TAX COURT OPINION

Case: Kenneth William Kasper
Docket Number: 13399-10W
Judge: Haines
Opinion Type: reported
Filed: 07/12/2011
Pages: 15

137'T.C. No. 4 UNITED STATES TAX COU1(T KENSETH WILLIAM KASPER,' Petitioner . COMMISSIONER OF INTERNAL REVENUE, Respondent Docket No. 13399-10W. Filed ¯July 12, 2011. On Jan. 29, 2009, P filed with R a claim for a whistleblowel award under sec. 7623(b).(4),'I.R.C., implicating a public corporation and its CEO. P' s whistleblower claim into a claim for the corporation and another for its CEO. On June 19, 2009, R purportedly- issued a letter for each claim, denying both on the basis that P did not meet sec. 7623(b) the appropriate criteria for an award under ' R bifurcated I.R.C. On May 3, 2010, P contacted R about the status of his whistleblowe:: claim. His letter referenced only thê' claim implicating the CEO.- sending P a copy of claim as to the CEO. with this Court seeking review of R' s denial of whistleblower claim as to the CEO. On "June 14, 2010, P filed a petition On May 24, 2010, R responded by letter pertaining to the the denial the R filed a motion to dismiss this case for lack of jurisdiction on two grounds: First, under sec. 7623(b), I.R.C., was made; and, second, that no determinatióii if we SERVED JUL 1 2 2011 find that a determination was made, petition this Court within 30 days as required by sec. 7623 (b) (4) , that P failed to I.R. C. P argues that he did not receive a determination I.R.C., with respect pursuant to sec. 7623(b).(4), corporate claim. Further, P argues that he did not receive a determination with respect to the claim implicating the CEO until May 24, 2010. Because he filed his petition on June 14, 2010, he argues that he has met requirement of sec . 7623 (b) (4 ) jurisdiction as to the claim implicating the CEO. , giving this Court the 30-day , I . R . C . to the Held: In accordance with our decision in Cooper v. Commissioner, 135 T.C. 70 (2010), each Whistleblower Office. letter that denies a whistleblower claim is a determination within the meaning of sec. 7623(b) (4), I.R.C. Held, further: R must prove by direct evidence the - date and fact of mailing of whistleblower . Magazine v . Commiss ioner, (1987) . the determination to the 8 9 - T . C . 321, 326 Held, further: The 30 -day period of sec . 7623 (b) (4) , I.R.C.,- within which a whistleblower-must file a petition in response tè a Whistleblower Office determination, begins on the date of mailing of Whistleblower Office. the determination by the Held, further: P filed his petition with this Court within the 30-day period specified by sec. 7623(b) (4), I.R.C , and we shall deny R's motion to dismiss for lack of urisdiction. Kenneth William Kasper, pro se. John T. Kirsch, for respondent. OPINION HAINES; Judge: This , case is before the" Court on respondent's motion to dismiss for lack of jurisdiction. The two - 3 - issues before us are: (1) Whether a letter denying petitioner's whistleblower claim constitutes a "determination" within the meaning of secticn 7623(b) (4);' and (2) if it does, whether petitioner filed a petition with this Court "within.30 days of such determinaticn" to establish subject matter jurisdiction. Petitioner resided in Arizona at the time he filed his Background petition. On January 29, 2009, petitioner filed a Form 211, Application for Award for Originale Information (whistleblower claim), with respondent's Whistleblower-Office -(Whistleblower Office). Petiticner's whistleblower-claim provided information alleging that'a public corporation and its CEO failed to pay réquired overtime and failed to withhold employment taxes with respect to that cvertime. The Whistletlower Office bifurcated petitioner'-s whistleblower claim into a claim for the corporation (the . corporate claim) and-one for the CEO (the CEO claim):and assigned each a separate claim number. On April 10, 2009, the Whistleblower office sent petitioner a separate letter for each claim which informed him that the claims were being evaluated to All section references are to the~Internal Revenue Code of 1986, as amended. determine whether an investigation was warranted and a reward was - 4 - appropriate. On June 19, 2009, the Whistleblower Office denied both claims . A denial letter was prepared for each claim. . Each denial. Ietter explained that the Whistleblower Of f ice had reviewed and evaluated petitioner's claim and determined that the informationt he provided did not¡meet the appropriate criteria for an award. The denial letters also stated that Federal disclosure and other prevai-ling laws- prevented the Whistleblower ,Office from providing a specific explanation for the denials. Consequently, the denial letters recited a boilerplate list of common reasons for not allowing;an award, including; (1) The application provided insuf f icient - information; (2) the information provided did not result: in the recovery of taxes, penalties, or fines; or (3) the Internal Revenue Service (IRS) already had the information provided or such information was available ein public records . The only direct eividence of the date when petitioner was notified of the denial of his whistleblower claim was a letter a sent by the Whistleblower Office in response to an inquiry by petitioner. On-May 3, 2010, petitioner notified the , s Whistleblower Office that the public corporation implicated had made a settlement payment to the IRS. In the May 3 letter, petitioner asked when he could expect notification that the - 5 - information he provided met the appropriate criteria for in - award. Petitioner's letter referenced the claim number assigned to the iCEO claim, not to the corporate claim. On MayE24; 2010; the Whistleblower Office responded by sending petitioner a copy of the denial letter dated June 19, 2009, for the CEOsclaim. A copy of the denial letter for the corporate claim was -not provided. On June 14, 2010, petitioner filed-his petition for a whistleblower action with this Court pursuant to section 7623(b) (4) éeeking review of'respondent's denial"of the whistleblower claim as to the CEO. During the time relevant to this case, the standard practice within thê Whistleblower Office was to- prepare-a denial letter and scan it into e-Trak,- the Whistleblower Office's computer database.2 Thereafter; history notes were written or typ~ed, dated,-and then entered into e-Trak as an investigation-history report. A copy of the denial letter was placed in a paper file. Standard mailing procedures for denial letters required that the original denial letter be plabed by a clerk in an-envelope addresséd eó the whistleblower claimant at his or her last known address and deposited in- the Whistleblower Office'.s outgoing mail. - At Ehedend of eäch day,' a clerk took the outgoing mailato 2Bradley DeBerg, supervisor of the Whistleblower Office in Ogden, Utah, provided the information relative to standard practicé by means of a declaration in support of respondent's motion to dïsmiiss for lack of júrisdiction. - 6 - the facilities mailroom, where mail was picked up daily for delivery by the U.S. Postal Service. None of the letters were sent-by certified or, registered mail,. and a mailing log was not kept a The e-Trak system and the investigation history reports e indicate that the Whistleblower Of f ice' s standard procedures were followed in'petitioner's case.3 Moreover,, the denial letters a were addressed to petitioner at his.last known address and were not returned to the Whistleblower Office by the U.S. Postal Service as undeliverable. Discussion We are -asked to decide: - (1) Whether a letter .denying petitioner' s whistleblower claim constitutes a. "determination" within the meaning of section 7623 (b) (4) ; and (2) if it does, whether petitioner filed a petition- with, this Court "within 30 days of such determination" pursuant - to section 7623 (b) (4) to give this Court subject-matter jurisdiction. The Tax Court is a court «of limited jurisdiction and may exercise its jurisdiction only to the extent authorized by Congress. Judcre v. Commissioner, 88 T.C. 11:75, 1180-1181 (1987); Naftel v. Commissioner, 85 T.C. 527, 529 (1985) . The Tax Court a 3The date on petitioner's denial letters is June 19,^ 2009', yet the investigation history reports provide a date of June 18, 2009. likely-that a clerk in the Whistleblower Office mistakenly used the wrong date stamp on the investigation history reports. :DeBerg explained this discrepancy by saying. that it is - 7 - is without authority to enlarge upon that statutory grant. See Phillips Petroleum Co. v. Commissioner, 92 T.C. 885; 888 (1989). We nevertheless have jurisdiction to determine whether we have jurisdiction. Hambrick v. Commissioner, 118 T.C. 348 (2002); Pyg v. Commissioner, 83 T.C. 626, 632 (1984); Kluger v. Commissioner, 83 T.C. 309, 314 (1984). Congress enacted section 7623 (b) (4) as part of the Tax Relief and Health Care Act of 2006, Pub. L. 109-432, diy. A, sec. 406, 120 Stat. 2958 (effective Dec. 20, 2006).. » Sectione 7623(b) (4) provides: (4) Appeal of award determination.--Any determination regarding an award under paragraph (1), within 30 days of such determination, be.appealed to.the Tax Court respect (and the Tax Court shall have jurisdiction with to such matter). (2), or (3) may, Section 7623 (b) (4) clearly provides.that: (1) The whistleblower claimant has a right to appeal- any determination made by the Whistleblower Office; (2) he or she must appeal within a 30-day period; and (3) -the Tax Court has jurisdiction to hear the appeal. • Theejurisdiction of the Court is dependent upon a finding that a determination has been made and a finding that the appeal from the determination is timely. However, the statute does not clearly define the term "determination" ror the date on which the 30-day period begins. A.. Determination - 8 - Respondent argues that there has been no determination with respect to either of petitioner's claims because the information provided was not used to detect underpayments. of: tax or to collect proceeds. Respondent argues that there can be a determination on which an appeal to the Tax Court can be based only if the Whistleblower Office undertakes an administrative or judicial action and thereafter determines to make an award. . We recently decided this issue in Cooper v. Commissioner, 135 T.C. 70 (2010). Faced with identical arguments from. the Commissioner :üa Cooper, we held that a letter rejecting a whistleblower claim constitutes a determination within thes meaning of section 7623 (b) (4) because it is a final administrative decision. We see no reason not to follow our holding in Cooper. Here the denial letter from the Whistleblower Office states that petitioner sis not entitled to an award-. It i-s a final administrative decision. Accordingly, we find that each of the June 19, 2009, denial letters constitutes a determination within the meaning of section 7623(b) (4). B. . Timeliness In 2006 the Tax Court was givens jurisdiction toshear appeals of determinations under the whistleblower statute (section- - 7623(b)(4)) and the lien and levy statute (section 6330(d)). Both statutes use similar language to describe the period within - 9 - which'a person may appeal an adverse determination to the Tax Court. Section 7623(b) (4) provides that-an appeal must be- filed "within 30ddays cf- such. determination", while section 6330(d) provides that an appeal must be filed "within 30 days of a - determination uncer this section". Neither statute expressly provides that the idetermination must be communicatedt to the rarea person subject tc the' determination. Yet Congress clearly e intended to provide at whistleblower with due process;- ite.7- notice and an opportunity: to be heard. Requiring the :: - - - - e Whistleblower Office to provide the whistleblower-with notice of the determinatior is the logical first step to- establish the starting date for the period of appeal.4 Otherwise; the IRS could delay notifying the claimant until 30 da~ys after the determination'is issued and thereby deprive÷a claimant of any appeal rights. When considering not'ice requirements in lien and levy cases, we have held in Weber v. Commissioner, 122 T.C. 258, 261-262 (2004) : Althouch section 6330(d) does not specify the means by which the CEmmissioner is required to give notice of a determinaticn made under sections 6320 and 6330, we conclude 4Every other statute invoking the jurisdiction of~Eh'e CoužE requires the Comn.issioner to mail a~written notice or determination, usually by certified or registered maili.or to personally deliver the notice or determination, starting date of the--period of appeal. 6015 (e) (1) (A) (i) ( I) ,±6110 (f ) ,- 6213'(a) ,- 6226 (a) , 6247 (a)t, 6404(h). See, e.g., secss.T e to establish the- ..that the method that Congress specifically authorized, for - 10 - sending notices of deficiency in section 6212(a) and (b) certainly should suf f ice . notice of determination issued pursuant to sections 6320 and/or 6330 is sufficient if such notice. is- sent by certified or registered mail last known: address. .* * * ? Accordingly, we hold, that a to a taxpayer at the taxpayer's a The Secretary promulgated detailed regulations - for lien and levy cases to establish that notices ,of determination must be mailed by certified or registered mail, must set-forth the Office of Appeals' findings and decisions, and must advise the taxpayer of the taxpayer's right to seek judicial review." In contrast, for whistleblower cases, the. IRS issued internal guidance governing the Whistleblower Office's operations .: Internal Revenue Manual (IRM) , pt . 25 . 2 . 2 , Whistleblower Awards. IRM pt. 25.2.2.13 (Dec. 30, 42008), in effect for the date the denial letters were.issued in this-case, stated: Once the. Whistleblower Office has made a f:i.nal determination regarding a claim, Of fice will communicate the determination, to the claimant. Final Whistleblower Office determinations regarding awards under section 7623 (b) may, within 30 days of such determination, be appealed to the United States Tax Court. section 7623 (b) (4) , decisions under section 7623 (a) may not be appealed to the Tax Court . In.accordance with the Whistleblower in writing, sSec. 301.6330-1(e) (3), Q&A E8, E10, Proced. & Admin. Regs. The regulations provide inconsistent starting dates (E8, within 30 days of the date of the notice of determination; E10,. within the 30-day period commencing athe day after the date of notice of determination) . litigation to date. The inconsistency has not been ;the subject of - 11 - The guidance was silent as to when and how the communication had to be sent.' -We hold that the Commissioner must demonstrate either mailing or spersor.al delivery of a denial letter to the whistleblower's-Jast known address. 1. The Arcuments The denial letters are dated June 19, 2009. Petitioner filed his petiticn with the Court on June 14, 2010, 360 days later. iPetitioner's petition references only the denial.letter for the CEO clain. Petitioner argues that he did not receive a denial letter in reference to the corporate claim. Petitioner further argues that he did.not receive a denial-letter in reference to the CEO claim until- May 24, 2010, when the 'On June 18, 2010, the IRM was revised. Revised IRM pt. 25.2.2.10 states: (3), in writing via certified mail, to the F:.nal Whistleblower Office determinations (2), the Whistleblower. Office will communicate the Once the Whistleblower Office has made a final determination regarding a claim under 7623(b) (1), or determination, claimant. regarding awards under section 7623(b) (1), (2) and (3) may, within :;0 calendar days of such determination, be appealed to the United States Tax Court, 400 Second Street, NW, and Washington DC 20217. have the -authority to extend the period for filing an appeal. decisions under section 7623(a) may not be appealed to the Tax Court. In accordance with section 7623(b) (4), The IRS does not The certified mail requirement, however, was not the date the denial therefore not applicable. letters were issued in this case and is in effect for - 12 - Whistleblówer Office sent him a copy 'of the June 19, 2009, -letter in response to his request for information on the statust of his whistleblower claim. Accordingly, petitioner argues that his petition with respect to the CEO claim is timely and-that he has yet to receive a determination with- respect to the corporáte claim. * * Respondent argues that the denial letters were mailed to petitioher on June 19, 2009, ,the date they were prepared, and, therefore, petitioner's 30-day window to appeal the denial letters began on that date. Because no appeal was filed as to the corporate claim and the appeal on the CEO claim was "filed outside the 30-day period, respondent argues that we are without jurisdiction to review the determinations. - - 2. Findings and Holding The Government is generally entitled to a rebuttable presumption of delivery upon presentation of evidence ' of proper mailing. - See Hagner v. United States, 285 U.S. 427, 430 (1932) i Godfrey v. United States, 997 F.2d 335, 338 (7th Cir. 1993) ; Doolin v. United States, 918 F.2d 15 (2d Cir. 1990) . Although the Whistleblower Office did not have a certified mailing requirement at the time the denial letters were issued, respondent argues there is a strong inference of delivery w en it is shown that the Whistleblower Office complied with its internal procëdures for mailing of the denial letters in the regular - 13 - course of its operations: See Mahon v; Credit Bureau of.Placer 2 Cy. Inc., 171 F.3d 1197 (9th Cir. 1999); Godfrey v. United , States, supra; Go zales Paaking Co. v. East Coast Brokers & 4 Packe s, Inc ,4961'F.2d 1543, 1545 (11th Cir. 1992); McClaskey v. Comeis'sioner, TCC. Memo. 2008-147. A strong inference must arise from moee than unsupported conclusory statements of an individual based onshis assumption of how máil was thandled-iñ the nórmal course of business in his office. See Leasing Associates; Inc v. Slaughter & Son, Inc., 450-F.2d 174; 178 (8theCir. 1971); Gonzales Packing Co. v. Eást Coast Brokers & Packers, Inc., supra at 1545. C Respondent argues that the standard operating procedures within the Whistleblower Office were followed torpröve that the denial letters were mailed.' The Whistleblower Office's e-trak system was describeds - The e-Trak system is a computer record which indicates that a denial letter was sent büt does not confirm here it was sent, to whom it wa's sent,sor whether it was a part of the Whistleblower Office's outgoing-mail. 'Nor was ther a mailing log. In McClaskey v. Commissioner, supra', we held* that mailing logs showing a- taxpayer's name and last known'address, confirmation that the log was reviewed for accuracy, and the de'stimony of an agent familiar.with the IRS' mailing procedures-were sufficient to prove thatsa- notice of beginning of administrativ~e proceeding had been mailed: - 14 - Respondent.has not presented similar mailing logs or any other direct evi-dence that the denial letters, were properly mailed to petitioner on June 19, 2009. Although evidence of standard practice-will be afforded appropriate weight as the circumstances-of, each case requ re, we cannotafind that compliance with standard practices within-the Whistleblower .Office, standing alone, permits a finding that the denial'letters in question were mailed to petitioner on June 19, 2009. Therdate a determination is mailed is of,critical importanceito establish our jurisdiction to review a taxpaye 's case. We will hold we do not have jurisdiction when a taxpayer doesanot meet the -30-day requirement. And as we have emphasized in casesainvolvinglour jurisdiction: , "In this setting, we must require * * * [the Commissioner] to prove,by,direct evidence the date-and fact of mailing the notice to a taxpayer." Magazine v. Commissioner, 89.TSC. 321, 326 (1987). 4/4 1:We hold that the 30-day period of section 7623(b) (4) within which a whistleblower must file a petition in response to,a Whistleblower Office determination begins on the date of mailing or personal delivery of the determination to the whistleblower at his lasteknown address. We further hold that the,Commissioner muste prover by direct evidence the date and fact of mailing or personal delivery of the notice to the whistleblower. Respondent failed to prove that the denial letters were properly;mailed,to - 15 - petitioner on June 19, 2009. The denial letter for the CEO claim, however, was mailed on May 24, 2010. Petitioner filed his petition with the Court on June 14, 2010. Accordingly, petitioner timely filed his petition with respect to the CEO claim.7 In reaching these holdings, the Court has considered all arguments made and, to the extent not mentioned, concludes that they are moot, irrelevant, or without merit. For the foregoing reasons, we will deny respondent's motion to dismiss as to the CEO claim. An appropriate order will be issued. ?With respect to the denial there is no direct evidence of mailing and, has yet to begin :.n which petitioner may file a petition as to that claim pursuant to sec. 7623(b) (4). letter on the corporate claim, the time therefore,