Court Opinion

ID: 9388516
Source: CourtListenerOpinion
Date Created: 2023-04-20 19:01:29.978767+00
Date Added: 2024-06-11T17:18:20.770022
License: Public Domain

United States Tax Court

                               T.C. Memo. 2023-51

                         SUZANNE JEAN McCRORY,
                               Petitioner

                                          v.

              COMMISSIONER OF INTERNAL REVENUE,
                          Respondent

                                    —————

Docket No. 15367-20W.                                         Filed April 20, 2023.

                                    —————

Suzanne Jean McCrory, pro se.

Alex Shlivko and Rachel L. Schiffman, for respondent.

                          MEMORANDUM OPINION

       LAUBER, Judge: In this whistleblower award case, the Internal
Revenue Service (IRS or respondent) has filed a Motion to Dismiss for
Lack of Jurisdiction. Respondent contends that the IRS Whistleblower
Office (WBO) did not “proceed[] with any administrative or judicial ac-
tion” based on petitioner’s information, see § 7623(b)(1), and hence that
dismissal is required under Li v. Commissioner, 22 F.4th 1014 (D.C. Cir.
2022). 1 Agreeing with respondent, we will grant his Motion.

                                    Background

      The following facts are derived from the parties’ pleadings and
Motion papers, including the Declarations and Exhibits attached
thereto. In April 2020 petitioner filed with the WBO claims for award
on Form 211, Application for Award for Original Information. These

       1 Unless otherwise indicated, all statutory references are to the Internal Reve-

nue Code, Title 26 U.S.C., in effect at all relevant times.

                                 Served 04/20/23
                                    2

[*2] claims relate to tort judgments paid by tobacco companies to tax-
payers (Target 1 and Target 2). Petitioner alleges that Targets failed
to report as taxable income the portions of these judgments attributable
to punitive damages, as well as post-judgment interest. Petitioner rep-
resents that she gathered information from public records, including the
tobacco companies’ financial statements, concerning the identity of Tar-
gets and the payments allegedly made to them. By her own count peti-
tioner has submitted approximately 60 Forms 211 relating to similar
tort judgments.

       In July 2020 the WBO acknowledged receipt of petitioner’s claims
and sent them to a “classifier” in the Small Business/Self-Employed op-
erating division. The role of a classifier is to “determine whether the
information should be forwarded for further review. Those claims not
forwarded for further review can be rejected or denied based on [the
classifier’s] rationale for not forwarding the claim.” Internal Revenue
Manual (IRM) 25.2.1.3.1(1) (May 28, 2020) (explaining the “roles and
responsibility of classification”).

        The classifier recommended that petitioner’s claims be rejected.
This recommendation was set forth in an Award Recommendation Mem-
orandum completed in October 2020. The classifier summarized peti-
tioner’s allegations as follows: “[Target 1 and Target 2] received post-
judgment interest on unreported taxable income” and “should have paid
taxes of $[]million . . . on the 2019 tax year.” The classifier’s recommen-
dation in each case was to “Reject the Claim: Allegations are not spe-
cific, credible, or are speculative.” As to Target 1, “[r]eview of [IRS da-
tabases] appear[ed] to show all income [was] reported” on information
returns for tax years 2019 and 2018. As to Target 2, the classifier found
that tax may not have been paid on a “small portion of interest for the
2019 tax year,” but that this amount was de minimis and “would be be-
low tolerance to pursue.” Petitioner’s claims as to both Targets were
thus “[r]ecommended for rejection by classification.”

       The WBO agreed with the classifier’s recommendations, and pe-
titioner’s claims were not forwarded to any IRS examination team for
further review. On October 27, 2020, the WBO issued petitioner a Final
Decision letter rejecting her claims. This letter explained that both
claims “ha[d] been rejected because the IRS decided not to pursue the
information you provided.” On November 25, 2020, petitioner timely
petitioned this Court for review of the IRS’s decision.
                                    3

[*3]                           Discussion

       The Tax Court is a court of limited jurisdiction and may exercise
jurisdiction only to the extent authorized by Congress. Judge v. Com-
missioner, 88 T.C. 1175, 1180–81 (1987); Naftel v. Commissioner, 85 T.C.
527, 529 (1985). We are without authority to enlarge upon that statu-
tory grant. See Phillips Petroleum Co. & Affiliated Subs. v. Commis-
sioner, 92 T.C. 885, 888 (1989). We nevertheless have jurisdiction to
decide whether we have jurisdiction. McCrory v. Commissioner, 156
T.C. 90, 93 (2021).

       Section 7623(b)(4) defines our jurisdiction in whistleblower award
cases. Shands v. Commissioner, No. 13499-16W, 160 T.C., slip op. at 7
(Mar. 8, 2023). It provides that “[a]ny determination regarding an
award under paragraph (1), (2), or (3) [of subsection (b)] 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).” By its terms,
the statute gives us jurisdiction only over “determination[s]” made un-
der section 7623(b), which authorizes the IRS to make nondiscretionary
awards.

       Absent stipulation to the contrary, appeal of whistleblower award
cases lies to the U.S. Court of Appeals for the D.C. Circuit. See
§ 7482(b)(1) (penultimate sentence); Kasper v. Commissioner, 150 T.C.
8, 11 n.1 (2018). In Li v. Commissioner, 22 F.4th 1014, the D.C. Circuit
delineated this Court’s jurisdiction to review cases (like this one) where
the IRS has issued a threshold rejection of a whistleblower’s claim. In
Li, the WBO rejected a whistleblower’s claim on the ground that the in-
formation she submitted was “vague and speculative.” Id. at 1017. The
WBO did not forward the claim to an IRS examination team for further
review, and no action was taken against the target taxpayer. Ibid.

       The D.C. Circuit held that the Tax Court lacked jurisdiction in
these circumstances because the IRS had made no “award determina-
tion” within the meaning of section 7623(b). Li v. Commissioner, 22
F.4th at 1017. As the court explained, “an award determination by the
IRS [under section 7623(b)] arises only when the IRS ‘proceeds with any
administrative or judicial action described in subsection (a) based on in-
formation brought to the Secretary’s attention by [the whistleblower].’”
Li v. Commissioner, 22 F.4th at 1017 (quoting § 7623(b)(1)). Because
“there was no proceeding . . . , the Tax Court had no jurisdiction to re-
view the WBO’s threshold rejection of [the claimant’s] Form 211.” Ibid.
                                    4

[*4] This case is on all fours with Li. An IRS classifier recommended
that petitioner’s claims be rejected because her “allegations are not spe-
cific, credible, or are speculative.” After consulting IRS databases, the
classifier found that Target 1 had no unpaid tax for 2019. Recognizing
that Target 2 may not have paid tax on a “small portion of interest for
the 2019 tax year,” the classifier found that this amount was trivial and
“would be below tolerance to pursue.” Accepting the classifier’s recom-
mendations, the WBO decided not to forward the information to an IRS
examination team, and no action was taken against Target 1 or Target
2 on the basis of information that petitioner submitted. Because the IRS
did not “proceed[] with any administrative or judicial action,” the D.C.
Circuit’s decision in Li dictates that we grant respondent’s Motion to
Dismiss for Lack of Jurisdiction.

       Petitioner contends that dismissal of this case would be “prema-
ture” because the IRS allegedly still has under consideration claims she
submitted in July 2018 about other taxpayers that she says are “simi-
larly situated” to Target 1 and Target 2. In essence, petitioner asserts
that the IRS has acted in an “arbitrary and capricious” manner by treat-
ing her similar claims differently.

      This argument is irrelevant in assessing our jurisdiction under
Li. Whatever action the IRS takes (or does not take) on petitioner’s
other claims, it is undisputed that the WBO rejected at the threshold
the two claims involved here, did not forward those claims to any exam-
ination team, and did not “proceed[] with any administrative or judicial
action” on the basis of information petitioner supplied about Target 1
and Target 2. We could consider her “arbitrary and capricious” argu-
ment on the merits only if we had jurisdiction over this case to begin
with. We lack such jurisdiction under Li.

      To implement the foregoing,

      An order will be entered granting respondent’s Motion to Dismiss
for Lack of Jurisdiction.