“Even were we to agree with respondent as to the scope of review, he cannot unilaterally decide what constitutes an administrative record.”

The Tax Court’s September 16^th opinion echoes what every whistleblower litigating in Tax Court knows; the IRS’s Whistleblower Administrative File is insufficient.  The petitioners in this case moved to compel production of documents and responses to interrogatories that were requesting information at the would show whether the IRS used their information to collect tax, penalties, interest, or additional amounts.  The IRS filed virtually identical responses to both motions stating its sole objection being that the information requested is not contained within the Whistleblower Office’s Administrative File and, therefore, beyond the scope of discovery.  The Tax Court disagreed and granted the motions.

Rule 70 governs discovery in the Tax Court.  Paragraph (b) states that the scope of discovery is “any matter not privileged and which is relevant to the subject matter involved in the pending case.”  The paragraph further provides: “It is not grounds for objection that the information or response appears reasonable calculated to lead to discovery of admissible evidence.”  The Court stated in its opinion that “the standard for relevancy in discovery is liberal.”  The Court went on to note that the information sought by the petitioners is clearly relevant to their case as the petitioners are looking for evidence that will prove that one or more collections of proceeds are attributable to their information.

The Tax Court addressed the IRS’s argument that the information sought is outside of the scope of review by stating that this argument was not a sufficient basis to deny the discovery requests.  The Tax Court stated: “Even were we to agree with respondent as to the scope of review, he cannot unilaterally decide what constitutes an administrative record.”  The Court reasoned that evidence related to whether there was a collection of proceeds and whether that collection was attributable to the whistleblower’s information goes to the very factual inquiries required by section 7623(b), and an administrative file that lacked such information was incomplete. 

While discovery matters are usually handled with the issuance of an order, the Tax Court issued a division opinion in this instance, giving citable precedence for future whistleblowers that are trying to seek discovery relating to what happened with the information they provided to the IRS.  Hopefully, these continued losses in Tax Court, where the Tax Court finds the administrative file is incomplete and opens discovery beyond the administrative file, leading to more complete administrative files within the Whistleblower Office.