The National Whistleblower Center’s (NWC) Senior Policy Advisor – Dean Zerbe and his law firm ZFF&J – were recently in Tax Court as the first lawyers to litigate in a hearing whether a whistleblower meets the three-part test of the IRS whistleblower award program. In brief, the three-part test is:
1) The Tax whistleblower provided information to the government.
2) The IRS acted on that information.
3) The IRS action resulted in collected proceeds.
While the case remains under seal, the whistleblower was able to show that the IRS denial letter was issued in error and that the whistleblower met the three-part test – in spades. Finally having their day in Tax Court to have the facts brought forward was in of itself a victory for the whistleblower.
The recent case highlights the need for whistleblowers to not take at face value the statements made in a form denial letter issued by the IRS. The whistleblower can often be erroneously given a denial letter because the IRS is misapplying the law (ex. In defining what it means for the IRS to “act on information;” the definition of “collected proceeds,” and; even the IRS incorrectly issuing a denial award because of arbitrary deadlines for filing set by the IRS without any notice).
As concerning, the IRS Chief Counsel’s office continues to argue that whistleblowers are only entitled to a perfunctory rubber-stamp review of their case by the tax court (whether the IRS acted in an arbitrary and capricious manner based on often a non-existent administrative file). This is directly contrary to the intent of the Congress – which directed for the Tax Court to have a complete fresh review of the facts of a whistleblower case.
The NWC is greatly concerned that these anti-whistleblower litigating positions by the IRS Chief Counsel pose a serious threat to the success of the IRS Whistleblower program – a program that has already brought in billions of dollars from tax cheats to the US government.
The NWC intends to contact the Congress on the issues and problems whistleblowers are seeing in litigation of the IRS Whistleblower Program. The NWC welcomes comments and input from practitioners as well as whistleblowers as the NWC puts together its proposals to Congress. In addition, the NWC is always happy to assist whistleblowers both in dealing with the IRS and in Tax Court. You may contact the National Whistleblower Center at firstname.lastname@example.org and reference this blog post.
IRS Reports Ten-Fold Increase in Tax Whistleblower Awards: $312 Million by Senior Policy Advisor Dean Zerbe