Amendments to New IRS Whistleblower Law Considered

We have had many calls this week from potential clients in our IRS Whistleblower practice, probably because msn.com featured an article about the IRS Whistleblower program on Monday that linked to our whistleblower lawyer blog.

As I have explained to many whistleblower clients, the new regulations for the IRS Whistleblower Rewards Program are in the works, but have not been issued. We have been pursuing IRS Whistleblower claims under the new program and have found the IRS agents to be excited about it.

Adding to the mix for those seeking a whistleblower attorney is that Congress is considering amendments to the law that established the new IRS Whistleblower Program in December 2006. Among the possible changes/additions are a provision opening up the Whistleblower Program to more claims by setting a different threshold for the amount of money in question, which could allow more whistleblowers to qualify for a reward.

Another provision would appropriate funds for the IRS Whistleblower Office, some of which might help defray expenses incurred by the whistleblower’s legal representative. Yet another provision addresses the confidentialty of whistleblowers in Tax Court proceedings.

These proposed changes are part of HB 2, the “minimum wage” bill, which passed the Senate in February.

We will continue to keep up with any developments affecting the IRS Whistleblower Program, which we believe promises to be a great success. If you have any questions about the IRS Whistleblower program, feel free to email me here.

The current section of the proposed HB 2 that applies to the IRS Whistleblower Program is below:

H.R.2 Resolved, That the bill from the House of Representatives (H.R. 2) entitled `An Act to amend the Fair Labor Standards Act of 1938 to provide for an increase in the Federal minimum… (Engrossed Amendment as Agreed to by Senate)

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SEC. 233. MODIFICATIONS TO WHISTLEBLOWER REFORMS.

(a) Modification of Tax Threshold for Awards- Subparagraph (B) of section 7623(b)(5), as added by the Tax Relief and Health Care Act of 2006, is amended by striking `$2,000,000′ and inserting `$20,000′.

(b) Whistleblower Office-

(1) IN GENERAL- Section 7623 is amended by adding at the end the following new subsections:

`(c) Whistleblower Office-

`(1) IN GENERAL- There is established in the Internal Revenue Service an office to be known as the `Whistleblower Office’ which–

`(A) shall at all times operate at the direction of the Commissioner and coordinate and consult with other divisions in the Internal Revenue Service as directed by the Commissioner,

`(B) shall analyze information received from any individual described in subsection (b) and either investigate the matter itself or assign it to the appropriate Internal Revenue Service office,

`(C) shall monitor any action taken with respect to such matter,

`(D) shall inform such individual that it has accepted the individual’s information for further review,

`(E) may require such individual and any legal representative of such individual to not disclose any information so provided,

`(F) in its sole discretion, may ask for additional assistance from such individual or any legal representative of such individual, and
`(G) shall determine the amount to be awarded to such individual under subsection (b).

`(2) FUNDING FOR OFFICE- There is authorized to be appropriated $10,000,000 for each fiscal year for the Whistleblower Office. These funds shall be used to maintain the Whistleblower Office and also to reimburse other Internal Revenue Service offices for related costs, such as costs of investigation and collection.

`(3) REQUEST FOR ASSISTANCE-

`(A) IN GENERAL- Any assistance requested under paragraph (1)(F) shall be under the direction and control of the Whistleblower Office or the office assigned to investigate the matter under subparagraph (A). No individual or legal representative whose assistance is so requested may by reason of such request represent himself or herself as an employee of the Federal Government.

`(B) FUNDING OF ASSISTANCE- From the amounts available for expenditure under subsection (b), the Whistleblower Office may, with the agreement of the individual described in subsection (b), reimburse the costs incurred by any legal representative of such individual in providing assistance described in subparagraph (A).

`(d) Reports- The Secretary shall each year conduct a study and report to Congress on the use of this section, including–

`(1) an analysis of the use of this section during the preceding year and the results of such use, and
`(2) any legislative or administrative recommendations regarding the provisions of this section and its application.’.

(2) CONFORMING AMENDMENT- Section 406 of division A of the Tax Relief and Health Care Act of 2006 is amended by striking subsections (b) and (c).

(3) REPORT ON IMPLEMENTATION- Not later than 6 months after the date of the enactment of this Act, the Secretary of the Treasury shall submit to Congress a report on the establishment and operation of the Whistleblower Office under section 7623(c) of the Internal Revenue Code of 1986.

(c) Publicity of Award Appeals- Paragraph (4) of section 7623(b), as added by the Tax Relief and Health Care Act of 2006, is amended to read as follows:

`(4) APPEAL OF AWARD DETERMINATION-

`(A) IN GENERAL- Any determination regarding an award under paragraph (1), (2), or (3) 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).

`(B) PUBLICITY OF APPEALS- Notwithstanding sections 7458 and 7461, the Tax Court may, in order to preserve the anonymity, privacy, or confidentiality of any person under this subsection, provide by rules adopted under section 7453 that portions of filings, hearings, testimony, evidence, and reports in connection with proceedings under this subsection may be closed to the public or to inspection by the public.’.

(d) Effective Date-

(1) IN GENERAL- Except as provided in paragraph (2), the amendments made by this section shall apply to information provided on or after the date of the enactment of this Act.

(2) PUBLICITY OF AWARD APPEALS- The amendment made by subsection (c) shall take effect as if included in the amendments made by section 406 of the Tax Relief and Health Care Act of 2006.