Anonymity of a Whistleblower in Tax Court

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One of the most often asked question a potential whistleblower has is: Will the IRS keep my name confidential?  In a prior blog, we discussed the IRS’ effort to protect the whistleblower’s identity.  See Treas. Reg. § 301.7623-1(e) and the IRS’ Statement on Confidentiality.

However, when appealing an award determination (including a denial or rejection) of a whistleblower case in the United States Tax Court, the issue of proceeding anonymously is one that must be addressed when the whistleblower files his/her petition in the United States Tax Court pursuant to I.R.C. § 7623(b)(4). 

Note: The United States Tax Court Rules do not provide that a whistleblower to automatically proceed anonymously, despite the representations that were made by the IRS when the Claim was filed.  Instead, the Court requires that the petitioner set forth a sufficient fact specific basis for anonymity.  See Tax Court Rule 345.  In fact, the Court will only permit a petitioner to proceed anonymously, “if the whistleblower presents a sufficient showing of potential harm that outweighs counterbalancing societal interest in knowing the whistleblower’s identity.”  See Whistleblower 12568-16W v. Commissioner, 148 T.C. No. 7 (March 22, 2017).

At this time, the Court has only published written opinions on the issue of anonymity in six reported cases, as summarized below:

  1. In Whistleblower 14106-10W v. Commissioner, 137 T.C.183 (2014), the Court considered the claim of a whistleblower who feared that professional stigma, retaliation, and economic distress would result from the disclosure of his identity because the whistleblower provided information to the IRS concerning his former employer’s tax underpayments.  The Court concluded that given the fact that the whistleblower acquired the information in the normal course of employment and was “privy to internal deliberations and communications regarding the events that allegedly gave rise to the underpayment,” the Court granted the whistleblower’s motion because revealing the whistleblower’s identity would “not only invade the whistleblower's legitimate privacy interest as a confidential informant but would likely cause severe damage to his standing in the professional community that provided his customary source of livelihood and could well jeopardize his employment.”  Id., Whistleblower 14106-10W, 137 T.C. at 203-204.  The Court also concluded that disposing of the case did not depend on the whistleblower’s identity and that the public’s interest in knowing the whistleblower’s identity was relatively weak.  Id., Whistleblower 14106-10W, 137 T.C. at 205.

  2. In Whistleblower 10949-13W v. Commissioner, T.C. Memo. 2014-94 (2017), the Court concluded that the whistleblower’s claims of threats of physical force or harm from the taxpayers involved in organized crime and terrorism, as substantiated by the U.S. Department of Justice attorneys, merited granting the whistleblower anonymity and outweighed the societal interest in knowing the whistleblower’s name.  Id., Whistleblower 10949-13W, T.C. Memo. 2014-94 at *6.

  3. In Whistleblower 11332-13W v. Commissioner, T.C. Memo. 2014-92 (2014), the Court concluded that when the whistleblower raised concerns over the target taxpayer’s tax structure, the target taxpayer used physical force and armed men to threaten and intimidate the whistleblower from disclosing the transaction and that protecting against the threat of physical violence and death to the whistleblower exceeded the societal interest in knowing the whistleblower’s identity. Id., Whistleblower 11332-13W, T.C. Memo. 2014-92 at *12.

  4. In Whistleblower 13412-12W v. Commissioner, T.C. Memo. 2014-93 (2014), the Court concluded that the whistleblower’s allegation of financial retaliation (loss of pension benefits), social and professional sigma and economic duress outweighed the societal interest in knowing the whistleblower’s identity.  Id., Whistleblower 13412-12W, T.C. Memo. 2014-93 at *6.

  5. In Whistleblower 12568-16W v. Commissioner, 148 T.C. No. 7 (2017), the Court concluded that in the early stages of a whistleblower case, the societal interest in knowing the whistleblower’s identity was weak, especially when the whistleblower alleged that the whistleblower learned of the fraudulent actions of the taxpayer through his prior employment by an entity related to the target taxpayer, and where the whistleblower also alleged: possible retaliation against the whistleblower and his family, possibly resulting in physical harm; professional and personal ostracism; economic loss; and danger to his family, warranted granting anonymity to the whistleblower until the balancing of the factors changed as the case progressed.  Id., Whistleblower 12568-16W v. Commissioner, 148 T.C. No. 7, Slip opinion pgs. 4-6, 9.

  6. In Whistleblower 14377-16W v. Commissioner, 148 T.C. No. 25 (2017), the Court concluded that the whistleblower, relying on only publicly available information, and a “serial filer” (11 cases before the Court, involving 50 taxpayers; and 4 cases before the IRS, involving 6 taxpayers), did not provide enough of a factual basis to overcome the societal interest in knowing the whistleblower’s identity.  Id., Whistleblower 14377-16W, 148 T.C. No. 25, Slip Opinion pg. 16.

Accordingly, the Tax Court appears to grant anonymity to a petitioner when there appears to be physical harm or the threat of physical harm.  The Court will tend to balance the harm in favor of a petitioner proceeding anonymously if the petitioner can show personal and professional ostracism, economic loss.  The alleged harm must have some reasonable cognizable (i.e., tangible) effect on the professional reputation, economic livelihood or personal reputation of the petitioner.  Simply put, it cannot just be only a perceived harm in the petitioner’s mind but must be more tangible than perception.   Without this showing, the Court is unlikely to permit the petitioner to file his/her petition anonymously.

This area of the law is still developing.  However, In considering whether to appeal your whistleblower claim, you should consider the following:

  1. Court will not necessarily grant anonymity to a serial filer of whistleblower claims.  This means if a petitioner has multiple claims before the IRS based on publicly available information (i.e., not obtained confidentially) then the harm to the whistleblower’s identity is not great enough to justify proceeding anonymously.

  2. The IRS has also challenged a whistleblower’s request to proceed anonymously under the doctrine of unclean hands.  The doctrine of unclean hands is the legal doctrine that a person can not avail himself or herself of protections of the law if the person violated the law. 

Whether to proceed anonymously when litigating your case against the IRS before the United States Tax Court is a complicated, fact intensive inquiry that should be explored with your experienced counsel before filing your petition with the United States Tax Court .If you have inquiries or need representation in the United States Tax Court, please contact us at Tax Whistleblower Law Firm to discuss your options.