IRS Whistleblower Advocates Hopeful New Administration Upholds “Collected Proceeds” Tax Court Decision

Published on January 31, 2017

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IRS Whistleblower Advocates Hopeful New Administration Upholds “Collected Proceeds” Tax Court Decision
In a press release issued today, attorneys for a husband and wife tax fraud whistleblowers, expressed optimism that President Trump’s pick for Secretary of Treasury Steve Mnuchin would show support for the IRS Whistleblower Office by not appealing a the Tax Court’s decision in Whistleblower 21276-13W v. CIR (147 TC 4).

The full press release is reprinted below:

Tax Court Denies IRS Motion for Reconsideration -Big Win Confirmed for Whistleblowers

Washington, D.C. January 31, 2017. The Tax Court issued its final decision in Whistleblower 21276-13W v. CIR (147 TC 4) and directed the IRS to pay an award of $17,791,706 to the husband and wife who blew the whistle on this big corporate tax fraud.  In making this order, Judge Jacobs denied the IRS’ Motion for Reconsideration.  The final decision keeps in place the landmark victory for whistleblowers by the Tax Court — encompassing a broad definition of “collected proceeds” and holding that whistleblowers should receive an award based on all the dollars collected by the government due to the information they provide.

“The IRS Chief Counsel’s office emptied the in basket in making arguments for the Motion for Reconsideration – including the availability of funds for award payments.  To no avail.  While I appreciate that Counsel wanted to defend its corner, at the end of the day the Tax Court wasn’t buying what IRS Counsel was selling.  This decision gives Treasury Secretary nominee Mnuchin and the new administration an opportunity to embrace the Tax Court’s final ruling and show that it supports the IRS whistleblower program and is serious about going after big time tax cheats’” said Dean Zerbe, Partner at Zerbe, Fingeret, Frank & Jadav, PC and lead counsel in the case.

Stephen M. Kohn, of Kohn, Kohn and Colapinto and co-counsel for the case as well as Executive Director of the National Whistleblower Center stated: “Senator Grassley, the champion of the IRS whistleblower program raised in questions to Secretary of Treasury nominee Mr. Steve Mnuchin before the Senate Finance Committee the issue of “collected proceeds” – which is at the center of this important Tax Court win for whistleblowers:” Senator Grassley had asked Mr. Mnuchin:

‘The IRS has chosen to interpret the whistleblower law narrowly to the detriment of whistleblowers and several instances, the IRS has interpreted the terms ‘collected proceeds’ which is the base for determining the amount of award to exclude criminal penalties and certain other proceeds suggest penalties assessed for undisclosed foreign bank accounts.  Two questions, and I will say that both – should you be confirmed, can I count on you to be support of the whistleblower program and work to ensure its success and would you be willing to review the IRS’s administration program including its very narrow interpretation of the words ‘collected proceeds’?

Mr. Kohn noted: “Mr. Mnuchin assured the Senator that he supported the IRS whistleblower program and would review the narrow interpretation of ‘collected proceeds.’”  Mr. Mnuchin went on in his response to Senator Grassley: “We are aware there is tax fraud.  There is tax fraud as you said, and we need to be diligent and I believe that the whistleblower laws are very important part of that.  I will work very hard with you on that.”

Mr. Kohn added: “The Tax Court decision gives Mr. Mnuchin the perfect opportunity to do the right thing, accept the Tax Court ruling in favor of whistleblowers, and make it clear to all the tax crooks that the new administration is putting out the welcome mat for tax whistleblowers.  By honoring his commitment to Senator Grassley on “collected proceeds,” Mr. Mnuchin will do right by the American people and honest taxpayers.”

“I can’t think of another governmental program that puts significant amounts of money into government coffers with absolutely no impact on the budget. Giving ”collected proceeds“ it’s plain meaning gives the government a larger pot of money, paid for completely by lawbreakers, with which to reward successful whistleblowers and encourage potential whistleblowers to turn in tax cheats” said Robert Amsel, co-counsel on the case, of Ross, Amsel, Raben, Nascimento PLLC.

The National Whistleblower Center (NWC) is leading a nation-wide campaign to urge the Trump administration not to appeal this decision. The NWC issued an action alert, “Major Tax Whistleblower Ruling at Risk-Act Now,” to garner public support for this effort.

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