Another Piece of the Tax Court’s Jurisdictional Puzzle

The United States Tax Court released an opinion today, Whistleblower 22231-12W v. Commissioner of Internal Revenue, which continues to piece together the bounds of the Tax Court’s jurisdiction.  The Tax Court held that the IRS Whistleblower Office could not have made a determination under section 7623(b)(1) until it has completed its review of all elements specified in that paragraph, which had not happened in this case at the time the petition was filed.

In this case, the petitioner submitted third claim for an award on August 23, 2011 relating to Taxpayer 1.  Taxpayer 1 agreed to pay a multimillion-dollar civil penalty for failing to report his foreign bank and financial accounts and a relatively small amount of restitution to the IRS reflecting the unpaid Federal income tax due on income earned from the Swiss bank accounts.  Petitioner filed a petition with the Tax Court on September 6, 2012, claiming that the IRS had made a de facto determination, even though petitioner’s claim was still open.  The IRS filed a motion to dismiss for lack of jurisdiction asserting that the IRS had not yet made a determination. 

In analyzing how section 7623(b)(4) applies to these facts, the Court noted that the labeling of the communication is not dispositive in determining if the communication is a determination.  The Court concluded that under the standards set in Cooper v. Commissioner to the email exchange between Ms. Stuart and petitioner’s counsel did not constitute a determination of the Taxpayer 1 claim.  The Court notes that Ms. Stuart’s email expressly stated that the claim remained open and that petitioner would be informed of a determination in official written correspondence once a determination was made.  The Court determined that because the IRS Whistleblower Office had not yet made a final administrative decision, that the Court lacked jurisdiction to hear petitioner’s claim.  The Court notes that the statutory language “cannot possibly have intended that this phrase would embrace every subsidiary finding of fact or conclusion of law that enters into the Office’s ultimate decision as to whether an award is appropriate and (if so) the amount thereof.”

This decision adds yet another piece to the puzzle that will ultimately define the Tax Court’s jurisdiction to review the IRS’s administrative decisions.  While this case appears to foreclose Tax Court review of certain de facto decisions, it provides more guidance on what is a determination for purposes of section 7623(b)(4).