Source: https://procedurallytaxing.com/category/whistleblower/
Timestamp: 2019-04-18 22:26:43+00:00

Document:
What Makes a Whistleblower Notice of Determination?
There is a case pending in the D.C. Circuit that may upend several Tax Court precedents concerning what constitutes a valid notice of determination concerning a whistleblower award. Such notices give the Tax Court review jurisdiction under section 7623(b)(4). In Myers v. Commissioner, 148 T.C. No. 20 (June 5, 2017), the Tax Court followed its prior precedent of Cooper v. Commissioner, 135 T.C. 70, 75-76 (2010), which held that there is no particular form for a whistleblower award notice of determination, and that multiple letters from the Whistleblower Office indicating that an award was not being granted each constituted tickets to the Tax Court. In an appeal of Myers, the whistleblower is challenging those holdings, which have never been reviewed by an appellate court. Under section 7482(b)(1)’s flush language, all appeals from Tax Court whistleblower award cases go to the D.C. Circuit – not the Circuit of residence. So, under Golsen, the Tax Court will have to accept anything the D.C. Circuit rules in the appeal of Myers.
Myers sought an award with respect to a former employer of his. He told the IRS that the employer had misclassified him and many of his co-workers as independent contractors. It is unclear whether the IRS ever used this information to conduct an administrative proceeding. In one letter to Myers, the IRS alleged that it did not collect $2 million – the threshold for awards under section 7623(b)(5) – which may imply it did audit the employer and collect some money. Starting in 2009 and going through 2014, Myers exchanged correspondence with the Whistleblower’s Office. In a series of four letters written to him in 2013 and 2014, the Office made clear that it was not giving him an award. But, despite the Manual’s then requirement (since repealed) that any whistleblower award notice of determination be sent certified mail, each of these letters was sent to Myers by regular mail. Further, none of the letters stated therein that this was a notice of determination, that review was available in the Tax Court, or that he had 30 days to file a Tax Court petition.
Myers was representing himself, and he was frustrated and did not know what to do to pursue his claim. Eventually, in 2015, Myers filed a Tax Court petition, and the IRS moved to dismiss the petition for lack of jurisdiction as untimely.
In the Tax Court, Myers resisted the IRS motion, arguing that the letters were not valid notices of determination, particularly since they were not sent certified mail, but also because they did not alert him to the possibility of filing in the Tax Court. Of course, if he were right on this, then perhaps the correct ruling would be for the court to dismiss the case for lack of jurisdiction for lack of a ticket to the Tax Court, rather than for untimely filing.
But, Myers also argued that, if the letters constituted valid notices of determination, then the Tax Court had jurisdiction because either equitable tolling or estoppel should prevent the IRS from arguing that he filed too late.
I’m going to take this matter under advisement. I am still — I mean, based on the testimony, you know, of both Ms. Carr and Mr. Myers, you know, Mr. Arthur and Mr. Barnes, I am still troubled, to be frank with you, by the fact that all of these letters or determinations, you know, they’re ambiguous. They give no clue as to — first, you know, like I said, at the outset starting the 30 days — starting the 30-day clock, so to speak.
And it just seems like, you know, the Internal Revenue Service issuing these letters, they can easily frustrate judicial review, you know, by issuing ambiguous denials.
You know, I don’t know whether, you know, it’s a matter of — and I think Judge Guy may have alluded to this when you all had a telephone conference. You know, the IRS whistleblower office, you know, issuing, you know, another, you know, denial letter certified mail, you know, so that — so that The Court, you know, can proceed, I guess.
When she wrote her opinion in Myers, though, Judge Ashford followed Cooper and held that each of these letters constituted notices of determination, and she got around the issue of the date the IRS sent the letters by holding that Mr. Myers’s actions in responding to them shows that he received the letters in sufficient time to petition the Tax Court within 30 days after the date of the letters, so his later Tax Court filing was untimely. She imported into the whistleblower award jurisdiction the similar case law from deficiency jurisdiction holding that if one actually received a notice of deficiency – one that was either not sent certified mail or not properly addressed – with enough time left on the 90-day period to file a petition, then the notice of deficiency was valid. She also observed that the Tax Court could not equitably toll the whistleblower award filing period, citing Friedland v. Commissioner, T.C. Memo. 2011-90, since the filing period is jurisdictional. As a side note, when Friedland came out, I questioned whether it was correct in light of recent Supreme Court case law that now only rarely makes filing deadlines jurisdictional and the existing presumption in favor of finding that statutes of limitations running against the government are subject to equitable tolling. See my “Friedland: Did the Tax Court Blow its Whistleblower Jurisdiction?”, Tax Notes Today, 2011 TNT 100-10 (May 24, 2011).
[P]etitioner places undue import on what transpired during a telephone conference the Court held with the parties before the hearing on respondent’s motion to dismiss and at the hearing. What the Court suggested to respondent was just that — a suggestion (to potentially resolve a previously unaddressed legal question). Indeed, as a court of limited jurisdiction, sec. 7442, we lack the authority to order respondent to take such a specific action as reissuing a determination letter. Cf. Cooper v. Commissioner, 136 T.C. 597, 600 (2011) (no authority under sec. 7623 to order Commissioner to initiate examination on basis of whistleblower information). The suggestion in any event (and respondent’s apparent disinclination to take up the Court’s suggestion) does not cause us to question the direct evidence that petitioner received actual notice of the Whistleblower Office’s determination letters significantly more than 30 days before he filed his petition with the Court.
We have not decided whether the reasoning in TRAC applies to the Tax Court and its jurisdiction under § 7623(b)(4). Nor have we decided whether, if the APA does not directly apply, this case nonetheless presents one of those instances in which the Tax Court, “in appropriate circumstances, borrow[s] principles of judicial review embodied in the APA.” Ewing v. Commissioner, 122 T.C. 32, 54 (2004) (Thornton, J., concurring).
We believe we ought not to reach those questions if we do not need to do so.
Before Judge Gustafson had to rule on this issue, the Insinga mater became moot when the IRS issued a notice of determination and the parties settled the Insinga case.
Still acting pro se, Myers appealed the Tax Court’s dismissal of his case to the Tenth Circuit. At the urging of the DOJ, though, the Tenth Circuit transferred the appeal to the Circuit with correct venue, the D.C. Circuit, per the following order.
In the alternative, if the letters were valid notices, Messrs. DiRuzzo and Golubitsky argued that the 30-day filing deadline in section 7623(b)(4) was not jurisdictional under current Supreme Court case law that now rarely makes filing deadlines jurisdictional, and the petition should be held timely under the doctrine of equitable tolling because of the misleading behavior of the IRS in this case. The Harvard Federal Tax Clinic filed an amicus brief in Myers (written by Keith and me) limited to the argument that the filing deadline is not jurisdictional. This is just another case in our campaign against judicial tax filing deadlines still being considered jurisdictional.
The DOJ has not yet filed its answering brief in Myers, so the government position on many of these issues is not yet known. This should be an interesting case to follow for many reasons. PT will keep you posted on further interesting developments therein.
At the recent Tax Court judicial conference, there was a specific breakout session dedicated to whistleblower cases. I attended the session not because my clinic has, or will ever have, a whistleblower case but because I have blogged a number of these cases which are coming out now with regularity. Since the jurisdictional basis is relatively new, many of the decisions set precedent. From going to this session, I now know that generally we have picked the most important issues to cover with our blog posts. Sadly, we have still not recruited a regular guest poster with expertise who could offer insights someone not litigating this type of case cannot offer. Anyone practicing in this area who would like to send us guest posts would be most welcome.
In addition to discussing and linking to information provided at the Judicial Conference about Whistleblowers, I will discuss a recent case involving the denial of any award. The case points out the difficulty that a claimant will have if the IRS determines that the information is privileged and the claimant disagrees. The Tax Court does not become the forum for litigating whether the IRS made the right decision regarding the privilege just as it does not second guess the IRS on whether it makes a good decision to pursue cases based on the information provided.
The non-judicial panel members for the whistleblower breakout session included: Erica L. Brady, of The Ferraro law Firm (a PT guest blogger); Bryan C. Skarlatos, of Kostelanetz & Fink, LLP; and Robert T. Wearing, of the IRS Office of Chief Counsel. The panel was co-moderated by The Honorable John O. Colvin and The Honorable Daniel A. Guy. During the session, documents were provided to attendees that were useful in following the presentation. The documentation was: first, an outline of the issues in whistleblower litigation; second, accompanying attachments to the outline of the whistleblower litigation issues; third, a general whistleblower outline on representing tax whistleblowers and defending against them; fourth, an outline on IRC section 6103 and the use and protection of taxpayer return information in whistleblower cases; and fifth, a copy of Form 11369 Confidential Evaluation Report on Claim for Award.
The Court provided some statistics on these cases during its presentation. Assuming my handwritten notes correctly captured the data provided, 101 whistleblower cases filed so far have requested permission to proceed anonymously. The Tax Court granted the request in about half of these cases, which is about the same number that were represented. The Court reminded us that the venue for appeal of these cases lies with the D.C. Circuit and stated that three cases were currently on appeal to that court. The number of petitioners seeking relief under this provision increased gradually until 2016 before dropping off in 2017. There were 56 whistleblower petitions filed in 2016 and only 45 in 2017. One panelist suggested fewer claims were filed because taxpayers and practitioners learned more about these claims. The number of IRC section 7623(b) claims has continued to rise each year. One surprising, but not too shocking, statistic was that it takes about seven and one-half years for a claim to go through the process to payout or denial.
Over 14,000 determinations have been made so far by the IRS whistleblower office but it is not clear how many of the determinations are for claims submitted under (a) and how many under (b). It is assumed that most are under (a). Last year the IRS made 242 awards, only 27 of which were under (b). Another thing I learned at the conference, related to the amount of time these cases take, is that the IRS has a relatively new program in which they try to follow up with a whistleblower each year.
On March 20, 2018, the Tax Court issued its most recent whistleblower opinion in the case of Whistleblower 23711-15W v. Commissioner, T.C. Memo 2018-34. In this sealed case, the Court granted summary judgment to the IRS because it did not initiate administrative or judicial action based on the information provided. The problem with the information was that the whistleblower, an attorney, got the information (in the view of the IRS) in a privileged context. The IRS decided that it could not use the information provided to it in order to create a case. There is not enough information in the opinion to permit a detailed analysis of the information and the privilege. The attorney must have thought that the information was not privileged. The attorney had enough concerns about the information in order to request and receive a sealing of the record of the case but that does not speak to the privilege. The IRS whistleblower office gave the information to Chief Counsel of the IRS, which opined that the privilege attached.
Petitioner had previously been employed as an attorney by the law firm that represented the reported party and alleged, based on information gathered during that relationship, that the taxpayer had “engaged in tax evasion using offshore entities.” Based on the advice received from Chief Counsel’s office, the IRS did not do anything with the information. Since the IRS showed the Tax Court that it did not collect any tax based on the tip, the Court sustained the motion for summary judgment filed by the IRS.
The whistleblower argued that the IRS should have “dug deeper” in reviewing the returns of the reported party but the Court had little trouble brushing aside this argument.
This case shows once again that whistleblowers will not get anywhere arguing to the Tax Court that the IRS failed to make good use of the valuable information provided. It also shows the value of providing the IRS with information about where the information came from and legal support for the ability of the IRS to use the information. The petitioner here disagreed with the determination of the Chief Counsel attorney that the petitioner gathered the information in a privileged setting. Petitioner should have anticipated the concern and provided a detailed legal supporting memo along with the information. Maybe the end result would not have changed, but by heading off concerns at the outset the whistleblower has a better chance that the IRS will accept the information that might otherwise cause it concern. Since the petitioner cannot use the Tax Court to settle any dispute regarding privilege, the petitioner must try to head off the concern before it gets to the stage of keeping the IRS from using the information.

References: v. 
 v. 
 v. 
 v. 
 § 7623
 v. 
 v.