Whistleblower FYE 2020 Report (1/6/21)

The IRS Whistleblower Office has released a report titled Fiscal Year 2020 annual report, here.  The opening message from the Director of the WBO, Lee D. Martin, is (have added links for the publications referenced):

The fiscal year (FY) 2020, which began on October 1, 2019, marked the 14th anniversary of the Whistleblower Office and the Whistleblower Program. I am extremely proud of the dedicated women and men in the Whistleblower Office, Small Business/Self-Employed (SB/SE) Initial Claims Evaluation unit, and other divisions across the Internal Revenue Service (IRS). Since 2007, the Whistleblower Program paid awards to whistleblowers totaling more than $1 billion dollars and has led to the successful collection of $6.14 billion from noncompliant taxpayers. 

Statistically in FY 2020, the Whistleblower Office made 169 awards to whistleblowers totaling $86,619,032 (before sequestration), which includes 30 awards under Internal Revenue Code (IRC) § 7623(b). Proceeds collected were $472,080,014. Included in the proceeds collected, as a result of IRC § 7623(c), are the non-Title 26 amounts collected for criminal fines, civil forfeitures, and violations of reporting requirements amounting to $110,438,166. The Title 26 amounts collected were $361,641,848. Whistleblower claim numbers assigned in FY 2020 decreased by 20 percent from those submitted in FY 2019, and closures decreased by 33 percent. 

During FY 2020, we continued our focus on operationalizing the whistleblower statutes under the Taxpayer First Act of 2019 (TFA 2019). This included adding four analysts to meet the increased workload due to the new provisions. To educate whistleblowers about the new TFA 2019 provisions, we updated Publication 5251, Whistleblower Claim Process and Timeline, and Internal Revenue Manuals 25.2.1 and 25.2.2. On December 3, 2019, we signed a Memorandum of Understanding (MOU) with Alcohol and Tobacco Tax and Trade Bureau (TTB) that put in place procedures between the IRS and TTB to process claims for whistleblower awards under Internal Revenue laws that are administered and enforced by TTB. On April 30, 2020, the Whistleblower Office held its first ever Whistleblower Program Forum. Lastly, like other organizations and businesses, the Whistleblower Office worked diligently to maintain Whistleblower Program operations that were impacted by office closures due to the coronavirus crisis. 

In closing, the Whistleblower Office continues to encourage all individuals with specific and credible information about tax noncompliance to provide this information to the Government by filing a claim on Form 211, Application for Award for Original Information, with the Whistleblower Office.

As often the case, the real information is in the data tables.  I particularly point to Table 1 Amounts Collected and Awards under IRC § 7623, Fiscal Years 2018 to 2020, on page 14-15, here.  Note that over the 3 years reported (2018-2020), the Total Awards and Proceeds Collected have been going down.

JAT Comment:

1. Prominent whistleblower lawyers have written an opinion article, Dean Zerbe and Matthew Beddingfield, Congress Intended Tax Whistleblowers to Enjoy De Novo Review (1/1/21), here, arguing that the Tax Court review of the awards (or lack of awards) should be de novo rather than abuse of discretion.  It is not entirely clear to me exactly which windmill that they tilt against.  First, they claim that Congress’ “true intent” which they claim to know was that the Tax Court have carte blanche de novo review.  It is interesting to me that they make a true intent argument not grounded in the statutory text but rather, they claim, "careful review of legislative history."  Second, there is de novo review for the quantum of collected proceeds because that is a determinable fact that can be ascertained and subject to de novo review.  The statute gives the IRS WBO no discretion in the quantum of collected proceeds.  Either the IRS did collect proceeds or it did not.  Third, also the issue of the relationship of the WB claim to the collected proceeds is, I think, subject to de novo review.  The IRS has no discretion in determining the relationship of the claim to the collected proceeds.  Fourth and finally, I presume that the authors are talking about the statutory authority to grant awards within the 15% - 30% range.  Congress said that determination of the award in that range is a made by the IRS based on the WB’s contribution to the action resulting in collected proceeds.  See § 7623(b)1) (“The determination of the amount of such award by the Whistleblower Office shall depend upon the extent to which the individual substantially contributed to such action.”)  To be sure, Congress could delegate that decision making authority to the Tax Court to make the final de novo call as to the appropriate percentage.  Congress has not done that in the statutory text as I read the text. 

This blog post is cross-posted on my Federal Tax Procedure Blog, here.