The new IRS Whistleblower Rewards Program continues to take shape, as the IRS’s Chief Counsel has advised IRS employees on the contacts they may have with certain whistleblowers or “informants.”
The new IRS Whistleblower Program for tax whistleblowers is an exciting development. It has brought together a team of extremely qualified professionals at the IRS, and has provided them the legal means to create an effective whistleblower program.
This Notice (CC-2008-011) addresses what contacts IRS employees may have with (1) informants with information about their current employer; and (2) informants who act as a taxpayer’s representative in an IRS examination or other IRS matter.
The IRS’s dealings with whistleblower or informants can present sensitive issues of privilege and confidentiality of information, as our whistleblower lawyer blog has discussed previously (and as I have discussed in a panel discussion last Fall with IRS Whistleblower Office Director Stephen Whitlock.)
This Notice from the IRS Chief Counsel’s Office recognizes the need to protect “privilege issues that may be present when an informant is a current employee and/or the taxpayer’s representative. It should be assumed that a current employee or a taxpayer’s representative has access to information that may be privileged and there has been no affirmative waiver by the taxpayer of applicable privileges. The use of potentially privileged information by the Service can also have the same effect of tainting an issue or an entire case.”
The IRS Notice reiterates the “one-bite” rule that permits the government to use information from a private party, “even if the private party obtained the information in an illicit or illegal manner as long as the government is a passive recipient of the information and did not encourage or acquiesce in the private party’s conduct.” This “one-bite” rule is derived from a 1921 Supreme Court decision, Burdeau v. McDowell, 256 U.S. 465 (1921).
In the same Notice, the IRS Chief Counsel also has emphasized that the IRS will not allow the taxpayer’s representative in an IRS proceeding to provide information as an informant, for obvious reasons:
“Any information provided by the taxpayer’s representative in connection with an overture to become an informant cannot be used by Service or Counsel employees in any matter concerning the taxpayer (or related taxpayers). It will be the responsibility of the informant to attempt to explain the reason for being excluded from the matter as the taxpayer’s representative under these circumstances. In addition, Service and Counsel employees should have no further dealings or contact with, or receive any further information from, the informant as an informant.”
We congratulate the IRS on its continued success in refining the new tax whistleblower program! You may read the Notice at https://www.irs.gov/pub/irs-ccdm/cc-2008-011.pdf.