A district court had held that the IRS’s Whistleblower Office did not abuse its discretion when it dismissed a whistleblower claim because the claim did not meet the threshold requirement that a claim be specific and credible. The claim concerned the alleged violation by 17 people of German (not US) income tax laws.
Background
Under IRS’s “whistleblower awards program,” IRS may pay awards to informers (known as whistleblowers) for information necessary to determine underpayments of tax, or to detect and bring to trial persons guilty of internal revenue law violations. (Code Sec. 7623(a))
The IRS’s Whistleblower Office (WBO) can dismiss a claim, without even referring the claim to an operating division of the IRS or otherwise considering or addressing its merits, if the whistleblower claim does not meet certain “threshold requirements.” One threshold requirement is that the whistleblower claim must contain both specific and credible information. (Reg § 301.7623-1(c)(4))
The Tax Court reviews, for abuse of discretion, the WBO’s summary rejection of a claim for failing to meet the threshold requirements even where, because of that rejection, there has been no administrative or judicial action initiated by the IRS as a result of the information that is the basis of the whistleblower’s claim. (Lacey, (2019), 153 T.C. No. 8)
Facts
Mr. Alber was a non-US citizen living in Germany. He filed a whistleblower claim alleging violations of the Germany income tax laws. He identified 17 discrete persons or entities as the perpetrators of his alleged grievances. But, the Tax Court said, he asserted no facts that would connect any of these alleged bad actors to a specific violation of an internal revenue law of the US.
Without referring the claim to an operating division of the IRS or otherwise considering or addressing its merits, the WBO summarily rejected it on the grounds that the information provided did not “provide specific or credible information regarding tax underpayments or violations of internal revenue laws.”
Mr. Alber appealed the WBO’s determination to reject his claim. The IRS argued that the WBO did not abuse its discretion in rejecting the claim.
Decision
The Tax Court found that the WBO did not abuse its discretion.
The Court found that the administrative record showed that the WBO received Mr. Alber’s claim, evaluated its contents, and considered its allegations. The WBO even went to the extent of making a preliminary determination that it was unable to identify any of the persons or entities alleged to have violated any tax laws. The WBO made the judgment that the allegations asserted grievances other than specific and credible information alleging a failure to comply with a US internal revenue law, and it determined that “the information provided [by Mr. Alber] was speculative and/or did not provide specific or credible information regarding tax underpayments or violations of [a US] internal revenue laws.”
The Court further found that, in deciding not to forward the claim for any further investigation by an IRS operating division, the WBO performed its evaluative function. The grounds articulated by the WBO in support of its determination to reject the claim did not lack a sound basis in fact and law, and hence, were not an abuse of discretion.
To continue your research on WBO rejection of whistleblower claims, see FTC 2d/FIN ¶T-1035.6; United States Tax Reporter ¶76234.
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