Monday, January 16, 2017

Statistics from the 2016 Whistleblower Office Report (1/16/17)

The IRS Whistleblower Program Fiscal Year 2016 Annual Report to Congress, here, reports the following statistics:

Table 1: Amounts Collected and Awards under Section 7623, Fiscal Years  2014 to 2016
Total Claims Related to Awards
Total Number of Awards fn4
Total IRC 7623(b) Awards

Collections over $2,000,000 fn5
Total Amount of Awards fn6
Amounts Collected  fn7
Awards as a Percentage of Amounts Collected

fn4  For Table 1, “Total Number of Awards” reflects the number of payments to whistleblowers. In some cases, awards can include proceeds from multiple taxpayers, which are reflected in the “Total Claims Related to Awards.”
fn5  This row includes pre-enactment section 7623(a) claims that were greater than $2 million and section 7623(b) claims.
fn6 The “Total Amount of Awards” is prior to sequestration reductions.
fn7  The “Total Amount of Awards” [for FY2015] was overstated by $441.84 on the FY 2015 Annual Report, and Table 1 has been revised to reflect the correct amount.

JAT Comments on the Statistics:

My own calculations the following averages per award from the numbers above:

Average Awards

These average award numbers are low because of the large number of § 7623(a) awards which generally tend to be significantly less than the § 7623(b) awards.  My inference is that the § 7623(b) awards – 0 in FY 2014, 19 in FY2015, and 18 in FY2016 - would average much more than the indicated average for all awards.  Indeed, I suspect that, although § 7623(b) awards made are a low percentage of total awards, the lion's share of the Total Amount of Awards is under § 7623(b).

These numbers for claims awarded under § 7623(b) may seem low, but § 7623(b) is still relatively new (enacted effective 2007) and processing whistleblower claims to fruition with collected proceeds (collections after the refund statute of limitations has expired) takes a long time.  So, the number of awards and the amounts awarded are probably not indicative of the future where awards may be in the pipeline for claims already made or will be received and processed in later years. 

Back to the Report:

The Report contains a discussion of "Other Issues of Interest."
1. Rules on access to and disclosure of taxpayer information could provide strongerprotection for taxpayers.  
Since FY 2010, the Whistleblower Office’s Annual Reports have noted concerns regarding the disclosure of taxpayer information to whistleblowers. Section 6103 provides authority for the IRS to disclose tax information to whistleblowers in certain, limited instances. Currently, the IRS uses the authority of section 6103(k)(6), which provides that return information may be disclosed as part of an investigation to the extent necessary in obtaining information, to communicate with whistleblowers where appropriate. The IRS also continues to look for appropriate cases to enter agreements under section 6103(n). Neither authority, however, precisely addresses the circumstances in which most disclosures to whistleblowers arise. Thus, the IRS welcomes the amendments recently proposed before the Senate that would both specifically authorize necessary investigative disclosures by the IRS to whistleblowers under section 6103(k) and at the same time ensure protection of taxpayer’s return information by extending the criminal penalties associated with any unauthorized re-disclosures by whistleblowers receiving such information. See S. Rep. No. 114-298 (2016).  
Additional taxpayer protections remain necessary with respect to disclosures made during the course of the administrative award determination process and resulting appeals to the Tax Court. The IRS makes disclosures in the administrative proceeding and before the Tax Court, pursuant to the authority of section 6103(h)(4). In conjunction with such disclosures, the IRS requires confidentiality agreements and the Tax Court issues protective orders to limit the ability of whistleblowers to re-disclose a taxpayer's return information. The effectiveness of these tools is limited. There is no restraint on whistleblowers redisclosing return information following the completion of the administrative and judicial processes. 
The absence of such protections has become all the more relevant in the context of extensive Tax Court discovery into taxpayer examination files. It is fundamentally unfair to the taxpayer (and potentially damages our system of tax administration) to be subject to the public release of confidential return information as a result of proceedings to which the taxpayer is not a party and otherwise has no interest. Since FY 2014, the Administration’s Budget has included a legislative proposal to extend the safeguarding requirements and penalties to whistleblowers for the unauthorized disclosure of taxpayer information obtained from the IRS.  
2. The law does not provide for whistleblower protection. 
Since FY 2014, the Administration’s Budget has also included a legislative proposal to provide whistleblowers with protection from retaliation, which section 7623 currently lacks. Providing whistleblowers with a zone of protection from economic or physical harm is imperative to the success of any whistleblower program as Congress has recognized in other whistleblower statutes. Accordingly, the IRS welcomes the recent Congressional proposal to provide explicit anti-retaliation protections for those individuals submitting information to the IRS. See S. Rep. No. 114-298 (2016). No individual should suffer any reprisals for providing truthful information to the IRS. 
The need for greater protection of whistleblowers is amplified as sophisticated taxpayers are increasingly attempting to learn the existence or identity of a whistleblower. The IRS remains committed to protecting the identity and even the existence of whistleblowers. Nonetheless, the defenses available to the IRS to maintain the confidentiality of whistleblowers are limited at best and additional statutory protections are necessary. 

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