Tax Court Remands Whistleblower Case Without Retaining Jurisdiction

(Parker Tax Publishing August 2022)

The Tax Court granted a joint motion filed by the IRS and a whistleblower asking the court to vacate prior determinations of the Whistleblower Office (WBO) and remand the whistleblower's claims to the WBO for further consideration without retaining jurisdiction over the case. The court found that nothing in Code Sec. 7623(b) precluded it from granting the parties' joint motion and that although it had discretion to retain jurisdiction pending completion of the remand, the court found that the circumstances did not support retaining jurisdiction. Whistleblower 769-16W v. Comm'r, 159 T.C. No. 2 (2022).

Background

In 2010, a whistleblower filed a Form 211, Application for Award for Original Information with the IRS Whistleblower Office (WBO). The Form 211 identified three taxpayers as the subjects of the claim for a whistleblower award. In a cover letter, the whistleblower explained the tax-avoidance scheme allegedly perpetrated by these taxpayers and stated that the scheme was also possibly used by several other taxpayers. The whistleblower later submitted additional Forms 211 regarding these taxpayers. In early 2012, the whistleblower contacted a congressional committee responsible for investigations and provided it with information similar to that contained in the Forms 211. Thereafter, the whistleblower continued to provide information to, and work with, the committee. In 2014, the congressional committee issued a report detailing the tax-avoidance scheme.

In 2015, the WBO issued a final determination denying the whistleblower's claim for an award. The final determination stated that the claim was denied because the IRS had identified the issue prior to the receipt of the whistleblower's information and therefore the information did not contribute to the actions taken by the IRS. The letter explained that the issue identified by the whistleblower was already in the IRS audit plan for the taxpayer, information document requests had been issued, and there were no changes in the IRS's approach to the issue after a review of the information the whistleblower provided.

The whistleblower appealed the WBO's determination to the Tax Court and the IRS filed a motion for summary judgment. In opposition to the motion, the whistleblower asserted that the WBO failed to access or review documents necessary for an adequate investigation and that there were genuine disputes of fact on whether the whistleblower brought certain information to the IRS's attention. The IRS then withdrew its motion and asked the court to remand the case to the WBO for further consideration of the whistleblower's assertions. The IRS acknowledged that the administrative record was incomplete and that the WBO had not considered (1) whether the congressional committee report might have included the whistleblower's information, and (2) whether the IRS might have proceeded on the basis of information the whistleblower brought to the IRS's attention as part of the congressional committee report. In Whistleblower 769-16W v. Comm'r, 152 T.C. 172 (2019), the Tax Court granted the IRS's motion to remand the case to the WBO while retaining jurisdiction over the case.

The remand did not resolve the relevant issues to the whistleblower's satisfaction, and the parties returned to the Tax Court. Following informal conferences and additional pretrial proceedings, however, the parties narrowed their dispute and then jointly moved for another remand, among other things, to permit the WBO to "evaluate the contribution of the whistleblower's information (which comprises [a congressional committee report]), if any, to any ongoing IRS action against" certain targets.

The joint motion also asked the Tax Court to remand without retaining jurisdiction. The parties explained that the pending IRS actions against the target taxpayers were not interdependent, and the actions could become final at different times and involve different levels of contribution from the whistleblower's information if it was considered. The parties said that therefore, the WBO may have to issue a separate determination relating to each target taxpayer. In addition, the parties asserted that the timeline for the resolution of any IRS actions against the target taxpayers could not be known at present, nor was that timing under the control of the WBO. Further, the WBO would have to wait until the outcome of the IRS actions before the WBO could evaluate the contribution, if any, of the whistleblower's information. The parties, therefore, requested that the Tax Court enter an order and decision vacating the prior determinations of the WBO and remanding the claims to the WBO without retaining jurisdiction. Therefore, under Code Sec. 7623(b)(4) any new determinations made by the WBO would be reviewed by the Tax Court in due course if the whistleblower decided to appeal them.

Analysis

The Tax Court granted the parties' joint motion to remand the case without retaining jurisdiction. First, the court noted that in Jacobson v. Comm'r, 148 T.C. 68 (2017), the Tax Court ruled that it had jurisdiction to grant a whistleblower's request to voluntarily have her case dismissed. The court reasoned that although the parties in this case did not seek a dismissal, the relief they requested presented similar considerations.

The court found that nothing in Code Sec. 7623(b) precluded it from proceeding as the parties requested, and the court saw no other reason for declining their request under the circumstances. In cases like this, the court said that it acts like an appellate court reviewing the record developed by the WBO. When a court of appeals remands a case to a district court or an administrative agency, the court explained, ordinarily it does not retain jurisdiction over the case. Rather, the norm is to remand for further proceedings consistent with the appellate court's decision, without retaining oversight over the remand proceedings.

The court acknowledged that courts have discretion to retain jurisdiction over a case pending completion of a remand, but found that the circumstances in this case did not support retaining jurisdiction. In the court's view, retaining jurisdiction would ordinarily be advisable in whistleblower cases that raise similar record issues that may be resolved through expeditious remand proceedings. But in this case, where the timeline for resolution of any IRS actions against the target taxpayers could not be known at present and was not under the WBO's control, retaining jurisdiction did not appear to aid an efficient resolution.

Finally, the Tax Court contrasted whistleblower proceedings with those under Code Sec. 6330, which governs hearings concerning proposed levies. Under Code Sec. 6330(b)(2), a taxpayer subject to a proposed levy is entitled to only one hearing with respect to the relevant taxable period. Thus, the court found that in such cases, retaining jurisdiction allows the court to review the entire hearing (as supplemented) once the remand is complete and avoids any disputes about compliance with the Code Sec. 6330(b)(2) restriction as well as any potential prejudice to a taxpayer seeking the court's review. The court said that by contrast, nothing in Code Sec. 7623(b) contemplates that a whistleblower is limited to one proceeding before the WBO. Thus, the court concluded that declining to retain jurisdiction in this case, at the request of the parties and after vacating the WBO's prior determinations, neither departed from the statute nor prejudiced the whistleblower.

For a discussion of appealing a whistleblower determination, see Parker Tax ¶262,340.

Disclaimer: This publication does not, and is not intended to, provide legal, tax or accounting advice, and readers should consult their tax advisors concerning the application of tax laws to their particular situations. This analysis is not tax advice and is not intended or written to be used, and cannot be used, for purposes of avoiding tax penalties that may be imposed on any taxpayer. The information contained herein is general in nature and based on authorities that are subject to change. Parker Tax Publishing guarantees neither the accuracy nor completeness of any information and is not responsible for any errors or omissions, or for results obtained by others as a result of reliance upon such information. Parker Tax Publishing assumes no obligation to inform the reader of any changes in tax laws or other factors that could affect information contained herein.

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