Court Opinion

ID: 9948111
Source: CourtListenerOpinion
Date Created: 2024-03-06 16:01:49.346095+00
Date Added: 2024-06-11T14:29:07.613232
License: Public Domain

United States Court of Appeals
                            FOR THE DISTRICT OF COLUMBIA CIRCUIT
                                     ____________
No. 23-1149                                                September Term, 2023
                                                                         USTC-714-20W
                                                      Filed On: March 6, 2024

Felix Luu,

             Appellant

      v.

Commissioner of Internal Revenue,

             Appellee

               ON APPEAL FROM THE UNITED STATES TAX COURT

      BEFORE:       Henderson, Millett, and Walker, Circuit judges

                                    JUDGMENT

       This appeal was considered on the record from the United States Tax Court and
on the briefs filed by the parties. See Fed. R. App. P. 34(a)(2); D.C. Cir. Rule 34(j).
Upon consideration of the foregoing and appellant’s motion to supplement the
appendix, it is

       ORDERED that the motion to supplement the appendix be granted. The Clerk is
directed to file the lodged supplement and the lodged sealed supplement. It is

       FURTHER ORDERED AND ADJUDGED that the Tax Court’s January 6, 2023
decision granting summary judgment in favor of the Internal Revenue Service (“IRS”) be
affirmed. Appellant was issued a whistleblower award in connection with information
that he provided to the IRS concerning his family’s businesses and their shareholders,
which included appellant and his siblings. Appellant challenged the award in Tax Court,
arguing that his whistleblower award was an abuse of discretion because the audits
conducted by the IRS during its investigation of his whistleblower information contained
errors and were otherwise insufficient. Appellant therefore argued that the IRS should
have collected more proceeds as a result of the information he disclosed. Appellant
also argued that the IRS violated the Internal Revenue Manual (“IRM”) during the
course of its investigation, and that there was insufficient evidence to support the IRS’s
application of two negative factors that ultimately reduced his whistleblower award.
                 United States Court of Appeals
                             FOR THE DISTRICT OF COLUMBIA CIRCUIT
                                       ____________
No. 23-1149                                                 September Term, 2023

      The court reviews de novo the Tax Court’s decision to grant summary judgment.
See Byers v. Comm’r of Internal Revenue, 740 F.3d 668, 675 (D.C. Cir. 2014). The
Tax Court in this case reviewed appellant’s whistleblower award to determine whether it
was arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with
law. Appellant does not argue that the Tax Court should have applied a different
standard of review, and he has therefore forfeited any challenge to that aspect of the
Tax Court’s decision. See United States ex rel. Totten v. Bombardier Corp., 380 F.3d
488, 497 (D.C. Cir. 2004). The court therefore assumes without deciding that the Tax
Court applied the correct standard of review.

       Here, the Tax Court did not err by rejecting appellant’s argument that his
whistleblower award was an abuse of discretion because the IRS should have collected
more proceeds based on the information he provided. By statute, a whistleblower
award consists of a percentage of the proceeds actually collected by the IRS as a result
of an administrative or judicial action based on the whistleblower’s information. See 26
U.S.C. § 7623(b)(1). The Tax Court does not have the authority to require the IRS to
take further actions to collect more proceeds. See Cohen v. Comm’r of Internal
Revenue, 550 F. App’x 10, 11 (D.C. Cir. 2014) (per curiam); Simmons v. Comm’r of
Internal Revenue, 523 F. App’x 728, 730 (D.C. Cir. 2013) (per curiam).

       In addition, the Tax Court did not err by rejecting appellant’s argument
concerning the IRM. “[I]t is well-settled . . . that the provisions of the [IRM] are directory
rather than mandatory, are not codified regulations, and clearly do not have the force
and effect of law.” Marks v. Comm’r of Internal Revenue, 947 F.2d 983, 986 n.1 (D.C.
Cir. 1991) (en banc) (per curiam).

        Lastly, the Tax Court did not err by concluding that there was sufficient evidence
in the record to support the IRS’s application of the two negative factors that reduced
appellant’s whistleblower award. The IRS applied the negative factors based in part on
its conclusion that, given his role within his family’s businesses, appellant most likely
was aware of the fraudulent activities at issue and participated in the associated
accumulation of cash. Appellant does not address whether that conclusion is
supported by sufficient evidence. He instead argues that statements by his siblings
implicating him in the fraudulent activities at issue are unreliable because his siblings
are not credible. However, appellant has not shown that the IRS relied on those
statements in deciding to reduce his whistleblower award. In any event, statements
that appellant was aware of the fraudulent activities are consistent with the inferences
drawn by the IRS based on appellant’s role in his family’s businesses.

                                           Page 2
                 United States Court of Appeals
                            FOR THE DISTRICT OF COLUMBIA CIRCUIT
                                     ____________
No. 23-1149                                                September Term, 2023

        Pursuant to D.C. Circuit Rule 36, this disposition will not be published. The Clerk
is directed to withhold issuance of the mandate herein until seven days after resolution
of any timely petition for rehearing or petition for rehearing en banc. See Fed. R. App.
P. 41(b); D.C. Cir. Rule 41.

                                       Per Curiam

                                          Page 3