Last week, Ferraro Law Firm partner, Scott Knott, spoke at the IRS’s public hearing on Proposed Treasury Regulations on the definition of “collected proceeds” in the context of paying whistleblower awards under section 7623.

Scott joined other practitioners in pointing out that the Proposed Regs are too narrow in scope and may prevent the IRS for paying awards that are otherwise authorized under the statute. As Scott noted, the current language “unduly ties the hands of the IRS Whistleblower Office.”

The tax press picked up on Scott’s message that the current language of the Reg unreasonably limits the scope of the statute and may unjustifiably shackle the IRS when it comes time to pay awards. Jeremiah Coder of Tax Notes Today, TNT 2011-10213 [PDF], highlighted Scott’s point that problems with the current wording are a “breadth issue.” Mr. Coder’s article reported that the other practitioners’ testimony echoed Scott’s message: the IRS needs to adopt a broader definition of “collected proceeds.” Similarly, CCH, CCH Federal Tax Day (May 11, 2011) [PDF], relayed Scott and the other practitioners’ message that the IRS needs to expand the scope of the definition of “collected proceeds.” The CCH article noted that whistleblower-favorable language will encourage more whistleblowers to come forward with information about tax evasion.
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PMTA 2010-60, Criminal Fines and Whistleblower Awards [PDF], is a line in the sand signaling that the IRS is willing to litigate whether criminal fines are properly included in “collected proceeds.”  The Proposed Treasury Regulations [PDF] are silent on the issue of both criminal fines and restitution payments.  However, the Internal Revenue Manual states, “Criminal