Lee Martin, Director IRS Whistleblower Office: Guest Speaker at TWLF's Attorneys Conference Call

On May 11, 2016, the Tax Whistleblower Law Firm held its bi-monthly conference call between tax whistleblower attorneys.  During this conference call, Lee Martin, the Director of the IRS Whistleblower Office, along with his representative from the IRS Chief Counsel, were in attendance and answered questions from the tax whistleblower attorneys as presented by Tom Pliske.

Some highlights of Director Martin’s responses are as follows:

• Director Martin views his role is to pay awards and make the whistleblower program successful.
• Director Martin stated that he was available to review a whistleblower case if a whistleblower or attorney was not satisfied with the outcome of the IRS’ determination. In fact, he encouraged whistleblowers and their representatives to contact him to review their case if there is a disagreement between the whistleblower and their representative and the IRS determination.
• Director Martin anticipated paying more awards in fiscal year 2016.
• Director Martin mentioned that his office is working with the IRS Congressional liaison to prepare legislation that would: a) create legal protections for whistleblowers and b) would increase protections for taxpayers against whistleblowers using the taxpayers’ information against them.
• Director Martin also stated that while a point system for differentiating whistleblower cases that are vetted by attorneys may sound like a good idea, pragmatically speaking he does not see that it is currently a possibility.  He stated that even though cases are vetted by attorneys, the cases still end up with the Whistleblower Office; and his job is to process all cases regardless if the claims have been vetted by an attorney.
• Director Martin stated that the de-briefing timelines and determination letter processing timelines in former Deputy Commissioner Miller’s and Deputy Commissioner Dalrymple’s guidelines are targets but are not set in stone.
• Director Martin commented that he and the IRS whistleblower program have the full support of Commissioner Koskinen.  He also stated that there were no advantages to having the IRS whistleblower program as an independent from IRS.  Director Martin also clarified that he maintains independent autonomy over whistleblower office and does not report to a board within the IRS to make decisions or to conduct and administrative appeal.
• Director Martin stated that the Informant Claims Examination (“ICE”) unit is moving back to SBSE to be more transparent.  He also stated that the rationale for the movement was it allowed the IRS to have the ability to better utilize analysts.  He then stated that this would apply to all whistleblower cases (7623(a) and 7623(b)).
• With respect to cases that have been open for 10+ years, Director Martin stated that there may be a valid reason why the cases remained open.  He reiterated that it does not hurt the process for whistleblowers and/or their counsel to inquire with the assigned analyst.  He further stated that the IRS whistleblower office is working on getting through every case, and to pay more awards.  He then stated that because he is trying to get more awards paid, the numbers of cases and awards paid are increasing.
• Finally, with respect to Title 18 and Title 31 penalties and whether they are collected proceeds, Director Martin stated that these penalties are not subject to an award.  He stated that the IRS whistleblower office has no policy as to these penalties, and that he would defer to Congress to determine if they should be included in the term "collected proceeds".

If you are a tax whistleblower attorney and are interested in participating in the conference calls, contact our firm to have us inform you of the next call and how to participate. 

Alternatively, if you have specific and credible information (including documents) of a taxpayer’s tax violations/liabilities, contact us to have us review your claim for an award from the IRS.  As a reminder, the IRS pays 15-30% of the tax, penalties, interest and other amounts collected from non-conforming taxpayers to whistleblowers that provide specific and credible information to the IRS.

Another Tax Authority allegedly is not doing its job....This time it isn't the IRS

Her Majesty's Revenue & Customs(HMRC) Self Assessment Tax Return

In the news lately, the IRS has been criticized for not doing its job.  Specifically, the Speaker of the House (Paul Ryan) has stated “The IRS is not doing its job. It is looking out for itself instead of looking out for our taxpayers,” when introducing the House Republican agenda for #ConfidentAmerica.  Speaker Ryan’s comments relate to IRS’ alleged inability to protect taxpayer payer information.  See Forbes or Tax Analysts articles re IRS online transcript service hacked by criminals.

News disclosed of IRS inability to protect taxpayer sensitive data, along with recent IRS headlines (including: Lois Lerner and the IRS targeting fiasco, etc. (See TaxProfBlog’s ongoing coverage of the “IRS Scandal and other IRS related news)) continues to undermine the IRS and continues to fuel Congress’ attacks of IRS especially through recent House bills passed aimed at shutting down the IRS.

Given this context, one would assume that news of another taxing authority not doing its job would just be a re-tread of another example of the IRS failing to do its job.  Instead, the recent news from Bloomberg BNA, actually highlights the U.K.’s tax collecting agency’s ((Her Majesty’s Revenue & Customs) HMRC) failure to prosecute tax evaders connected to the HSBC bank leak.  The Bloomberg BNA blog highlights that only one of 3,600 alleged tax evaders has been prosecuted by HMRC, which is costing the U.K. approximately 16 billion pounds ($23 billion) in tax revenue each year.   See the U.K. Public Accounts Committee (PAC) Report criticizing HMRC and its November 2015 Report also criticizing HMRC for its failures.  PAC recommended increasing investigations and prosecutions of wealth individuals, especially given the recent release of the Panama Papers.

With all these attacks on taxing authorities, it begs the question whether the attacks are justified, or whether the people attacking the taxing authorities are providing enough guidance and/or resources to permit the taxing authority to properly do its job.  One such advocate is the editorial board at the Washington Post.  The Washington Post commentary suggests that the source for the IRS’ lack of customer service is the House Republicans (the same group that just passed measures to underfund and restrict the IRS’ authority).  The Washington post article relies on the following facts:

1. IRS budget is $500 million below the 2010 budget level;
2. IRS has had to shed 17,000 workers
3. IRS has increased responsibilities including Obamacare (Affordable Care Act), FACTA (Foreign Account Tax Compliance Act), and the passport law (Fixing America’s Surface Transportation Act, or “FAST Act.”).

The Washington Post commentary concludes that House Republicans are rewarding tax cheats by de-funding the IRS, as the IRS will just conduct fewer audits and cost the U.S. government $8 billion.  The commentary also concludes that Congress should adequately fund the IRS instead of attacking the IRS.

While the Washington Post article makes several key points, the Washington Post article fails to address one area where IRS and IRS management can help in to minimize House Republicans’ attacks against the IRS.  The IRS and IRS management specifically, can utilize one tool Congress has provided the IRS to close the tax gap, namely the IRS whistleblower program.  IRS management could make a priority in taking whistleblower tips and utilizing whistleblowers to track down the tax evaders and collect the delinquent taxes.  Instead, as the GAO has reported in 2015 and as blogged here by Thomas C. Pliske, the IRS has vastly under-utilized the whistleblower program.

Perhaps if the IRS were to feature the whistleblower program, it could increase revenue collected despite the budget constraints, and also turn the tide against the “bash the IRS” movement, by demonstrating that it is doing its job, collecting taxes of the United States.

If you have specific or credible evidence of an individual or corporate taxpayer not paying its tax liabilities, please contact us, to discuss filing a claim for an award with the IRS.  IRS pays between 15-30% of the collected proceeds (in excess of $2,000,000) to a whistleblower.

Tax Holidays and Tax Amnesty Programs: Do they work or are we just giving tax violators a break?

In recent news, the State of Alabama is considering creating a tax amnesty period from June 30 through Aug. 30, 2016.  The amnesty program will apparently forgive tax liabilities related to individual and business income taxes, sales and use tax, lodgings tax, severance taxes, cigarette taxes and business privilege taxes. While some exclusion from the program are motor fuel taxes and certain healthcare and environmental taxes.  As noted by the Bloomberg blog, other states have also instituted amnesty programs, Massachusetts, or are considering implementing a tax amnesty program, South Carolina.

The IRS also has several amnesty programs in place for people that have not filed their taxes or have not paid their tax liabilities.  The programs are as follows:

1. Domestic Tax Amnesty for unfiled tax returns or unreported tax liability (Voluntary Disclosure, See IRS IRM provisions.  See also blog discussing how far back to file unfiled tax returns.)

2. Offshore Voluntary Disclosure Program

Additionally, Congress has, in the past, instituted a one-time tax holiday to allow U.S. multinational corporations to bring back money the multinational corporations had previously invested in its offshore foreign subsidiaries.  See NY Times article about the 2004 tax amnesty and its effects.  See also the Salon.com article and the Senate PSI report stating that the promised 2004 tax repatriation holiday failed to meet the promised benefits of new jobs, or research and development (R&D) expenditure. 

The 2004 tax holiday allowed corporations to repatriate amounts held offshore at a reduced rate 5.25% instead of the statutory corporate rate of 35%.  The PSI report highlights the fact that the 2004 tax holiday permitted corporations to bring back $312 Billion.  The PSI report also highlights that while the 2004 law prohibited the repatriated funds for stock repurchases or executive pay, there was no mechanism for monitoring the use of the repatriated funds, so most of the funds were used exactly for stock buybacks and increased executive pay.

There have also been recent attempts by Congress to allow another tax holiday to allow U.S. multinationals to repatriate offshore funds.  In 2014, Senators Boxer and Paul introduced an infrastructure bill tied to a tax holiday (a 6.5% tax on repatriation of funds over a five year period).  The Boxer-Paul bill prohibits dividends, shareholder buybacks or executive compensation for 3 years and the revenue generated would by the 6.5% tax would fund infrastructure projects.  However, as presented in the Salon article, and as reported in Bloomberg, the Joint Committee on Taxation determined that such a tax holiday would really cost taxpayers $96 billion over 10 years.

An alternative to a tax repatriation holiday appears to be a transitory tax on “permanently reinvested offshore earnings.  Such a transitory tax was proposed by former House Ways and Means Chairman Dave Camp in the Tax Reform Act of 2014.  As stated in The Center on Budget and Policy Priorities article, “Repatriation Tax Holiday Would Lose Revenue And Is a Proven Policy Failure” by, The Tax Reform Act of 2014 proposed to tax all offshore profits as a transition to a new international tax system that would generate an estimated $170 billion of revenue over 10 years for the Highway Trust Fund. 

President Obama has also introduced a budget proposal (fiscal year 2015) which would utilize revenue from transitioning to a new corporate tax system to finance infrastructure.  See the CBPP article.  The President’s proposal would require multinational corporations to pay a one-time U.S. tax on the profits held overseas prior to changing the permanent way the U.S. would account and tax the offshore profits currently not being taxed.  The President’s proposal allegedly would generate taxes in the amount of $268 billion over 10 years to fund infrastructure improvements.  See this CBPP article comparing transition tax and repatriation tax holiday.

As the CBPP articles reflect, and the PSI’s examination of the 2004 tax holiday, a tax repatriation holiday does not work to generate present and future investment in the United States.  Instead, the empirical data suggests that companies will use the repatriated funds to:

1. Repurchase Shares from Shareholders or pay dividends to shareholders;

2. Increase Executive Compensation;

3. Terminate workers in the United States;

4. More Aggressively transfer profits offshore to increase amounts “held” or “permanently reinvested offshore” to avoid U.S. taxes because Congress will just grant another tax repatriation holiday in the future.

Following the 2004 tax repatriation holiday as an example of what to expect when IRS or States permit tax violators to be forgiven of their tax liabilities through tax holidays or tax amnesty program, the question to ask is: Why are the tax violators getting a break at the expense of compliant taxpayers?  Or alternatively: Shouldn’t government be in the business of rewarding compliance instead of rewarding habitual tax violators?

How can governments reverse or flip the logic behind a tax holiday or tax amnesty program?  Maybe the governing bodies should reward compliant taxpayers by allowing them to reduce their tax rate for each year of compliance.  Or maybe governments could permit additional deductions/exemptions or reduce phase-outs for deductions for the taxpayers that are compliant and based on the length of compliance.  If the goal is compliance and tax collection, shouldn’t the carrot be a reward for compliance instead of rewarding habitual tax violators by giving them a break for their continued tax violations.  Something to think about.

If you know of any individual or corporation that has not paid their tax liabilities or has habitually avoided paying its taxes, you should file a tax whistleblower claim.  The IRS has a whistleblower program that will pay between 15% and 30% of the collected proceeds (that exceed $2,000,000) to whistleblowers that provide specific and credible evidence of the tax violations of the individuals/corporations.  Contact us to evaluate your claim and to file your claim for an IRS award.