The IRS whistleblower program has had a long, hard road but recent events have me a believer that for whistleblowers the land of milk and honey is finally in sight.
Three actions have me buying my map for the promised land: 1) the June 20, 2012 memorandum by the Deputy Commissioner of the IRS Steven Miller; 2) the Tax Court’s acceptance of the National Whistleblower Center amicus brief in the Insinga case; and, 3) Senator Grassley.
Deputy Commissioner Memo. The Deputy Commissioner, Steven Miller, has been a key supporter for the IRS Whistleblower Office headed by Steve Whitlock. Whitlock and his dedicated team have had to address a daunting gauntlet of issues and concerns and having the Deputy Commissioner as a blocking fullback clearing the path for them has been a big help in achieving progress.
The Deputy Commissioner’s support is apparent in the June 20, 2012 memorandum which established set deadlines for the IRS to perform its work regarding whistleblower submissions. The memorandum particularly addresses two long-time concerns of whistleblowers: 1) the failure (or long delay) in the IRS meeting with a whistleblower to discuss their submission; and, 2) set timelines for the IRS to consider a submission and also, where appropriate, to make an award. As important, the general tone and tenor of the memorandum from the Deputy Commissioner is that the IRS whistleblower program is valuable and beneficial to the work of the IRS. Early indications are that the IRS is striving to meet the policies and goals put forward by the Deputy Commissioner.
Amicus Brief – Insinga Case. An important case for whistleblowers is before the tax court – the Insinga case. In (very) brief, the whistleblower in Insinga contends that he provided significant information to the IRS; the IRS used that information to collect taxes; and, the IRS is now improperly delaying making a decision about an award for the whistleblower. The whistleblower has asked the Tax Court to find that the IRS effectively denied his claim – and allow the whistleblower to have discovery to show that he is entitled to an award.
The National Whistleblower Center filed an amicus brief (drafted by myself and my co-counsel Stephen Kohn)with the Tax Court asking that the Tax Court apply general standards of law under the Administrative Procedures Act (APA) and direct the IRS to make a determination on Insinga’s claim within a reasonable time period (ex. 90 days). Having the Tax Court signal that the IRS is bound by the APA as it relates to the IRS Whistleblower program and that the IRS is incorrect in its view that there is “no limitation” – in the words of the IRS counsel – in the time the IRS can take in making a decision would be a huge victory. For the Tax Court to state that the IRS must make decisions in a reasonable time period would put real teeth to the memorandum by the Deputy Commissioner and give whistleblowers meaningful protections.
The Tax Court has not ruled on the issues raised by the amicus brief from the National Whistleblower Center but it did accept the brief over the objections of the IRS — and moreover, in doing so signaled with its citing of the recent Supreme Court case of Mayo that, at a minimum, the Tax Court was going to take a hard eye at the IRS’s delays in making a decision for the whistleblower.
Senator Grassley. Senator Grassley has engaged in significant oversight of the IRS Whistleblower law — of which he was the author and driving force (Grassley has had a long history of legislation and oversight on behalf of whistleblowers – including the False Claims Act (Qui Tam); the SEC whistleblower law; and numerous provisions protecting whistleblowers). Senator Grassley has written repeatedly to the IRS and Treasury about the IRS whistleblower program and has certainly kept the pressure on the IRS to have more giddyup in keeping the program moving forward. The June 20, 2012 memorandum by Steve Miller is clearly a response to Grassley’s efforts. Senator Grassley is certainly not going away on this issue and he has had a real and significant positive impact on the whistleblower program getting on its feet.
One of the highest honors you can have in Iowa is to have a sculpture made of you in butter at the state fair. Whistleblowers should be buying butter now for a sculpture of Grassley for next year’s fair to thank him for all of his enormous efforts over the years on their behalf.
All this adds up to good news for whistleblowers. One last piece of positive news is that the New York AG’s office has been engaged and active in working with tax whistleblowers in response to the recent change in New York law which allows whistleblowers to file claims under the state false claims act for tax matters (only for whistleblower claims for New York taxes). I’ve found the New York AG’s office to have a positive and open attitude toward working with tax whistleblowers.
As the tax counsel on the Senate Finance Committee responsible (under the direction of Chairman Grassley) for the creation of the new IRS whistleblower law in 2006 (Section 7623(b) of the code) and now representing the most important tax whistleblower in the history of the country (Brad Birkenfeld – who broke open UBS and illegal offshore banking) I am personally heartened at this positive turn of events for the program. Not only should this good news encourage whistleblowers to come forward but a successful whistleblower program will also benefit the overwhelming number of honest taxpayers – especially small and medium businesses – as the IRS can focus its limited resources going after the bad actors and spending less time grinding honest taxpayers (see the recent TIGTA report about very high no-change rates on audits of small and medium businesses).
What do whistleblowers need to do? I’ve found the submissions that have had better success with the IRS are in brief those that are involving recent activity (not older than 7 years), have detailed information, documents, a clear narrative and a substantive discussion of the relevant law. IRS employees are overwhelmed with work – a good whistleblower submission makes it easy for the IRS to readily understand the facts and the law that are being raised. Whistleblowers still need to have patience as the IRS has to conduct the examination and the taxpayers’ rights to appeal have to expire before the process is final. However, the days ahead look bright for whistleblowers and the IRS whistleblower program.
