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‘in connection with’ … determining the unregulated access to return informa- extent the regulations allow limited return
civil or criminal liabilities of” the three tion of any taxpayer that a whistleblower information disclosure to whistleblowers,
taxpayers the whistleblower informed on. might choose to target.” This would be in the IRS’s eyes, these disclosures are au-
The court explained that “[w]hen, as here, contrary to the overarching purpose of thorized by Sec. 6103(h)(4)(B) or (C) and
a whistleblower provides information Sec. 6103, which the IRS claimed is to not Sec. 6103(h)(4)(A).
to the IRS on a target taxpayer and the “restrict access to return information The Tax Court saw things differently,
IRS proceeds with an action and collects within well-defined limits.” The Tax observing that Regs. Secs. 301.6103(h)
proceeds from that target taxpayer, the Court gave four reasons why it did not (4)-1(b) and 301.7623-3(c)(4)(i)(B)
decision whether to grant the whistle- believe this was the case. authorize the WBO to disclose returns
blower an award — as well as [the Tax First, the Tax Court explained that and return information to a whistleblower
Court’s] eventual review of that decision the general rule of Sec. 6103 and its during the whistleblower administrative
— is inextricably linked with determin- “numerous” exceptions already reflected proceeding and that these regulations
ing the target taxpayer’s civil or criminal Congress’s balancing of the competing were based on Sec. 6103(h)(4)(A). Be-
liability for at least two reasons.” Thus, interests of taxpayers in maintaining the cause the court saw no reason that Sec.
the whistleblower’s case was within the confidentiality of their returns and return 6103(h)(4)(A) would authorize broader
scope of Sec. 6103(h)(4)(A), and disclo- information and the interests of others disclosure in administrative proceedings
sure of the WBO’s administrative record whose rights might be affected by that in- than in judicial proceedings, it concluded
was authorized. formation. Second, the Tax Court noted that the regulations reinforced its conclu-
The IRS appeared to acknowledge that Congress had used a broad phrase in sion that Sec. 6103(h)(4)(A) authorizes
that the plain text of Sec. 6103(h)(4) the provision and, if it intended to adopt the disclosure of the administrative record.
(A) supported the Tax Court’s conclu- a narrower standard, it could have easily
sion, conceding in its brief that its own used narrower language. Third, the flush Reflections
interpretation is “narrower in scope than text in Sec. 6103(h)(4) gives the IRS As the Tax Court pointed out in the
the plain language implies.” The IRS authority to prevent disclosure if it “deter- conclusion to its opinion, its holding did
contended that the legislative history of mines that such disclosure would identify not leave taxpayer information in a WBO
the provision and its statutory purpose a confidential informant or seriously im- administrative record without protec-
supported its narrower interpretation. pair a civil or criminal tax investigation.” tion, citing for example its own rules that
The IRS argued that examples from Thus, in the court’s view, Congress did allow the Tax Court to require further
the legislative history of a parallel provi- not leave the IRS powerless with respect redactions from the record or to issue
sion in Sec. 6103(h) show that Congress to disclosures in judicial proceedings. a protective order. It further noted that
had a more limited understanding of Sec. Finally, the Tax Court stated that it under another of its rules, on a party’s mo-
6103(h)(4)(A). The Tax Court, however, did not share the IRS’s broad view of tion and for good cause shown, “the [Tax
found that this legislative history, being what it was holding. According to the Court] may make any order that justice
from a parallel provision, had no proba- court, a number of rules in addition to requires to protect a party or other person
tive value in determining the meaning Sec. 6103 limit the information available from annoyance, embarrassment, oppres-
of Sec. 6103(h)(4)(A). Even if it did, the to whistleblowers in Tax Court. Contrary sion, or undue burden or expense.” While
court found that the legislative history to the IRS’s contention, therefore, it was the IRS can pursue redaction under these
the IRS cited simply comprised some not holding that every whistleblower rules, it cannot claim that it is prohibited
illustrative examples of circumstances should receive unfettered access to the by Sec. 6103 from complying with Tax
that would fall under the parallel provi- return information of every target the Court orders.
sion and there was no indication that the whistleblower names. Instead, the court Whistleblower 972-17W, 159 T.C.
legislative history was intended to be an stated it was holding that in the specific No. 1 (2022) ■
all-inclusive expression of what the paral- circumstances present in the whistle-
lel provision or Sec. 6103(h)(4)(A) meant. blower’s case, Sec. 6103 does not prohibit
Regarding the statutory purpose disclosure of the taxpayers’ returns and re- Contributor
of Sec. 6103, the IRS argued that the turn information that the WBO included
James A. Beavers, CPA, CGMA,
Tax Court’s interpretation of Sec. in the administrative record supporting
J.D., LL.M., is The Tax Adviser’s tax
6103(h)(4)(A) would allow “unfettered its determination.
technical content manager. For more
disclosure” of return information to The court then addressed the IRS’s
information about this column, contact
“any whistleblower who might file a Tax contention that the current regulations
thetaxadviser@aicpa.org.
Court appeal,” resulting in “wholesale, were consistent with its position. To the
www.thetaxadviser.com October 2022 55