In Uncategorized on 11/22/2021 at 15:55

That’s what Herman J. Marino, 2021 T. C. Memo. 138, filed 11/22/21*, wants from Judge James S (“Big Jim”) Halpern. While IRS’ investigation and audit may have been less than brilliant, and the administrative record itself been insufficient to support IRS’ motion for summary J tossing Herman, Judge Big Jim isn’t buying it.

First, as to the deficient administrative record, “(R)ule 802 of the Federal Rules of Evidence generally prohibits the admission of hearsay. But those rules ‘apply [only] to proceedings in United States courts.’ Fed. R. Evid. 101. Thus, in determining petitioner’s eligibility for an award, the WBO was not barred from considering hearsay evidence. And in determining whether the administrative record supports the WBO’s denial of an award, we must consider the contents of that record without regard to whether it might include evidence that would be inadmissible as hearsay in a trial de novo. A court reviewing agency action for abuse of discretion must uphold the agency’s factual findings if they are ‘supported by substantial evidence’.”2021 T.C. Memo. 138, at p. 21. (Citations omitted). And Judge Big Jim finds the hearsay trustworthy and reliable.

Of course, Tax Court can’t order IRS to audit, investigate, or sue. All pore l’il ol’ Tax Court can do is see if the reward (or lack thereof) is based on substantial evidence, the  abuse-of-discretion standard.

Herman relies on the 2018 amendment to Section 7623, which added the parenthetical “(determined without regard to whether such proceeds are available to the Secretary).” Herman says that means he gets an award even if IRS got nothing. Herman is nothing if not inventive: he gets a simultaneous Taishoff “Oh, Please!” and a Taishoff “Good Try, Third Class.”

Alas, Judge Big Jim awards Herman only a brush-off. “…petitioner’s interpretation of section 7623(b)(1), as amended in 2018, is nonsensical. If a whistleblower’s entitlement to an award no longer depends on the collection of proceeds, how would the amount of the required award be determined? As a percentage of the proceeds that would have been collected had the IRS conducted an audit satisfactory to the whistleblower? Petitioner never explains.” 2021 T. C. Memo. 138, at p. 36.

There’s a lot here for practitioners who represent blowers, or for those seeking to enter the practice, that time and space limits prevent me from drilling down. To them I say, read and heed. And watch the administrative record: there’s a lot of room for wildcards and last-minute ben trovatos.

*Herman J Marino 2021 T C Memo 138 11 22 21



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