Court Opinion

ID: 9940584
Source: CourtListenerOpinion
Date Created: 2024-02-14 20:02:10.516504+00
Date Added: 2024-06-11T13:45:18.286545
License: Public Domain

United States Tax Court

                                T.C. Memo. 2024-22

                        WHISTLEBLOWER 14376-16W,
                                Petitioner

                                            v.

               COMMISSIONER OF INTERNAL REVENUE,
                          Respondent 1

                                      __________

Docket No. 14376-16W.                                      Filed February 14, 2024.

                                      __________

Sealed, 2 for petitioner.

Ashley M. Bender, Moenika N. Coleman, and Brooke N. Stan, for
respondent.

              SUPPLEMENTAL MEMORANDUM OPINION

       THORNTON, Judge: This Court previously remanded this case
to the Internal Revenue Service (IRS) Whistleblower Office (WBO) for
further consideration of petitioner’s claim for an award pursuant to
section 7623(b). 3 The WBO subsequently issued a supplemental
determination affirming its previous denial of petitioner’s claim.
Pending before us are (1) petitioner’s Motion to Compel Production of

        1 This Opinion supplements our previously filed opinion Whistleblower 14376-

16W v. Commissioner, T.C. Memo. 2017-181 (T.C. Memo. 2017-181).
        2 The name of petitioner’s counsel has been omitted in furtherance of protecting

petitioner’s identity.
        3 Unless otherwise indicated, statutory references are to the Internal Revenue

Code, Title 26 U.S.C. (I.R.C. or Code), in effect at all relevant times, regulation
references are to the Code of Federal Regulations, Title 26 (Treas. Reg.), in effect at all
relevant times, and Rule references are to the Tax Court Rules of Practice and
Procedure.

                                  Served 02/14/24
                                          2

[*2] Documents and (2) the parties’ Cross-Motions for Summary
Judgment.

                                    Background

       We recount below pertinent aspects of the factual background
discussed in our prior opinion, T.C. Memo. 2017-181, and include some
additional relevant details.

Petitioner’s Form 211

       On or about November 22, 2010, petitioner submitted to the WBO
a Form 211, Application for Award for Original Information, asserting
that taxpayer 1 and other individuals and entities had received
unreported income as reflected in a memorandum attached to the Form
211. 4 The attached memorandum lists 20 business entities in which
taxpayer 1 allegedly held interests and also lists five individuals who
“may also have knowledge of [taxpayer 1’s] financial activities and/or
unpaid tax liabilities resulting from their association with [taxpayer 1].”
In response to the directive in line 16 of Form 211 to “[d]escribe the
amount owed by the taxpayer(s),” there is a cross-reference to a chart
appearing in the attached memorandum. That chart sets forth, with
respect to taxpayer 1 and four of the related entities (taxpayer 1’s
controlled corporations, taxpayers 2 and 3, plus two other flowthrough
entities), for the years 2007 through 2010, various amounts of income,
aggregating hundreds of millions of dollars, that “it is believed . . . [have]
never been subject to tax.” 5 The Form 211 and attached memorandum
do not otherwise expressly assign unreported income to any other

        4 We refer to the target taxpayers in generic terms to protect petitioner’s

identity and the identities of nonparty taxpayers. See Rule 345(b).
        5 More particularly, this chart attributes to taxpayer 1 and a flowthrough

entity, for tax year 2009, over $437 million of combined untaxed income from
agreements with two energy holding companies. The chart also alleges that for tax
years 2007, 2009, and 2010 taxpayer 1 had, all together, over $285,000 of unreported
income associated with a specified bank account and for tax year 2007 over $7 million
of unreported income attributable to an “Unaudited Financial Statement.” The chart
attributes to a different flowthrough entity $300,000 of unreported income from a
different specified bank account for 2007. The chart assigns to taxpayer 2 over $1.8
million of total unreported income for tax year 2007 attributable to a specified bank
account and a letter of intent with an energy company. The chart assigns to taxpayer 3
$150 million of unreported income for tax year 2009 attributable to a lease and smaller
amounts for years 2009 and 2010 attributable to a specified bank account.
                                           3

[*3] business entities or individuals.           The WBO assigned No. 2011-
001890 to petitioner’s claim.

Target Taxpayers’ Voluntary Disclosure Program Request

       Before the WBO had taken any action on petitioner’s
whistleblower claim, on January 27, 2011, the IRS Criminal
Investigation Division (CI) received a letter from a law firm requesting
that taxpayers 1, 2, and 3 (target taxpayers) enter the IRS Voluntary
Disclosure Program (VDP). 6 The VDP request did not include any tax
returns, estimates of income, or other documents.

       On May 12, 2011, CI received another letter from the same law
firm relating to the VDP request. As with the letter submitted on
January 27, 2011, no tax returns, estimates of income, or other
documents were included with the May 12, 2011, letter. On or about
May 20, 2011, CI Special Agent Denise Corcoran, in CI’s Dallas, Texas,
field office, referred the VDP request to the IRS Small Business/Self-
Employed Examination Division (SB/SE).

WBO Referral to CI

       In the meantime, on or about March 29, 2011, the WBO had
forwarded petitioner’s Form 211, excluding the supporting documents,
to CI Analyst Jack Grauch (Analyst Grauch), in CI’s Philadelphia Lead
Development Center, to perform an initial review with respect to
taxpayer 1. On June 1, 2011, having received no response from CI, the
WBO sent a followup email to Analyst Grauch and CI Agent Robert
Cohen (Agent Cohen). That same day Analyst Grauch forwarded the
email to CI Investigative Analyst George Jordan (Analyst Jordan) in
CI’s Philadelphia Lead Development Center. On June 2, 2011, Analyst

         6 The VDP is “a long-standing practice of IRS Criminal Investigation (CI)

providing taxpayers with criminal exposure for tax and tax-related crimes a means to
come into compliance with the law and potentially avoid criminal prosecution.”
Internal Revenue Manual (IRM) 4.63.3.1.1.3 (Apr. 27, 2021). The 2011 IRS Offshore
Voluntary Disclosure Initiative (OVDI), which was one of several iterations of various
IRS offshore voluntary disclosure programs that terminated in 2018, was a
“counterpart” of this voluntary disclosure practice directed specifically at U.S.
taxpayers with undisclosed income from offshore assets. Shands v. Commissioner, No.
13499-16W, 160 T.C., slip op. at 3 (Mar. 8, 2023); see IRM 4.63.3.1 (Apr. 27, 2021). The
administrative record sometimes refers to the target taxpayers’ request as a VDP
request and sometimes as an OVDI request. The parties agree that the OVDI program
had not yet been initiated when the target taxpayers first made their request and that
in fact they participated in the VDP program.
                                       4

[*4] Jordan responded to the WBO that he intended to forward
petitioner’s claim to the field and requested that all supporting
information be forwarded to CI. Shortly thereafter, the WBO forwarded
petitioner’s complete Form 211, including the supporting documents, to
Analyst Jordan.

      On February 3, 2012, Agent Cohen sent to the WBO a completed
Form 11369, Confidential Evaluation Report on Claim for Award, with
respect to taxpayer 1. 7 This Form 11369 indicated that CI had not
examined the case because it previously had been referred to SB/SE for
examination. The attached narrative states:

      Prior to CI receiving this referral from the WBO,
      [taxpayer 1] requested to participate in the IRS Voluntary
      Disclosure Program. [Taxpayer 1] was cleared by CI to
      enter the program; at which point [taxpayer 1’s] request
      was referred to SB/SE Examination.

      CI received the Voluntary Disclosure request on January
      27, 2011. Worked by S/A [Special Agent] Denise Corcoran,
      Dallas FO [field office]. CI closed the Voluntary Disclosure
      as a Direct referral to SB/SE on May 20, 2011. On July 26,
      2011, CI received the referral from the WBO. Taxpayer [1]
      was already accepted into program and referred to SB/SE.

WBO Referral to SB/SE

       On February 10, 2012, after receiving CI’s Form 11369, the WBO
referred petitioner’s whistleblower claim to SB/SE for further
investigation, again identifying taxpayer 1 as the subject of the claim.
The WBO analyst’s transmittal memorandum explained that
petitioner’s Form 211 information had previously been shared with CI,
which had declined to pursue the matter; the memorandum noted that
taxpayer 1 had “filed Domestic Voluntary Disclosure in 2011.”

SB/SE’s Examination and Recommendations

      On July 11, 2012, petitioner’s Form 211 was assigned to an SB/SE
Field Examination Group in Dallas, Texas, managed by Supervisory
Revenue Agent Brenda Perritt (Group Manager Perritt).              The
examination was assigned to Revenue Agent Chris Martin (RA Martin),
who began working the case on July 30, 2012. After reviewing the case

      7 CI did not complete Forms 11369 for taxpayers 2 and 3.
                                          5

[*5] file, RA Martin preliminarily concluded that the VDP request
submitted on behalf of the target taxpayers was invalid because the IRS
had already received the whistleblower’s information before the VDP
request was submitted. 8 At some point in this process Group Manager
Perritt disclosed to the target taxpayers’ representative the existence,
but not the identity, of a whistleblower. On August 28, 2012, RA Martin
emailed WBO Analyst Chu S. Pak, stating: “[I]t is my understanding
that none of the whistleblower information can be shared with the REP
or the TP, is that correct? The REP wants a copy of all the whistleblower
info to prepare returns.” WBO Analyst Pak responded: “Per IRM 25.2.2,
the informant identity and information are strictly confidential. Do not
disclose them to TP and REP. You can’t tell them that we have an
informant.”

       An entry dated September 11, 2012, in RA Martin’s Examining
Officer’s Activity Record indicates that he had spoken to Group Manager
Perritt, who had spoken to WBO and CI personnel, and states, without
elaboration: “We are going to honor the voluntary disclosure.” A later
entry indicates that in a September 18, 2012, phone call with the target
taxpayers’ representative, Group Manager Perritt stated that “we would
follow the spirit of the law and honor the voluntary disclosure.”

      Accordingly, RA Martin conducted his examination of the target
taxpayers as a voluntary disclosure. On January 28, 2013, RA Martin
phoned the target taxpayers’ representative to request the taxpayers’
signed returns. RA Martin used petitioner’s information to write an
Information Document Request (IDR), which he issued to the target
taxpayers on March 15, 2013.

      On March 28, 2013, the IRS received and processed the target
taxpayers’ delinquent returns for tax years 2007, 2008, and 2009 (as well
as for 2006 for taxpayer 2). 9        These delinquent returns were

        8 IRM 9.5.11.9(3) (Dec. 2, 2009) states that a voluntary disclosure must be

timely. A voluntary disclosure is timely if received before the IRS “has received
information from a third party (e.g., informant, other governmental agency, or media)
alerting the IRS to the specific taxpayer’s noncompliance.” IRM 9.5.11.9(4)(b) (Dec. 2,
2009).
       9 Taxpayer 1’s Forms 1040, U.S. Individual Income Tax Return, reported these

income tax liabilities: $65,111 for 2007, $35 for 2008, and $74,118 for 2009.
Taxpayer 2’s Forms 1120, U.S. Corporation Income Tax Return, reported these income
tax liabilities: zero for 2006, $140,971 for 2007, $44,685 for 2008, and zero for 2009.
Taxpayer 3’s Forms 1120 reported these income tax liabilities: zero for 2007, zero for
2008, and $832,075 for 2009. The tax liabilities reported by taxpayer 1 were
attributable predominantly to ordinary dividends; the tax liabilities reported by
                                          6

[*6] accompanied by checks in payment of the reported tax liabilities.
On February 28, 2014, respondent’s Field Examination unit received
taxpayer 1’s Forms 1040X, Amended U.S. Individual Income Tax
Return, for tax years 2007, 2008, 2009, and 2010, reporting relatively
small or nominal amounts of increased tax due for these years. 10

      On May 19, 2014, RA Martin issued another IDR. On September
30, 2014, respondent received from the target taxpayer’s representative
a Form 1120X, Amended U.S. Corporation Income Tax Return, for
taxpayer 3’s tax year 2009, as well as a second Form 1040X for
taxpayer 1’s 2009 tax year, which reported, on the basis of information
in taxpayer 3’s Form 1040X, additional tax resulting from additional
dividends received from taxpayer 3. 11

        On October 1, 2014—one day after receiving taxpayer 1’s second
Form 1040X and taxpayer 3’s Form 1120X—RA Martin prepared Form
4549, Income Tax Examination Changes, with respect to taxpayer 1’s
tax years 2007–10. This Form 4549 indicated that RA Martin had
accepted taxpayer 1’s Forms 1040 and 1040X as filed. The Forms 4549
indicate that for tax years 2007, 2008, and 2009 taxpayer 1 owed, in
total, taxes, penalties, and interest of $47,594.69, with no amount owed
for 2010. 12

      Also on October 1, 2014, RA Martin prepared for taxpayers 2
and 3 Forms 4549–A, Income Tax Examination Changes, showing no
changes to the taxable income and income tax reported on taxpayer 2’s

taxpayers 2 and 3 were attributable predominantly to gains from sales of business
assets.
       10 The increased amounts of tax due reported on these returns were: $13,850

for 2007 (attributable primarily to income reported on Schedule C, Profit or Loss From
Business), $542 for 2008 (attributable primarily to dividends), $1,598 for 2009
(attributable primarily to Schedule C income), and $119 for 2010 (attributable to $795
of newly reported Schedule C income). Although the record is unclear on this point, it
appears that taxpayer 1’s Form 1040X for tax year 2010 amended a Form 1040 that
was filed sometime before March 28, 2013, when taxpayer 1 filed delinquent Forms
1040 for tax years 2007–09.
       11 Taxpayer 3’s 2009 Form 1120X reflected the payment of a cash dividend but

reported no additional tax due. Taxpayer 1’s second 2009 Form 1040X reported a
$112,068 increase in dividends received, “BASED ON A RECENTLY FILED FORM
1120X” from taxpayer 3, resulting in additional tax due of $16,811.
       12 The only adjustments to income shown on the Form 4549 were for the same

adjustments reported on taxpayer 1’s Forms 1040X, plus accuracy-related penalties
under section 6662 and interest under section 6601.
                                        7

[*7] Forms 1120 for 2006–09 or on taxpayer 3’s Forms 1120 and 1120X
for 2007–09.

      On October 20, 2014, RA Martin received a cashier’s check from
the target taxpayers for the additional amounts owed as reflected on
taxpayer 1’s Forms 1040X and on Form 4549.

       Upon completing his examinations regarding the target
taxpayers, RA Martin forwarded to the WBO three largely identical
Forms 11369 dated October 1, 2014 (one each for taxpayers 1, 2, and 3),
enclosing narratives and documents from SB/SE’s examinations. 13 On
these Forms 11369 RA Martin checked the “Yes” box next to these
questions in section 11 (“Did the whistleblower contribute to the
development of facts in the audit or investigation?”):

       A.      Did the Service use the information the
               whistleblower provided to develop specific document
               requests or other inquiries to the taxpayer?

       B.      Did the Service use the information provided by the
               whistleblower to validate the completeness and
               accuracy of the taxpayer's response to information
               requests?

RA Martin checked the “No” box next to all other questions (C. through
J.) in section 11, thereby indicating that petitioner had not otherwise
contributed to the development of facts in the audit or investigation.
The three Forms 11369 include identical attachments, each stating in
full:

       13 For taxpayer 1, the Form 11369 package included: Form 4549 covering tax

years 2007–10 with accompanying schedules; Form 886–A, Explanation of Items, for
tax years 2007 and 2009; taxpayer 1’s Forms 1040 for tax years 2007–09 (without
schedules), and Forms 1040X for tax years 2007–10; Form 9984, Examining Officer’s
[Martin’s] Activity Record, with entries from July 30, 2012, to November 17, 2014,
including workpapers stating that for each of the tax years 2007–10, “Adjustments
made on basis of Forms 1040X.” For taxpayer 2 the Form 11369 package included
Form 4549–A for tax years 2006–09, indicating “NO CHANGE”; Forms 1120 for tax
years 2006–09 (without schedules); and Workpaper 400, Minimum Income Probe
Corporations and Other Business Returns, indicating that taxpayer 2’s delinquent
returns were “accepted as filed.” For taxpayer 3 the Form 11369 package included
Form 4549–A for tax years 2007–09, indicating “NO CHANGE”; Forms 1120 for tax
years 2007–09 (without schedules); Form 1120X for tax year 2009; and Workpaper 400,
indicating that taxpayer 3’s delinquent returns were “accepted as filed.”
                                    8

[*8]   12/1/2010   Form 211 Filed

       1/11/2013   [Taxpayer 2] received a letter from the IRS
                   because no 2008 [Form] 1120 was received [As
                   stated in T.C. Memo. 2017-181, at *5 n.4, we
                   conclude that this date should actually be
                   January 11, 2011.]

       1/27/2011   [Representative] sent in a voluntary
                   disclosure letter for [taxpayer 1]
                   The letter covered [taxpayer 1, taxpayer 2,
                   and taxpayer 3]

       5/12/2011   Letter received from [representative] for
                   Voluntary Disclosure.
                   Q 10 - [Taxpayer 1] is an oil and gas
                   entrepreneur
                   Q 11 - TP desires to be tax compliant
                   Q 18 - TP will fine [sic] personal tax returns
                   and, as appropriate, returns of certain
                   affiliated entities in which [taxpayer 1] holds
                   an interest. These are largely flowthrough
                   entities.
                   Non-filer for '03-'09.

       With the filings from [representative], there were no
       returns prepared, no estimates of income provided, no
       documents were provided.

       2/l0/2012   Memo from whistleblower office - CI was
                   contacted and declined the case.

       7/30/2012   RA began working the case

       8/28/2012   RA called REP and informed him that
                   [taxpayer 1] was not eligible for voluntary
                   disclosure.

       9/11/2012   CI called Brenda Perritt, MGR, and discussed
                   the case with her.

       9/18/2012   MGR called REP with RA present and told
                   REP that we would follow the spirit of the law
                   and honor the voluntary disclosure.
                                    9

[*9]          As the timeline indicates, the TP [taxpayer] filed a
       voluntary disclosure due to receiving a letter about one of
       [taxpayer 1’s] companies. This was done before the file
       came to the field. The prior manager told the REP
       [representative] that we would honor the voluntary
       disclosure even though there was a whistleblower involved.
       As a result, the case was worked as a voluntary disclosure
       case, but summonses were issued to verify that none of the
       items in the documents provided by the whistleblower were
       omitted, if they were valid items.

              As a result, the delinquent and amended returns
       received were accepted as filed as no omitted income was
       identified. The information provided by the whistleblower
       did not affect any adjustments or delinquent returns.

WBO’s Initial Denial Determination

       On November 21, 2014, the WBO received the Forms 11369 and
other documents from RA Martin. On April 10, 2015, WBO Senior Tax
Analyst Kenneth Chatham (STA Chatham) was assigned to work
petitioner’s award claim. On February 24, 2016, STA Chatham mailed
a preliminary denial letter to petitioner, copying petitioner’s counsel. It
stated in part:

              The claim has been recommended for denial because
       the IRS identified the issues prior to receipt of your
       information and your information did not substantially
       contribute to the actions taken by the IRS. Prior to receipt
       of your Form 211 information, the IRS received substantial
       information on the same issues from another source. Field
       examinations determined all examination adjustments
       and assessments from the information provided by this
       other source. Your information was made available but
       was not used to start any examinations nor to make any
       substantial contributions to the development of any of the
       issues or adjustments pursued.

      Also on February 24, 2016, STA Chatham mailed to petitioner’s
counsel a copy of an Award Recommendation Memorandum (ARM),
from STA Chatham to the WBO Director, explaining in more detail the
reasons for the recommended denial of petitioner’s claim. It stated in
part:
                                  10

[*10] Based on Form 11369 information from both CI and SBSE
      Exam, this claim should be denied. CI did not take any
      formal investigative actions in response to the
      Whistleblower’s claim. SB/SE did conduct an examination
      of the primary taxpayer [taxpayer 1] and [taxpayer 1’s]
      controlled corporations but all tax assessments made and
      paid resulted directly from the primary taxpayer’s OVDI
      information and from [taxpayer 1’s] delinquent and
      amended tax returns. No significant audit actions or
      results can be connected to the Whistleblower’s Form 211
      information.

      This claim was initially referred to CI on 3/28/2011. Per
      Form 11369 dated 2/03/2012 from CI, it declined any
      formal investigation of the taxpayers because, before the
      claim was received, the primary taxpayer had already been
      accepted into the IRS OVDI program. CI received the
      taxpayer’s OVDI request on 1/27/2011 and it was referred
      by CI to SB/SE on 5/20/2011. The CI Special Agent did not
      receive the Whistleblower’s information until later on
      7/26/2011, after the primary taxpayer had already been
      accepted by CI into the OVDI program and been referred
      to SB/SE. Per transmittal memo dated 5/17/2011, CI
      forwarded the primary taxpayer’s OVDI package to SB/SE
      and recommended acceptance of the taxpayer into the
      OVDI program.

      Next, the claim was referred to SB/SE Exam, Gulf States
      Area, from the Whistleblower Office on 2/10/2012. The
      claim case was assigned to a Dallas, TX exam group on
      7/11/2012. Assigned Revenue Agent Chris Martin started
      work on the taxpayer cases on 7/30/2012. He conducted
      audits of the primary taxpayer (individual) and two related
      C corporations for the 2007–2009 years. Both audits of the
      corporate entities closed as No Changes (DC 02). As the
      primary taxpayer was a nonfiler for 2007–2009, delinquent
      Form 1040 and Form 1040X amended returns were secured
      from [taxpayer 1] as part of the OVDI program and
      assessed for these years. All audit deficiencies of the
      primary taxpayer reported on the audit RARs were
      determined directly from [taxpayer 1’s] own delinquent
      1040 and 1040X amended tax returns. These audit
                                   11

[*11] assessments were also promptly paid in full by the primary
      taxpayer per IDRS transcripts.

      The Form 11369’s for all taxpayers from the SB/SE
      examiner were dated 10/01/2014. In it he credited the
      taxpayer’s OVDl application and his delinquent and
      amended returns for all audit results. He gave no credit to
      the Whistleblower. In the Form 11369 narrative the
      examiner stated, “. . . the delinquent and amended returns
      received were accepted as filed as no omitted income was
      identified. The information provided by the Whistleblower
      did not affect any adjustments or delinquent returns”.

      Exam Results:

      No formal criminal investigations were ever conducted by
      CI using the Whistleblower’s information. SB/SE Exam’s
      civil audits of [taxpayers 2 and 3] both closed as No
      Changes with no payments due from the companies. The
      SB/SE 1040 audit of the primary taxpayer resulted in
      Agreed tax deficiencies that were all determined directly
      from delinquent 1040 and amended tax returns provided
      by [taxpayer 1] as part of [taxpayer 1’s] OVDI information.
      Per the Form 11369 narrative by the SB/SE examiner,
      none of the audit adjustments or assessments were
      connected to the Whistleblower’s information.

      Whistleblower Tax Law:

      This claim denial is supported by IRC 7623(b)(1), which
      requires that the Whistleblower’s information give rise to
      some administrative or judicial action that results in
      collected proceeds that are connected to the information.
      This claim for award resulted in no such actions and no
      collected proceeds that were attributable to the
      Whistleblower’s     information.     The    Whistleblower’s
      information did not start any of the examinations of the
      primary taxpayer or his companies and did not
      significantly contribute to any of the issues raised or audit
      assessments against the taxpayers. Consequently, none of
      the collected proceeds from the taxpayers is attributable to
      the Whistleblower's information.
                                   12

[*12] After further communications with petitioner’s counsel, who
disagreed with the preliminary denial letter, on May 25, 2016, STA
Chatham sent petitioner a final determination, which indicated that
petitioner’s claim for an award had been denied for the same reasons
stated in the preliminary denial letter.

Tax Court Proceedings

       Petitioner timely petitioned this Court to review the WBO’s
denial determination.      Respondent filed a Motion for Summary
Judgment, asserting that the IRS had not initiated any administrative
or judicial action using petitioner’s information and that, although the
IRS had collected proceeds from the target taxpayers, these collections
had not resulted from petitioner’s information but rather from the target
taxpayers’ participation in the VDP. On September 19, 2017, this Court
denied respondent’s Motion for Summary Judgment, reasoning that we
could not conclude, on the record then before the Court, that the IRS did
not proceed with an administrative or judicial action using the
information provided by petitioner and did not collect proceeds using
petitioner’s information. T.C. Memo. 2017-181.

Discovery Dispute

      In response to petitioner’s informal discovery requests,
respondent produced 1,488 pages of documents. After unsuccessfully
attempting further informal discovery, petitioner filed a Motion to
Compel Production of Documents accompanied by the Unsworn
Declaration of Stephanie K. McGuire Under Penalty of Perjury in
Support of Motion to Compel Production of Documents. Petitioner’s
discovery motion seeks the following 36 categories of documents:

1. All documents used in respondent’s response to petitioner’s
interrogatories.

2. Any “taint or risk analysis” memos prepared by respondent
regarding petitioner’s whistleblower claim.

3. Transcripts from the IRS Integrated Data Retrieval System for each
of the tax years 2007 through 2016 for “each Non-Compliant Taxpayer
and related taxpayers identified in the Petitioner’s Whistleblower Claim
                                           13

[*13] . . . and supporting documents that are the subject of this
litigation.” 14

4. For each of the tax years 2007 through 2016, copies of all narrative
entries made into the Whistleblower Management Information Tracking
System (ETRAK), including all attachments, for each of the “Non-
Compliant Taxpayers (including related taxpayers identified in
Petitioner’s Whistleblower Claim and supporting documents)” but
specifically requested with respect to the Non-Compliant Taxpayers
listed in the Claim 211.”

5. All documents included in the administrative file maintained by the
IRS Whistleblower Analyst assigned to the case that were not included
in the ETRAK system.

6. All IRS tax examination team notes “including but not limited to,
the CI program, IRS OVDI/DVD, SB/SE exam team, and the IRS tax
specialist regarding all interaction with the Non-Compliant Taxpayers”
or their representatives, “as well as any other meetings between the
IRS” and the “Non-Compliant Taxpayers” or their representatives.

7. All “history notes of the IRS tax examination team” with respect to
the “Non-Compliant Taxpayers” for each of the tax years 2007 through
2016.

8. “Copies of all IRS Form 4549, Tax Adjustment(s), Revenue Agent
Report(s), and/or Notice of Delinquency” issued to the “Non-Compliant
Taxpayers” for each of the tax years 2007–16.

9. Copies of any “settlement agreement and/or closing agreements”
entered into between respondent and “the Non-Compliant Taxpayer” for
each of the tax years 2007–16.

         14 In petitioner’s original formal discovery requests to respondent (as contained

in petitioner’s letter to respondent dated January 12, 2017), the term “Non-Compliant
Taxpayer(s)” is defined broadly to include not only taxpayers 1, 2, and 3 but also the
23 “Other Potential Non-Compliant Taxpayer(s)” that had been named in the
memorandum attached to petitioner’s Form 211. By contrast, in the reference list of
redacted information associated with petitioner’s Motion to Compel Production of
Documents, the term “Non-Compliant Taxpayer(s)” is defined as taxpayers 1, 2, and 3,
while the other 23 taxpayers are sometimes identified as “Other potential Non-
Compliant Taxpayers.” The seeming discrepancy does not affect our analysis.
                                  14

[*14] 10. “Copies of any notice and/or demand made upon the Non-
Compliant Taxpayer” for tax years 2007–16.

11. “Copies of any notices of deficiencies the Respondent issued to the
Non-Compliant Taxpayer” for tax years 2007–16.

12. “Any and all documents regarding the Respondent’s determination
that the Non-Compliant Taxpayers qualified and/or met the IRS’
criterion for inclusion in a voluntary disclosure program including but
not limited to either Domestic Voluntary Disclosure (‘DVD’) or Offshore
Voluntary Disclosure Initiative (‘OVDI’).”

13. “Any and all documents showing how, when, and what process the
Respondent used to verify whether a whistleblower claim was filed
involving the Non-Compliant Taxpayer before, during, or after
approving their participation in the DVD and/or OVDI program(s).”

14. Any documents showing “CID and/or ___ [sic] request for approval”
from the WBO regarding DVD/OVDI programs.

15. “Any and all documents illustrating the number of Whistleblower
Claims submitted to the Respondent’s Whistleblower Office from 2007
to the present wherein the Respondent allowed a Non-Compliant
Taxpayer to participate in either the DVD and/or OVDI program even
though a pre-existing Whistleblower Claim was filed against the Non-
Compliant Taxpayers. For the purpose of this request, ‘Non-Compliant
Taxpayer(s)’ includes all Non-Compliant Taxpayers (including but not
limited to the Non-Compliant Taxpayers in this lawsuit) allowed to
participate in either the DVD and/or OVDI programs during this time
frame.”

16. “Any and all documents regarding why the respondent elected to
give priority to the Non-Compliant Taxpayers’ alleged ‘voluntary
disclosure’ which was submitted after Petitioner’s Form 211 filing.”

17. Any documents regarding “the lack of or pre-existence of any audit
or investigation . . . that Respondent planned for each of the Non-
Compliant Taxpayers for the year(s) identified by the Petitioner’s Form
211.”

18. “Any and all documents showing how the Respondent used the
Petitioner’s information to develop specific document requests or other
inquiries to the Non-Compliant Taxpayers.”
                                    15

[*15] 19. Any documents showing how respondent used petitioner’s
information to “validate the completeness and accuracy of the Non-
Compliant Taxpayers’ responses to information requests.”

20. “Any and all documents regarding the Respondent’s decision to
‘honor’ the Non-Compliant Taxpayers’ voluntary disclosure ‘even though
there was a whistleblower involved.’”

21. “Any and all documents regarding the Respondent’s decision to
disclose the existence of the Petitioner’s whistleblower filing to the Non-
Compliant Taxpayers, including all communications within the
Commission and/or between the Commission and [the] Non-Compliant
Taxpayer regarding either the existence of a whistleblower and/or
turning over the whistleblower’s information to the Non-Compliant
Taxpayer so they can ‘prepare returns.’”

22. Any documents “showing communications” between respondent
and any representative of the “Non-Compliant Taxpayers.”

23. Respondent’s “entire examination file related to the Non-Compliant
Taxpayers for all tax years” 2007–16.

24. “Any and all documents that Non-Compliant Taxpayers qualified
and/or met the Respondent’s criterion for inclusion in any voluntary
disclosure program” including DVD and/or OVDI.

25. Any documents “illustrating Respondent’s internal claim numbers
tracking” petitioner’s whistleblower claim.

26. Any “documents regarding the Non-Compliant Taxpayers in the
Respondent’s internal, whistleblower database used to track or review
the Non-Compliant Taxpayers request or consideration for inclusion in
any voluntary disclosure program, including” DVD and OVDI.

27. Any documents showing communications to or from the IRS
regarding the “Non-Compliant Taxpayers’” request for inclusion in the
DVD or OVDI, including all documents included with the “Non-
Compliant Taxpayer’s purported voluntary domestic disclosure
submission.”

28. Any documents showing any “Report of Foreign Bank and
Financial Accounts (‘FBAR’) penalties and/or any other fines penalties
or forfeitures” that were assessed against the “Non-Compliant
Taxpayers” for tax years 2007–16.
                                        16

[*16] 29. Any documents showing taxes respondent collected from the
“Non-Compliant Taxpayers” for tax years 2007–16.

30. Any documents regarding respondent’s CI investigation of the
“Non-Compliant Taxpayers.”

31. Any documents regarding respondent’s initiation of any audit,
investigation, or examination of any of the 22 “other, potential Non-
Compliant Taxpayers” identified in the materials submitted in support
of the Form 211.

32. Any documents “extending the statute of limitations” between
respondent and the “Non-Compliant Taxpayers.”

33. “Any [and] all documents wherein the Respondent is currently
monitoring the Non-Compliant Taxpayers’ compliance with tax issues,”
including “any and all correspondence” regarding such monitoring.

34. Any documents showing “all of the Respondent’s internal projects,
including updates to the Internal Revenue Manual (IRM), treasury
regulations, and Notices to IRS examination agents that were started or
begun after the submission” of petitioner’s whistleblower claim.

35. “Copies of all administrative files along with all documentation,
emails, memorandums, etc., associated with the Respondent’s projects
identified in response to the preceding request.”

36. “Any final reports issued by any expert witness(es) that will testify
on Respondent’s behalf in the trial of this lawsuit.”

       Respondent objects to petitioner’s Motion to Compel Production
of Documents primarily on the grounds that he has already provided
petitioner with a complete copy of the administrative record upon which
the WBO based its determination and that this administrative record
contains responsive documents relating to taxpayers 1, 2, and 3 for all
the years referenced in petitioner’s Form 211. Respondent contends that
even if additional responsive documents existed they would be
protected, variously, as confidential return information under section
6103 or by the deliberative process privilege or attorney-client
privilege. 15 Insofar as petitioner’s discovery requests relate to years

       15 In his Response to Motion to Compel Production of Documents, respondent

clarifies that he has “neither identified nor withheld any specific documents on the
grounds they are privileged. Rather, respondent maintains that it has produced all
responsive documents—the administrative record that was before the Whistleblower
                                     17

[*17] beyond 2010 (the last year expressly referenced in petitioner’s
Form 211) or to taxpayers that were neither referred by the WBO nor
examined by the IRS, respondent objects that petitioner’s request is
overbroad. Respondent states that he is unable to produce the
documents described in petitioner’s requests numbered 1, 2, 14, 15, 18,
19, and 21 because “no such documents exist.”

Remand to WBO

       On May 8, 2019, the Court remanded this case to the WBO,
finding that on the record then before us we were unable to adequately
evaluate the challenged agency action. We ordered the WBO to further
consider (1) whether the whistleblower’s information caused the target
taxpayers’ entry into the VDP, either directly or indirectly, (2) whether
the existence of a whistleblower or the whistleblower’s information was
disclosed to the target taxpayers, and (3) whether the whistleblower’s
information was used in the examination of the target taxpayers’
voluntary disclosure.     The Court ordered respondent to file a
supplemental determination and held petitioner’s Motion to Compel
Production of Documents in abeyance.

WBO’s Supplemental Determination

        On January 30, 2020, respondent issued the WBO’s
Supplemental Determination, again denying petitioner’s claim for a
whistleblower award and stating in response to the three issues
identified in the Court’s remand order:

              (1) Your Whistleblower claim for award did not
       directly or indirectly cause [taxpayer 1] to enter the
       Voluntary Disclosure Program (VDP) nor to file . . . [a] VDP
       submission with the IRS.

              (2) The existence of a whistleblower was disclosed to
       [taxpayer 1] and [taxpayer 1’s] representatives on or
       around 8/28/2012, but the identity of the whistleblower and
       the information in the claim for award filing were not
       disclosed. Further, it appears from information available
       that [taxpayer 1] and [taxpayer 1’s] representatives did not
       correctly identify the whistleblower, and there is no
       evidence that this disclosure had any negative effects on

Office—that is necessary for the Tax Court to assess whether or not respondent
properly evaluated petitioner’s claim for an award.”
                                         18

[*18] the [taxpayer 1’s] examination case nor on the handling of
      your claim for award.

               (3) Your claim for award information was reviewed
       and used during the examination of [taxpayer 1’s] VDP
       filing.     However,    no    examination    adjustments,
       assessments, or proceeds resulted from the examiner’s use
       of your information. Instead, all examination assessments
       and proceeds collected resulted from [taxpayer 1’s] own
       VDP information including [taxpayer 1-]related delinquent
       and amended tax return filings.

       The Supplemental Determination filed with the Court was
accompanied by the Declaration of STA Chatham (Chatham
declaration). STA Chatham declared under penalty of perjury that
petitioner’s whistleblower claim had been assigned to him for processing
from April 2015 until the WBO denied petitioner’s claim on May 25,
2016, and again after the Court remanded the case on May 8, 2019, until
the issuance of the Supplemental Determination on January 30, 2020.
He certified that the pages attached to his declaration (Bates-stamped
1–1722) constitute the complete administrative record. 16

      Included in the administrative record is a supplemental ARM
from STA Chatham, explaining in detail his reasons for recommending
denial of petitioner’s award claim. The supplemental ARM states in
part:

       Based on Form 11369 information from both CI and SBSE
       Exam, this claim should be denied. CI did not take any
       formal investigative actions in response to the
       Whistleblower’s claim. SB/SE did conduct an examination
       of the primary taxpayer and his controlled corporations but
       all tax assessments and proceeds collected resulted directly
       from the primary taxpayer’s Voluntary Disclosure Program
       (VDP) information and from his own delinquent and
       amended tax returns. No significant audit actions or

        16 The Chatham declaration explains that the pages Bates-stamped 1–1488

constitute the administrative file created before the remand of this case to the WBO,
and that the remaining pages Bates-stamped 1489–1722 constitute the administrative
record created after the remand of this case to the WBO (supplemental record).
Respondent’s privilege log indicated that certain documents in the supplemental
record attached to the Chatham declaration had been redacted or withheld for
privilege.
                                  19

[*19] results can be connected to the Whistleblower’s Form 211
      information.

            ....

      After receiving the claim case files back from the Tax Court
      remand in June 2019, the [WBO] analyst reconsidered
      whether any audit adjustments (and resulting proceeds
      collected) from the SB/SE audit of [taxpayer 1] arose from
      or could be connected to any information or assistance from
      the Whistleblower’s claim for award.

      However, consistent with the original ARM memo and
      original claim denial letters, it must again be determined
      that none of the audit assessments or proceeds collected
      from the SB/SE examination can be reasonably connected
      to the Whistleblower’s claim for award.

      The original ARM memo provided detailed Form 11369
      information from CI and SB/SE Exam as well as
      observations from the timeline of events for this claim case
      to support the denial of the Whistleblower’s claim for
      award. These documents indicated that all audit
      adjustments and tax assessments related to the 2007–2010
      examination of [taxpayer 1] were based on Voluntary
      Disclosure information from [taxpayer 1 and taxpayer 1’s]
      representatives in addition to [taxpayer 1’s] own
      delinquent Form 1040 return filings and related Form
      1040X amended returns, not on any Whistleblower claim
      information. This ARM memo quoted the SB/SE Exam
      findings from the Form 11369 by RA Chris Martin stating,
      “. . . the delinquent and amended returns received (from
      [taxpayer 1 and taxpayer 1’s] representatives) were
      accepted as filed as no omitted income was identified. The
      information provided by the Whistleblower did not affect
      any adjustments or delinquent returns”. This memo
      further concluded, “SB/SE did conduct an examination of
      the [target taxpayers] but all tax assessments made and
      paid resulted directly from [taxpayer 1’s] VDP information
      and from [taxpayer 1’s] delinquent and amended tax
      returns. No significant audit actions or results can be
      connected to the Whistleblower’s Form 211 information”.
                                   20

[*20] To check these original findings, the [WBO] analyst again
      reviewed the SB/SE Exam RA’s case activity record as well
      as his case workpapers from his examination of
      [taxpayer 1]. He also contacted assigned SB/SE Exam
      Revenue Agent Chris R. Martin by both telephone and
      email message to secure additional and clarifying
      information surrounding his examination case on
      [taxpayer 1]. These audit documents all referenced the
      source of adjustments and tax assessments as
      [taxpayer 1’s] own Voluntary Disclosure information and
      the delinquent 1040 and amended tax returns submitted
      by [taxpayer 1’s] representatives. It is also noteworthy that
      no comments or assertions in the RA’s audit case
      workpapers appeared to credit a source of information that
      could have been the Whistleblower’s claim for award
      information. Per the Exam case workpapers provided and
      copies of the delinquent 1040 and amended tax returns for
      the 2007–2009 years, it is clear that the examiner accepted
      partial assessments of these taxpayer returns as they were
      prepared by the [taxpayer 1’s] representatives and
      submitted to him. His audit workpapers also consistently
      cited “Forms 1040” as the source of the adjustments and
      tax assessments. No statements were found in the Form
      11369 nor in any of the audit documents that indicated that
      any credit should go to the Whistleblower’s claim
      information for any exam adjustments or tax assessments.

      These original findings that led to the initial denial
      determination were again confirmed by an email response
      on 7/31/2019 from Revenue Agent Chris Martin. The RA
      recalled that he did consider the Whistleblower’s claim for
      award information and did try to utilize parts of it in the
      taxpayer’s examination case. However, this claim
      information could not be verified as accurate and all audit
      steps utilizing claim information resulted in no
      adjustments or tax assessments. With regard to [a
      particular transaction] mentioned in RA’s phone call with
      the WO analyst on 7/31/2019, the RA stated, “Overall, the
      information provided by the whistleblower could not be
      substantiated. This is especially true of the large, $100
      million contracts where [taxpayer 1] was supposed to have
      millions wired into [taxpayer 1’s] accounts when the deal
      closed. It would appear that either these deals never closed
                                  21

[*21] or [taxpayer 1] was not included in the final deal”. During
      this phone call with the RA on 7/31/2019, he also stated
      that, during his audit work on [taxpayer 1], he never tried
      to contact the whistleblower or [the whistleblower’s]
      representatives.

      The RA’s email response further confirmed that the
      Whistleblower’s claim information was not used to
      determine any Exam adjustments or tax assessments
      when he stated in this email, “The whistleblower
      information was considered, and the RA tried to verify the
      items provided. Overall, the whistleblower information
      could not be verified. No adjustments were made as a
      result of the whistleblower information received”. This
      conclusion also clearly supports the original claim denial
      determination previously made and issued to the
      Whistleblower and [the whistleblower’s] representatives.

      A final consideration was whether the Whistleblower’s
      claim for award information could have directly or
      indirectly caused [taxpayer 1] to enter the VDP and to
      cooperate with the IRS. But, again the available
      information and documentation clearly indicates that the
      Whistleblower’s information had no such effect on the
      taxpayer.

      Firstly, the timeline of events in the Whistleblower’s claim
      case fully supports the conclusion that the Whistleblower’s
      claim information had no effect on [taxpayer 1’s] decision
      to enter the VDP and to cooperate with the IRS. The
      Whistleblower’s Form 211 claim for award was received by
      the W[B]O on 12/13/2010 but was not shared with any field
      OD [operating division] until this information was first
      referred to CI on 3/28/2011. Meanwhile, the taxpayer’s
      VDP application package was received by CI on 1/27/2011,
      a full two months before the claim information was ever
      referred to CI. So, at the date that the taxpayer had
      submitted [taxpayer 1’s] VDP package and it was accepted
      by CI, the Whistleblower’s claim information was still held
      in the W[B]O and had not been referred to any field OD (i.e.
      CI or SB/SE Exam). Consequently, the taxpayer would
      have had no way to have learned about the claim
                                  22

[*22] information from IRS before submitting [taxpayer 1’s] VDP
      application.

      The Form 11369 narrative provided by CI on the
      Whistleblower’s case further supports the timeline of
      events and the observations above. It states, “Prior to
      receiving this referral from the WBO, taxpayer [1]
      requested to participate in the IRS Voluntary Disclosure
      Program. [Taxpayer 1] was cleared to enter the program
      at which point [the] request was referred to SB/SE
      Examination”. The narrative continues, “CI received the
      Voluntary Disclosure request on January 27, 2011. Worked
      by SA (Special Agent) Denise Corcoran, Dallas FO. CI
      closed the Voluntary Disclosure as a direct referral to
      SB/SE on May 20, 2011. On July 26, 2011, (the assigned)
      CI (Special Agent actually) received the referral from the
      WBO. Taxpayer was already accepted into the program
      and referred to SB/SE.” So CI received and worked on the
      taxpayer’s VDP application a full 6 months before the
      referral of the Whistleblower’s claim for award was ever
      assigned to a CI agent for consideration. This narrative of
      the facts therefore provides virtually no chance that the
      taxpayer found out about the Whistleblower’s claim for
      award before coming forward and submitting [taxpayer 1’s]
      VDP application for CI approval.

            ....

      In the W[B]O analyst’s phone call with SB/SE Exam
      Revenue Agent Chris R. Martin on 7/31/2019, he confirmed
      many of the points above. RA Martin stated the taxpayer’s
      attorneys . . . told him that the IRS letter on unfiled tax
      returns due from [taxpayer 2] caused [taxpayer 1] to come
      forward and enter the Voluntary Disclosure program in
      early 2011. At that time, the taxpayer’s attorneys did not
      mention the Whistleblower . . . or any possible or suspected
      Whistleblower claim filing from [the whistleblower]. So the
      RA stands by his statements in his Form 11369 narrative
      regarding this point. In addition, RA Martin’s email reply
      dated 7/31/2019 on this question further confirmed the
      conclusion that the Whistleblower’s claim information had
      no effect on the taxpayer’s decision to enter the VDP and to
      cooperate with the IRS.
                                    23

[*23] The only way that that Whistleblower’s claim for award
      information could have influenced the taxpayer to come
      forward, enter the VDP, and cooperate with the IRS would
      be if the taxpayer learned directly from the Whistleblower
      . . . or indirectly thru some other source apart from the IRS
      that [the whistleblower] was about to submit the claim
      information on [taxpayer 1] to the IRS and that news
      motivated [taxpayer 1] to quickly come forward with
      [taxpayer 1’s] VDP application package. Such an incident,
      if it actually occurred, would have taken place sometime in
      November or December 2010. However, knowledge of any
      such incident is not available to the IRS, and there is no
      trace of information connected to this claim case that
      suggests that it did occur.

      In conclusion, based on the information and observations
      provided above, it must [be] determined that none of the
      audit adjustments and proceeds collected from the VDP
      submission and the resulting examination of taxpayer [1]
      can be connected to the Whistleblower’s claim for award
      information. Consequently, the Whistleblower’s claim for
      award must be denied.

       The supplemental ARM indicates that before the WBO issued its
supplemental determination it shared a preliminary version with
petitioner’s representative, who responded in a letter dated January 3,
2020, expressing several points of disagreement. One of those points of
disagreement regarded the timing and effect of the IRS’s improper
disclosure to the target taxpayers’ representative, in August 2012, of the
existence (but not the identity) of a whistleblower. The response letter
asserted that this disclosure of a whistleblower was sufficient cause for
the target taxpayers to file their delinquent returns and pay the
delinquent taxes. The supplemental ARM rejected this argument,
stating:

      While the taxpayer did not submit his delinquent tax
      returns until 3/28/2013 (the received stamp date on each
      return), the taxpayer entered the VDP program back on
      1/27/2011, a date well before the improper disclosure of a
      whistleblower was made. Entrance into the VDP program
      in January 2011 obligated [taxpayer 1] to file any and all
      amended and delinquent tax returns necessary to fully
      report [taxpayer 1’s] personal tax liabilities and to fully pay
                                   24

[*24] these taxes due. The disclosure of a whistleblower came
      well after this time and cannot be reasonably presumed to
      have motivated the taxpayer to file [taxpayer 1’s]
      delinquent tax returns. In addition, the SB/SE Exam
      Revenue Agent in his Form 11369 has previously
      identified, based on his discussions with the taxpayer’s
      representatives, the IRS letter dated 1/11/2011 to the
      taxpayer regarding nonfiled tax years by [taxpayer 2] as
      the specific motivation for [taxpayer 1’s] entrance into the
      VDP program and for [taxpayer 1’s] voluntary filing of
      delinquent personal tax returns and payment of taxes due.
      It is also important to note that the taxpayer was referred
      for civil audit in SB/SE for non-filed returns in early
      February 2012, well before the improper disclosure was
      made by the Exam group manager. Thus, the taxpayer was
      well obligated to file delinquent tax returns and pay
      [taxpayer 1’s] taxes due before [taxpayer 1] ever found out
      about a whistleblower or informant. This fact makes any
      attempt to credit the improper disclosure of a
      whistleblower to the taxpayer for these proceeds both
      unreasonable and inaccurate.

      The supplemental ARM also addressed arguments by petitioner’s
representatives regarding alleged abuses of discretion by the IRS in
processing the target taxpayers’ VDP request. The supplemental ARM
stated:

      Based on the WO analyst’s telephone call with RA Chris
      Martin on 1/15/2020, the decision to accept and utilize the
      taxpayer’s VDP filing was made by Brenda Perritt, his
      Exam group manager, shortly after the taxpayer’s audit
      case was started in the RA’s Exam group in August-
      September 2012. This decision to accept the taxpayer’s
      VDP filing was totally outside the purview of the
      Whistleblower Office and had no direct effect on the
      outcome of the Whistleblower’s claim for award. Further, it
      is very important to note that, while the Exam group did
      accept and utilize the VDP filing in conducting the
      taxpayer’s 1040 audit case, it did not refuse to consider or
      use the Whistleblower’s claim information. Rather, the RA
      has several times stated to the WO analyst that he did try
      to use the Whistleblower’s claim information, but no audit
      adjustments resulted from using this information. For
                                        25

[*25] example, see the large oil deal issue first mentioned above
      on page 3 that was considered from the Whistleblower’s
      Form 211 and that ultimately resulted in no adjustment to
      the taxpayer’s income. Thus, the Exam group never
      deliberately chose to use the taxpayer’s VDP information
      to the exclusion of the Whistleblower’s claim for award.
      Instead, both sources on information were considered
      during the taxpayer’s examination, but all adjustments
      were ultimately derived from the taxpayer’s information
      and from his own delinquent and amended return filings.

       The fourth point in the response letter presents additional
       alleged “abuses of discretion” regarding the IRS’s handling
       and acceptance of the taxpayer’s VDP application. As is
       pointed out above for the third point, these processes and
       decisions made in the field are outside of the purview of the
       Whistleblower Office and cannot be used to award proceeds
       to the Whistleblower if the examiner in fact utilized the
       VDP information and delinquent/amended tax returns
       provided by the taxpayer to identify and develop tax
       adjustments instead of the claim for award information
       from the Whistleblower. Such is the situation in this case
       as has been consistently reported by the Revenue Agent in
       his Form 11369 as well as in later telephone and email
       inquiries by the WO analyst.

Tax Court Proceedings After Supplemental Determination

      In response to the supplemental determination, petitioner filed a
Supplemental Petition. 17 On January 12, 2021, respondent filed a
Motion for Summary Judgment supported by the Chatham declaration.
In a Response and First Supplemental Response, petitioner opposed the
granting of respondent’s Motion for Summary Judgment and cross-
moved for summary judgment. Further briefing ensued.

        17 In response to the supplemental determination, petitioner also filed a

Petition in a new case, Docket No. 4014-20W, which the Court subsequently closed as
duplicative of the instant case.
                                          26

[*26]                               Discussion

A.      Jurisdiction

       Section 7623(b)(1) requires payment of an award to an individual
(commonly referred to as a whistleblower) who provides information
concerning underpayments of tax if the Commissioner, on the basis of
that information, “proceeds with any administrative or judicial action”
that results in the collection of proceeds. Section 7623(b)(4) provides, in
relevant part, that this Court has jurisdiction over an appeal of “[a]ny
determination regarding an award” under section 7623(b)(1). 18

       The U.S. Court of Appeals for the District of Columbia Circuit, to
which any appeal of this case would ordinarily lie, see I.R.C. § 7482(b)
(flush language), has confirmed that pursuant to section 7623(b)(4) this
Court had jurisdiction over an appeal where the WBO referred a
whistleblower’s submission to another office of the IRS, which initiated
an examination of the issue that the whistleblower had identified, and
the WBO subsequently issued a determination denying the
whistleblower any award, Lissack v. Commissioner, 68 F.4th 1312,
1320–21 (D.C. Cir. 2023) (distinguishing Li v. Commissioner, 22 F.4th
1014 (D.C. Cir. 2022) (holding that the Tax Court lacks jurisdiction over
the appeal of a threshold rejection of a whistleblower claim where the
IRS does not proceed with any relevant administrative or judicial action
against the target taxpayers)), aff’g 157 T.C. 63 (2021); see Berenblatt v.
Commissioner, No. 7208-17W, 160 T.C., slip op. at 12–13 (May 24, 2023);
Whistleblower 972-17W v. Commissioner, 159 T.C. 1, 7–10 (2022).
Similarly, in the case at hand, because the WBO referred petitioner’s
claim to another office of the IRS, which proceeded with administrative

        18 Section 7623(b)(5) provides in part that section 7623(b) applies if the
proceeds in dispute exceed $2 million. This Court has held that the $2 million
threshold is not jurisdictional but rather may create an affirmative defense that must
be pleaded in the answer and proved by the Commissioner. Lippolis v. Commissioner,
143 T.C. 393 (2014). Although in his original Motion for Summary Judgment
respondent asserted that the $2 million threshold of section 7623(b)(5)(B) had not been
met in this case, in his most recent Motion for Summary Judgment respondent
concedes that the threshold has been met because “the proceeds in dispute as alleged
by petitioner exceeded $2 million.” We accept respondent’s concession without
expressing any view on its legal correctness. Cf. Treas. Reg. § 301.7623-2(e)(2)
(defining the “amount in dispute” as “the greater of the maximum total of tax,
penalties, interest, additions to tax, and additional amounts that resulted from the
action(s) with which the IRS proceeded based on the information provided, or the
maximum total of such amounts that were stated in formal positions taken by the IRS
in the action(s)”).
                                         27

[*27] action, and the WBO subsequently issued a final award decision
denying petitioner’s claim, this Court has jurisdiction over this case. See
Whistleblower 972-17W, 159 T.C. at 7–10; McCrory v. Commissioner,
T.C. Memo. 2023-98, at *7 n.5.

B.     Standard and Scope of Review

       We review the WBO’s determinations for abuse of discretion,
generally confining our review to the administrative record. Kasper v.
Commissioner, 150 T.C. 8, 20–23 (2018). In reviewing an appeal of the
WBO’s determination this Court “should have before it neither more nor
less information than the [WBO] had when it made its determination.”
Berenblatt, 160 T.C., slip op. at 14 (citing Hill Dermaceuticals, Inc. v.
FDA, 709 F.3d 44, 47 (D.C. Cir. 2013)).

       The complete administrative record should contain “all the
information [the WBO] considered directly or indirectly” in making its
determination. Van Bemmelen v. Commissioner, 155 T.C. 64, 74 (2020)
(quoting Cape Hatteras Access Pres. All. v. U.S. Dep’t of Interior, 667 F.
Supp. 2d 111, 114 (D.D.C. 2009)). The WBO is generally presumed to
have properly compiled the administrative record. Id. To overcome this
presumption requires “a substantial showing . . . with clear evidence”
that documents sought to be included in the record before the court were
in fact considered by the WBO, directly or indirectly, when it made its
decision. Id. (first citing Oceana, Inc. v. Ross, 920 F.3d 855, 865 (D.C.
Cir. 2019); and then citing Cape Hatteras Access Pres. All., 667 F. Supp.
2d at 114).

      Treasury Regulation § 301.7623-3(e) describes the materials that
should be included in the administrative record relating to a
whistleblower determination: 19

       Treas. Reg. § 301.7623-3(e) Administrative record.
              (1) In general. The administrative record comprises
       all information contained in the administrative claim file
       that is relevant to the award determination and not
       protected by one or more common law or statutory
       privileges.

       19 This regulation applies to this case because petitioner’s claim for an award

was open as of August 12, 2014, when the regulation became effective. See Berenblatt,
160 T.C., slip op. at 11 n.5; Treas. Reg. § 301.7623-3(f).
                                     28

[*28]          (2) Administrative claim file. The administrative
        claim file will include the following materials relating to
        the action(s) to which the determination relates—
                      (i) The Form 211, “Application for Award for
               Original Information,” filed by the whistleblower
               and all information provided by the whistleblower
               (whether provided with the whistleblower’s original
               submission or through a subsequent contact with
               the IRS).
                      (ii) Copies of all debriefing notes and recorded
               interviews held with the whistleblower (and the
               whistleblower’s legal representative, if any).
                      (iii) Form(s) 11369, “Confidential Evaluation
               Report on Claim for Award,” including narratives
               prepared by the relevant IRS office(s), explaining
               the whistleblower’s contributions to the actions and
               documenting the actions taken by the IRS in the
               case(s). The Form 11369 will refer to and incorporate
               additional documents relating to the issues raised by
               the claim, as appropriate, including, for example,
               relevant portions of revenue agent reports, copies of
               agreements entered into with the taxpayer(s), tax
               returns, and activity records.
                      (iv) Copies of all contracts entered into among
               the IRS, the whistleblower, and the whistleblower’s
               legal representative (if any), and an explanation of
               the cooperation provided by the whistleblower (or
               the whistleblower’s legal representative, if any)
               under the contract.
                      (v) Any information that reflects actions by
               the whistleblower that may have had a negative
               impact on the IRS’s ability to examine the
               taxpayer(s).
                      (vi) All correspondence and documents sent
               by the Whistleblower Office to the whistleblower.
                      (vii) All notes, memoranda, and other
               documents made by officers and employees of the
               Whistleblower Office and considered by the official
               making the award determination.
                      (viii) All correspondence and documents
               received by the Whistleblower Office from the
               whistleblower (and the whistleblower’s legal
                                     29

[*29]         representative, if any) in the course of the
              whistleblower administrative proceeding.
                      (ix) All other information considered by the
              official making the award determination.

C.      Discovery Standard

       In Berenblatt, 160 T.C., slip op. at 18, this Court clarified the
discovery standard that applies in a whistleblower proceeding in this
Court:

        [W]e hold that whistleblower discovery requests are
        appropriate upon a significant showing that (1) there is
        material in the IRS’s possession indicative of bad faith on
        the IRS’s part in connection with the case or (2) there is
        material in the IRS’s possession indicating that the
        designated record omits material the WBO actually
        considered (directly or indirectly) or that otherwise falls
        under a category listed in Treasury Regulation
        § 301.7623-3(e).

      The Court also stated: “For purposes of evaluating whether a
whistleblower has made a significant showing . . . of an incomplete
record, we will deem all materials listed in Treasury Regulation
§ 301.7623-3(e) to be necessary parts of the complete record.” Id.
at 16–17.

D.      Petitioner’s Motion to Compel Production of Documents

       Petitioner’s Motion to Compel Production of Documents seeks
documents in 36 broad categories, covering primarily the target
taxpayers, although at least some of the requests (e.g., those numbered
3, 4, and 31) appear also to cover most if not all of the 23 other “potential
Non-Compliant Taxpayers” identified in the attachment to petitioner’s
Form 211. These discovery requests generally span the years 2007
through 2016.

       Respondent objects to the granting of petitioner’s motion,
asserting that he has already produced the administrative claim file
that contains “the universe of documents before the Whistleblower
Office at the time respondent made his determination in this case.”
Respondent asserts that further discovery is unwarranted because the
documents that petitioner seeks through discovery have already been
provided, do not exist, or are outside the scope of the administrative
                                          30

[*30] record and protected, variously, as confidential return information
under section 6103 or by the deliberative process privilege or by
attorney-client privilege. 20     Moreover, respondent objects that
petitioner’s discovery requests are overly broad and unduly burdensome
insofar as they relate to (1) tax years that were not placed at issue in
petitioner’s claim and were outside the years audited by the IRS or
(2) the other “potential Non-Compliant Taxpayers” as to which the WBO
has made no determination.

       At the Court’s direction, the parties have provided supplemental
briefing on various discovery issues, including Berenblatt’s effect on the
proper disposition of petitioner’s Motion to Compel Production of
Documents.

       1.      Overbreadth of Discovery Requests

        We agree with respondent that petitioner’s discovery requests are
overly broad and unduly burdensome insofar as they relate to entities
or persons other than the target taxpayers or to tax years other than
those for which the IRS proceeded with examinations on the basis of
petitioner’s information (for simplicity, collectively, other taxpayers or
years). Although petitioner’s claim submission identified 25 entities and
individuals as having some possible connection with or knowledge of
taxpayer 1’s business activities, the submission provided specific
information only with respect to the three target taxpayers and two
other flowthrough entities, for the years 2007 through 2010. The WBO
initially made referrals to CI and SB/SE only for petitioner’s claims
relating to taxpayer 1. During SB/SE’s examination, taxpayers 2 and 3
were associated with the claim. Taxpayer 1 was audited for tax years
2007–10; taxpayer 2 was audited for tax years 2006–09; and taxpayer 3
was audited for tax years 2007–09. The record shows that for these
years the IRS collected taxes remitted pursuant to the delinquent and
amended tax returns that taxpayers 1, 2, and 3 filed for tax years 2007
through 2010. There is no hint in the record that the IRS proceeded

        20 Respondent represents that, with respect to that portion of the designated

administrative record created before this Court’s remand to the WBO, respondent had
“neither identified nor withheld any specific documents on the grounds they are
privileged.” With respect to the supplemental record created after this Court’s remand,
respondent provided a privilege log indicating that certain documents had been
withheld or redacted. Petitioner has not expressly challenged these privilege claims
as they relate to the supplemental record, and our ruling today does not necessitate an
evaluation of these privilege claims.
                                          31

[*31] with any action against other taxpayers on the basis of petitioner’s
information.

       Petitioner has offered no meaningful theory under which
documents relating to other taxpayers or years are relevant for our
review of the WBO’s award determination. Documents relating to other
taxpayers or years were not part of the administrative record that the
WBO developed or collected as part of its administrative process.
Petitioner has failed to rebut the strong presumption that respondent
properly excluded such documents from the designated record. We
decline to sanction a fishing expedition for such documents.

       2.      Completeness of Form 11369 Packages

       Petitioner argues that the requested discovery is warranted
because the record produced by the IRS is incomplete, lacking materials
that petitioner believes should have been included with the Forms 11369
that CI and SB/SE forwarded to the WBO upon concluding their
investigations. In support of this position, petitioner cites IRM
25.2.1.5.5.1 (Jan. 11, 2018), which lists various types of documentation
to be included in the “Form 11369 Package.” These IRM directives did
not become effective, however, until January 11, 2018, well after CI sent
its Form 11369 package to the WBO on February 3, 2012, and well after
SB/SE sent its Form 11369 package to the WBO on October 1, 2014.
Consequently, these IRM directives were not in effect at any time
relevant to this proceeding. 21 Rather than looking to these IRM
directives, pursuant to the holding in Berenblatt we look to Treasury
Regulation § 301.7623-3(e)(2)(iii), which was in effect at all relevant
times.

       As noted, Treasury Regulation § 301.7623-3(e)(2)(iii) states that
the administrative claim file should include any Form 11369 prepared
with respect to the whistleblower’s case, “including narratives prepared
by the relevant IRS office(s), explaining the whistleblower’s
contributions to the actions and documenting the actions taken by the

        21 We express no view on the potential relevance of these IRM directives had

they been in effect at any relevant time. Although IRM provisions may be “instructive
in ascertaining the procedures the IRS expects its employees to follow,” Wadleigh v.
Commissioner, 134 T.C. 280, 294 (2010), it is “well-settled” that IRM provisions are
“directory rather than mandatory, are not codified regulations, and clearly do not have
the force and effect of law,” Marks v. Commissioner, 947 F.2d 983, 986 n.1 (D.C. Cir.
1991), aff’g T.C. Memo. 1989-575; accord Weiss v. Commissioner, 147 T.C. 179, 196
(2016) (“The IRM lacks the force of law and does not create rights for taxpayers.”),
aff’d, No. 16-1407, 2018 WL 2759389 (D.C. Cir. May 22, 2018).
                                          32

[*32] IRS in the case(s).” The designated administrative record that
respondent has submitted satisfies this requirement. It contains four
Forms 11369—one that CI forwarded to the WBO and three that SB/SE
subsequently forwarded to the WBO. The Form 11369 that CI
forwarded to the WBO pertains only to taxpayer 1 and explains that CI
had received the VDP request and referred it to SB/SE before receiving
the whistleblower claim referral from the WBO. 22 After conducting its
examination, SB/SE forwarded to the WBO three largely identical
Forms 11369 for the target taxpayers. Each Form 11369 describes the
actions taken by SB/SE and states that no audit adjustments or
assessments were connected with the information in petitioner’s
whistleblower claim. These narratives explain that all tax assessments
against taxpayer 1 resulted directly from the taxes reported on taxpayer
1’s delinquent and amended tax returns, and that the audits of
taxpayers 2 and 3 were closed as “No Changes” with no tax payments
due.

        In addition to requiring that the administrative claim file include
Forms 11369 and accompanying narratives, Treas. Reg. § 301.7623-
3(e)(iii) states: “The Form 11369 will refer to and incorporate additional
documents relating to the issues raised by the claim, as appropriate,
including, for example, relevant portions of revenue agent reports,
copies of agreements entered into with the taxpayer(s), tax returns, and
activity records.” 23 We are satisfied that the Form 11369 packages
included in the designated record also meet this requirement. For
taxpayer 1 the SB/SE Form 11369 package includes Form 4549 for tax
years 2007–10, with accompanying schedules; relevant portions of
taxpayer 1’s Forms 1040 and 1040X; and Examining Officer Martin’s
Activity Record and workpapers. For taxpayers 2 and 3 the SB/SE Form
11369 packages include Forms 4549–A, indicating “NO CHANGE”;
relevant portions of Forms 1120 and 1120X; and Workpapers 400,
indicating that the delinquent returns of taxpayers 2 and 3 were
“accepted as filed.” See supra note 13. Petitioner has not overcome the
presumption of correctness that the Form 11369 packages included in
the designated administrative record meet the requirements of
Treasury Regulation § 301.7623-3(e)(2)(iii).

        22 CI did not prepare separate Forms 11369 for taxpayers 2 and 3, which were

associated with petitioner’s whistleblower claim only after the WBO subsequently
referred it to SB/SE.
        23 This regulation “does not explicitly include all such ‘additional documents’

in the record.” Berenblatt, 160 T.C. at 21 & n.8.
                                    33

[*33] In short, we are unpersuaded by petitioner’s argument that the
designated administrative record is incomplete for failure to include
documents that fall under a category listed in Treasury Regulation
§ 301.7623-3(e).

      3.     VDP Materials

       In supplemental briefing addressing Berenblatt’s effect on
petitioner’s Motion to Compel Production of Documents, petitioner
focuses mainly on the target taxpayers’ VDP submission and materials
relating to respondent’s decision to honor it (collectively, VDP
materials)—items encompassed in petitioner’s document production
requests numbered 12, 16, 20, 24, 26, and 27. Petitioner contends that
the VDP materials are discoverable because (1) the WBO considered
these materials and consequently they should be included in the
administrative record or (2) alternatively, the VDP materials are
extrarecord evidence with which the administrative record should be
supplemented. We address these arguments in turn.

             a.     Incomplete Record

       Petitioner suggests that the VDP materials are discoverable as
potentially relevant materials that should have been included in the
administrative record. An agency, however, is “not obligated to include
[in the administrative record] every potentially relevant document
existing within its agency. Only those documents that were directly or
indirectly considered by the [agency’s] decisionmaker(s) should be
included in the administrative record.” Pac. Shores Subdiv. Cal. Water
Dist. v. U.S. Army Corps of Eng’rs, 448 F. Supp. 2d 1, 7 (D.D.C. 2006).
“[A]bsent clear evidence to the contrary, an agency is entitled to a strong
presumption of regularity, that it properly designated the
administrative record.” Id. at 5. The relevant question is whether
petitioner has provided “concrete evidence . . . that the specific
documents allegedly missing from the administrative record were
directly or indirectly considered by the actual decision makers involved
in the challenged agency action.” Dist. Hosp. Partners, L.P. v. Sebelius,
971 F. Supp. 2d 15, 20 (D.D.C. 2013) (emphasis added), aff’d sub nom.
Dist. Hosp. Partners, L.P. v. Burwell, 786 F.3d 46 (D.C. Cir. 2015).

      Petitioner does not expressly contend that the WBO considered
the VDP materials directly. Indeed, the record does not suggest that
any of the VDP materials were ever forwarded to or collected by the
WBO, which relied instead on the Forms 11369 and supporting
                                          34

[*34] documentation provided by CI and SB/SE. Complete copies of
these Forms 11369 and supporting documentation are already
contained in the designated administrative record.

        Petitioner contends, however, that the WBO “indirectly
considered” the VDP materials. As one court has aptly observed, “it is
not entirely clear what it means to indirectly consider documents or
materials.” Amgen Inc. v. Hargan, 285 F. Supp. 3d 397, 404 (D.D.C.
2017) (treating the “indirect consideration” concept as “captur[ing]
materials that are necessary to understand the documents that the
agency directly relied upon” and denying motion to supplement the
administrative record with documents intended to test a decision by the
Food and Drug Administration for consistency with previous decisions).
The caselaw provides no general test. 24 But it does suggest some guiding
principles. One court has observed that if an agency’s final decision was
based “on the work and recommendations of subordinates, those
materials should be included as well.” Amfac Resorts, L.L.C. v. U.S.
Dep’t. of Interior, 143 F. Supp. 2d 7, 12 (D.D.C. 2001) (collecting cases),
aff’d in part, rev’d in part 282 F.3d 818 (D.C. Cir. 2002), vacated in part
sub nom. Nat’l Park Hosp. Ass’n v. Dep’t of Interior, 538 U.S. 803 (2003).
On the other hand, it is not always necessary to include in the
administrative record source information upon which agency staff relied
in making their recommendations to the agency decisionmakers if other
information in the record obviates the need to consider the source
information independently. See, e.g., James Madison Ltd. by Hecht v.
Ludwig, 82 F.3d 1085, 1095 (D.C. Cir. 1996) (affirming denial of
discovery and record supplementation with respect to source documents
that bank examiners had relied upon in making their bank-insolvency
reports to the Comptroller of the Currency, where “detailed
contemporaneous reports from the examiner-in-charge and members of
her examination team explain[ed] how and why they reached their
conclusions regarding the banks’ reserves”); Cape Hatteras Access Pres.
All., 667 F. Supp. 2d at 114 (denying motion to supplement the record
with a biological report that the National Park Service had relied upon

         24 See Daniel J. Rohlf, Avoiding the “Bare Record”: Safeguarding Meaningful

Judicial Review of Federal Agency Actions, 35 Ohio N.U. L. Rev. 575, 584 (2009)
(“[C]ourts have not set forth a general test for assessing what constitutes an agency’s
‘indirect’ consideration of documents or other information, so judges have broad
latitude to decide this issue in the context of the factual circumstances of individual
cases.”); see also Aram A. Gavoor & Steven A. Platt, Administrative Records and the
Courts, 67 U. Kan. L. Rev. 1, 33 (2018) (stating that the indirect consideration concept
“does not appear to have a principled origin. Indeed, there is no clear meaning as to
what it means for a decisionmaker to have ‘indirectly’ considered materials.”).
                                   35

[*35] in developing an interim strategy that was before the Fish and
Wildlife Service when it designated certain critical habitats, even
though the biological report was referenced by several other documents
in the administrative file).

        In Berenblatt, 160 T.C., slip op. at 19–21, this Court denied
requested discovery of certain interview documents and subpoenaed
financial records that the IRS had obtained before the whistleblower
initially provided information to the IRS in an interview. The CI special
agent who had interviewed the whistleblower referenced these
documents in his Form 11369 narrative, but they were not included in
the designated administrative record. This Court rejected an argument
that because these documents had been available to the CI special agent
when he completed the Form 11369, they had been indirectly considered
in reaching a decision on the whistleblower’s award claim. The Court
reasoned that the decisionmakers for the whistleblower’s claim were the
relevant WBO personnel and not the CI special agent who prepared the
Form 11369. Id. at 19. The Court observed: “If any potentially available
document in the IRS’s possession at the time the WBO made its decision
were discoverable, that would render the record rule all but
meaningless.” Id. at 20. The Court further stated that discovery of
items available to the CI special agent were “limited to those relevant to
[the whistleblower’s] contribution to the ongoing investigation and
generally does not extend to those created before his interview.” Id.

       In the instant case, CI received the target taxpayers’ VDP
application and forwarded it to SB/SE weeks before receiving
petitioner’s complete Form 211 package and forwarding it to a CI
analyst for consideration. It was many months later that the WBO,
upon learning that CI had ultimately declined to pursue the matter,
forwarded petitioner’s whistleblower information to SB/SE. Nothing in
the record suggests that the VDP materials were “relevant to [the
whistleblower’s] contribution to the ongoing investigation.” Id. As the
record makes clear, the only tax collections resulting from the
investigation of the target taxpayers were attributable to the taxes that
they reported on their delinquent and amended income tax returns and
not to any information that petitioner provided.

      Similarly, the references to the target taxpayers’ VDP application
as contained in SA Chatham’s ARMs do not compel the conclusion that
the VDP materials were before the WBO in making its decision. As the
ARMs make clear, this information was obtained from the Forms 11369
that CI and SB/SE forwarded to the WBO. The mere reference to the
                                    36

[*36] VDP application in these documents does not necessarily make it
part of the record. See Berenblatt, 160 T.C., slip op. at 21 n.8; Oceana,
Inc. v. Ross, 290 F. Supp. 3d 73, 79 (D.D.C. 2018) (“[T]he mere mention
of a document in the agency’s decision or the record does not always
mean, ipso facto, that the agency considered the document.” (citing
Franks v. Salazar, 751 F. Supp. 2d 62, 69 (D.D.C. 2010))). There is a
difference between an agency’s citing a document for a substantive
proposition, which may indicate that the agency actually considered the
document in making its decision, and merely referencing a document’s
existence, which is insufficient, on its own, to show consideration.
Oceana, 290 F. Supp. 3d at 80; see also Marcum v. Salazar, 751 F.
Supp. 2d 74, 80 (D.D.C. 2010) (“[R]eferences to documents in the
administrative record do not prove that that the documents were ‘before’
the deciding agency.”); WildEarth Guardians v. Salazar, 670 F. Supp.
2d 1, 6 (D.D.C. 2009) (“Although citation to a document may . . . indicate
consideration of the contents of the document, the fact that a document
is merely mentioned does not lead to the same conclusion.”); Cape
Hatteras Access Pres. All., 667 F. Supp. 2d at 114 (stating that multiple
references in the record to a biological report did “not prove that it was
before the agency when it made its decision”).

       The decisionmakers for petitioner’s award claim were STA
Chatham and his colleagues in the WBO, not the IRS field personnel
who considered the VDP request. See Berenblatt, 160 T.C., slip op. at
19; see also IRM 25.2.1.1.2(2) and (3) (Mar. 10, 2023) (“The authority to
determine and approve awards under IRC 7623 . . . is delegated to the
Director of the W[B]O . . . . The operating divisions do not have authority
to determine or approve awards under IRC 7623.”). Nothing in the
record suggests that the WBO actually considered the substantive
contents of the target taxpayers’ VDP application or of any other VDP
materials in making its decision to deny petitioner’s award claim. As
stated in SA Chatham’s supplemental ARM: “This decision to accept the
taxpayer’s VDP filing was totally outside the purview of the
Whistleblower Office and had no direct effect on the outcome of the
Whistleblower’s claim for award.” In these circumstances the references
to the target taxpayers’ VDP application in the ARMs and Forms 11369
are insufficient to overcome the presumption that the WBO properly
designated the record. See Cape Hatteras Access Pres. Alliance, 667 F.
Supp. 2d at 114.

      Petitioner suggests that discovery of the VDP materials is
necessary because respondent’s actions are not adequately explained in
the administrative record.    Petitioner posits various “mysteries”
                                   37

[*37] involving the IRS’s decision to honor the target taxpayers’ VDP
request—why the IRS accepted a VDP request that was allegedly
incomplete, disclosed the existence of a whistleblower to the target
taxpayers’ representative, and ultimately honored the VDP request
even though it was submitted after petitioner had submitted the Form
211. The relevant question in this whistleblower proceeding, however,
is not whether the IRS properly processed or honored the target
taxpayers’ VDP request—again, a question outside the purview of the
WBO—but whether the WBO abused its discretion in denying
petitioner’s award claim. That question is the crux of this case, and we
address it below in evaluating the substantive merits of this case rather
than as part of our consideration of petitioner’s discovery motion.

             b.     Extrarecord Evidence

      Alternatively, petitioner contends that respondent should be
required to produce the VDP materials as extrarecord evidence. In
support of this discovery request, petitioner points to the holding of the
U.S. Court of Appeals for the District of Columbia Circuit that
extrarecord evidence may be consulted in these three “unusual
circumstances”:

      (1) if the agency “deliberately or negligently excluded
      documents that may have been adverse to its decision,”
      (2) if background information was needed “to determine
      whether the agency considered all the relevant factors,” or
      (3) if the “agency failed to explain administrative action so
      as to frustrate judicial review” . . . .

City of Dania Beach v. FAA, 628 F.3d 581, 590 (D.C. Cir. 2010) (quoting
Am. Wildlands v. Kempthorne, 530 F.3d 991, 1002 (D.C. Cir. 2008)).

      In Berenblatt, 160 T.C., slip op. at 18, this Court observed that
the standards set forth in City of Dania Beach expressly apply to a
request to supplement the record with extrarecord evidence rather than
to a request for discovery of such evidence. Berenblatt left open the
question of “whether discovery is appropriate to uncover extra-record
evidence.” Id.

       Other courts that have addressed discovery of extrarecord
evidence have applied a standard that is slightly different from that
articulated in City of Dania Beach, although the standards are similar
and to a degree overlapping. Under this discovery standard the party
seeking discovery must make a “significant showing . . . that it will find
                                           38

[*38] material in the agency’s possession indicative of bad faith or an
incomplete record.” Air Transp. Ass’n of Am., Inc. v. Nat’l Mediation
Bd., 663 F.3d 476, 487–88 (D.C. Cir. 2011) (citing Citizens to Pres.
Overton Park, Inc. v. Volpe, 401 U.S. 402, 420 (1971)); see also Amfac
Resorts, L.L.C., 143 F. Supp. 2d at 12.

       Applying this discovery standard, we conclude that petitioner has
not made a significant showing that discovery of the VDP materials is
merited on the basis of bad faith on the part of the WBO. 25 Rather,
petitioner contends that the VDP materials fall within the second
category of permissible extrarecord evidence as articulated in City of
Dania Beach. More particularly, petitioner contends that the VDP
materials constitute background information needed to determine
whether the WBO considered all relevant factors. In support of this
argument, petitioner asserts that petitioner’s complete information had
been submitted to the IRS, and the target taxpayers had been notified
of the existence of a whistleblower, before the target taxpayers provided
documents, filed returns, and paid taxes. Discovery is not necessary,
however, to establish these undisputed facts, which are acknowledged
and addressed in the materials included in the designated
administrative record. See Lissack v. Commissioner, 68 F.4th at 1327
(rejecting need for discovery “to support an already-accepted factual
premise”).

       Moreover, construing petitioner’s argument broadly as directed to
the question of whether discovery of the VDP materials is merited as
indicative of an incomplete record, we conclude that petitioner has failed
to make the requisite significant showing in this regard. SA Chatham’s
detailed reports to the WBO address the processing of the VDP request
and thoroughly explain the basis for concluding that petitioner’s
information did not lead to the collection of proceeds from the target
taxpayers. As those reports make clear, the only tax proceeds collected
from the target taxpayers were directly attributable to their tax
reporting on their delinquent returns rather than to the VDP materials

        25 Alluding to the first and third categories of permissible extrarecord materials

as articulated in City of Dania Beach, petitioner states that “[u]ntil discovery is
complete it is difficult to determine” if the WBO has deliberately or negligently
excluded documents or attempted to frustrate judicial review. Construing this
statement broadly as directed toward the question of bad faith, we nevertheless find
that petitioner has failed to make a “strong showing of [agency] bad faith.” Dist. Hosp.
Partners, L.P., 786 F.3d at 54 (quoting James Madison Ltd. by Hecht, 82 F.3d at 1095).
Indeed, petitioner has provided, and we discern, no reason to infer bad faith by the
WBO.
                                    39

[*39] per se. And because the relevant portions of the target taxpayers’
tax returns are already included in the record, it is unclear “how judicial
review could be any more effectual” if the VDP materials were included
in the record. Cape Hatteras Access Pres. All., 667 F. Supp. 2d at 115.

      In short, petitioner has not made a significant showing of an
incomplete record so as to merit discovery of the VDP materials that SA
Chatham may have relied upon as source materials in making his
reports and representations to the WBO decisionmakers. See James
Madison Ltd. by Hecht, 82 F.3d at 1095 (affirming denial of discovery
and record supplementation with respect to source documents that bank
examiners had relied upon in making their bank-insolvency reports to
the Comptroller of the Currency, where “detailed contemporaneous
reports from the examiner-in-charge and members of her examination
team explain[ed] how and why they reached their conclusions regarding
the banks’ reserves”); see also Dist. Hosp. Partners, L.P., 786 F.3d 46
(denying supplementation of the administrative record with source data
used by agency staff in their report to the Secretary of Health and
Human Services setting Medicare reimbursement rates). As explained
in FDIC v. Bank of Am., N.A., No. 17-00036, 2020 U.S. Dist. LEXIS
85468, at *17–18 (D.D.C. Jan. 27, 2020) (denying supplementation of the
administrative record with source data underlying staff reports that
were part of the administrative record):

             The logic of District Hospital Partners and James
      Madison flows from the nature of agency decision-making.
      Agency staff across the federal government, as a matter of
      course, generate a considerable amount of work product
      every day. Agency decisionmakers then rely on some, but
      not all, of this work product in agency rulemaking and
      enforcement. As a general matter, it is far from unusual
      for an agency to rely on summaries of staff work product
      without looking at the source information upon which staff
      relied. Source information upon which staff, but not
      agency decisionmakers, rely is therefore not necessary
      “background information in order to determine whether
      the agency considered all of the relevant factors[.]” Dist.
      Hosp. Partners, 786 F.3d at 55. To supplement the record
      with such information “would render judicial review
      meaningless” by flooding courts with information that
      decisionmakers did not actually consider. Pac. Shores, 448
      F. Supp. 2d at 5.
                                   40

[*40] Such concerns are no less salient in this whistleblower case in
which, as discussed below, we must also be mindful of concerns about
unnecessary disclosure of third-party tax information—such as the VDP
materials—that might result from overly permissive discovery.

      4.     Other Document Production Requests

      Apart from making the arguments addressed above, petitioner
has not meaningfully explained which of respondent’s specific discovery
responses petitioner believes to be inadequate or why. Petitioner’s
Motion to Compel Production of Documents and supporting papers do,
however, make at least passing references to some particular discovery
requests, which we address below.

       Petitioner’s document production request numbered 9 seeks
“[c]opies of any settlement agreement and/or closing agreements entered
between the respondent and the Non-Compliant Taxpayer for each of
the tax years [2007–16].” The designated administrative record
indicates that for the years that are the subject of petitioner’s award
claim and the WBO’s determination the examining agent accepted the
target taxpayers’ Forms 1040 and 1040X as filed. Respondent asserts,
and we agree, that the record does not suggest the existence of any other
settlement agreement or closing agreement for these years. For reasons
already discussed, insofar as petitioner’s document production request
seeks materials relating to other taxpayers or other years, it is overly
broad and unduly burdensome.

       Petitioner’s document production request numbered 28 seeks
copies of documents relating to any “Foreign Bank and Financial
Accounts (‘FBAR’) penalties and/or any other fines, penalties or
forfeitures [that] were assessed against and collected from the Non-
Compliant Taxpayers for the tax years identified in the Form 211
through and including [December 31, 2016].” Petitioner suggests that
this discovery request directly relates to the amount of collected
proceeds under section 7623(b)(1). The designated administrative
record contains IRS transcripts and Forms 4549 and 4549–A for the
target taxpayers, all indicating that the only penalties assessed against
them for the relevant years were accuracy-related penalties assessed
against taxpayer 1 under section 6662. For reasons already discussed,
insofar as this discovery request relates to other taxpayers or years, it
is overly broad and unduly burdensome.
                                         41

[*41] We also agree with respondent that petitioner’s requested
discovery is overly broad and unduly burdensome as relates to document
production request numbered 34, seeking “[a]ny and all documents
showing all of the Respondent’s internal projects, including updates to
the Internal Revenue Manual (IRM), treasury regulations, and Notices
to IRS examination agents that were started or begun after the
submission of Petitioner’s Form 211 Claim,” and document production
request numbered 35, seeking “Copies of all administrative files along
with all documentation, emails, memorandums, etc., associated with the
Respondent’s projects identified in response to the preceding request.”
These materials do not fall within any category listed in Treasury
Regulation § 301.7623-3(e), and petitioner has not demonstrated they
would be indicative of bad faith on the IRS’s part, that they were
actually considered by the WBO, directly or indirectly, in connection
with this case, or, more generally, that they are relevant for deciding
any issue in this case.

      Respondent asserts, and petitioner has not expressly disputed,
that certain of the documents petitioner has requested (in document
production requests numbered 1, 2, 14, 15, 18, 19, and 21) do not exist.
We cannot compel discovery of nonexistent documents. See Berenblatt,
160 T.C., slip op. at 23.

      5.      Section 6103 Privacy Protections

       Most of the documents that petitioner seeks to discover constitute
third-party tax return information. Section 6103(a) provides that tax
returns and return information generally must be kept confidential
unless disclosure is specifically authorized by the Code. Section
6103(h)(4) authorizes disclosure in certain circumstances involving a
judicial or administrative proceeding. 26 The parties disagree as to

      26 Section 6103(h)(4) provides:

      A return or return information may be disclosed in a Federal or State
      judicial or administrative proceeding pertaining to tax administration,
      but only—
                        (A) if the taxpayer is a party to the proceeding, or the
               proceeding arose out of, or in connection with, determining the
               taxpayer’s civil or criminal liability, or the collection of such
               civil liability, in respect of any tax imposed under this title;
                        (B) if the treatment of an item reflected on such return
               is directly related to the resolution of an issue in the
               proceeding; [or]
                        (C) if such return or return information directly relates
               to a transactional relationship between a person who is a party
                                      42

[*42] whether section 6103(h)(4) authorizes disclosure of the various
documents that petitioner seeks to discover.

      This Court has held that section 6103(h)(4)(A) permits disclosure
of returns and return information that the WBO includes in the
administrative record supporting its award determination.
Whistleblower 972-17W, 159 T.C. at 22. The Court stated:

      [T]he information available in a whistleblower case
      generally will be limited to the administrative record the
      WBO develops or a properly supplemented record, because
      that is the record that is subject to the Court’s review.
      Nothing in section 6103(h)(4)(A) or our holding gives
      whistleblowers license to seek returns or return
      information that the WBO did not collect as part of its
      administrative process. That such documents might exist
      in the hands of the IRS generally or in the files of an
      examination team that audited a target taxpayer does not
      (without more) make those documents part of the
      administrative record . . . .

Id. at 23 (citations omitted).

       Accordingly, absent a showing that the documents petitioner
seeks to discover are part of a properly supplemented administrative
record, it is unnecessary to opine on the hypothetical application of the
disclosure authorizations of section 6103(h)(4) to petitioner’s requested
discovery.

      6.     Conclusion About Motion to Compel Production of
             Documents

       In conclusion, petitioner has failed to overcome the presumption
that the WBO has properly compiled the administrative record.
Petitioner has not made a significant showing that respondent exercised
bad faith in compiling it, nor has petitioner made a significant showing
that it omits material that the WBO actually considered, directly or
indirectly, or material that otherwise falls under a category listed in
Treasury Regulation § 301.7623-3(e). Furthermore, petitioner has not
demonstrated the applicability of any of the narrow exceptions to the

             to the proceeding and the taxpayer which directly affects the
             resolution of an issue in the proceeding . . . .
                                   43

[*43] record rule that would permit extrarecord evidence to be consulted
in this case. Consequently, we will deny petitioner’s Motion to Compel
Production of Documents.

E.    Evidentiary Objections

       Petitioner contends that the Chatham declaration, which
respondent submitted in support of his second Motion for Summary
Judgment, fails to properly authenticate the exhibits appended to it and
fails to lay the necessary evidentiary foundation. We disagree. The
exhibits in question are properly authenticated by the sworn declaration
of STA Chatham, made on personal knowledge, as constituting “the
complete administrative record.” In accordance with Rule 121(c)(4), the
declaration shows affirmatively that STA Chatham was the WBO
analyst who processed and managed petitioner’s whistleblower claim for
the WBO’s initial denial determination and subsequently upon remand
from this Court. This declaration complies with Rule 121(c)(4) as a
proper declaration to support a motion for summary judgment. See
Levin v. Commissioner, T.C. Memo. 2018-172, at *28–30, aff’d, 804 F.
App’x 833 (9th Cir. 2020).

       We also reject petitioner’s objection that “a good majority” of the
exhibits constitute hearsay. Respondent has submitted all these
documents in support of his Motion for Summary Judgment, not to prove
the truth of their contents but to show what documents STA Chatham
relied on in deciding to deny petitioner’s whistleblower claim.
Accordingly, we overrule the hearsay objection. See id.; see also Marino
v. Commissioner, T.C. Memo. 2021-130, at *21 (holding that this Court
reviews the administrative record in a whistleblower case “without
regard to whether it might include evidence that would be inadmissible
as hearsay in a trial de novo”); Whistleblower 23711-15W v.
Commissioner, T.C. Memo. 2018-34, at *18 n.9 (overruling hearsay
objection with respect to contents of a Form 11369 attached to a
declaration in support of a motion for summary judgment in a
whistleblower case).

F.    Cross-Motions for Summary Judgment

      1.     Summary Judgment Standard

      Both parties have moved for summary judgment under Rule 121.
Ordinarily, under Rule 121(a)(2) the Court may grant summary
judgment when there is no genuine dispute as to any material fact and
a decision may be rendered as a matter of law. Sundstrand Corp. v.
                                    44

[*44] Commissioner, 98 T.C. 518, 520 (1992), aff’d, 17 F.3d 965 (7th Cir.
1994). However, this summary judgment standard is “not generally apt
where we must confine ourselves to the administrative record to decide
whether there has been an abuse of discretion.” Van Bemmelen, 155
T.C. at 78; see Rule 121(j). In a case such as this involving review of the
WBO’s adverse determination of a whistleblower’s claim to an award,
“summary judgment serves as a mechanism for deciding, as a matter of
law, whether the agency action is supported by the administrative
record and is not arbitrary, capricious, an abuse of discretion, or
otherwise not in accordance with law.” Van Bemmelen, 155 T.C. at 79.

      2.     Analysis

       Section 7623(a) authorizes the payment of sums necessary for
“detecting underpayments of tax” or “detecting and bringing to trial and
punishment persons guilty of violating the internal revenue laws or
conniving at the same.” Subsection (b)(1) provides for awards of at least
15% and not more than 30% of the collected proceeds if all stated
requirements are met. Under section 7623(b)(1), an award can be paid
only if the IRS “proceeds with an[] administrative or judicial action . . .
based on information brought to the Secretary’s attention.” The
whistleblower is entitled to an award only if the IRS collects money “as
a result of the action.” I.R.C. § 7623(b)(1).

       The WBO’s initial determination denied petitioner’s award claim
on the ground that petitioner’s information “did not substantially
contribute to the actions taken by the IRS.” This Court previously
remanded this case to the WBO for further investigation or explanation
of three questions: (1) whether petitioner’s information caused the
target taxpayers’ entry into the VDP, either directly or indirectly,
(2) whether the existence of a whistleblower or the whistleblower’s
information was disclosed to the target taxpayers, and (3) whether
petitioner’s information was used in the examination of the target
taxpayers’ voluntary disclosure.

       In response to these directives, the WBO concluded in its
supplemental determination that (1) the whistleblower’s information
did not cause the target taxpayers’ entry into the VDP, directly or
indirectly; (2) the existence of a whistleblower, but not the
whistleblower’s information, was disclosed to the taxpayer and his
representatives in 2012; and (3) although the whistleblower’s
information was reviewed and used during the examination of the target
taxpayers’ VDP filing, no examination adjustments, assessments, or
                                    45

[*45] proceeds resulted from the examiner’s use of the whistleblower’s
information but rather all examination assessments and proceeds
collected resulted from the VDP information, including taxpayer 1’s
delinquent and amended tax returns. STA Chatham’s supplemental
ARM, attached to the supplemental determination, explains in detail
the basis for these conclusions.

       Challenging these conclusions, petitioner argues that the target
taxpayers’ VDP request was untimely because the IRS received it after
petitioner had already submitted Form 211 to the WBO. Petitioner also
suggests that the VDP request might have been incomplete or
untruthful, and consequently that it constituted an abuse of discretion
for the WBO to deny petitioner’s award claim on the basis of VDP
documents that are absent from the administrative record. As STA
Chatham indicated in his supplemental ARM, however, decisions made
by IRS field personnel to accept the target taxpayers’ VDP request were
outside the WBO’s purview and cannot be used as the basis of an award
to petitioner. The issue before us in this whistleblower proceeding is not
whether the IRS properly granted the target taxpayers’ VDP request but
rather whether the WBO abused its discretion in denying petitioner’s
award claim. Even if the VDP request was untimely or defective in some
other manner, the administrative record shows that the IRS did in fact
grant the VDP request and that the target taxpayers subsequently filed
delinquent and amended tax returns and paid the tax liabilities reported
therein. STA Chatham did not abuse his discretion in making his
determinations in this regard.

        Similarly, STA Chatham did not abuse his discretion in
determining that petitioner’s award claim did not directly or indirectly
cause the target taxpayers to file their VDP request. The administrative
record confirms this sequence of events: (1) in December 2010 petitioner
submitted Form 211 to the WBO; (2) in January 2011 CI’s Dallas, Texas,
field office received the target taxpayers’ VDP request; (3) in March 2011
the WBO forwarded petitioner’s Form 211 (without supporting
documents) to CI’s Philadelphia Lead Development Center; 27 and (4) in
June 2011 CI’s Philadelphia Lead Development Center referred
petitioner’s award claim information to a CI analyst for consideration.
As STA Chatham observed in his supplemental ARM, this sequence of
events “provides virtually no chance” that the target taxpayers found
out about petitioner’s award claim before submitting their VDP

      27 The WBO did not forward the complete Form 211, including supporting

documents, to CI until July 2011.
                                   46

[*46] application to CI; “[t]he only way” petitioner’s award claim could
have caused the target taxpayers to file their VDP request would have
been for them to learn about petitioner’s claim from some source other
than the IRS. STA Chatham further observed: “However, knowledge of
any such incident is not available to the IRS, and there is no trace of
information connected to this claim case that suggests that it did occur.”
These conclusions are logical, reasonable, and consistent with the
administrative record.

       As petitioner points out, the IRS did not receive the target
taxpayers’ first round of delinquent returns until March 2013, over two
years after they submitted their VDP request. In the interim the WBO
had referred petitioner’s whistleblower information to SB/SE after CI
had declined to examine the case. The administrative record indicates
that RA Martin in SB/SE used petitioner’s whistleblower information to
issue IDRs and summonses but ultimately was unable to verify
petitioner’s information. STA Chatham did not abuse his discretion in
concluding, on the basis of his communications with RA Martin and his
review of the administrative record, that petitioner’s whistleblower
information could not be credited with any adjustments or collected
proceeds, which instead were based on the target taxpayers’ delinquent
and amended returns. That conclusion is further buttressed by the lack
of any discernible correlation between the types and amounts of
unreported income as alleged in petitioner’s Form 211 and as reported
in the target taxpayers’ delinquent and amended returns.

       It is undisputed that the IRS made missteps in the summer of
2012 when it revealed to the target taxpayers’ representative, in
communications about the target taxpayers’ eligibility for the VDP
program, the existence (but not the identity) of a whistleblower.
Petitioner asserts that this improper disclosure constituted an
“administrative action” based upon petitioner’s whistleblower
information and that this disclosure induced the target taxpayers to
subsequently file their delinquent and amended tax returns. Petitioner
suggests that the target taxpayers’ tax liabilities would not have been
reported and paid but for the IRS’s disclosure of the existence of a
whistleblower.

       Upon remand, STA Chatham further investigated the timing and
circumstances of the improper disclosure of the existence of a
whistleblower. He concluded that the improper disclosure “cannot be
reasonably presumed to have motivated” the target taxpayers to file
their delinquent tax returns for several reasons: the target taxpayers’
                                    47

[*47] request to enter the VDP program was made in 2011, well before
the improper disclosure occurred in 2012; the target taxpayers’ entry
into the VDP program obligated them to file delinquent returns and pay
taxes due; that obligation was reinforced by the IRS’s referral of the
target taxpayers for civil audit in SB/SE in February 2012, before the
improper disclosure occurred; and according to representations by the
target taxpayers’ representative, as described in RA Martin’s Form
11369 and in his communications with STA Chatham on remand, the
target taxpayers’ entry into the VDP program was precipitated by a
letter that taxpayer 2 had received (again, well before the improper
disclosure) from the IRS regarding unfiled returns. STA Chatham’s
determinations in this regard are reasonable, logical, and fully
supported by the administrative record. Any suggestion that the IRS
would not have collected the taxes reported on the target taxpayers’
delinquent and amended returns but for the disclosure of the existence
of a whistleblower is entirely speculative and is insufficient as the basis
for a mandatory award under section 7623(b)(1). Cf. Lissack v.
Commissioner, 68 F.4th at 1322 (rejecting “but for” causation as the
basis for a mandatory award under section 7623(b)(1) and the applicable
regulations).

G.    Conclusion

       We conclude and hold that the WBO did not act arbitrarily,
capriciously, with abuse of discretion, or otherwise not in accordance
with law in denying petitioner’s claim for an award. Accordingly, we
will grant respondent’s Motion for Summary Judgment and deny
petitioner’s Cross-Motion for Summary Judgment.

      An appropriate order and decision will be entered.