This Act, signed into Law, December 20, 2006, did the following:
- established the IRS Whistleblower Office,
- required annual reports to Congress,
- added section 7623(b) enhancing whistleblower award provisions making it mandatory for the IRS to pay an award between 15% and 30% of the tax collected based upon information from an individual that substantially contributed to the IRS determination and or collection of the tax,
- provided jurisdiction to the U.S. Tax Court for the appeal of the IRS determination of the award, and
- provided for an above the line deduction for attorneys fees in section 7623(b) cases.
TAX RELIEF AND HEALTH CARE ACT OF 2006 H.R. 6111, (Signed into Law, December 20, 2006) SECTION 406, WHISTLEBLOWER REFORMS / PDF
(a) Awards to Whistleblowers-
(1) IN GENERAL- Section 7623 (relating to expenses of detection of underpayments and fraud, etc.) is amended--
(A) by striking `The Secretary' and inserting `(a) In General- The Secretary',
(B) by striking `and' at the end of paragraph (1) and inserting `or',
(C) by striking `(other than interest)', and
(D) by adding at the end the following new subsection:
(b) Awards to Whistleblowers-
(1) IN GENERAL- If the Secretary proceeds with any administrative or judicial action described in subsection (a) based on information brought to the Secretary's attention by an individual, such individual shall, subject to paragraph (2), receive as an award at least 15 percent but not more than 30 percent of the collected proceeds (including penalties, interest, additions to tax, and additional amounts) resulting from the action (including any related actions) or from any settlement in response to such action. The determination of the amount of such award by the Whistleblower Office shall depend upon the extent to which the individual substantially contributed to such action.
(2) AWARD IN CASE OF LESS SUBSTANTIAL CONTRIBUTION-
(A) IN GENERAL- In the event the action described in paragraph (1) is one which the Whistleblower Office determines to be based principally on disclosures of specific allegations (other than information provided by the individual described in paragraph (1)) resulting from a judicial or administrative hearing, from a governmental report, hearing, audit, or investigation, or from the news media, the Whistleblower Office may award such sums as it considers appropriate, but in no case more than 10 percent of the collected proceeds (including penalties, interest, additions to tax, and additional amounts) resulting from the action (including any related actions) or from any settlement in response to such action, taking into account the significance of the individual's information and the role of such individual and any legal representative of such individual in contributing to such action.
(B) NONAPPLICATION OF PARAGRAPH WHERE INDIVIDUAL IS ORIGINAL SOURCE OF INFORMATION- Subparagraph (A) shall not apply if the information resulting in the initiation of the action described in paragraph (1) was originally provided by the individual described in paragraph (1).
(3) REDUCTION IN OR DENIAL OF AWARD- If the Whistleblower Office determines that the claim for an award under paragraph (1) or (2) is brought by an individual who planned and initiated the actions that led to the underpayment of tax or actions described in subsection (a)(2), then the Whistleblower Office may appropriately reduce such award. If such individual is convicted of criminal conduct arising from the role described in the preceding sentence, the Whistleblower Office shall deny any award.
(4) APPEAL OF AWARD DETERMINATION- Any determination regarding an award under paragraph (1), (2), or (3) may, within 30 days of such determination, be appealed to the Tax Court (and the Tax Court shall have jurisdiction with respect to such matter).
(5) APPLICATION OF THIS SUBSECTION- This subsection shall apply with respect to any action--
(A) against any taxpayer, but in the case of any individual, only if such individual's gross income exceeds $200,000 for any taxable year subject to such action, and
(B) if the tax, penalties, interest, additions to tax, and additional amounts in dispute exceed $2,000,000.
(6) ADDITIONAL RULES-
(A) NO CONTRACT NECESSARY- No contract with the Internal Revenue Service is necessary for any individual to receive an award under this subsection.
(B) REPRESENTATION- Any individual described in paragraph (1) or (2) may be represented by counsel.
(C) SUBMISSION OF INFORMATION- No award may be made under this subsection based on information submitted to the Secretary unless such information is submitted under penalty of perjury.'.
(2) ASSIGNMENT TO SPECIAL TRIAL JUDGES-
(A) IN GENERAL- Section 7443A(b) (relating to proceedings which may be assigned to special trial judges) is amended by striking `and' at the end of paragraph (5), by redesignating paragraph (6) as paragraph (7), and by inserting after paragraph (5) the following new paragraph:
(6) any proceeding under section 7623(b)(4), and
(B) CONFORMING AMENDMENT- Section 7443A(c) is amended by striking `or (5)' and inserting `(5), or (6)'.
(3) DEDUCTION ALLOWED WHETHER OR NOT TAXPAYER ITEMIZES- Subsection (a) of section 62 (relating to general rule defining adjusted gross income) is amended by inserting after paragraph (20) the following new paragraph:
(21) ATTORNEYS FEES RELATING TO AWARDS TO WHISTLEBLOWERS- Any deduction allowable under this chapter for attorney fees and court costs paid by, or on behalf of, the taxpayer in connection with any award under section 7623(b) (relating to awards to whistleblowers). The preceding sentence shall not apply to any deduction in excess of the amount includible in the taxpayer's gross income for the taxable year on account of such award.'.
(b) Whistleblower Office-
(1) IN GENERAL- Not later than the date which is 12 months after the date of the enactment of this Act, the Secretary of the Treasury shall issue guidance for the operation of a whistleblower program to be administered in the Internal Revenue Service by an office to be known as the `Whistleblower Office' which--
(A) shall at all times operate at the direction of the Commissioner of Internal Revenue and coordinate and consult with other divisions in the Internal Revenue Service as directed by the Commissioner of Internal Revenue,
(B) shall analyze information received from any individual described in section 7623(b) of the Internal Revenue Code of 1986 and either investigate the matter itself or assign it to the appropriate Internal Revenue Service office, and
(C) in its sole discretion, may ask for additional assistance from such individual or any legal representative of such individual.
(2) REQUEST FOR ASSISTANCE- The guidance issued under paragraph (1) shall specify that any assistance requested under paragraph (1)(C) shall be under the direction and control of the Whistleblower Office or the office assigned to investigate the matter under paragraph (1)(A). No individual or legal representative whose assistance is so requested may by reason of such request represent himself or herself as an employee of the Federal Government.
(c) Report by Secretary- The Secretary of the Treasury shall each year conduct a study and report to Congress on the use of section 7623 of the Internal Revenue Code of 1986, including--
(1) an analysis of the use of such section during the preceding year and the results of such use, and
(2) any legislative or administrative recommendations regarding the provisions of such section and its application.
(d) Effective Date- The amendments made by subsection (a) shall apply to information provided on or after the date of the enactment of this Act.