The NWC  releases today an extensive commentary that was written by myself and Steve Kohn (with a huge assist from Felipe Bohnet-Gomez) regarding the Treasury Department’s IRS whistleblower reward regs – specifically on the issue of the Treasury’s narrow interpretation of “collected proceeds.”

“Collected proceeds”  — two little words — the definition of which could make a big difference in the success of the IRS whistleblower program going after tax cheats (especially those with illegal offshore accounts).   The NWC commentary provides chapter and verse to the finding that the Treasury and IRS are ignoring the plain language of the whistleblower award statute (Section 7623 of title 26) as well as the history, structure and context of the legislation in seeking thorough regulations to dramatically cut back when a tax whistleblower can get an award.

What is the issue? –
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By Dean Zerbe, Advisor to NWC and Attorney at Zerbe, Fingeret, Frank & Jadav.

Dean Zerbe

Tax Court in a recent decision – “Whistleblower 10949-13W v. Commissioner of Internal Revenue” – TC Memo 2014-106 (June 4, 2014) made an important ruling favorable to tax whistleblowers (disclosure:  I am counsel for the whistleblower on this case and also benefitted mightily from the work of my colleague Felipe Bohnet-Gomez).  Key is that the Tax Court rejected the IRS argument which at its core is that a whistleblower can’t get an award if the IRS was already aware of the tax issues of the taxpayer.  The Tax Court made clear that if the IRS uses information (information that is material and not just confirming details) provided by the whistleblower in proceeding against a taxpayer (even where the IRS is already aware of the tax issues of the taxpayer) then the whistleblower is entitled to judicial review of an award (ie the whistleblower is potentially eligible for an award under the IRS whistleblower program – Section 7623(b) of the tax code).  The critical statement from the Tax Court is:
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