Court Opinion

ID: 9404330
Source: CourtListenerOpinion
Date Created: 2023-06-22 19:03:01.694273+00
Date Added: 2024-06-11T17:20:13.191548
License: Public Domain

United States Tax Court

                              T.C. Memo. 2023-79

                        JOSHUA ELIAS RAFFAELLI,
                               Petitioner

                                         v.

              COMMISSIONER OF INTERNAL REVENUE,
                          Respondent

                                    —————

Docket No. 11004-20W.                                       Filed June 22, 2023.

                                    —————

Joshua Elias Raffaelli, pro se.

Brandon M. Chavez, Michael Skeen, and Lesley A. Hale, for respondent.

                         MEMORANDUM OPINION

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

                                   Background

       The following facts are derived from the parties’ pleadings and
respondent’s Motion, including the Exhibits attached thereto. These Ex-
hibits include the relevant portions of the administrative record under-
lying this case. In April 2020 petitioner filed with the WBO Form 211,

       1 Unless otherwise indicated, statutory references are to the Internal Revenue

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

                                Served 06/22/23
                                   2

[*2] Application for Award for Original Information. This claim relates
to an alleged gift of $350,000 from a taxpayer (Target) to her daughter
to enable the latter to purchase a home. Petitioner alleges that Target
failed to report the supposed gift to the IRS. Petitioner represents that
he gathered this information from documents and testimony that
emerged during his civil litigation against Target’s daughter.

        In November 2019 the WBO acknowledged receipt of petitioner’s
claim and sent it to a “classifier” in the Estate and Gift Tax Operating
Division. The role of a classifier is to “determine whether the infor-
mation should be forwarded for further review. Those claims not for-
warded for further review can be rejected or denied based on [the classi-
fier’s] rationale for not forwarding the claim.” Internal Revenue Manual
25.2.1.3.1(1) (May 28, 2020) (explaining the “roles and responsibility of
classification”).

       The classifier recommended that petitioner’s claim be rejected.
This recommendation was set forth in an Award Recommendation Mem-
orandum completed in May 2020. Acknowledging that Target did not
file a gift tax return reporting a $350,000 gift, the classifier recom-
mended that petitioner’s claim be rejected because his “allegations do
not describe amount[s] owed by [Target] . . . greater than or equal to
$2,000,000.” See § 7623(b)(5)(B) (authorizing nondiscretionary awards
only “if the proceeds in dispute exceed $2,000,000”).

       The classifier also recommended rejection because “[n]o credible
information has been provided to support that a gift was made by [Tar-
get].” As the classifier explained:

      A review of the Form 211 indicated that what mostly likely
      transpired was that [Target] made a loan to her daughter
      so that she could make a down payment on the home. The
      Form 211 documents and [petitioner’s] own assertions in-
      dicate that there was a great probability that [Target] had
      loaned, not gifted, the $350,000 amount to her daughter.
      There were no documents provided such as bank state-
      ments or a gift letter that would evidence a gift had been
      made . . . .

       The classifier recommended that the claim be rejected as “based
solely on [petitioner’s] speculation and conjecture.” The WBO agreed
with this recommendation, and petitioner’s claim was not forwarded to
any IRS examination team for further review. On June 8, 2020, the
                                    3

[*3] WBO issued petitioner a Final Decision letter rejecting his claim.
This letter explained that the claim “ha[d] been rejected because the IRS
decided not to pursue the information [petitioner] provided.”

       Petitioner timely sought review of the IRS’s decision. On March
28, 2023, respondent filed a Motion to Dismiss for Lack of Jurisdiction.
We directed petitioner to respond to the Motion by April 27, 2023. He
filed no response by that date or subsequently.

                               Discussion

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

       Section 7623(b)(4) defines our jurisdiction in whistleblower award
cases. Shands v. Commissioner, No. 13499-16W, 160 T.C., slip op. at 7
(Mar. 8, 2023). It provides that “[a]ny determination regarding an
award under paragraph (1), (2), or (3) [of subsection (b)] may, within 30
days of such determination, be appealed to the Tax Court (and the Tax
Court shall have jurisdiction with respect to such matter).” By its terms,
the statute gives us jurisdiction only over “determination[s]” made un-
der section 7623(b), which authorizes the IRS to make nondiscretionary
awards.

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

      The D.C. Circuit held that the Tax Court lacked jurisdiction in
these circumstances because the IRS had made no “award determina-
tion” within the meaning of section 7623(b). Li v. Commissioner,
                                     4

[*4] 22 F.4th at 1017. As the court explained, “an award determination
by the IRS [under section 7623(b)] arises only when the IRS ‘proceeds
with any administrative or judicial action described in subsection (a)
based on information brought to the Secretary’s attention by [the whis-
tleblower].’” Id. (quoting § 7623(b)(1)). Because “[t]here was no proceed-
ing . . . , the Tax Court had no jurisdiction to review the WBO’s threshold
rejection of [the claimant’s] Form 211.” Ibid.

       This case is on all fours with Li. An IRS classifier recommended
that petitioner’s claim be rejected because “[n]o credible information
[was] provided to support that a gift was made.” In any event, peti-
tioner’s allegations did not “describe amount[s] owed by [Target] . . .
greater than or equal to $2,000,000,” the threshold that must be met in
order for petitioner to qualify for a mandatory award.                   See
§ 7623(b)(5)(B). Accepting the classifier’s recommendations, the WBO
decided not to forward the information to an IRS examination team, and
no action was taken against Target on the basis of information that pe-
titioner supplied. Because the IRS did not “proceed[] with any adminis-
trative or judicial action,” the D.C. Circuit’s decision in Li dictates that
we grant respondent’s Motion to Dismiss for Lack of Jurisdiction.

      To implement the foregoing,

      An order of dismissal for lack of jurisdiction will be entered.