DC Circuit Issues Awaited Whistleblower Opinion in Lissack v Commissioner

Lissack v Commissioner is an important DC Circuit whistleblower opinion that clarifies the extent to which Whistleblower Office (WBO) decisions are subject to court review. Lissack also upholds under Chevron review the regulations’ approach to limiting awards to situations when the information provided is substantively connected to an eventual adjustment, even if the IRS would not have examined the taxpayer but for the informant identifying the targeted taxpayer.


In Lissack, which a guest post prior to this opinion discussed here, a whistleblower submitted information to the WBO about a condominium development group that allegedly evaded taxes due to its treatment of golf club membership deposits. The WBO investigated and found the claim credible, but the IRS found that the condo group’s income tax treatment of the deposits was correct. In examining the group, the IRS did discover an unrelated issue: it had taken an erroneous $60 million intercompany bad debt deduction.

About eight years after Lissack submitted his application for award, the WBO denied his claim, stating that the information that he submitted about the tax treatment of the deposits was not relevant for the bad debt deduction. While there was no dispute that the IRS’s investigation into the taxpayer was attributable to Lissack’s application to the WBO, the information was substantively unrelated to the IRS’s eventual bad debt adjustment and ultimate tax collection.

The Tax Court granted summary judgment to the IRS, holding that even though the IRS “did initiate an action” based on Lissack’s information he was ineligible for an award because “the IRS did not collect any proceeds as a result of…” an action or related action, as those terms are defined in the 7623 regs.

On appeal the government argued that the Tax Court did not have jurisdiction to review the IRS’s award denial. On appeal, the government also defended the validity of regulations that effectively denied awards when an informant’s information about an identified taxpayer is substantively unconnected to the issue that the IRS finds to be improper.

In Lissack, the DC Circuit Court of Appeals held that (1) the Tax Court had jurisdiction to consider the IRS’s denial of a whistleblower claim, (2) regulations under Section 7623 are valid under the still (for now) relevant Chevron two-step framework and (3) under those regulations it was proper for the IRS to deny Lissack any award.

The Tax Court Had Properly Exercised Jurisdiction

The government’s threshold argument was that its decision to deny the claim was unreviewable. In arguing that the WBO’s decision was not subject to review, the government relied on Li v Commissioner, where, as Keith discussed here, the DC Circuit held that a rejection of an application for a mandatory award on  Form 211 was not a reviewable award determination.

In Li, the DC Circuit held that a “threshold rejection of a Form 211 by nature means the IRS is not proceeding with an action against the target taxpayer,” and that “[t]herefore, there is no award determination, negative or otherwise, and no jurisdiction for the Tax Court.” 

Distinguishing Li, the DC Circuit in Lissack held that even though no award was given there was in fact a determination that triggered court review:

The fact that the IRS conducted an examination here suffices to distinguish Lissack’s case from Li.  Li never claimed that the IRS proceeded with any administrative or judicial action against the target taxpayer based on her submission…Here, by contrast, there is no dispute that the Whistleblower Office referred Lissack’s submission to the IRS, and an IRS revenue agent initiated an examination of the membership-deposits issue that Lissack identified.  That referral and examination count as the IRS “proceed[ing] with” an “administrative action” that was “based on” the information Lissack brought to the Secretary’s attention.  I.R.C. § 7623(b)(1).  And the “determination regarding an award” was the Whistleblower Office letter to Lissack informing him that the examination it initiated based on the information he provided did not result in the collection of any proceeds, so he was not entitled to an award.  

In arguing that Li applied to this case, the government was effectively arguing that judicial review of a WBO action was predicated on its finding that a whistleblower had made a meritorious claim. In Lissack the DC Circuit has limited the reach of Li, and while under Li judicial review requires that the IRS proceed with a claim there is no jurisdictional requirement that the IRS have “collected proceeds” based on the whistleblower’s information.

The DC Circuit Upholds the Regs

After finding against the government on the question of reviewability, on the merits, the DC Circuit looked to the regulatory requirements. Lissack argued essentially that under the plain language of the statute he was entitled to an award because but for the information he supplied the IRS would not have proceeded with an examination against the condo group.

The opinion frames the challenge, starting with the relevant statutory hook:

He challenges the regulatory provisions that control the IRS’s determinations whether any proceeds were “collected as a result of” an IRS “administrative action” to which a whistleblower “substantially contributed.”  I.R.C. § 7623(b)(1). 

First, he challenges the provision of the Rule defining an “administrative action” that the IRS treats as “based on” a whistleblower submission under subsection (b)(1) to be “all or a portion of” a proceeding that may yield collected proceeds.  26 C.F.R. § 301.7623-2(a)(2). 

Second, he challenges an example (Example Two) that illustrates how, when the IRS discovers “additional facts that are unrelated to the activities described in the information provided by the whistleblower” and accordingly expands the scope of the examination, the investigation into those unrelated facts “are not actions with which the IRS proceeds based on the information provided by the whistleblower.”  26 C.F.R. § 301.7623-2(b)(2) (Example 2).  

The parties both agreed that Chevron applied, and identified two key Step 1 questions:

First, whether the tax whistleblower statute requires the IRS to consider the “whole action”—in this case, all its examination activity—regarding one taxpayer as a single administrative action….

[Second,] whether the statute mandates an award whenever the whistleblower’s information was the but-for cause to initiate an investigation of the taxpayer, even if the ultimate basis for the IRS’s collection of proceeds found no factual support in the information the whistleblower provided.

The opinion finds under Chevron Step 1 that the statute does not require the IRS to consider the whole action nor mandate a but for causation approach to determining whether there is a collection of proceeds.

In the absence of the statute speaking directly to those issues, the DC Circuit finds that the regulatory approach was reasonable:

The ordinary meaning of “administrative action”—activities by executive agencies— may in this context sensibly be limited to action on the discrete tax issue or issues the whistleblower’s information identifies.

Further buttressing its Step 2 conclusion, the opinion discounts Lissack’s policy-based argument that he “provided ‘valuable information’ by informing the IRS that the development group taxpayers ‘are the type of taxpayers to misstate their tax liability generally, and debt in particular’”:

[T]here is ample reason to doubt that Congress meant to entitle whistleblowers to substantial awards just for raising plausible but meritless concerns about taxpayers who, on investigation by the IRS, turn out to be noncompliant in some other, unrelated way.  Such a regime likely would encourage whistleblowers to flyspeck major taxpayers, identifying any plausible underpayment in the hope of triggering an examination yielding some other, major adjustment.  The IRS approach, in contrast, calibrates mandatory awards to the fruits of the particular IRS actions that the whistleblower’s information substantially assists.


While the opinion on the merits is a victory for the government, the threshold jurisdictional question is a victory for the whistleblower bar.

The opinion is also significant for what it declined to consider, including whether the Tax Court must conduct a trial de novo on an appeal of a WBO determination and the standard of review that applies to a challenge to the scope of the record the IRS submitted to the Tax Court.

In declining to entertain those issues, the DC Circuit noted that Lissack failed to request that the Tax Court “expand the administrative record or create a new one”, issues that spin off the Administrative Procedure Act and the Kasper decision that I discussed a few years ago here and more recently here.  

While noting that Lissack effectively waived these issues by failing to act below, the DC Circuit acknowledged (as has the Tax Court) that some whistleblower cases will warrant discovery and exceptions to the record rule. By failing to see how the exceptions or the need for new evidence might have benefitted Lissack, the DC Circuit was able to sidestep those issues.

While those issues await another case, the proposed Whistleblower Program Improvement Act that Senators Grassley, Wyden, Wicker, and Cardin introduced earlier this year  would provide for a de novo standard of review and “allow for new evidence to be admitted to the record based on the administrative record established at the time of the original determination and any additional newly discovered or previously unavailable evidence.”  Readers of PT know that the “newly discovered” or “previously unavailable” framework are also part of the Taxpayer First Act amendments to innocent spouse cases. Let’s hope that if legislation progresses, Congressional staff take a hard look at this standard, and consider how those terms are far from self-defining.

How the D.C. Circuit’s Upcoming Decision in Lissack Could Begin to Undo the IRS’s Nullifications of the Whistleblower Program

We welcome first time guest-blogger Michael Humphreys.  He practiced transactional tax law for several years at Cravath and Skadden and provided transactional tax advice at EY for several years thereafter. He re-entered legal practice four years ago to represent a whistleblower in a high stakes case in Tax Court. He has written a forthcoming article which will appear in Tax Notes and expects to supplement it with two additional articles.  He can be reached at MAHumphreys612@gmail.com. Keith

Tax Notes will be publishing on Monday, April 10th, an article of mine with the following provisional title: “How the D.C. Circuit Can Save an IRS-Nullified Whistleblower Law.” This blog entry provides a brief introduction. I would welcome any comments sent to my email address above.

Section 406 of P.L. 109-432, division A, Title IV (December 20, 2006), redesignated then section 7623 as subsection (a), added new subsection (b), and added statutes surviving outside of the Code (“statutory notes”) and amendments to the Code to implement new subsection (b) (collectively, capitalized “Section 406”).

Before Section 406, section 7623 had granted the IRS sole discretion over whether and how much to pay persons (“informants”) for information leading to the detection of underpayments of tax. The IRS used its powers to develop what it called the Informants’ Rewards Program (the “informant program”). Congress left the informant program untouched by preserving prior section 7623 as new subsection 7623(a). The other provisions of Section 406 created a new program (the “whistleblower program”), which was based explicitly (in key parts word for word) on the 1986 reforms to the qui tam provisions of the False Claims Act (the “1986 FCA reforms”).

The upcoming Tax Notes article urges the U.S. Court of Appeals for the District of Columbia Circuit (the “D.C. Circuit”) to reach two, possibly three, holdings in the main tax whistleblower case before it, Michael Lissack v. Commissioner, USCA 21-1268 (“Lissack”). In so doing, the D.C. Circuit must overrule an appalling decision reached last year by a different panel of D.C. Circuit judges in Li v. Commissioner, 22 F.4th 1014 (D.C. Cir. 2022) (“Li”). The Li panel was grossly deceived by an amicus curiae brief filed by the D.C. office of large corporate law firm with a whistleblower-defense practice area.

The three recommended holdings are summarized below. Needless to say, the IRS is litigating the opposing positions. If the IRS prevails, the pragmatic nullification of the whistleblower program, effected by IRS leadership within a year of the enactment of Section 406, will be formally complete, with the exception of a tiny number of claims currently under appeal.

The three recommended holdings reflect a “radical” analysis of the law, in the original meaning of “originating in the root or ground.” The analysis is grounded as none has been before in the words of Section 406, considered as an integrated whole, and as an explicit incorporation by Congress of the 1986 FCA reforms into section 7623. The radical analysis has yielded what will seem upon first reading as radical conclusions. Sometimes there is nothing so astonishing as the simple truth.  

Readers wondering why anyone would bother to invest so much analysis in an area of law that has attracted zero scholarship and precious little of practitioner attention might want to read the immediately following paragraphs. Those not wondering why should skip ahead to the “First Holding Sought.”


How the Tax Notes Article Came to Be

Due to an incorrect Tax Court holding obtained by IRS litigators against a pro se whistleblower in Kasper v. Commissioner, 150 T.C. 8 (2018) (“Kasper”), the evidence in a Tax Court appeal of the denial of a whistleblower claim under section 7623(b)(1) (as further defined below, a “(b)(1) claim”) is shockingly limited. There is no “trial” and no discovery within the ordinary meaning of the term. Instead, the Tax Court limits its review, under an “abuse of discretion” standard, to documents originally filed with the IRS by the whistleblower (the “(b)(1) claimant”) and documents subsequently prepared, edited, and selected by the IRS (in its sole discretion) for inclusion in the “administrative record” for the (b)(1) claim (such evidentiary restriction, the so-called “record rule”).

A (b)(1) claimant appealing in Tax Court may, however, obtain discovery of IRS documents the IRS has not already curated in anticipation of such litigation. In particular, a (b)(1) claimant may obtain “extra-record” evidence regarding “the mental processes of [IRS] decisionmakers” by submitting “meaningful documentation” making a “strong showing of bad faith or improper behavior” by the IRS. See Van Bemmelen v. Commissioner, 155 T.C. 64 (2020) (“Van Bemmelen”).

As the IRS proceeded to file numerous motions needlessly delaying disposition of my client’s case, I had the time and motivation to research the history of the whistleblower program to find publicly documented evidence of systematic bad faith by the IRS. The more I looked, the more I saw. The IRS was not merely applying the law desultorily or in bad faith; it had devoted itself to a subtle, relentless, and comprehensive campaign to nullify virtually every element of the whistleblower program Congress enacted in 2006.

After I filed on behalf of my client meaningful documentation making such strong showing of bad faith or improper behavior by the IRS as part of discovery-related motions, the IRS moved—two years into the litigation—to block all public access to filings in the case, even if redacted of all “return information” of the taxpayer.

I began reading Procedurally Taxing. There I learned about Li, which literally eliminated the whistleblower program for all future (b)(1) claimants.

Under Li, if the IRS (really LB&I) sees that a future (b)(1) claim is “too big to pay,” it can prevent any Tax Court appeal simply by directing the whistleblower office (the “WO”) to “reject” the (b)(2) claim upon receipt, without “assigning” it to an “appropriate office” elsewhere in the IRS (an “AO”). Yes. I reached out to Ms. Li about her petition to SCOTUS for a writ of certiorari, but we disagreed about the writ.

Then I learned in Procedurally Taxing that the D.C. Circuit was reviewing Lissack, which would extend Li. Under Lissack as the IRS wishes it to be decided, in the case of all current (b)(1) claims that have already been “assigned” by the WO to an AO, the IRS can prevent any Tax Court appeal by directing such AO to “deny” the claim. Yes. Unfortunately, I did not find about Lissack until such time that it would be impossible to file before oral argument. The D.C. Circuit clerks advised that I could still file a proposed brief, which provided an analysis similar to what is in the Tax Notes article, but severely constrained by a word limit. The D.C. Circuit declined to accept the brief, probably because it would have required a response brief from the IRS that would have further delayed proceedings.       

At that point I decided to do all I could to get the analysis out in a public forum that the three judges in the Lissack panel would be likely to hear about and read. I prepared a comprehensive analysis of how the IRS has nullified the whistleblower law through written guidance, operational decisions, Treasury regulations, and strategic litigation, mainly against pro se petitioners (the “nullifications”). These nullifications are based entirely on public documents and not documents in the case in which I represent a client currently in litigation. Tax Notes advised me to write a shorter article focused on Lissack and then to present the remaining material in two less urgent articles to be published later.

First Holding Sought

The first holding the D.C. Circuit should reach is that Mr. Lissack had the right under section 7623(b)(4) to appeal to the Tax Court the denial by the IRS of his claim for an award under section 7623(b)(1).

More precisely—and yet more generally—section 7623(b)(4) explicitly grants the Tax Court “subject matter jurisdiction” to hear an “appeal” of “any” administrative “determination” by the IRS “regarding” an award for a whistleblower claim such as Mr. Lissack’s that satisfies the threshold requirements of section 7623(b)(1) (a “(b)(1) claim”). Claims qualifying as (b)(1) claims must allege amounts in dispute exceeding $2 million, not be based on public allegations, and not involving tax abuses in which the whistleblower was complicit.

Section 7623(b) claims under paragraphs (2) (based on public allegations) and (3) (involving whistleblower complicity) may be appealed as well, but such claims are expressly at the discretion of the IRS and thus peripheral to the core purpose of the whistleblower program. The second sentence of the official legislative history describes Section 406 as follows: “Generally, the provision establishes an award floor of 15 percent of the collected proceeds … if the IRS moves forward with an administrative or judicial action … based on information brought to the IRS’s attention by an individual.”  

Under the first sentence of section 7623(b)(1), “if the Secretary proceeds with any administrative or judicial action based on” the “information” in the (b)(1) claim (“(b)(1) information”), the Secretary “shall” pay the individual filing the (b)(1) claim (the “(b)(1) claimant”) “at least 15 percent … of the proceeds collected as a result of the action … or from any settlement in response to such action.”

This core provision corresponds exactly to the key provision in the 1986 FCA reforms, 31 U.S.C. section 3730(d)(1): “If the [Department of Justice (“DOJ”)],” after reviewing the “information” contained in a qui tam action filed by a person (the “complainant”), “proceeds with [the] action brought by [the complainant], such [complainant] shall … receive at least 15 percent … of the proceeds of the action or settlement of the claim.”

Information that initiates action immediately locks in the right to 15 percent of any proceeds ultimately collected under such action. This is true regardless of any future contribution of the (b)(1) claimant, as it is for an FCA complainant.

The second administrative determination by the IRS is almost always the settlement agreement reached with the taxpayer regarding the action. This establishes the amount of proceeds collected—the dollar amount to which the award percentage applies. The third administrative determination is set forth separately in the second sentence of section 7623(b)(1). After proceeds are collected, the IRS determines the “amount” by which the award percentage may be increased from 15 percent up to 30 percent “depending upon the extent to which the person [—the (b)(1) claimant, not the (b)(1) information—] substantially contributed to the action.”

The IRS cannot delay an appeal by delaying notice to the whistleblower of an administrative determination under section 7623(b)(1). The IRS delayed notification of its final administrative determination to deny Mr. Lissack’s (b)(1) claim by at least five years.

Any concerns that (b)(1) claimants would file ‘too many’ appeals to the Tax Court were addressed in two ways by Congress. First, the threshold requirements for a (b)(1) claim were so stringent that only a tiny percentage of information disclosed under section 7623 could result in appeals. Second, Section 406 amended the Code to permit the Tax Court to use “special trial judges” to handle section 7623(b)(4) appeals with the utmost of judicial economy.

Appeals regarding (b)(1) claims are not limited, as IRS litigators have relentlessly argued since Section 406 was enacted, to the last possible administrative determination under section 7623(b)(1). This is the third administrative determination that applies only if the IRS has already decided to offer an award: the final award percentage (15 to 30 percent).

The IRS position that (b)(1) claimants can only appeal the amount of an award the IRS offers, but not the outright denial of any award, is absurd and malign. The legislative history made plain that the purpose of Section 406 was to establish a 15 percent award floor. No floor exists if a (b)(1) claimant can only appeal the extent to which an award offer exceeds 15 percent, not the right to the 15 percent minimum.

Second Holding Sought

The second holding the D.C. Circuit should reach is that reg. section 301.7623-2, which the Tax Court relied upon in deciding against Mr. Lissack, is utterly invalid under any conceivable Chevron analysis. This regulation, which was based on written guidance issued by the IRS Office of Chief Counsel (“OCC”) within a year of the enactment of Section 406, affirmatively nullified section 7623(b)(1) and pragmatically nullified section 7623(b)(4). The IRS minimized public scrutiny of its nullifications by presenting them first informally in Notice 2008-4, I.R.B. 2008-2, rather than by presenting them (through Treasury) as proposed regulations. 

As explained in the article, OCC issued written guidance and Treasury wrote regulations that scrambled the terms used in section 7623(b)(1) to nullify all administrative determinations described above other than the final one after collections are complete. No public commentators noticed. The IRS successfully relied upon the fact that proposed regulations under Section 406 could not be expected to elicit detailed analysis by public commentators such as the Tax Section of the New York State Bar Association.

OCC and Treasury rewrote section 7623(b)(1) so that no (b)(1) claim would be paid unless the (b)(1) information satisfied, in hindsight, two tests found nowhere in section 7623(b)(1). First, the (b)(1) information would have to qualify as the only possible cause of the initiation of the action. If any other later information could have initiated the action, the (b)(1) claim would get nothing. Second, the (b)(1) information would have to qualify as the (only named) “cause” of the completion of the action: the recovery of proceeds. 

This replicated the reward determination procedures and principles under the informant program. Under the informant program, there was only one administrative determination, after collections. With hindsight, the IRS would determine the “value” of the informant’s initially filed information compared with the value all of the information generated by the IRS during audit, appeals, and collections, including information obtained from the informant at the request of the IRS (the “retrospective relative value” test). To obtain the maximum award percentage of 15 percent, the informant had to file documentation sufficient not only to initiate the action, but also to “result in, or be a direct factor in” the final recovery of proceeds; that is, to dispose of the case with minimal IRS effort (“dispositive documentation”).

The retrospective relative value test and dispositive documentation test made informant claims regarding taxpayers audited by what is now called the Large Business and International Division (including predecessor divisions, “LB&I”) (“LB&I claims”) virtually impossible. Tax planning underpayments by LB&I taxpayers are usually complicated and take a long time to resolve. The longer the fight, the greater the information generated by the IRS, and the smaller the relative value of the information initially filed by the informant. Unlike the case with simple fraud by smaller taxpayers, production of a missing document rarely disposes of a case.

LB&I had been protected from informants by the award guidelines under the informant program. LB&I was immediately protected from whistleblowers by OCC, which rewrote section 7623(b)(1) so that (b)(1) claims would be treated exactly the same as they would have been if Section 406 had never been enacted.

Not only were LB&I claims destined for denial; final determinations were delayed for several years. Under the ‘logic’ of the retrospective relative value test, the single and final administrative determination would not be made until collections were complete. LB&I audits often take several years. This systematic delay in notifying (b)(1) claimants that their (b)(1) claims have been denied gave the IRS several years to put into place numerous other nullifications to destroy the whistleblower program. It also pragmatically nullified section 7623(b)(4) as justice delayed is justice denied.

Third Holding Sought

Third, to the extent a decision based on the facts of Lissack may differ depending upon the judicial standard of review, such standard should be de novo, not for abuse of discretion. Nothing in the wording of section 7623(b)(4) implies any limitation as to standard of review. Furthermore, the first sentence of section 7623(b)(1) contains certain words that deviate significantly from the corresponding provisions under the 1986 FCA reforms. These deviations prove that Congress intended de novo review to apply because it would prove necessary. The article explains how LB&I subsequently proved precisely why the edits by Congress were in fact necesssary.


As mentioned above, the forthcoming article in Tax Notes is the first of three. The second article provides a full discussion of the informant program (and the bogus so-called “Special Agreements” thereunder), operational decisions by IRS management that rendered the whistleblower office created by Congress irrelevant, other nullifications introduced by OCC guidance, and how the Treasury regulations ‘codified’ and extended OCC’s nullifications. The third article will analyze in detail the strategic litigation campaign by IRS litigators, begun shortly after the whistleblower program was created, to reduce section 7623(b)(4) appeals to rubber-stamp proceedings in which judicial review is reduced to a determination whether the IRS “abused its discretion” based on the “administrative record” curated by the IRS itself.

Tax Court Vacates at Least 40 Dismissals of Whistleblower Cases

In a 2020 unpublished order in Li v. Commissioner, Docket No. 5070-19W, the Tax Court held, on summary judgment, that the IRS whistleblower office (WBO) did not abuse its discretion in denying Ms. Li an award because she provided only vague and speculative information. She had alleged that the target taxpayer had filed false claims of rental income, dependent children, alimony paid, and mortgage interest paid for its 2016 and 2017 tax years.  A classifier in the WBO reviewed the target’s tax returns, found nothing amiss, and had denied Ms. Li’s claim in a final notice of determination. So, Ms. Li brought suit in the Tax Court under IRC 7623(b)(4).

The DC Circuit reversed the summary judgment decision, at 22 F.4th 1014 (D.C. Cir. 2022), because the circuit court determined that the Tax Court did not even have jurisdiction to hear the case.  I discussed the DC Circuit’s decision here.  The circuit court decision rests on the fact that the IRS never proceeded with an audit of the target taxpayer.  The Tax Court had thought it had jurisdiction of any final rejection of an award, no matter how early in the processes of the WBO.

Carl Smith has been following this case and has kept me abreast regarding what is happening in Li and in the Tax Court more generally, since a large number of WBO cases in the Tax Court involve threshold rejections like Li.


On June 16, 2022, the Supreme Court received a pro se cert petition filed by Ms. Li, but the Court mysteriously did not promptly set up an electronic docket for the case. 

Ms. Li is a lawyer currently working at Stanford Law School, so her cert petition is much more lawyerly than most pro se petitions. In the petition Ms. Li argues that the Tax Court has jurisdiction to review threshold rejections of whistleblower awards under IRC 7623(b)(4), and that even if that statute doesn’t apply, the Administrative Procedure Act requires judicial review of threshold rejections by some court.  Here’s from the cert. petition:

[T]he D.C. Circuit held that the Tax Court lacks jurisdiction to hear appeals from threshold rejections of whistleblower award requests. Li v. Comm’r, 22 F.4th 1014, 1017 (D.C. Cir. 2022). But the fact that the Tax Court is precluded from hearing this instant appeal does not remove the statutory obligation to provide some form of judicial review of the WO final decision. If threshold rejections of whistleblower award requests are not reviewable by the Tax Court, then another court must have the judicial review authority. Take away judicial review entirely, and threshold rejections of whistleblower award requests are immune from judicial review.

The cert petition argues that there is a Circuit split, though, of course, only the D.C. Circuit can hear whistleblower award cases under IRC 7623(b)(4) and 7482(b)(1) (flush language).

On the understanding that the circuit court’s Li opinion had become final when the time to file a cert petition appeared to pass without such a filing, in July 2022, the Tax Court issued a number of orders in pending whistleblower award cases dismissing them for lack of jurisdiction because they involved threshold rejections of awards, similar to Li. 

On August 30, 2022, the Supreme Court belatedly created a docket for the Li cert petition.  The Tax Court became aware of the cert petition within a day or two after the Supreme Court had created the docket.

Concluding that the cert petition in Li was timely, the Tax Court decided to undo all the orders of dismissal it issued in July in Li and similar cases. One of the orders where the Tax Court vacated a prior dismissal, Essex v. Commissioner, can be found here. The other orders can be found on DAWSON.

There may be more to come, but as of the close of business on September 6, over three business days, the Tax Court has vacated 40 dismissal orders in whistleblower cases, including Li. I think it’s safe to assume that the Court is also holding onto any currently pending motions to dismiss these cases while it waits to determine if the Supreme Court will accept the case and then, if it does, how it will rule. This affects a substantial portion of the Tax Court’s whistleblower docket.  According to p. 19 of the Tax Court’s most recent FYE Budget Justification report, only 63 WB cases were filed in the Tax Court in FYE 2021. 

The Tax Court did not vacate recent dismissal orders in late-filed CDP cases when Boechler filed its cert petition.  Indeed, only after cert was granted did the Tax Court prospectively stop issuing orders in cases involving late-filed CDP petitions, pending the ruling by the Supreme Court on the merits.  As we have discussed in prior posts, after May 6, 2022, the Tax Court has also suspended the issuing of dismissals in cases involving late-filed deficiency proceedings pending the outcome of its decision in Hallmark, though the court has not vacated any earlier-issued dismissals of late-filed deficiency cases for lack of jurisdiction.  The Tax Court’s decision to vacate whistleblower dismissal orders merely at the time that the Li cert petition was filed may reflect an evolution of the Court’s views on undoing prior dismissal orders after what it had done in the CDP and deficiency cases.  It may, on the other hand, merely reflect a recognition that the number of jurisdictional dismissals in whistleblower case would only be a tiny fraction of the number of prior dismissals in CDP and deficiency cases.  For whatever reason, it’s a nice practice from the petitioners’ perspective.

The combination of the two groups of cases the Court is now suspending (i.e., Li-type and Hallmark-type cases) means that at some point the Court will have quite a few cases to work through in the future.  Still, this is a practice that protects petitioners and keeps them from having to file needless appeals or to lose their case while an issue of the Court’s jurisdiction is at play.

What’s Happening in Myers and Whistleblower Cases After the Decision the Statute is a Claims Processing Rule

In 2019 the D.C. Circuit held in Myers v. Commissioner, 928 F.3d 1025, that the language creating the Tax Court’s basis for jurisdiction to hear whistleblower cases did not create a jurisdictional filing deadline.  It also held the time period subject to equitable tolling.  So, can the subsequent history of Myers provide insight into how the Tax Court will handle equitable tolling cases in Collection Due Process cases (CDP)?  No, it cannot because the Court held off on looking into equitable tolling waiting for the outcome in Boechler, but the post-Myers cases do provide insight into what happens when no one raises the issue of late filing.

Since the Myers decision, it does not appear that the Tax Court has issued any other rulings on whistleblower cases deciding an equitable tolling issue.  This signals how rarely equitable tolling issues present themselves. The IRS Whistleblower Office Annual Report to Congress (of which the most recent report posted to IRS.gov is for FYE 2020; see https://www.irs.gov/pub/irs-pdf/p5241.pdf) says in Table 3 on page 24 that there were 118 IRC 7623(b) claims in litigation as of 9/30/20, but then confusingly notes:  “There are closed claims that are in litigation. Table 3 identifies only open claims.”  Does that mean that Tax Court cases are not in the 118 or are in the 118?  This probably means that the 118 cases in litigation are pending Tax Court cases.  The Tax Court has reported to Congress that during FYE 2021 there were 63 whistleblower (WB) cases filed.  https://www.ustaxcourt.gov/resources/budget_justification/FY_2023_Congressional_Budget_Justification.pdf

The benefit of Myers to taxpayers who file late, however, appears to be in prohibiting the Tax Court from issuing orders to show cause why a whistleblower case should be dismissed for lack of jurisdiction (LOJ).  This post will discuss four opinions below, each of which suggests that the Tax Court would have issued orders to show cause to dismiss for lack of jurisdiction due to late filing, had the filing deadline been jurisdictional.  This provides a window into what will happen with late filed CDP cases where the IRS does not raise the timing of the filing.    In Myers any benefit from the D.C. Circuit opinion as confirmed by the Supreme Court in Boechler will come from the application of equitable tolling.


Looking at the whistleblower cases decided since the Myers decision, Carl Smith found the following cases:

(1)  In Whistleblower 15977-18W, T.C. Memo. 2021-143 (12/29/21), the taxpayer lost on summary judgment because the Tax Court upheld a determination by the WB office that the WB did not provide specific enough information.  (Query whether the more recent D.C. Circuit case, Li v. Commissioner, would have required the Tax Court to dismiss this case for LOJ because the WB office did not appear to take any action on the claim beyond asking SB/SE to look into the claim.  There is no mention of any proceeding done against the taxpayer.)  The WB office issued a notice of determination to the WB on Oct. 16, 2017.  The WB, who lived overseas, may not have received the notice of determination until after the 30 days to petition expired.  In any event, the WB petitioned the Tax Court on Aug. 16, 2018.  The IRS did not raise to the Tax Court that the case should be dismissed for late filing.  Here’s footnote 3 from the opinion:

Petitioner resided outside of the United States when the petition was filed.  In Myers v. Commissioner, 928 F.3d 1025, 1036-1037, 442 U.S. App. D.C. 110 (D.C. Cir. 2019), rev’g and remanding 148 T.C. 438 (2017), the Court of Appeals for the D.C. Circuit held that the 30-day period for filing a petition to initiate a whistleblower action is subject to equitable tolling. The D.C. Circuit is the appellate venue for this case. See sec. 7482(b)(1) (penultimate sentence). We thus follow its precedent. See Golsen v. Commissioner, 54 T.C. 742, 757 (1970), aff’d, 445 F.2d 985 (10th Cir. 1971). Consistently with Myers, we hold that we have jurisdiction to consider this case. And since neither party has questioned the filing of the petition after the 30-day period or addressed the subject of equitable tolling, we will proceed to consider the pending motions.

The Tax Court did exactly what it should have.  It no longer has the right to raise timeliness issues on its own.  This will happen more and more now that the CDP cases have entered the pool of cases subject to the claims processing rule. 

(2)  Similar is Damiani, T.C. Memo. 2020-132, where the court saw that, obviously, the petition was not timely filed.  Here’s a bit from the Damiani opinion:

The Office agreed with Mr. Wiggins’ recommendation and on June 14, 2019, issued a final determination letter rejecting petitioner’s claims. The letter stated in pertinent part that “[t]he claim has been rejected because the information submitted did not identify an issue regarding tax underpayments or violations of internal revenue laws.” The letter informed petitioner: “If you disagree with this determination, you have 30 days from the date of this letter to file a petition with the Tax Court.”

Petitioner petitioned this Court for review of the Office’s determination. Her petition was mailed from Germany, postmarked by Deutsche Post on July 31, 2019, and was received and filed by the Court on August 12, 2019. 

. . . .

Consistently with Myers, we hold that we have jurisdiction to consider this case. And since neither party has questioned the filing of the petition after the 30-day period or addressed the subject of equitable tolling, we will proceed to consider respondent’s motion for summary judgment.

(3) Also similar is Friedel, T.C. Memo. 2020-131.  Here’s a bit from the Friedel opinion:

The Office agreed with both recommendations and issued on April 30 and May 8, 2019, final determination letters rejecting petitioner’s claims. Each letter stated in pertinent part that “[t]he claim has been rejected because the IRS decided not to pursue the information you provided.” The letters informed petitioner: “If you disagree with this determination, you have 30 days from the date of this letter to file a petition with the Tax Court.”

Petitioner petitioned this Court for review of the Office’s determinations. His petition was mailed from Germany, postmarked by Deutsche Post on June 11, 2019, and was received and filed by the Court on June 24, 2019. 

. . . .

[S]ince neither party has questioned the filing of the petition after the 30-day period or addressed the subject of equitable tolling, we will proceed to consider respondent’s motion for summary judgment.

(4)  Also similar is Stevenson, T.C. Memo. 2020-137, where the court expressed concern that the petition might not have been timely, but did not actually find facts as to the 30-day deadline.  The court there wrote:

Section 7623(b)(4) provides that “[a]ny determination regarding an award * * * 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).” The Office issued its determination letter to petitioner on April 10, 2019. He signed his petition on May 2, 2019, but the mailing date is unclear. See sec. 7502(a). The petition was received and filed by the Court on May 13, 2019, more than 30 days after the date on which the Office issued the determination letter.

. . . .

Since neither party has questioned the filing of the petition after the 30-day period or addressed the subject of equitable tolling, we will proceed to consider respondent’s motion for summary judgment.

In all of these cases, the IRS successfully moved for summary judgment.  Perhaps the IRS was so confident it would win on summary judgment that it did not bother to raise the petition untimeliness issues. In the amicus brief the Tax Clinic at the Legal Services Center of Harvard Law School filed for the Center for Taxpayer Rights in Boechler at the cert. stage, we predicted this outcome.  It may well turn out that it is more important to taxpayers that the Tax Court can’t raise timeliness issues on its own if a deadline is not jurisdictional than that the taxpayers can also raise equitable tolling. 

As the recent post on the application of 7459 pointed out by detailing the number of dismissals in deficiency, CDP, innocent spouse, and WB cases, there will be more (1) cases in which the IRS just misses the late filing and so doesn’t raise the issue than (2) cases where the IRS will raise the issue and the taxpayer will argue for equitable tolling.  It may be that the WBs in each of the above cases had an equitable tolling argument (e.g., non-receipt during the 30-day period, like Ms. Castillo), but they never had to present one.

D.C. Circuit Narrows Tax Court Whistleblower Award Jurisdiction

In Li v. Commissioner, No. 20-1245 (D.C. Cir. 2021) the court holds that the Tax Court lacks jurisdiction to hear appeal of threshold rejection of whistleblower award requests.  The case arrived in the circuit court after the Tax Court held the IRS did not abuse its discretion in rejecting the award request.  In deciding the Li case the D.C. Circuit also found that two prior precedential Tax Court cases, Cooper v. Commissioner, 135 T.C. 70 (2010) and Lacey v. Commissioner, 153 T.C. 146 (2019), were wrongly decided.  As we have discussed here, all appeals of whistleblower cases from the Tax Court go to the D.C. Circuit because of the language in IRC 7482.  Therefore, the decision in the Li case binds the Tax Court in its consideration of future whistleblower cases unless the Supreme Court takes up the issue.  Having knocked out two precedential Tax Court opinions in one blow, the Li case will create at least one more when the Tax Court takes up the issue again.

An interesting side note in this case before moving on to the jurisdictional issue involves the D.C. Circuit’s appointment of an amicus to argue the issue of jurisdiction before it.  Neither Ms. Li, the IRS nor the Tax Court raised any jurisdictional concerns and the court felt the need to have legal argument from a lawyer on the jurisdictional point, as the Supreme Court had done in a case involving jurisdiction, Sebelius v. Auburn Regional Medical Center, where it appointed John Manning, my dean at Harvard Law School, to brief the jurisdictional issue. 

Robert Manhas and Robert Loeb filed an amicus brief in Li concluding that the Tax Court lacked jurisdiction to hear the case at the time of the filing of the Tax Court petition.  After the amicus brief was filed making the argument that the courts lacked jurisdiction, the DOJ (but not the taxpayer) filed a “final reply brief” (i.e., in addition to the DOJ prior reply brief) in which the DOJ changed position and agreed with the amicus that the Tax Court, and therefore, the D.C. Circuit, lacked jurisdiction.  No one briefed the argument that the Tax Court actually had jurisdiction.  So, once again, a pro se taxpayer effectively lost on an issue without representation.


The taxpayer had submitted a Form 211, and the reviewer in the IRS Whistleblower Office (WBO) decided that the information on the target taxpayer was too vague and speculative to forward the Form 211 for further action.  The WBO issued a determination letter telling the whistleblower that she could contest the decision by petitioning the Tax Court.  She did, pro se.  After she lost in the Tax Court, she appealed pro se. 

Neither the IRS nor Ms. Li nor the Tax Court identified a possible jurisdictional issue.  The Tax Court decision found that:

the WBO adequately performed its evaluative function in reviewing Li’s application and did not abuse its discretion by rejecting it for an award.

The D.C. Circuit, sua sponte, wondered whether the Tax Court lacked jurisdiction and so appointed an amicus to argue that jurisdiction was lacking.  In the published ruling, the D.C. Circuit overturns Tax Court precedent that holds that pretty much any reason (even a preliminary ruling) for turning down an award can be the subject of a Tax Court suit.  The D.C. Circuit finds that it only has jurisdiction to rule on the whistleblower decision if the Tax Court had jurisdiction.  Since it determines the Tax Court lacked jurisdiction, it only has jurisdiction to cure the defect caused by the incorrect exercise of jurisdiction.  It writes:

After review, we conclude that Cooper and Lacey were wrongly decided. The Tax Court lacks jurisdiction to hear appeals from threshold rejections of whistleblower award requests.

Subsection (b)(4) of § 7623 gives the Tax Court exclusive jurisdiction over only a “determination regarding an award” under subsections (b)(1)(3). The Cooper and Lacey Courts held that a threshold rejection of a whistleblower award request constituted such an award determination because the rejection of an award was a so-called “negative” award determination. Lacey, 153 T.C. 163 n.19 (citing in accompanying text Cooper, 135 T.C. 70); see also id. at 150 n.5 (“[A] ‘rejection’ is also a ‘determination’. . . .”). We disagree. A threshold rejection of a whistleblower’s Form 211 for vague and speculative information is not a negative award determination, as there is no determination as to an award under subsections (b)(1)(3) whatsoever. Per subsection (b)(1), an award determination by the IRS 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 whistleblower]. . . .” 26 U.S.C. § 7623(b)(1) (emphasis added). A threshold rejection of a Form 211 by nature means the IRS is not proceeding with an action against the target taxpayer. See Cline v. Comm’r, 119 T.C.M. (CCH) 1199, 2020 WL 1249454, at *5 (T.C. 2020). Therefore, there is no award determination, negative or otherwise, and no jurisdiction for the Tax Court.2

In this case, the WBO rejected Li’s Form 211 for providing vague and speculative information it could not corroborate, even after examining supplemental material Li herself did not provide. The WBO did not forward Li’s Form 211 to an IRS examiner for further action, and the IRS did not take any action against the target taxpayer. There was no proceeding and thus no “award determination” by the IRS for Li’s whistleblower information. Therefore, the Tax Court had no jurisdiction to review the WBO’s threshold rejection of Li’s Form 211.

This Court regrets that Li was informed otherwise by letter to her from the WBO. However, “no action of the parties can confer subject-matter jurisdiction upon a federal court.” Insurance Corp. of Ireland v. Compagnie des Bauxites de Guinee, 456 U.S. 694, 702 (1982).

Finally, the parties have called our attention to our decision in Myers v. Comm’r which contains the statement that “’written notice informing a claimant that the IRS has considered information that he submitted and has decided whether the information qualifies the claimant for an award’ suffices to constitute a ‘determination’ for the purpose of § 7623(b)(4).” 928 F.3d 1025, 1032 (D.C. Cir. 2019). Upon review, we conclude that this statement is not a holding concerning the issue in the present case. This statement was responding to petitioner’s argument that the WBO denial letter in his case did not contain enough information to qualify as a “determination” under the statute. Id. We subsequently declined to “craft requirements out of whole cloth” regarding what information a WBO denial letter must contain. Id. at 1033. By contrast, the question in this case asks whether § 7623(b)(4) confers jurisdiction only when there is both an IRS action based on whistleblower information and proceeds collected from that action. As this issue was not squarely before us in Myers, the above statement from Myers does not bind our decision today.

The Li decision will undoubtedly cause attorneys in the whistleblower bar to take notice and this may be a case in which a petition for certiorari is filed since the issue is important to the determination of the Tax Court’s jurisdiction and no possibility of a circuit split exists.

The Myers case referred to in the final quoted paragraph is still pending in the Tax Court after a trip to the D.C. Circuit.  If I recall the facts there, Myers may be in a similar situation to Li (though the parties are, I think, in discovery about whether the IRS actually used the information and conducted an audit of the taxpayer).  Will the IRS now move to dismiss the Myers case for lack of jurisdiction?  Remember that jurisdictional issues can be raised at any time.  The D.C. Circuit opinion in Myers created the conflict in the circuits on the jurisdictional issue recently argued in Boechler before the Supreme Court.  If Myers is dismissed belatedly for lack of jurisdiction, does that cause the opinion of the D.C. Circuit in that case to be vacated, canceling it as precedent?  The continuing precedential validity of Myers regarding the interpretation at issue in Boechler, though, will no doubt be decided by the Boechler case, as it is unlikely that, after Boechler, the D.C. Circuit will differ in future whistleblower rulings from the ruling of the Supreme Court in CDP cases.

Does Death of a Whistleblower Mean Death of the Claim?

Miami Legal Services is looking to add an attorney to their tax clinic. Here is a link to the job announcement. Keith

In Insinga v. Commissioner, 157 T.C. No. 8 (2021) the Tax Court holds that the claim for payment a whistleblower has for providing information to the IRS does not die with the whistleblower.  Joseph Insinga filed his whistleblower case on April 25, 2013 and passed away on March 22, 2021 while the case was still pending.  If a whistleblower was required to stay alive until the end of a Tax Court case when cases can last so long, it would be quite a limiting factor.  Fortunately for the heirs of Mr. Insinga, the Court finds that death does not terminate his claim but it takes several pages of a precedential opinion to get there.


The Court mentions that substantial development of the case has occurred by the time of this opinion through orders entered in 2016 and 2017.  Unfortunately, a portion of this case is sealed which means that for purposes of access on the Court’s website through Dawson the entire docket is sealed and the links to the orders which would ordinarily be available in a case without a sealed document are unavailable here since the sealing of any document results in the inability of the public to see the docket at all.  This is one of the features of Dawson the Court is working on but I have not seen an announcement regarding when the public might be able to see docket entries that are not sealed in cases where one sealed document exists.  If you want to see the orders, and if these orders are not sealed, you cannot go to the clerk’s office yet to view the file but you could call the clerk’s office and order the documents.  Because of the reference to the orders and the dates in this opinion, it will be relatively easy to identify for the clerk which documents you seek.  This will not be the case in other cases with sealed documents since you will need the clerk to read you the docket in order to select the documents you would like to see.  I also do not know if the Court sends out orders for free since they would be free if Dawson did not block the view of the docket or if you must pay the fee for the order the way you would for documents submitted by the parties. 

When Mr. Insinga passed away, a motion for substitution of party was filed shortly thereafter seeking to substitute the person appointed as personal representative for the estate.  The statute creating the whistleblower jurisdiction of the Tax Court is silent on the issue of survivability of whistleblower claims.  Because this issue was one of first impression in the Tax Court, the opinion in the case is precedential.

The court notes that in its deficiency jurisdiction survivability is not a problem:

In deficiency cases, which constitute most of the cases before this Court, “it is well settled that a petitioner’s death does not divest this Court of jurisdiction over his income tax liability for years already in issue”. Beatty v. Commissioner, T.C. Memo. 1980-168, 1980 Tax Ct. Memo LEXIS 414, at *7 (citing Nordstrom v. Commissioner, 50 T.C. 30 (1968), and Yeoman v. Commissioner, 25 T.C. 589 (1955)).3 Our deficiency jurisdiction is based on a timely filed petition, see sec. 6213(a); and (as held by our predecessor, the Board of Tax Appeals) “that jurisdiction * * * continues unimpaired” after the petitioner’s death,4 because “the action is one which survives against * * * [the petitioner’s] estate”, Duggan v. Commissioner, 18 B.T.A. 608, 625 (1930);5 see also Nordstrom v. Commissioner, 50 T.C. at 31-32 (citing Duggan v. Commissioner, 18 B.T.A. at 625, and Yeoman v. Commissioner, 25 T.C. 589, 593 (1955), in support of its holding that the Court’s jurisdiction over a case continues unimpaired by the death of a taxpayer and even though there is no personal representative appointed to act in the place and stead of the decedent).

To decide whether the whistleblower statute is one in which the claim survives death, the Court looks to federal common law.  It finds:

Federal statutes survive a plaintiff’s death if the statute is remedial, not penal. See Ex parte Schreiber, 110 U.S. 76, 80 (1884); see also United States ex rel. Hood v. Satory Global, Inc., 946 F.Supp.2d 69, 81 (D.D.C. 2013) (holding that a claim arising under the False Claims Act survives the death of the relator-plaintiff). The Court of Appeals for the Federal Circuit has expressed this rule by holding that, in the absence of a statutory provision to the contrary, common law supplies a presumption in favor of the survival of a remedial right of action arising under a Federal statute. See Figueroa v. Sec’y of Health & Human Servs., 715 F.3d 1314, 1319 (Fed. Cir. 2013).

This raises the issue of which statutes are remedial and which are penal.  The Court finds a three-part test from appellate case law:

(1) whether the purpose of the statute was to redress individual wrongs or more general wrongs to the public; (2) whether recovery under the statute runs to the harmed individual or to the public; and (3) whether the recovery authorized by the statute is wholly disproportionate to the harm suffered.” United States v. NEC Corp., 11 F.3d 136, 137 (11th Cir. 1993) (quoting First Nat’l Bank & Tr. Co. in Macon v. Flatau (In re Wood), 643 F.2d 188, 191 (5th Cir. 1980)).

Although no existing precedent exists regarding the remedial or penal nature of the whistleblower provision, the Court finds a close cousin in the qui tam provisions of the False Claims Act found in 31 U.S.C. secs. 3729-3733.  Qui tam actions have never been a big part of federal tax claims, in other areas of federal law the qui tam precedent is robust.  The Court analyzed the NEC case cited above in which the 11th Circuit went through the three tests to find that qui tam actions met the criteria for remedial provisions in concluding that the provisions survived death.  It then looked at the purpose of the whistleblower provisions:

Applying the three-factor test set forth in NEC Corp., 11 F.3d at 137-139, we conclude: (1) Like the purpose of the FCA’s qui tam remedy, the purpose of the award provisions of section 7623(b) is to redress individual wrongs of the whistleblower in bringing his claim (such as retaliation by his employer or professional ostracism) by compensating him for the harm he may incur by doing so.12 (2) Section 7623(b) is intended to provide a remedy to the whistleblower for bringing his claim by providing mandatory compensation for claims where the collected proceeds meet certain statutory thresholds. And (3) the recovery due to the whistleblower under section 7623(b)(1), which “shall depend upon the extent to which the individual substantially contributed to such action”, shows that the whistleblower’s recovery is proportional to the harm he incurs in bringing his claim. Consequently, these three factors weigh in favor of holding (and we therefore do hold) that section 7623(b) has a remedial purpose, and therefore the petitioner-whistleblower’s Tax Court petition survives his death.

The Court notes that this result is also consistent with the applicable regulations and Court rules.  The opinion reaches a logical and unsurprising conclusion.  Not too many cases apply federal common law.  Any other result would create inconsistency with other tax provisions and an unintended harshness.  The heirs must still prevail in the underlying claim to the extent the orders in 2016 and 2017 have not already decided issues in the case.

In Whistleblower Case Tax Court Admonishes IRS For Failing to Follow Its Own Rules

Rogers v Commissioner is a Tax Court opinion that explores the IRS process for whistleblower claims and the impact of administrative law principles when the IRS fails to follow its own guidance. The case involves a series of allegations against nine family members and acquaintances who Rogers claimed had “conspired to commit grand theft through conversion of the assets of Mr. Rogers’ mother.”  As the opinion recounts, Rogers claimed that the nine fraudulently shifted assets away from his mother causing her to be “[divested] of her financial assets and property without her direct knowledge or control.”

The opinion discusses the process the Whistleblower Office (WBO) employs to review claims. That has recently changed, with SBSE operating division classifiers reviewing the claim (it used to be done principally by WBO staff). In this case the classifier recommended that the Service reject the claim because the “allegations are not specific, credible, or are speculative.”

In response, the WBO sent a letter to Rogers stating that it rejected his claim because it “decided not to pursue the information you provided.” The letter did not identify the reason for rejecting as being tied to a credibility determination.

Rogers appealed to the Tax Court seeking review of the WBO’s award determination under Section 7623(b)(4). The IRS filed an answer and then filed a motion for summary judgment. The Tax Court rejected the IRS’s motion, and in so doing issued a precedential opinion that clarified a few prior important principles and also established some new ones. In this post I will highlight some of the major points in the opinion.


As an initial matter the opinion notes that the monetary thresholds for mandatory awards under 7623(b) are not jurisdictional and are affirmative defenses that the government must plead and prove. There are two thresholds for mandatory awards; a $200,000 income test and $2 million dispute test. A prior opinion established that the $2 million test was not jurisdictional and Rogers extends that reasoning to the $200,000 test. As the government failed to raise that defense in its answer, the opinion proceeded to the merits of the motion.

As I discussed in Tax Court Decides Scope and Standard of Review in Whistleblower Cases WBO appeals are subject to the record rule, meaning that generally the Tax Court is bound to the record below (scope of review). The standard of review is abuse of discretion, meaning that the Tax Court will not sustain a decision when a determination is arbitrary, capricious, or without sound basis in fact or law.  

As part of that abuse standard review, administrative law precedent establishes that an agency that fails to follow its own regs has abused its discretion.  In addition, under the Chenery doctrine the Tax Court “can uphold the WBO’s determination only on the grounds it actually relied on when making its determination….This means that the WBO must clearly set forth the grounds on which it made its determination, so that we don’t have to guess.” 

These points are key in this case, as the opinion discusses how the WBO letter to Rogers purported to reject his claim but in fact was a denial. 

The regulations under 7623 distinguish between WBO office rejections and denials. Under the regulations, “[a] rejection is a determination that relates solely to the whistleblower and the information on the face of the claim that pertains to the whistleblower.” Sec. 301.7623-3(c)(7), Proced. & Admin. Regs.; see also Internal Revenue Manual (“IRM”) pt. (Apr. 29, 2019).

As the opinion notes a denial “is fundamentally different from a “rejection.” Under the regulations, “[a] denial is a determination that relates to or implicates taxpayer information.” Sec. 301.7623-3(c)(8), Proced. & Admin. Regs.; see also IRM pt. (“A denial is a determination that is made for reasons beyond the information contained on the Form 211. [sic] (e.g., the Service did not proceed based on the information provided by the whistleblower, the case was surveyed or no changed by the operating division, the issue(s) alleged by the whistleblower were no change issues, the issues alleged by the whistleblower were below threshold, the statute has expired on the issues raised by the whistleblower, there are no collected proceeds).”).

The distinction matters, as there are different process for denials as compared to rejections. And it matters even more for purposes of this case because the Tax Court is going to hold the IRS to the procedures it has established in the regs:

On its face, the Letter states that the WBO is rejecting Mr. Rogers’ claim. But the WBO Letter fails to include any rationale that would support a rejection under the regulations….

Rather than focusing on the whistleblower and explaining what he failed to [do it] switches its focus to the agency itself and what the agency chose to do. Thus, the Letter tells Mr. Rogers that “the IRS decided not to pursue the information you provided.” While this may be a plausible explanation for a denial, it does not explain the basis of a rejection.

The opinion continues with a reference to the late great Yogi Berra:

In short, the regulatory framework gave the WBO two distinct paths for action — rejection or denial. Having come to that “fork in the road,” the WBO Letter followed Yogi Berra’s advice and “took it.” The Yankee great’s suggestion was sound in context, as both prongs of the fork led to his home. But with respect to a whistleblower award, the two prongs of the regulations lead to very different places. By including the “decided not to pursue” rationale as the reason for its purported rejection, the WBO Letter in effect said to Mr. Rogers “we reject your claim because we are denying the claim.” This statement was self-contradictory — and therefore impermissible — under the regulations.

There is more to the opinion and I will highlight some of the main points below.

Under Chenery the Tax Court will look beyond the determination letter to see if there was other material in the record as a “determination letter that is silent or muddled with respect to a supportable rationale may still be sustained if other materials in the record clarify the agency’s reasoning.” 

After performing that inquiry the opinion concluded that the rest of the record contradicted the rationale it gave Rogers in the letter. I found this part of the opinion interesting, as it revealed the likely reason why the WBO used the language it did with Rogers. Rejections generate fewer opportunities to perfect a claim; thus WBO likely did not want to have Rogers resubmit his claim and take additional IRS resources in dealing with additional submissions. 

The opinion did not look favorably at this tactic, emphasizing that the “WBO is not free to take away with double speak rights that the regulations plainly provide.” 

And for good measure the opinion rebukes the WBO for failing to treat Rogers fairly:

As the Supreme Court recently observed: “If men must turn square corners when they deal with the government, it cannot be too much to expect the government to turn square corners when it deals with them.” Niz-Chavez v. Garland, 593 U.S. ___, ___, 141 S. Ct. 1474, 1486 (2021). We cannot countenance intentional obfuscation on the part of the WBO. And neither the WBO Letter alone nor the Letter coupled with the administrative record here provides a coherent account of the WBO’s determination that is consistent with the regulations. That, in turn, represents an abuse of discretion, and accordingly we must deny the Commissioner’s motion


The opinion also explores the implications of the shifting of some WBO functions to SBSE in light of a general reluctance of courts to interfere with agency enforcement decisions. 

But the main takeaway from Rogers is that the opinion explores how even limited abuse of discretion review such as that in WBO determinations can ensure that the IRS treat individuals transparently and in line with its own procedures.

As the opinion notes, “it may well be that Mr. Rogers’ claim is nothing more than a personal dispute that the IRS will decide not to pursue even if Mr. Rogers provides additional information. Nevertheless, the WBO must comply with the regulations, and Mr. Rogers is entitled to transparency and candor as to the reasons for its ultimate determination. We cannot countenance intentional obfuscation by the WBO, nor will we bless attempts to improperly shield cases from judicial review

Whistleblower Case Dismissed – Could All Writs Provision Have Saved It?

In McCrory v. Commissioner, 156 T.C. No. 6 (2021) the Tax Court issued a precedential opinion holding that McCrory came to the Tax Court before she received what the Tax Court felt was the proper ticket.  Ms. McCrory represented herself in the Tax Court case.  As discussed below, she may have had an argument that she did not make.  It’s tough for everyone when the court creates precedent based on a one sided argument.


Ms. McCrory sent the IRS 21 separate claims for whistleblower awards in 2015.  Her claims were based on public records and alleged that the taxpayers about whom she provided information had underreported awards obtained in a litigation settlement.  She received from the IRS Whistleblower office a letter offering her an award if she agreed to accept the award in full settlement and waive her right to go to court.  The letter also offered a second option by which she would indicate disagreement with the proposed offer.  Instead of accepting the offer or indicating disagreement, she asked for access to the IRS administrative file in order to make a more informed decision.

This seemingly reasonable request pits her need for information against the requirement that the IRS keep taxpayer information confidential – a tension that exists regularly in whistleblower cases.  The IRS told her it could not provide the information she wanted, and she petitioned the Tax Court in response to the IRS letter denying her the right to information.  The letter denying her the right to information did not deny her whistleblower claim.

The IRS moved to dismiss her petition for lack of jurisdiction arguing that she filed the petition prematurely.  Essentially, the IRS argues that the Tax Court lacks jurisdiction to review its determination regarding the information she may see and even if at some point the Tax Court has jurisdiction over the issue of the information she can see, it lacks that jurisdiction prior to the time the IRS makes a formal determination regarding the amount of award she should receive, if any. As the Tax Court frames the case:

The sole issue for decision is whether the letter respondent sent to petitioner recommending a preliminary award under section 7623(a) constitutes a “determination” within the meaning of section 7623(b)(4).

The tricky thing about whistleblower cases is that the statute doesn’t say what action by the IRS constitutes a determination.  Unlike deficiency cases where the statute provides much more guidance regarding the “thing” that gives a taxpayer a ticket to the Tax Court, the whistleblower statute comes up short in this area.  The court notes:

[w]e have held that the name or label of a document does not control whether the document constitutes a determination” and that “our jurisdiction is established when the Commissioner issues a written notice that embodies a determination.” Cooper v. Commissioner, 135 T.C. 70, 75 (2010).

The Tax Court had not previously issued a specific opinion regarding the document the IRS calls a preliminary award recommendation and whether this letter could qualify as a basis for Tax Court jurisdiction.  In the Cooper case the court held that another letter that did not call itself a determination letter did provide a basis for jurisdiction. 

So, Ms. McCrory’s petition in the context of the whistleblower statute deserved a close look.  The court described her argument as follows:

Petitioner contends the preliminary letter embodied a “determination” because the letter: (1) requested that she waive her appeal rights; (2) did not indicate that the preliminary award amount would change; and (3) did not indicate that a subsequent determination would be issued.

In finding that the letter Ms. McCrory received did not serve as a determination of the type to provide it with jurisdiction, the court was not surprisingly influenced by the wording of the letter stating it was a preliminary award determination.  Even though the IRS may not have changed its mind had she checked the box declining the proffered settlement, the court found that another step needed to occur before the IRS had issued the type of determination needed to invoke its jurisdiction.  It noted that the sending of the preliminary award letter complied with the framework of the regulations under section 7623(a).

Ms. McCrory also requested that the court order the IRS to issue a determination so she could move forward and save her time and the court’s time in getting to a determination of the proper amount of her award.  The court declined to do this since it had no jurisdiction over the matter.  It said:

In the event we agree with respondent, as we have, petitioner alternatively asks that the Court either order respondent to issue a final decision or consider the preliminary award recommendation a final decision in the interests of judicial economy. As previously stated, the Court may exercise jurisdiction only to the extent authorized by Congress and is without authority to enlarge upon that statutory grant. Judge v. Commissioner, 88 T.C. at 1180-1181Naftel v. Commissioner, 85 T.C. at 529; see Phillips Petroleum Co. & Affiliated Subs. v. Commissioner, 92 T.C. at 888Section 7623(b)(4) authorizes this Court to exercise jurisdiction when a determination has been made. Kasper v. Commissioner, 137 T.C. at 41. Since we have concluded that respondent has not made a “determination”, we lack authority to enlarge upon that statutory grant by deeming the preliminary award recommendation to be a “determination” for purposes of our review. Likewise, we decline to order respondent to issue a final decision or to intervene in the whistleblower administrative process.

This portion of the opinion drew a comment from former frequent guest blogger Carl Smith.  Carl found it very disappointing to see this last sentence in a precedential T.C. opinion without a discussion of the All Writs Act.  The All Writs Act allows a supervising court to order an agency to act.  In a case years ago named Insinga, Judge Gustafson asked the parties to brief the applicability of the All Writs Act in a similar case.  In a PT post Carl wrote on the Tax Court’s Myers opinion, he discussed and linked to the order in Insinga.  Here’s from the order:

The amicus curiae (National Whistleblower Center) argues in the alternative that where an award determination has been unreasonably delayed, the Tax Court has jurisdiction–in light of § 7623(b)(4) and under § 706(1) of the Administrative Procedures Act (“APA”), 5 U.S.C. § 551 et seq.–to “compel agency action unlawfully withheld or unreasonably delayed”. Respondent counters that the APA itself confers no jurisdiction and that the mandamus statute (28 U.S.C. § 1361) by its terms gives jurisdiction only to “[t]he district courts”. Respondent is correct; but the “All Writs Act” (28 U.S.C. § 1651) applies to “all courts established by Act of Congress” (cf. 26 U.S.C. § 7441, establishing the U.S. Tax Court); and the U.S. Court of Appeals for the D.C. Circuit has held in Telecommunications Research and Action Center v. FCC, 750 F.2d 70, 75 (D.C. Cir. 1984) (“TRAC“), that, in view of the APA and the All Writs Act, “it is clear–and no party disputes this point–that” if a statute (there, 28 U.S.C. § 2342(1)) confers on a court exclusive jurisdiction to review a final agency order, then even before the final order has been issued, the court has “jurisdiction over claims of unreasonable [agency] delay”. (The D.C. Circuit would appear to be the default venue for any appeal in this case; see 26 U.S.C. § 7482(b)(1).)

We have not decided whether the reasoning in TRAC applies to the Tax Court and its jurisdiction under § 7623(b)(4). Nor have we decided whether, if the APA does not directly apply, this case nonetheless presents one of those instances in which the Tax Court, “in appropriate circumstances, borrow[s] principles of judicial review embodied in the APA.” Ewing v. Commissioner, 122 T.C. 32, 54 (2004) (Thornton, J., concurring).

We believe we ought not to reach those questions if we do not need to do so.

The issue in Insinga was rendered moot before Judge Gustafson ruled when the IRS issued a final determination letter. 

Maybe Ms. McCrory will consider doing a motion to reconsider the All Writs Act authority, though it is possible that the judge will still say he declined to issue an order, whether or not he had the power.  This may be an opportunity for someone in the Whistleblower bar to step in and assist a pro se petitioner on a matter that might have broader implications.  The opinion does not state that he lacks the power, though it is clearly implied by the sentences preceding the holding that discuss lack of power in other situations.