Yesterday the United States Tax Court decided Friedland v. Commissioner, T.C. Memo 2011-217 (Sept. 7, 2011) in favor of the Internal Revenue Service.  Friedland may sound familiar to some, as his previous case against the IRS did not get very far either.  See, Friedland v. Commissioner, T.C. Memo 2011-90 (April 25, 2011).  The case is generally unremarkable.  The Tax Court found that Friedland failed to file his petition to the Tax Court within 30 days of the IRS mailing its “thanks but no thanks” letter.  What caught our eye, however, was this little nugget,

“Respondent [that’s the IRS folks] relies upon the March 3, 2011, date to commence the period for petitioner to file a timely petition.”  

Id. at 3.  This is the first time the IRS has acknowledged that the letter it sends out stating that the IRS cannot make an award determination because it had decided not to utilize the tax whistleblowers information is, in fact, a final administrative decision regarding a tax whistleblower claim.  In Cooper,v. Commissioner, 135 T.C. No. 4 (July 8, 2010), the IRS hotly contested the idea that the denial letter was a ticket to Tax Court.  The IRS lost there, the first Friedland, and Kasper v. Commissioner, 137 T.C. No. 4 (July 12, 2011).  It appears that the IRS has thrown in the towel on this issue and has now taken to using the Tax Court’s holding to its advantage.  While we applaud the IRS for accepting the Tax Court’s jurisdiction, we actively encourage the next step – rolling a “no award determination” into the administrative appeal process.  Telling a tax whistleblower why the IRS is not moving forward on their submission, something allowed under Section 6103 in an administrative proceeding, would greatly reduce the number of Coopers, Kaspers, and Friedlands the IRS must face in Tax Court.  In our view, the best course of action is to avoid a “no award determination” letter in the first place by filing a well-prepared submission vetted by your tax lawyer.  We happen to know a few if you need some help.     

Lynam Knott