Tax Whistleblower Blog

Tax Court Issues New Whistleblower Rules

The Tax Court yesterday issued a Press Release and a Notice of Proposed Amendments to its Rules of Practice and Procedure on Tax Whistleblower award actions.   These proposed amendments address the recently (December 20, 2006) enacted legislation of IRC Section 7623.  Specifically, IRC Section 7623(b)(4), concerning the Appeal of Award Determination, provides as follows:

“Any determination regarding an award under paragraph (1), (2), or (3) may, within 30 days of such determination, be appealed to the Tax Court (and the Tax Court shall have jurisdiction with respect to such matter).”

However, the main problem with respect to this statute has not been addressed by Congress, the IRS, and now the U.S. Tax Court.  Although, it appears to be beneficial and helpful to the Tax Whistleblowing Program, we believe that a Tax Whistleblower’s confidentiality should be protected at all cost.  Although there are a few attorneys that are willing to Guarantee the Tax Whistleblower’s Confidentiality, in the sense that they are willing to forfeit their fees if their client’s identity is disclosed by their office or by the IRS, most attorneys are not willing to do so.

Of course there are many issues that may face a tax whistleblower including,

·     the loss of employment,

·     the loss of their license (attorney/CPA),

·     a lawsuit for damages associated with breach of confidentiality or breach of fiduciary duty, or even

·     a fear for their physical safety. 

Therefore, the proposed rules by the U.S. Tax Court fail to go far enough to protect the identity and safety of the Tax Whistleblower.  Without such protection, (i.e. a “John Doe petition”, automatically “sealing the file”, etc.) it is unlikely that there will be many challenges to the Tax Reward as it is determined by the Internal Revenue Service.

We suggest that comments, being solicited by the U.S. Tax Court on its proposed amendments, be mailed to Robert R. Di Trolio, Clerk of the Court, U.S. Tax Court, 400 2nd St., N.W., Room 111, Washington, D.C. 20217.  All such comments are due by July 31, 2008.