Tax Court Ruling: Landmark Victory for Whistleblowers

The IRS Whistleblower Program Works

August 4, 2016. Washington, D.C. 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 the IRS whistleblower program. 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.

Stephen M. Kohn, Kohn, Kohn and Colapinto, who was co-counsel for the whistleblowers stated, “It is extremely heartening to see that the Tax Court gave such a sweeping and broad finding in its decision. 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.”

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.

The Kohn firm co-counseled the case with Dean Zerbe. Both Zerbe and Kohn also are leading a four-year effort by the National Whistleblower Center to force the Department of Treasury to change its rule which currently excludes criminal penalties from the IRS reward program. These efforts included co-authoring the major analysis of the IRS whistleblower, which was published in Tax Notes and filed with the Secretary of Treasury.