April 18, 2023 was Tax Day and whistleblower advocates took advantage of the day to draw attention to the IRS Whistleblower Program Improvement Act of 2023. The bipartisan bill, introduced on March 2, offers reforms to the IRS Whistleblower Program, which has been plagued by a number of issues over the past few years.
In a new National Law Review article, leading whistleblower attorney Stephen M. Kohn of Kohn, Kohn & Colapinto explains the need for the bill. He outlines the past successes of the IRS Whistleblower Program and the current crisis it is facing.
“By offering monetary awards to whistleblowers, the program has been immensely successful in incentivizing individuals with direct knowledge of large-scale tax fraud to come forward and cooperate with U.S. authorities,” Kohn writes. “In recent years, however, the program has been plagued by a number of issues, including massive delays, which have greatly undermined its efficacy.”
Kohn details the key provisions of the bill which would bolster the IRS Whistleblower Program: “In addition to addressing the debilitating delays, the bill takes aim at the tax whistleblower law’s lack of statutory anonymity for whistleblowers, the absence of de novo review for tax whistleblower award appeals, and the improper reduction of awards through budget sequestration.”
“An effective IRS Whistleblower Program is key to the efforts of the United States to hold wealthy tax cheats accountable to cut down on the tax gap,” Kohn writes in conclusion. “By addressing the statutory loopholes currently undermining the program, the IRS Whistleblower Improvement Act goes a long way in ensuring the program is effective.”
On Tax Day, the National Whistleblower Center (NWC) hosted a live panel discussion about the IRS and tax whistleblowers. After touching on a wide-range of topics, the panelists, NWC Executive Director Siri Nelson and Former SBSE IRS Commissioner Eric Hylton, discussed the importance of the IRS Whistleblower Improvement Act.
In particular, Hylton highlighted the institution of de novo review in award case appeals and the establishment of the presumption of anonymity as critical reforms offered by the bill. “With the de novo review, it allows you to bring in all the information and give the full overview of the case. As a taxpayer: you want that,” Hylton said. He further explained that “presumption of anonymity is a key factor because as I talk to whistleblowers they are constantly asking ‘can I remain anonymous?’”
“Hopefully this bipartisan bill will be passed. I think it will be great overall,” Hylton said, while Nelson voiced her support for the bill.
Another call for the passage of the IRS Whistleblower Improvement Act came in a NWC blog post written by Matthew Beddingfield, a Senior Associate at Zerbe, Miller, Fingeret, Frank & Jadav LLP. Beddingfield also drew attention to the role that increased funding for the IRS could play in bolstering the whistleblower program.
He notes that the IRS Whistleblower Program Improvement Act “would greatly improve a tax whistleblower’s ability to appeal IRS determinations they do not agree with, a core aspect of due process that has so far been absent from the program. The bill also aims to bring tax whistleblowers greater protections in terms of their identity and financial interests.”
“Even though the IRS Whistleblower Program is just a portion of the agency’s enforcement arm, it’s a vitally important one that has the potential to drastically shrink the tax gap,” Beddingfield notes. “This will only help the agency’s continued efforts to convince Congress that: more agency money, more government return.”
The IRS Whistleblower Improvement Act was introduced by Senators Chuck Grassley (R-IA), Ron Wyden (D-OR), Roger Wicker (R-MS) and Ben Cardin (D-MD). A House version of the bill was introduced by Representatives Mike Kelly (R-PA) and Mike Thompson (D-CA). The House version was sent to the Committee on Ways and Means and the Committee on the Budget while the Senate version was sent to the Finance Committee.