In Uncategorized on 02/22/2017 at 14:59

It’s not enough to disqualify a whistleblower if the info provided may be inadmissible on a trial. And if IRS keeps getting info from whistleblower after rejecting earlier info as “tainted”, does that let IRS off the Section 7623 hook?

No, says Judge Lauber. Here’s Whistleblower 23711-15W, filed 2/22/17.

Notwithstanding an initial “extensive and rigorous” grilling by CID after the Ogden Sunseteers scanned and sent them the info he gave, the whistleblower gets bounced, the Sunseteers producing a document from CID that claimed the info was “tainted,” but didn’t say how.

Answering IRS’ summary J motion, whistleblower claims “…’at various dates…, [he] supplied a substantial amount of updated information.’ Petitioners avers, without contradiction by respondent, that the IRS commenced ‘criminal and civil investigations of Target that resulted, ultimately, in the IRS collecting substantial revenue.’” Order, at p. 2.

“For a variety of reasons, we conclude that respondent’s motion for summary judgment must be denied. Respondent does not dispute petitioner’s averment that the IRS proceeded against Target with an administrative or judicial action described in section 7623(a). Assuming satisfaction of the statute’s other requirements, petitioner would thus be entitled to an award if the IRS action against Target was ‘based on information brought to the Secretary’s attention’ by petitioner. Sec. 7623(b)(1). We find that there exist material disputes of fact on this point.

“Respondent asserts that… the IRS did not use petitioner’s information to ‘further develop’ its investigation of Target because it determined that his information was ‘tainted.’ This assertion raises a number of questions, both legal and factual. Petitioner avers that his information was not in fact ‘tainted’; he presents two distinct arguments in support of that averment, neither of which respondent has addressed. Petitioner also avers that he continued to supply the IRS with updated information ‘at various dates…’; this appears to create a factual dispute in light of respondent’s assertion that the IRS did not use petitioner’s information…. And even if the IRS did not use petitioner’s information to ‘further develop’ its investigation…, there is a material dispute of fact as to whether any IRS action against Target was nevertheless ‘based on information’ that petitioner ‘brought to the Secretary’s attention’….” Order, at pp. 2-3.

And Section 7623 says nothing about whether the information was admissible on a trial, privileged or illegally obtained.

“Section 7623(b)(3) provides that the Secretary may reduce or deny an award in certain circumstances, i.e., if the whistleblower ‘planned or initiated the actions’ that led to the tax underpayment or ‘is convicted of criminal conduct arising from’ such activity. The statute does not list the provision of privileged or ‘tainted’ information as a basis for denying an award, and respondent has cited no other authority for denying an award on this basis. It is entirely possible that information which would not constitute admissible evidence at trial–hearsay, for example—may nevertheless be ‘used’ by the Secretary in the course of conducting an investigation. Without a clearer understanding of the legal theory upon which respondent is relying, and the authority for and scope of that theory, we could not find that respondent is entitled to judgment ‘as a matter of law.’ Rule 121(b).” Order, at p. 3.

And the whistleblower gets a break.

“The IRS has not disputed that it took action against and collected proceeds from Target, and we find that there exist material disputes of fact as to whether such action was ‘based on information brought to the Secretary’s attention’ by petitioner. Sec. 7623(b)(1). Given that the very facts that petitioner may need to prove his case are in the sole possession of respondent, petitioner will be entitled to discovery that will aid in resolving these factual disputes. See W.L. Gore & Associates, Inc. v. Commissioner, T.C. Memo. 1995-96; Rule 121(e).” Order, at p. 3.

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