Court Opinion

ID: 9782656
Source: CourtListenerOpinion
Date Created: 2023-08-30 19:02:45.042961+00
Date Added: 2024-06-11T12:26:56.522532
License: Public Domain

United States Tax Court

                             T.C. Memo. 2023-112

                          ANDREW BILL KATAKIS,
                               Petitioner

                                         v.

              COMMISSIONER OF INTERNAL REVENUE,
                          Respondent

                                    —————

Docket No. 11725-20W.                                     Filed August 30, 2023.

                                    —————

Andrew Bill Katakis, 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” on the basis of 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. On February 25, 2020, petitioner filed with the WBO

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

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

                                Served 08/30/23
                                     2

[*2] Form 211, Application for Award for Original Information. Peti-
tioner allegedly gathered the information underlying his claims from
documents and testimony that emerged during civil litigation involving
14 different taxpayers (Targets).

      Petitioner alleged that Targets had engaged in money laundering
through real estate transactions. He included a spreadsheet listing hun-
dreds of such transactions, showing for each the buyer, the seller, the
sale price, the property address, the transaction date, etc. For some
transactions he appended “WB Comments,” e.g., “Where did the down
payment come from and who is making the loan payments and what is
the current loan balance[?]” He did not allege any specific violation of
any Federal tax law.

      On June 12, 2020, the WBO acknowledged receipt of petitioner’s
claims and sent them to a “classifier” in the Small Business/Self-Em-
ployed Operating Division. The role of a classifier is to “determine
whether the information should be forwarded for further review. Those
claims not forwarded for further review can be rejected or denied based
on [the classifier’s] rationale for not forwarding the claim.” Internal
Revenue Manual 25.2.1.3.1(1) (May 28, 2020) (explaining the “roles and
responsibility of classification”).

       In an Award Recommendation Memorandum dated August 15,
2020, the classifier recommended that petitioner’s claims be rejected.
The classifier noted that petitioner had not supplied any financial rec-
ords or source documents “that would allow the Service to determine
amounts, tax years, where business income was allocated. . . , [or the]
nature or validity of the allegation.” Finding that petitioner had pro-
vided “[n]o specific and credible information about a Federal tax issue
or non-compliance,” the classifier recommended “[r]ejecting [the]
claim[s] for failing to include . . . information to support a potential tax
violation/allegation, as well as documentation to support the claim[s].”

       The WBO agreed with this recommendation, and petitioner’s
claims were not forwarded to any IRS examination team for further re-
view. On August 19, 2020, the WBO issued petitioner a Final Decision
letter rejecting his claims. This letter explained that the claims “ha[d]
been rejected because the IRS decided not to pursue the information you
provided.”

       Petitioner timely petitioned this Court for review of the WBO’s
decision. On March 24, 2023, respondent filed the Motion to Dismiss for
                                    3

[*3] Lack of Jurisdiction. We directed petitioner to file a response to the
Motion, if he disagreed with it, by August 22, 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, 22
F.4th at 1017. As the court explained, “an award determination by the
IRS [under section 7623(b)] arises only when the IRS ‘proceeds with any
administrative or judicial action described in subsection (a) based on in-
formation brought to the Secretary’s attention by [the whistleblower].’”
                                    4

[*4] Id. (quoting § 7623(b)(1)). Because “[t]here was no proceeding . . . ,
the Tax Court had no jurisdiction to review the WBO’s threshold rejec-
tion of [the claimant’s] Form 211.” Ibid.

       This case is on all fours with Li. An IRS classifier recommended
that petitioner’s claims be rejected “for failing to include specific and
credible information to support a potential tax violation/allegation.” Ac-
cepting the classifier’s recommendations, the WBO decided not to for-
ward the information to an IRS examination team, and no action was
taken against Targets on the basis of information that petitioner sup-
plied. Because the IRS did not “proceed[] with any administrative or
judicial action,” the D.C. Circuit’s decision in Li dictates that we grant
respondent’s Motion to Dismiss for Lack of Jurisdiction.

      To implement the foregoing,

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