Tax Court Win for Whistleblowers
As previously discussed in these summaries, the Tax Court in Whistleblower 21276-13W determined that collected proceeds includes amounts collected outside of Title 26 (the Internal Revenue Code). Since the August 3, 2016 opinion, the IRS filed a motion on September 2, 2016, requesting the Court to reconsider its opinion. Petitioners then filed their response on September 13, 2016. The Court then denied IRS' Motion for Reconsideration on December 20, 2016.
In the IRS' Motion for Reconsideration, the IRS stated that the basis of their motion was to resolve the inconsistency between the Court's opinion in Whistleblower 21276-13W and the Court's prior decision in Whistleblower 22716-13W (where the Court determined that under I.R.C. § 7623(b)(5)'s amounts in dispute determining additional amounts did not include penalties outside of Chapter 68 of Title 26). This inconsistency, as argued by the IRS, is a problem because how can cases that fail to meet the $2,000,000 threshold under I.R.C.§ 7623(b)(5) and which do not include the non-Title 26 penalties be different than cases that meet the "insignificant" $2,000,000 threshold which would include penalties previously excluded by I.R.C. § 7623(b)(5).
The IRS also makes the following points in its Motion for Reconsideration:
- IRS' position regarding collected proceeds is the best because collective proceeds are taxes, penalties, interest, additions to tax and additional amounts.
- Court improperly separates 7623(a) and 7623(b) programs as two separate programs. Instead, the IRS reads the 7623(a) restriction on payments being derived solely from amounts collected as equally applicable to 7623(a) and 7623(b) cases.
In response to the IRS' Motion, the Petitioners made the following points in their Reply:
- IRS fails to raise new arguments in its Motion to Reconsider.
- Despite IRS claiming an inconsistency exists with the Court's opinion in 21276-13W, the Court has explained exactly why its opinion did not contradict 22716-13W.
- IRS' inconsistency argument is disguising its real argument that it does not have access to the funds to pay the whistleblowers.
- Court's position in prior opinion are correct.
As stated above, the Court denied IRS' Motion for Reconsideration, so the Court opinion and the positions in that opinion are still the Court's interpretation of the law.