As we have written about in the past, for the last few years IRS whistleblower awards under section 7623 have been subject to sequestration reductions of between 7.2% and 8.7% (currently 7.3% for fiscal year 2015 awards) pursuant to the Balanced Budget and Emergency Deficit Control Act. We believe these cuts are contrary to law, and furthermore make bad fiscal sense, much like cuts to the IRS enforcement budget. However, the budget that President Obama released today would put an end to these automatic across-the-board spending cuts. He said: “I’m not going to accept a budget that locks in sequestration going forward. It would be bad for our security, and bad for our growth.”
Now a budget proposal is pretty far from law, and with the Republicans in control of both chambers of Congress they are really calling the shots on the budget, but it is a good sign that an end to sequestration is on the table. We believe that the legality of sequestration cuts to whistleblower awards under section 7623 is currently being disputed in the US Tax Court, but it would be great if that issue became moot through legislation.