New IRS Whistleblower Rules Are Issued by U.S. Tax Court

One of the most meaningful improvements of the new IRS Whistleblower Program authorized by Congress in December 2006 is that IRS Whistleblowers have an enforceable right to a reward when they report significant tax violations. To enforce that right, tax whistleblowers can seek review by the U.S. Tax Court of award decisions.

This week, the United States Tax Court has proposed amendments to its Rules of Practice and Procedure regarding whistleblower award actions, which can be found at http://www.ustaxcourt.gov/press/060208.pdf. The IRS Whistleblower Office is expected to review the proposed Rules now and provide feedback to the Court.

The Tax Court also has invited public comments on the proposed amendments, to be received by July 31, 2008.

Excerpts of the Tax Court’s announcement of the new proposed Rules for IRS Whistleblower claims are below:

UNITED STATES TAX COURT WASHINGTON, D.C. 20217 June 2, 2008 PRESS RELEASE
Chief Judge John O. Colvin announced today that the United States Tax Court has proposed amendments to its Rules of Practice and Procedure regarding whistleblower award actions and electronic service. The Court has also proposed various conforming and miscellaneous amendments to its Rules and forms.
The proposed amendments are contained in the Notice attached to this press release and are available at the Tax Court’s Web site at www.ustaxcourt.gov.

Chief Judge Colvin also announced that the Tax Court invites public comment on the proposed amendments. Written comments must be received by July 31, 2008. Comments must be addressed to:

Robert R. Di Trolio Clerk of the Court U.S. Tax Court 400 2nd St., N.W., Room 111 Washington, D.C. 20217 UNITED STATES TAX COURT WASHINGTON, D.C. 20217
NOTICE OF PROPOSED AMENDMENTS TO RULES
Pursuant to section 7453 of the Internal Revenue Code as amended and Rule 1 of the Tax Court Rules of Practice and Procedure, the United States Tax Court hereby provides notice that it proposes the attached amendments to its Rules of Practice and Procedure and invites public comment thereon. Written comments must be received by July 31, 2008. Comments must be addressed to:

Robert R. Di Trolio Clerk of the Court U.S. Tax Court 400 2nd St., N.W., Room 111 Washington, D.C. 20217
The proposed amendments and explanations are as follows.

I. Whistleblower Awards
Introduction
In 2006, Congress amended section 7623 by adding new subsection (b), which authorizes the Whistleblower Office of the IRS to determine the amount of awards to whistleblowers based on a percentage of the tax collected. Section 7623(b)(4) confers jurisdiction on the Court over appeals of the award determinations, effective for determinations with respect to information provided on or after December 20, 2006. Accordingly,
it is proposed that Rules 13, 34, and 182 be amended and new Title XXXIII (Rules 340-344) be adopted to provide procedures for commencing a whistleblower award action.

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New Title XXXIII is added.

TITLE XXXIII WHISTLEBLOWER AWARD ACTIONS
Prefatory Note
The Rules of Practice and Procedure of the United States Tax Court are amended by adding a new Title XXXIII, relating to whistleblower award actions. This title has been added because of the enlargement of the Court’s jurisdiction by sec. 406 of the Tax Relief and Health Care Act of 2006, Pub. L. 109-432, 120 Stat. 2922. That section amended section 7623 by adding new subsection (b) to provide for awards to whistleblowers. Section 7623(b)(4) confers jurisdiction on the Court over appeals from determinations regarding awards under subsection (b)(1) through (b)(3).

Title XXXIII consists of the following five new Rules:
Rule 340–-General Rule 341–-Commencement of Whistleblower Award Action Rule 342–-Request for Place of Trial Rule 343-–Other Pleadings Rule 344–-Joinder of Issue in Whistleblower Award Actions
The Rules of Title XXXIII are effective as to whistleblower award actions commenced with respect to determinations regarding awards based on information provided on or after December 20,
2006.

New Rule 340 is added.
RULE 340. GENERAL (a) Applicability: The Rules of this Title XXXIII set forth the provisions that apply to whistleblower award actions under Code section 7623(b)(4). Except as otherwise provided in this Title, the other Rules of Practice and Procedure of the Court, to the extent pertinent, are applicable to such actions.
(b) Jurisdiction: The Court shall have jurisdiction of a whistleblower award action under this Title when the conditions of Code section 7623(b)(4) have been satisfied.
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Explanation It is proposed that new Rule 340 be adopted to provide for the general applicability of Title XXXIII and the jurisdiction of the Court regarding whistleblower award actions.
The Court’s Rules generally contemplate disposition on the administrative record for disclosure actions and declaratory judgment actions, pursuant to specific legislative guidance.
Without specific statutory authority or evidence of legislative intent establishing whether whistleblower award actions are to be decided on the administrative record, Title XXXIII as proposed follows the general procedures for deficiency and other types of actions before the Court.
New Rule 341 is added.
RULE 341. COMMENCEMENT OF WHISTLEBLOWER AWARD ACTION (a) Commencement of Action: A whistleblower award action under Code section 7623(b)(4) shall be commenced by filing a petition with the Court. See Rule 20, relating to commencement of case; Rule 22, relating to the place and manner of filing the petition; and Rule 32, regarding the form of pleadings.
(b) Content of Petition: A petition filed pursuant to this Rule shall be entitled “Petition for Whistleblower Award Action under Code Section 7623(b)(4)” and shall contain the following:
(1) The petitioner’s name, State of legal residence,
and mailing address, stated as of the date that the petition is filed.
(2) The date of the determination regarding an award under Code section 7623(b)(1), (2), or (3) by the Internal Revenue Service Whistleblower Office.
(3) Lettered statements explaining why the petitioner disagrees with the determination by the Internal Revenue Service Whistleblower Office.
(4) Lettered statements setting forth the facts upon which the petitioner relies to support the petitioner’s position.
(5) A prayer setting forth the relief sought by the petitioner.
(6) The signature, mailing address, and telephone number of each petitioner or each petitioner’s counsel, as well as counsel’s Tax Court bar number.
(7) As an attachment, a copy of the determination.
(c) Filing Fee: The fee for filing a petition for a whistleblower action shall be $60, payable at the time of filing.
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Explanation It is proposed that new Rule 341 be adopted to provide procedures for commencing a whistleblower award action.
Paragraph (b)(1) of new Rule 341 requires that the petition contain only the name, State of legal residence, and mailing address of an individual, as section 7623(b)(1) provides that a whistleblower award may be made to an individual, which would exclude awards to a trust, partnership, association, company, or corporation. See section 7701(a)(1).
Paragraph (b)(2) of new Rule 341 does not require that the petition contain the city and State of the Office making the determination (see, e.g., Rules 281(b)(2), 331(b)(2)), as section 406(b) through (d) of Pub. L. 109-432 provides for the establishment of only one Whistleblower Office.
New Rule 342 is added.
RULE 342. REQUEST FOR PLACE OF TRIAL At the time of filing a petition for a whistleblower award action, a request for place of trial shall be filed in accordance with Rule 140.
Explanation It is proposed that new Rule 342 be adopted to provide the procedure for requesting the place of trial of a whistleblower award action. The Rule reflects the general requirement under Rule 140(a).
New Rule 343 is added.
RULE 343. OTHER PLEADINGS (a) Answer: The Commissioner shall file an answer or shall move with respect to the petition within the periods specified in and in accordance with the provisions of Rule 36.
(b) Reply: For provisions relating to the filing of a reply, see Rule 37.
Explanation It is proposed that new Rule 343 be adopted to provide rules for filing answers and replies in whistleblower award actions.
The proposed Rule adopts the pleading procedures used in most types of actions before the Court, contained in Rules 36 and 37.
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New Rule 344 is added.
RULE 344. JOINDER OF ISSUE IN WHISTLEBLOWER AWARD ACTIONS A whistleblower award action under Code section 7623(b)(4)
shall be deemed at issue as provided by Rule 38.
Explanation It is proposed that new Rule 344 be adopted to provide for joinder of issue in whistleblower award actions.