Tax Court calls for an answer from IRS whistleblower case

The United States Tax Court issued an order Tuesday that requires the Internal Revenue Service (IRS) to respond by September 24, 2012, to an amicus brief filed by the National Whistleblowers Center (NWC). We reported here on July 11, 2012, about the NWC “friend of the court” brief in Insinga v. Commissioner of Internal Revenue, Docket No. 4609-12W. The main issue is whether tax whistleblowers will have any remedy when the IRS Whistleblower Office drags its feet in issuing rewards to whistleblowers who helped the IRS collect $2 million or more.

Attorney Dean Zerbe, arguing for NWC, objected to the IRS practice of pocketing the money they can collect with the help of the whistleblower’s tip, and then becoming non-responsive when the whistleblower asks for the reward now required by federal law. The IRS cannot be allowed to “dine and dash,” Zerbe argues. The NWC brief argues that the Administrative Procedures Act (APA) applies to the IRS and authorizes the Tax Court to compel timely action on its legal mandates.

The IRS opposed the NWC request to file its amicus brief. The IRS argued that it is not subject to the APA, and the Court should not even read the NWC argument on the issue.

Now the Tax Court has accepted the NWC brief and ordered the IRS to respond. The Tax Court specifically asked the IRS to explain how it could be exempt from the APA when the Supreme Court specifically rejected the IRS claim of exemption just last year in Mayo Foundation v. United States, 131 S.Ct. 704, 713 (2011).

This order is a good sign that Tax Court can come a viable route for tax whistleblowers to recover the rewards due to them under law, but for which the IRS is dragging its feet. In a press release, Dean Zerbe said, “Tax whistleblowers should be heartened by the Tax Court’s actions.”