Whistleblower Office FY 2014 Annual Report Released, What Did We Learn?

Key Points from the Body of the Report

Final Regulations were a “top priority” and added “necessary clarification and provided additional guidance for whistleblower submissions under 7623.”(p. 4). The report also notes that “the regulations confirm that the director, officers, and employees of the Whistleblower Office are authorized to disclose return information to the extent necessary to conduct whistleblower administrative proceedings.”
- The WBO began the process of updating the IRM, correspondence, policies, and procedures accordingly.
- The impact of the final regs is further seen in this report as 2 points from the FY 2013’s section on “Other Issues of Interest” are not present in this 2014 report. Those points concerned what constituted “collected proceeds” and a request for clarification of dollar amount thresholds for gross income and amounts in dispute.
The Whistleblower Office had a net increase of 3 senior analysts in FY 2014, brining the total staff of the Whistleblower Office to 43.

The report notes that the WBO “has seen steady and consistent grown from year to year in both staffing and claim submissions.

The Deputy Commissioner, Services and Enforcement directed a program review to ensure the resources committed to the WBO are “applied efficiently and effectively” – the assessment is expected to be completed in FY 2015.

The FY 2014 report again notes that “Rules on access to and disclosure of taxpayer information could provide stronger protection for taxpayers.” – Noting two concerns:
- (1) Current law does not provide a sanction if a whistleblower discloses taxpayer information in violation of a confidentiality agreement and 6103(h).
- (2) The whistleblower may disclose the identity of the taxpayer in Tax Court or other judicial proceeding.
  - The report notes that the second concern was addressed in a revision to Tax Court Rule 345 which now requires the taxpayer information to be masked in documents filed with the Court.
- As a third (3) concern – the report states that “release of information during discovery in Tax Court proceedings is not addressed in the new rules and has brought a new set of concerns.” (p. 7).
The President’s FY 2014 Budget has included a legislative proposal to address this issue by providing a sanction for disclosure of taxpayer information obtained from the IRS as part of the award claim process.

The law does not provide for whistleblower protection unlike other laws that encourage whistleblowers to report information. (Same statement as 2013).

The WBO has limited information about the extent of whistleblower’s contribution in criminal cases due to information being protected from disclosure under FRCP. (Same statement as 2013).

Notable Statistics from Tables in the Appendix

Overall the claim and award numbers are substantially similar to 2013 Report with indications that FY 2015 numbers will be higher.

Table 6 of the report shows the awards paid from 2010 through 2014. There were 101 awards paid in FY 2014 which is down from 2013’s 122 and 2012’s 128. Collections of $2 million were up in 2014 to 9 from 6 in 2013. The total amounts of awards paid in 2014 was down slightly from 2013 at $52,281,628 (from $53,054,302 in 2013). However, the awards paid as a percentage of amounts collected was up to 16.9% in 2014 which is a nice increase from 14.6% in 2013. (All but one of these wards we paid under section 7623(a).)

Sequester required reductions that were 7.2% of the amount that would have otherwise been payable in FY 2014. Reductions totaling $3,764,722 were applied to awards paid during FY 2014. Thus, the total amount of payments, after reduction, was $48,516,906.

In the “Amounts Collected and Awards Paid” Chart, the report uses the pre-sequester reduction number.

Total claims received is up from 2013, going from 10,520 to 14,365 (total submissions were 4,166 up from 4,067 in the 2013 report). (Table 1).

The report cited that the most common reasons for denial of claims were “non-specific allegations, issues that were below the threshold for IRS action, and allegations that did not identify a tax issue.” (Table 3).

The report cited that a total of 238 claims were closed in FY 2014 as a result of awards being paid in full. That number is significantly increased from the number reported in the 2013 report, where only 130 awards were paid in full. (Table 3).

Overwhelmingly, the most common reason for closures in 2014 was “no tax issue” which differs from the 2013 report that noted “allegations unclear or non-specific” as the most common reason for closures in that year.

Table 2 shows that the vast majority of submissions go to SBSE and LB&I. The table reports that those operating divisions received 138 and 134 section 7623(b) submissions respectively as compared to TEGE, which only received 24.

The only operating division that had more (b) submissions and claims than (a) submissions and claims was CI.

Table 4 of the report details the status of open 7623(b) claims for all years. Particularly noteworthy is the category of “Case Suspended: Whistleblower Litigation Regarding Award Determination” which was reported as 10 claims in 2013, is up to 41 claims in the 2014 report. Additionally, the category of “Case Suspended Payment Received, Awaiting Expiration of Statute of Limitations on Taxpayer Claim for Refund” was reported as 161 claims in 2013, is now up to 514 in the 2014 report, which means the IRS has now collected tax as a result of over 500 whistleblower cases for which it has not yet paid an award because it is waiting for the section 6511 statute of limitations on refunds to expire (the “two year rule”). The table indicates that 2 claims from 2 whistleblowers fall into the category of “Final Award Processing.” Finally, the report notes that Table 4 does not reflect some changes that were supposed to be made to the data via manual input in FY 2014. Due to staffing issues, those changes are deferred to FY 2015 and data will be more accurate once those changes are made.

Table 5 shows data of “Days in Current Status” of the open 7623(b) claims. The table shows a significant increase from the 2013 report in both average number of days and longest days of “whistleblower office – initial review” – 85 and 673, respectively (up from 64 and 405 in the 2013 report). The table includes a status called “whistleblower office – manager approval for preliminary award recommendation letter” – and reports the average number of days and longest days for that status as 42 and 94 respectively. Although that category was not included in the FY 2013 report, the 2013 report did have a category called “whistleblower office – award evaluation.” Finally, the 2014 report included a status called “final award processing” and reported average number of days, longest days, and shortest days for that status as 218 for the two claims that fall under this category, which should be the very brief final stage of a whistleblower claim.