In Uncategorized on 08/03/2016 at 18:02

His Honor Big Julie, Judge Julian I Jacobs (hereinafter HHBJJJIJ) is playing the old UK party game, and the big winner is Whistleblower 21276-13W, 147 T. C. 4, filed 8/3/16.

You remember Whistleblower 21276-13W, right? If not, read my blogpost “Sunset in Ogden,” 6/2/15.

Well, blower and Mrs. blower are back. And IRS, in a burst of magnanimity, concedes that blower and Mrs. blower are entitled to 24% of collected proceeds.

But the dude and friends went down criminally as well as civilly, and coughed up “$74,131,694 in tax restitution, a criminal fine, and civil forfeitures to the Government under 18 U.S.C. sec 3571.” 147 T. C. 4, at p. 4.

IRS will only go for 24% of the $20 million piece of the $74 million-plus that was tax restitution. Blower and Mrs. Blower want 24% of the whole enchilada.

It’s all about Section 7623(b). Both IRS and the blowers claim the language is clear, and the post-2014 regulations don’t apply, as the blowers put in their claim before.

Some versions of clear language is clearer than others.

“The language of section 7623(b)(1) is plain. And ‘[w]here * * * the statute’s language is plain, “the sole function of the courts is to enforce it according to its terms.”’ We therefore must ‘give effect to the will of Congress, and where its will has been expressed in reasonably plain terms, ‘that language must ordinarily be regarded as conclusive.’” 147 T.C. 4, at pp. 10-11. (Citations omitted).

Section 7623 is expansive, so whatever IRS does to grab money from dodgers and evaders is up for grabs. But the statute doesn’t define what “collected proceeds” might be. So HHBJJJIJ goes for plain meaning.

Well, although HHBJJJIJ is careful that interpreting legislation does not become creating legislation, he decides that “proceeds” means more than just cash, and “collected” means whatever you got.

“We are leery of arbitrarily limiting the meaning of an expansive and general term such as ‘collected proceeds’. In drafting section 7623(b)(1), Congress could have provided that the whistleblower’s award is to be based on taxes and other amounts assessed and collected by the IRS under title 26. But it did not. Instead, Congress chose to use a sweeping term ‘collected proceeds’ as the basis of the award. The context of the statute in which the term ‘collected proceeds’ is used reinforces our conclusion. Congress revealed its intent that the mandatory whistleblower program be an expansive rewards program by including in section 7623(b)(1) other broad and sweeping terms such as ‘any administrative or judicial action’, ‘any related actions’, and ‘any settlement in response to such action.’” 147 T. C. 4, at p. 14.

“Respondent [IRS] claims the phrase ‘detecting and bringing to trial and punishment persons guilty of violating the internal revenue laws’, as used in section 7623(a)(2), is essentially synonymous with the phrase ‘detecting underpayments of tax’, as used in section 7623(a)(1), and that both phrases refer to taxes assessed and collected under a provision of title 26. Consequently, according to respondent, only amounts assessed and collected under a provision of title 26 may be used in funding the award to a whistleblower.” 147 T. C. 4, at pp. 14-15.

That doesn’t fly. Criminal offenses under Title 18 are mentioned in Title 26.

“We find the reference in section 6531(8) to 18 U.S.C. sec. 371 to be especially illuminating inasmuch as the targeted taxpayer pleaded guilty to conspiracy to defraud the IRS, file false Federal income tax returns, and evade Federal income tax, in violation of 18 U.S.C. sec. 371.  Finally, the phrase ‘internal revenue laws’ dates from the earliest version of the whistleblower statute enacted in 1867. At that time, the modern title 26 did not exist; internal revenue laws meant all revenue laws. We think it erroneous to impose a post facto restriction on the meaning of the phrase not intended by Congress when it enacted the legislation. In sum, the phrase ‘internal revenue laws’ is not limited to those laws codified in title 26.” 147 T. C. 4, at pp. 17-18. (Footnote omitted).

IRS’ last argument is that “including” doesn’t mean “including.”

This gets the Tax Court equivalent of a Taishoff “Oh please.”

There’s no conflict with the case I blogged in the abovecited blogpost. FBAR penalties only exist in Title 31.

“In sum, we herein hold that the phrase ‘collected proceeds’ is sweeping in scope and is not limited to amounts assessed and collected under title 26. To paraphrase the Court of Appeals: Congress’ not supplementing the comprehensive phrase ‘collected proceeds’ with an exclamatory ‘and we mean all proceeds collected’ does not lessen the force of the statute’s plain language.” 147 T. C. 4, at pp. 23-24.

Section 7623(a) is discretionary; Section 7623(b) is mandatory. IRS tries to conflate these; HHBJJJIJ deflates IRS’ arguments.

Blower and Mrs. blower hit the jackpot.

Footnote- I want to give a Taishoff “Good Job, First Class” to blower’s and Mrs. blower’s counsel, but it must be an anonymous award, because HHBJJJIJ has sealed counsel’s identity to protect the innocent.


  1. […] Taishoff, DARES OR FORFEITS. What is the base when the IRS has to pay a whistleblower?  “Section 7623 is expansive, so […]


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