The Ferraro Law Firm files an amicus curiae brief in a Tax Court case involving a de facto denied claim.

Some of our clients and readers of this blog have asked that we publish the amicus curiae brief that The Ferraro Law Firm recently filed with the United States Tax Court in the case of Joseph A. Insinga v. Commissioner of Internal Revenue.  Mr. Insinga is the whistleblower who reported his former employer, Rabobank, to the IRS for facilitating tax avoidance transactions for United States taxpayers.  Mr. Insinga saw SEC disclosures by several of the United States taxpayers/Rabobank customers he turned in that lead Mr. Insinga to believe that last year they paid some of the tax he alleged that they owed, and therefore he is due an award.  However, the IRS has refused to make an award determination.  The Ferraro Law Firm’s amicus curiae brief highlighted the fact that the IRS’s refusal to issue a whistleblower award determination, despite having allegedly collected proceeds within the meaning of section 7623(b), is tantamount to a negative award determination, or what we call a de facto denial.  

The denial of an award through the IRS’s refusal to make a determination could potentially be more harmful for the whistleblower than a flat denial because a flat denial is clearly a determination, which a whistleblower can appeal to the Tax Court under Cooper v. Commissioner.  Mr. Insinga never received a rejection letter, even after being told that it was unlikely that he would receive an award and requesting that if the IRS intended to deny his claim that the IRS issue him a rejection letter.  We believe that the failure to either pay an award or deny a whistleblower’s claim in a timely manner could side step whistleblowers’ rights to judicial review unless the IRS’s failure to act is treated as a de facto denial.  Our brief’s argument centered on the fact that other IRS “determinations” (pursuant to other Internal Revenue Code sections) can be “denied” by the passage of time without requiring a written denial, and that the Tax Court would be treating section 7623(b) award determinations consistent with other determinations by assuming jurisdiction when such a de facto denial occurs.

The need for award determination timelines was echoed just days later in Deputy Commissioner Miller’s field directive to the extent that it called for the Whistleblower Office to make an award determination within 90 days of when proceeds are finally determined in a matter.  It appears based on the allegations in Insinga’s petition that this new timeline was not met.  Not even close.  We hope that the establishment of an internal timeline prevents these de facto denials from happening in the future.