Whistleblower Law Blog
Topic: Internal Revenue Service (IRS)
In a report released November 30, 2015, the Government Accountability Office found that the IRS Whistleblower Office had recovered $2 billion in tax revenue that would have been lost without the efforts of whistleblowers. But despite this success, the GAO concluded that the IRS Whistleblower Office is plagued by administrative issues, and recommended that Congress pass new employment protections for tax whistleblowers.
The Tax Relief and Health Care Act of 2006 created the Whistleblower Office within the IRS. It manages and tracks claims made under two programs, one for claims of under $2 million (26 U.S.C. 7623(a)) and the other for claims of more than $2 million (26 U.S.C. 7623(b)). The 7623(b) program was also created by the Tax Relief and Health Care Act of 2006.
Tax whistleblowers have helped the IRS collect nearly $2 billion in additional revenue since the first 7623(b) claim was paid in 2011 under the expanded program that awards whistleblowers between 15 percent and 30 percent of collected proceeds. Since that time, the Whistleblower Office has awarded more than $315 million to whistleblowers.
In In the Matter of the Tax Liabilities Of: John Does, the United States District Court for the Southern District of Florida authorized the Internal Revenue Service to use “John Doe” summonses to identify U.S. taxpayers with undisclosed bank accounts in Belize. The IRS uses “John Doe” summonses to assist in investigations where the identities of individuals are unknown. This marks at least the third time the IRS has used this investigatory tool, which makes it easier for the IRS to pursue tax fraud cases.
The IRS sought records from Bank of America, N.A. and Citibank, N.A. identifying U.S. taxpayers with accounts at Belize Bank International Limited, Belize Bank Limited, or Belize Corporate Services. According to a Justice Department statement, these entities are subsidiaries of BCB Holdings Limited.
In August 2014, the Internal Revenue Service issued final regulations amending its whistleblowing program. The most significant changes pertain to administrative proceedings outlined in 26 C.F.R. § 301.7623, and provide whistleblowers with more information regarding the status of IRS investigations of their claims. The changes also provide more structured timelines in which the IRS must process claims under its whistleblowing program.
A U.S. Tax Court judge on Tuesday allowed three whistleblowers to hide their identities in court for reasons that ranged from death threats to a fear of professional ostracism.
The rulings by Judge Diane L. Kroupa appear to be the the first decisions publicly reached under the Tax Court’s Rule 345, which in 2012 established a formal procedure for tax whistleblowers to request anonymity.
An administrative law judge at the U.S. Department of Labor ruled that a whistleblower’s duplication and removal of confidential information from his employer was a protected activity under the Sarbanes-Oxley Act (SOX) — and that it was neither unlawful nor a valid reason for firing, as his employer had claimed.
What can whistleblowers do when the IRS Whistleblower Office denies them an award for helping the government to recover money from a suspected tax cheat?
They can do what Albert G. Hill, III, did — challenge the denial in tax court.
But such challenges are difficult without access to information that the IRS used to deny the award in its often-opaque decision process. In Mr. Hill’s case, the IRS took a common — yet extreme — position on taxpayer confidentiality, refusing to allow Mr. Hill to review documents from the administrative file of the taxpayer he had targeted.
This week the U.S. Tax Court ordered the IRS to hand over the documents under strict conditions — and, in doing so, provided a sensible model for how such appeals should be handled.
In an unusually blunt opinion, the U.S. Tax Court rebuked the Internal Revenue Service for continuing to fight award claims made by two anonymous whistleblowers — even as the agency was reopening the same claims in a related investigation.
In a dismissal order issued on May 10, 2013, Judge Maurice Foley slammed the IRS for providing “incomplete, misleading, and possibly inaccurate information” in the case.
President Obama’s proposed budget for fiscal 2014 includes good news for whistleblowers: Under his plan, the law finally would protect people who report tax cheats to the U.S. Internal Revenue Service (IRS).
R. Scott Oswald, managing principal of The Employment Law Group, P.C., recently published an article in Law360 reviewing favorable developments in employment law for whistleblowers during 2012.
According to Oswald, these developments “further open the door to greater whistleblower revelations in the future, resulting in fewer laws being broken, savings for taxpayers, safer working conditions, increased awards to relators, other benefits and even lives being saved.”
Among the significant developments for whistleblowers in 2012 discussed were:
- The Department of Justice collecting nearly $5 billion in False Claims Act settlements and judgments
- The IRS and SEC Whistleblower Offices announced some of their first and largest awards
- The passage of the Whistleblower Protection Enhancement Act (WPEA) strengthened legal protections for federal employees who blow the whistle by disclosing government abuse, fraud and waste
- States continued to enact local False Claim Acts to come into compliance with the federal False Claims Act
- The Administrative Review Board (ARB) at the Department of Labor continued its whistleblower-favorable trend
- Federal courts interpreted the Dodd-Frank Act’s anti-retaliation provisions to include internal complaints, with the first Dodd-Frank claims surviving a motion to dismiss in federal court.
The article, “2012 Opens The Door For More Whistleblower Participation”, was published in the January 3, 2013 edition of Law360.
The Employment Law Group® law firm has an nationwide whistleblower protection practice representing employees who have been victims of retaliation, including a $819,000 False Claims Act whistleblower retaliation verdict on behalf of a client.
R. Scott Oswald, Managing Principal of The Employment Law Group® law firm, discusses in the Law360 article titled Revival of SOX Case Stokes Confidentiality Concerns, which outlines the U.S. Department of Labor Administrative Review Board’s blockbuster holding in Vannoy v. Celanese Corp.
Whistleblower Matthew Vannoy noticed potential weaknesses in his employer’s credit card reimbursement program and reported those weaknesses internally and to the IRS. Some of the documents Vannoy sent to the IRS included confidential employer information such as employee home addresses and social security numbers. The ARB held that disclosures containing employer confidential information are protected disclosures under the SOX whistleblower provisions so long as those disclosures contain original information evidencing the purported securities law violation.
R. Scott Oswald of the Employment Law Group, which represents employees, said that with the exception of the May 25 decision in Sylvester v. Parexel, the Vannoy decision was the most significant ruling to come out of the ARB in 2011.
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“It will facilitate cooperation between whistleblowers and the law enforcement agencies that Congress has designated to root out fraud in the corporate sector,” Oswald said of the Vannoy ruling.
According to Oswald, the Vannoy decision eviscerates the argument that using or supplying information that an employer deems confidential to a government body may serve as the basis for disciplinary action.
How the ALJ will rule is still an open question, but if there’s a nexus between the documents Vannoy accessed and his tax fraud allegations, that would be enough to trigger the protections of SOX, he said.
- R. Scott Oswald Interviewed by Legal Bisnow (executivecounselblog.com)
- TELG Managing Principal Scott Oswald Quoted on Senator Johnson’s Executive Compensation (executivecounselblog.com)
- TELG Principal Named Top Ten Leader in Employment Law for Washington, D.C. Metropolitan Area (executivecounselblog.com)