United States Tax Court

163 T.C. No. 6

JOHN F. CARTER,

Petitioner

v.

COMMISSIONER OF INTERNAL REVENUE,

Respondent

—————

Docket No. 9379-22W. Filed October 3, 2024.

—————

R denied P’s whistleblower award claim under I.R.C. 

§ 7623. After filing a Petition in this Court for review of the 

denial, P filed for bankruptcy. The Internal Revenue 

Service filed a claim in P’s bankruptcy case for unpaid tax 

P owed for pre-Petition year(s). P alleges that an automatic 

stay pursuant to 11 U.S.C. § 362(a)(8) applies to this case.

Held: A taxpayer’s bankruptcy filing does not 

pursuant to 11 U.S.C. § 362(a)(8) automatically stay a 

whistleblower case filed by the taxpayer.

—————

Paul Michael Spizzirri, for petitioner.

Caroline T. Parnass and James H. Brunson, for respondent.

OPINION

GOEKE, Judge: In this whistleblower case petitioner seeks 

review of a denial of a whistleblower award by the Whistleblower Office 

Served 10/03/24
2

(WBO) of the Internal Revenue Service (IRS) under section 7623.1 After 

filing the Petition for review of the award denial, petitioner filed for 

bankruptcy. The issue before the Court is whether petitioner’s 

bankruptcy filing automatically stays this proceeding pursuant to 

Bankruptcy Code section 362(a)(8).

Background

During 2012 petitioner engaged in a transaction with the target 

taxpayer (target). Petitioner filed a whistleblower claim in May 2015 in 

which he asserted that the target incorrectly reported the transaction. 

The WBO referred petitioner’s claim to an IRS operating division for

examination as part of an ongoing audit of the target involving other 

taxable years.

On January 24, 2022, the WBO issued a Final Determination 

denying a whistleblower award, stating that “[t]he information you 

provided didn’t result in the collection of any proceeds” and “didn’t result 

in an assessment with respect to the issues you raised.”

On August 12, 2024, petitioner filed a Notice of Proceeding in 

Bankruptcy. Although he had filed the bankruptcy case on May 23, 

2023, the parties failed to inform the Court of the bankruptcy filing

promptly. The IRS has filed a proof of claim for unpaid tax for prePetition years. The record does not establish when or how the IRS 

assessed the unpaid tax. Upon filing of the Bankruptcy Notice, we 

ordered the parties to address whether the automatic stay under 

Bankruptcy Code section 362(a)(8) applies. The parties filed a joint 

status report indicating that petitioner believes an automatic stay

applies, but respondent disagrees.2

1 Unless otherwise indicated, statutory references are to the Internal Revenue 

Code, Title 26 U.S.C., in effect at all relevant times. We refer to title 11 U.S.C. as the 

Bankruptcy Code. 

2 Instead, respondent asserts that the Court may wait to make a decision 

pending the outcome of two cases that relate to our jurisdiction to review denials of 

whistleblower awards, Kennedy v. Commissioner, No. 21-1133 (D.C. Cir. filed June 7, 

2021), and Lissack v. Commissioner, 144 S. Ct. 2707 (2024), vacating and remanding

68 F.4th 1312 (D.C. Cir. 2023), aff’g 157 T.C. 63 (2021), that are currently before the 

U.S. Court of Appeals for the District of Columbia Circuit (to which all whistleblower 

cases are appealable pursuant to section 7482(b)(1) absent a stipulation to the 

contrary). Respondent previously filed a Motion to Stay Proceedings on this ground, 

which the Court denied.
3

Petitioner argues that the whistleblower claim concerns his tax 

liability because the whistleblower claim and his tax liability arise from 

the same transaction and involve the same operative facts.3

Alternatively, petitioner argues that the potential for a setoff of his 

whistleblower award against his tax liability means that this case 

concerns his tax liability.

Discussion

A taxpayer’s bankruptcy filing generally triggers an automatic 

stay of Tax Court proceedings concerning a taxpayer’s tax liability. 

Kovitch v. Commissioner, 128 T.C. 108, 111 (2007). In relevant part, 

Bankruptcy Code section 362(a)(8) stays Tax Court proceedings 

“concerning the tax liability of a debtor who is an individual for a taxable 

period ending before the date of the order for relief” under the 

Bankruptcy Code.4

A prior version of Bankruptcy Code section 362(a)(8) used the 

phrase “concerning the debtor” which we narrowly interpret to mean

that the automatic stay “should not apply unless the Tax Court 

proceeding possibly would affect the tax liability of the debtor in 

bankruptcy.” Kovitch, 128 T.C. at 112 (finding that in innocent spouse 

case, bankruptcy of the nonrequesting, intervenor-spouse does not 

result in an automatic stay); see also People Place Auto Hand Carwash, 

LLC v. Commissioner, 126 T.C. 359, 363 (2006) (finding that the 

bankruptcy filing of the members of an LLC does not automatically stay 

the LLC’s Tax Court case); 1983 W. Rsrv. Oil & Gas Co. v. 

Commissioner, 95 T.C. 51, 57 (1990) (finding that a partnership’s 

bankruptcy filing does not automatically stay a partnership case

because partnerships are not subject to tax and, thus, the case would 

affect the partners’ tax liabilities, not the partnership’s), aff’d, 995 F.2d 

235 (9th Cir. 1993) (unpublished table decision). Congress amended 

Bankruptcy Code section 362(a)(8) to remove the phrase “the debtor” 

and replace it with the above.5 See Bankruptcy Abuse Prevention and 

3 The record before the Court does not allow us to verify these assertions, but 

we find it unnecessary to do so.

4 We have jurisdiction to determine whether this case is automatically stayed

under Bankruptcy Code section 362(a)(8). See Moody v. Commissioner, 95 T.C. 655, 

658 (1990).

5 The amendment also separately addressed corporate debtors, which the prior 

version of the Bankruptcy Code did not do. The amendment provided that an automatic 
4

Consumer Protection Act of 2005, Pub. L. No. 109-8, § 709, 119 Stat. 23, 

127.

We see no reason that our prior interpretation of the statute 

should change as a result of the amendment. The amendment clarifies 

what we understood, that the automatic stay applies only if the case 

before us concerns the tax liability of the debtor-taxpayer. See Stanwyck 

v. Commissioner, T.C. Memo. 2009-73, slip op. at 6. Both the amended 

version and the prior version focus on the tax liability of the debtor.

Our decision in a whistleblower case does not affect the 

whistleblower’s tax liability even if the claim involves the same 

transaction and facts as his tax liability. Under section 7623(b), we have 

jurisdiction to review the IRS’s whistleblower award determinations.

We do not have jurisdiction to review or determine the target’s tax 

liability. Cohen v. Commissioner, 139 T.C. 299 (2012), aff’d, 500 F. App’x 

10 (2014); Cooper v. Commissioner, 136 T.C. 597, 600 (2011); Pulcine v. 

Commissioner, T.C. Memo. 2020-29. Nor do we review the IRS’s decision 

not to proceed with an administrative action against the target or its 

decision not to assert that the target incorrectly reported its tax liability. 

Cooper, 136 T.C. at 600. Nor can we ask the IRS to explain its decision 

not to audit a target or order the IRS to audit the target. Lacey v. 

Commissioner, 153 T.C. 146, 166 (2019), abrogated on other grounds by

Li v. Commissioner, 22 F.4th 1014 (D.C. Cir. 2022); Cooper, 136 T.C. 

at 600–01. Rather, we review the WBO’s determination to deny 

petitioner a whistleblower award for abuse of discretion. Kasper v. 

Commissioner, 150 T.C. 8, 21–23 (2018); see also Van Bemmelen v. 

Commissioner, 155 T.C. 64 (2020). We do not substitute our own 

judgment for that of the WBO.

On the basis of our jurisdiction, our decision in this whistleblower 

case does not involve any factual findings about the target and 

petitioner’s transaction or its proper tax treatment. Thus, our review of 

the denial cannot affect the amount of petitioner’s pre-Petition tax 

liability. 

Petitioner’s argument that the potential for setoff makes an 

automatic stay of this case appropriate is also of no avail. Bankruptcy 

Code section 362(a)(7) imposes an automatic stay on a creditor’s setoff 

rights. Thus, the Bankruptcy Code stays the IRS’s right to set off 

stay applies to a Tax Court proceeding “concerning a tax liability of a debtor that is a 

corporation for a taxable period the bankruptcy court may determine.” Bankruptcy

Code § 362(a)(8).
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petitioner’s whistleblower award against his tax liability that is 

separate from the automatic stay applicable to Tax Court cases 

concerning the debtor’s tax liability. The automatic stay against a 

creditor’s right of setoff “does not defeat the right of setoff; rather, setoff 

is merely stayed pending an ‘orderly examination of the debtor’s and 

creditor’s rights.’” United States v. Orlinski (In re Orlinski), 140 B.R. 

600, 603 (Bankr. S.D. Ga. 1991) (quoting 4 Collier on Bankruptcy

¶ 553.05 (15th ed. 1991)). Before the IRS can exercise any right to set off

a whistleblower award against petitioner’s unpaid tax liability, the IRS 

must obtain relief from stay from the bankruptcy court. See In re 

Dominguez, 67 B.R. 526, 528 (Bankr. N.D. Ohio 1986). Accordingly, 

there is no need for the bankruptcy filing to prevent this Court from 

determining whether petitioner is in fact entitled to a whistleblower

award.

To reflect the foregoing,

An appropriate order will be issued.