Tax Court Ruling: Landmark Victory for Whistleblowers

The IRS Whistleblower Program Works

August 4, 2016. Washington, D.C. Good news for tax whistleblowers – the Tax Court, in a landmark precedent setting ruling, made it clear that whistleblowers can receive award payments for criminal penalties and civil forfeitures – not just tax payments made under Title 26. The Tax Court opinion, 147 T.C. No. 4 – Whistleblower 21276-13W v. CIR (Aug. 3, 2016) held that for the purposes of the IRS whistleblower award program – “collected proceeds” includes criminal fines and civil forfeitures.

The U.S. Tax Court awarded $17.8 million to a pair of IRS whistleblowers in a decision that significantly expands the scope of what can be used to calculate the award in such cases. This ruling for the first time allows the whistleblowers to get a portion of criminal fines and civil forfeitures in addition to part of the taxes the government recouped because of information they provided.

Judge Julian Jacobs wrote the decision in which he discussed the term “collected proceeds.” Judge Jacobs wrote, “’collected proceeds’ is sweeping in scope,” paraphrasing the Court of Appeals he continued, “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.”

Dean Zerbe, Zerbe Fingeret Frank & Jadav, lead counsel for the whistleblowers in this case stated, “Let the bells ring. This is a tremendous win for whistleblowers – making it clear that whistleblowers who come forward with information about big-time tax cheats will get an award regardless of whether the government pursues the tax cheat civilly or criminally. The Tax Court decision puts out a huge “welcome mat” for whistleblowers who have information about tax crimes and illegal offshore accounts. Individuals with illegal offshore bank accounts should run not walk to come clean with the U.S. Government.”

Stephen M. Kohn, Kohn, Kohn and Colapinto, who was co-counsel for the whistleblowers in this case stated, “It is extremely heartening to see that the Tax Court gave such a sweeping and broad finding in its decision. There are no dark corners or uncertainties with the Tax Court’s decision today – which greatly clarifies the basis on which tax whistleblowers can receive an award. The Tax Court made the absolute right call on the law and on the policy. This is a win for whistleblowers and a win for honest taxpayers.”

Zerbe and Kohn stated: “We are especially pleased and heartened to have achieved this success for our clients — the whistleblowers. As the Court made clear in its earlier decision – this couple did all they could to help the U.S. government – including putting themselves at personal risk. It has been a long hard journey for them and we are almost as happy as they are with the Court’s decision. It has been an honor to represent them. This decision goes far in showing that the IRS whistleblower award program works – and should encourage other whistleblowers to come forward.”

Under the IRS whistleblower program, people who have knowledge of tax violations can file confidential claims with the IRS and get as much as 30% of what the government collects. This case is likely one of the five largest awards issued.

Along with Zerbe and Kohn, Bob Amsel of Ross Amsel & Raben of Miami, Jeremy Fingeret and associate Felipe Bohnet-Gomez, represented the whistleblowers.

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