The Record Rule in Tax Court Whistleblower Proceedings

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The Tax Court’s memorandum opinion in Neal v Commissioner highlights some of the unique aspects of whistleblower cases, including whether Tax Court should supplement the administrative record when there is a claim that the record is deficient. 

To set the stage, I include the language from the syllabus to the opinion:


P [the petitioner] was a consultant who worked for target (“T”) and, at T’s request, assembled information to give to an IRS agent who conducted an audit. P left T in 2012, and in 2014 he submitted to R’s Whistleblower Office (“WBO”) a Form 211, “Application for Award for Original Information”, making allegations of tax issues concerning T. The WBO determined that an audit of T’s returns was already underway and that the same issue that P raised in his Form 211 in 2014 had been raised in another individual’s Form 211 that had been previously submitted in 2010 and had been forwarded to the agent. The WBO did not forward P’s Form 211 to the agent and denied P’s claim for an award on the grounds that “the information you provided did not result in the collection of any proceeds”. R made adjustments to T’s liability and collected tax. P filed a petition in the Tax Court seeking review of the WBO’s denial of an award. 

In other words, the WBO denied the award because it found that someone else had beaten Mr. Neal to the punch. Neal appealed the determination in Tax Court. The IRS moved for summary judgment based on the certified administrative record, as it argued that the earlier whistleblowing meant that with respect to Neal “no administrative or judicial action occurred and no proceeds were collected as a result of information provided in the claim.”

Neal disagreed with the facts and information in the record. He alleged that the record 1) omitted information he had provided to the agent and 2) failed to show that the WBO forwarded his Form 211 to the agent. Neal claimed to have played a prominent role with the examining agent and audit of the target even though the record did not corroborate that.

In deficiency cases, the Tax Court generally takes in evidence on a de novo basis. Not so in whistleblower cases.  As a refresher, in Kasper v Commissioner the Tax Court held that the scope of review in whistleblower cases is subject to the record rule and that the standard of review is abuse of discretion. (For my post on Kasper and more on standard and scope of review see Tax Court Decides Scope and Standard of Review in Whistleblower Cases.)

While the Tax Court is generally bound to the record, that does not mean that the Tax Court is obligated to accept what the IRS provides as the certified record. For example in Van Bemmelen v. Commissioner, the Tax Court noted that in a whistleblower case an administrative record may be “supplemented” in one of two ways:

either by (1) including evidence that should have been properly a part of the administrative record but was excluded by the agency, or (2) adding extrajudicial evidence that was not initially before the agency but the party believes should nonetheless be included in the administrative record. [citations omitted]

In Neal, the focus was on the first way, as Neal claimed that the IRS failed to include in the record relevant information pertaining to the audit and Neal’s role in eventually leading to collected proceeds from the target.  The Neal opinion is important as it highlights that an allegation that the record is inadequate is met with a presumption of administrative regularity. That means that “[a]bsent a substantial showing made with clear evidence to the contrary” [as per the Van Bemmelen case] unsupported allegations will not be enough to warrant supplementing the record.

In Neal, the Tax Court held an evidentiary hearing to resolve the challenge to the sufficiency of the administrative record.  The hearing failed to generate the facts needed for Neal to meet the bar of a “substantial showing” with “clear evidence”. For example, the IRS’s examining agent credibly testified that he did  “not ever see Mr. Neal’s Form 211, that he did not recall ever making any information requests of Mr. Neal, that he did not recall ever receiving any documents from Mr. Neal, and that he did not remember ever seeing Mr. Neal before the day of trial.” 

The Neal opinion is also interesting in that it further applies and refines the summary judgment standard in whistleblower cases, and it discusses the distinction in these cases from typical deficiency cases where the parties and the court are not similarly constrained by the record below:

[I]n a “record rule” whistleblower case there will not be a trial on the merits. In such a case involving review of final agency action under the APA, summary judgment serves as a mechanism for deciding, as a matter of law, whether the agency action is supported by the administrative record and is not arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law. 

In Neal, the distinction between the rationales for denying the government’s summary judgment motion did not matter:

That distinction (denying the motion where the record shows a dispute of fact versus denying the motion where the record fails to support the conclusion) does not affect the outcome in this case since, as we explain below, the administrative record does not reflect any dispute of fact as to, nor any lack of support for, the WBO’s determination.


In A Legislative History of the Modern Tax Whistleblower Program [$], an article that came out today in Tax Notes, Dean Zerbe argues that the Tax Court’s approach to review in whistleblower cases is wrong as a matter of law. Dean was formerly chief investigative counsel and tax counsel for the Senate Finance Committee. In that capacity he was the lead counsel responsible for drafting section 7623(b), the mandatory whistleblower award provision. He believes that the legislative history supports a finding that the standard of review is de novo (which would allow the Tax Court to conduct a trial and the parties to make their own record in court). In the article Dean states that Chief Counsel and the Tax Court failed to consider that history in Kasper, which, as he notes, involved a pro se taxpayer who failed to fully brief the issue. Keith has suggested that when there are pro se cases that may trigger precedential opinions on issues, the Tax Court should have a process in place to ensure amicus involvement. The issues in those cases deserve full briefing, and there are many important Tax Court opinions involving pro se petitioners.

As the Tax Court hears more whistleblower appeals it will confront many thorny issues surrounding the adequacy of the record.  The record rule, and its exceptions, is a more familiar issue for other courts used to a constrained review of administrative agency actions.  In addition, it is possible that there will be challenges to the standard of review and record rule in circuit courts, as Kasper may not be the last word on that issue. 

Avatar photo About Leslie Book

Professor Book is a Professor of Law at the Villanova University Charles Widger School of Law.


  1. bryan camp says

    Good post, Les. Helping folks understand the record “rule” is not so much a rule as it is a presumption is really important and this post does a good job explaining how this case illustrates that point.

  2. Robert Kantowitz says

    The IRS Whistleblower program is, like others, necessarily, fraught with difficulty and contradictions. Start with the proposition that we do not want our friends, neighbors and colleagues to be like the East German Stasi spying on us and each other, and yet the WB program relies on exactly that. To make it more complex and uncertain, in at least one case a court in NY refused to allow a lawyer an award on the basis that by submitting WB information he had breached his duty to the client, and yet it is often the lawyers who will me best able to spot illegality. Few individuals, without being very dissatisfied or disgruntled, will turn others in, especially weighing the social and professional ostracism against the long time and low likelihood of ever collecting a dime, let alone enough money to “walk away.” Any rational individual has to realize that a WB filing may be discovered by the “target” long before any resolution. And then there are the impediments that the IRS throws up, including how long things drag out, lack of feedback from the IRS, impossibility of forcing the IRS to pursue a case and occasional stretched reasoning in the IRS as to why not to pay. For example, if the program is to work, then WBs should not be in a winner-take-all race to file 211s; instead, all that come in within a reasonable time of each other should be aggregated, even if the later ones do not have additional material details. Otherwise, a would-be WB is risking a lot in filing a 211 that might be rejected only because someone else filed first, and conversely, the IRS could deny the first to file any award on the ground that his information came to the IRS’s attention without his efforts shortly thereafter so his filing made no impact.

    With due respect to Mr. Zerbe and to the “successes” of the program, it may be doing more harm than good, and I would like to see it eliminated, or at least cut back to cover only amounts in excess of, say, $25mm or systemic underpayment by an entire industry or logical grouping of taxpayers, so that it does not engender reporting by an individual specifically of one other taxpayer with which he has had a falling out. And if the program remains, the IRS should be required to give a notice to a filer, within say 90 days, as to whether they will proceed,

    (And protections of WBs from retaliation should remain in place and possibly be strengthened in light of the Somers case.)

    • Kenneth H. Ryesky says

      “And then there are the impediments that the IRS throws up, including … …”

      To which might be added that amidst all of the lack of transparency and the IRS’s wiggle room for arbitrary caprice, there is the fear, with some justification, that blowing the whistle might possibly increase the odds of the IRS auditing the whistleblower himself/herself.

  3. I reported the practice of misclassifiation by a huge multinational bank, which includes my own case. I did so via telephone back in 2006. Not only haven’t I heard anything but my taxes were scrutinized and I am in litigation, defending myself vs. the IRS/DoJ. When I asked why this was happening to me, I was told that I am “the low hanging fruit”. 16k later, I am still fighting back.

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