Last week Senator Charles Grassley (R-Iowa) wrote a letter to John Koskinen, former chairman of Freddie Mac, congratulating him on his nomination as the Commissioner of the Internal Revenue Service.  After congratulations were out of the way, Senator Grassley got right down to business by asking for Koskinen’s help in encouraging the IRS to use the “tools” it has been given to efficiently collect revenue.  The letter read like an offer to work as a team, with Grassley listing problem areas in IRS enforcement and asking Koskinen for his support, thoughts and feedback.  Specifically, Grassley emphasized his displeasure with the way the IRS has treated the private debt collectors program (PDC) and the IRS whistleblower program, asking Koskinen to reinstate the PDC and to “review the work and role of the IRS Whistleblower Office.”

In the letter, Grassley stated that “before increasing taxes on the millions of law-abiding Americans who voluntarily comply with the tax law, Treasury and IRS should make every effort to collect the billions of dollars in taxes that currently go uncollected.” To that point, Grassley’s frustration with the IRS and Treasury came through in the letter as he noted, “Over the past decade I have sought to provide the IRS with additional tools to track down tax cheats and collect funds through the enactment of the Private Debt Collection program and the expansion of the IRS whistleblower program.  Unfortunately, both programs have been fought every step of the way by some within Treasury and IRS who have an ideological disposition to oppose any program that seeks to utilize “private” or non-government resources to reduce the burden on the IRS.”

Grassley pointed out the success that the whistleblower program has had when it has been utilized by the IRS but said that “despite this success, many at the IRS, and especially Treasury and Chief Counsel have undermined the program and have discouraged whistleblowers from coming forward.” Grassley noted four problems: (1) payouts under the program are few and far between; (2) the IRS agents refuse to fully utilize the whistleblower’s knowledge and expertise; (3) whistleblowers “who put their whole career on the line frequently have to wait for years in the dark with no information as to whether or when the IRS will act on their claim”; and (4) Treasury is proposing regulations that will undercut the whistleblower program “with a shortsighted view that will save a penny today and lose the Treasury much more in the future due to discouraged whistleblowers not coming forward.”

Grassley pointed out that the Department of Justice has found success “to the tune of billions of dollars” that were recovered under the False Claims Act by working with whistleblowers and their representatives. He said that the IRS would find similar success by working with whistleblowers and their attorneys “if it would only get out of its own way.”  Grassley said that the fact that the IRS has delegated its authority to request whistleblower assistance solely to the IRS filed offices that have no understanding, guidance or support is “inexcusable.” Grassley even requested that the IRS implement a recognition program that would reward those IRS agents and examiners who work with whistleblowers to achieve “superior accomplishments.”

To finish up the letter, Grassley specifically asks Koskinen for several showings of support and follow-ups, including Koskinen’s commitment to affirm the Whistleblower Office’s authority to contract with whistleblowers and their representatives and to provide clear direction that contracting is “encouraged and should be a priority.”  Expressing the need for the IRS to reassure whistleblowers that they are valued and will be treated fairly, Grassley said that the proposed regulations would have the effect of discouraging whistleblowers and giving comfort to tax cheats. Grassley said “Time and time again the writers of the proposed regulation turn a blind eye to the plain meaning of the statute I wrote, the policy of the statute rewarding whistleblowers, and the precedence of the False Claims Act.”  Since the regulations would require Koskinen’s approval before made final, Grassley asks Koskinen to review the proposed regulations, Grassley’s correspondence with Treasury and the IRS on the matter, and the comments on the regulations by the leading whistleblower representatives.  Taking that concern a step further, Grassley asks Koskinen to provide him with his thoughts on the whistleblower program along with the steps that Koskinen intends to take to “ensure success is realized – particularly those steps you can take under your own authority such as improved communication with whistleblowers during the process – and your views on the proposed regulations – especially on the issues of “related action,” “collected proceeds,” and “planned and initiated.”

Clearly, Grassley’s frustration with the IRS and Treasury regarding the PDC and the whistleblower program will not be lost on Koskinen.  Grassley’s letter was not just a rant of everything that is wrong with the IRS and the whistleblower program, instead the letter is an invitation to improve the program and increase much needed revenue for the federal government.  What’s more, is that Grassley is giving the top IRS nominee a heads-up on whistleblower issues that will bring him success if they are solved.  Grassley is seeking Koskinen’s commitment to the tools and resources he put in place for the IRS but is also seeking his feedback and thoughts.  In this way, Grassley’s letter is largely a symbol of his support and commitment to the whistleblower program and he is simply asking for the same in return from Koskinen.  After all, as Grassley points out, “it is incumbent on the IRS to work smarter and utilize all the resources currently at its disposal.”

  • Bubba Shawn

    Unfortunately, the IRS chooses to kick IRS whistleblowers in the gut again by imposing a new 2014 sequester tax of 7.2% reduction on awards.

    Senator Grassley might be just like the rest of us by engaging in wishful thinking that the IRS values the very whistleblowers that acted in good faith that they would be treated fairly.

  • Linda Williams

    Effectively the IRS Whistleblower Program died sometime during the summer of 2013. ‘Death by a thousand cuts.’ Subject of numerous TIGTA investigations which never see the light of day and which never get acted on afterwards and numerous promises by IRS mangement that they will review and reform.

    It was great to hear from Senator Grassley after a 7 month silence and his letters are well intentioned and create hope, however he is alone in Congress without support when it comes to the moribund IRS whistleblower program.

    One unintended consequence of the IRS’s policy of slowly strangling the whistleblower program over the last 7 years is that leading whistleblower law firms are now refusing to take on more cases other than the easiest and largest whistleblower cases. This means any small or medium sized whistleblower cases will never see the light of day.

    What does the future hold……….the program will continue in a limited way…..long periods of silence punctuated with the odd big payout announcement, but for many of the existing 1500 odd whistleblowers disappointment awaits. Vastly smaller awards than expected or rejection after a long wait.

    Even at this late stage, 7 years into the program, it would be great if the leading Whistleblower attorneys Ferraro, Zerbe, Carr, Carmody, Pliske etc would get together pool some financial and intellectual resources and start some hard lobbying of Congress. Post budget crisis you might be surprised at the reception you get on the Hill and the positive results. Senator Grassley would certainly appreciate the help

  • Bubba Shawn

    Linda,

    As of 6/8/2012 the IRS Whistleblowers with claims numbered 1709. As of 12/10/2012 that number dropped to 1126. Those 583 7623(b) claims IRS whistleblowers were either mailed rejection letters by the WO or paid awards. During that six months, of those 583, 51 7623(b) claims that the SOL expired were either paid or rejected. The same number of 7623(b) claims -51- were either completed by Criminal investigations or disqualified from award consideration during those six months.

    All of that happened while Commissioner Miller time and again testified to Senators that he appreciated IRS Whistleblowers and the proposed final regulations were being written.