Today the Tax Court issued an opinion, Whistleblower 4496-15W v. Commissioner of Internal Revenue, granting the IRS’s motion for summary judgement. In this case, the informant had received a preliminary award determination for an award of $2,954,933. Congratulation to the informant in this case on the receipt of an award. The award was computed as follows in the Summary Report, which is attached to the Preliminary Award Determination letter:
- Tax, Penalties, interest, and other amounts collected based on information provided by Whistleblower: $14,489,227
- Recommended Award Percentage: 22%
- Collected proceeds (Line 1) x recommended award percent (Line 2): $3,187,630
- Budget Control Act reduction (Line 3 amount x 7.3 percent): $232,697
- Award after Budget Control Act Reduction (Line 3 less Line 4): $2,954,933
The informant in this case ultimately chose to accept the award amount in the preliminary award recommendation by checking the box captioned:
I agree with the preliminary award recommendation and accept it as the award determination. I waive all of my administrative and judicial appeal rights with respect to the award determination, including my right to petition the United States Tax Court.
The petitioner made this choice after his counsel consulted with the IRS for options of receiving the award but keeping the option to appeal just the Budget Control Act Reduction (more commonly referred to as the “sequester cut”). The IRS Whistleblower Office processed the paperwork and sent the informant a check for $2,135,826 ($2,954,933 – $819,107 of withheld taxes). Within 30 days of receiving the check the informant filed a petition with the Tax Court.
The IRS filed a motion to dismiss for lack of jurisdiction, which the Court found that it had because the petition was timely filed within 30 days of the IRS making an award determination in this case. The motion also urged the Court to dismiss because the petitioner had agreed to waive their right to appeal the award when they accepted the preliminary award recommendation. The Court treated the acceptance of the preliminary award recommendation as a settlement where the right to further administrative or judicial appeal has been waived. The Court pointed to the fact that the informant could have elected not to accept the award and when a final award determination was made by the IRS Whistleblower Office, they could have appealed to the Tax Court then. However, this would have delayed the receipt of the award.