case for which the whistleblower has It generally takes five to seven years, N.Y., focusing on federal and state criminal
provided information has been referred for or more, to complete the process of issu- and civil tax matters.

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