United States Supreme Court denies certiorari of IRS whistleblower case.

On October 15, 2013, the United States Supreme Court issued an order denying certiorari of O’Donnell v. Commissioner, a case where summary judgment was granted by the Tax Court, and affirmed on appeal, because the information provided did not cause the IRS to initiate an administrative or judicial proceeding that resulted in the collection of Federal tax from the taxpayer to whom the information.  By denying certiorari, the United States Supreme Court effectively solidified Cooper v. CIR, 136 T.C. 597, 600 (2011) as the law of the land.  This means a whistleblower is not eligible for an award under section 7623(b) where the information provided did not result in an initiation of an administrative or judicial action or the collection of tax proceeds.  This is a reminder that it is not enough to merely hand the IRS information, but that the whistleblower’s submission must also cause the IRS to act on the information in a way that results in collected proceeds.

George and James O’Donnell filed a claim for an award on March 6, 2009, alleging significant tax underpayments based on court records.  The O’Donnells filed a petition with the Tax Court alleging that the IRS failed to proceed as required and that their filing of the Form 211 created a bilateral contract.  The IRS filed a Motion for Summary Judgment that stated the IRS “has not initiated any administrative or judicial proceeding nor collected any proceeds based on information provided by petitioners.”  The Tax Court stated that various statements in various documents submitted by the O’Donnells suggested that the IRS had failed to properly consider the information they submitted or failed to proceed as required by section 7623; however, the O’Donnells “do not allege, much less show, that an administrative or judicial proceeding was initiated by [the IRS] or that any Federal tax was collected from any taxpayer as [the] result of information that they provided to [the IRS].”  The Tax Court cited Cooper for the premise that a person’s eligibility for an award under section 7623(b) requires both an administrative or judicial proceeding and that the administrative or judicial proceeding results in the collection of Federal tax in the order granting the IRS’s Motion for Summary Judgment.

On appeal to the United States Court of Appeals for the District of Columbia Circuit, the DC Circuit Court affirmed the Tax Court’s Order and Decision in an unpublished per curiam decision.  The DC Circuit Court stated that “The Tax Court correctly concluded that because the information appellant provided did not result in ‘initiation of an administrative or judicial action’ or ‘collection of tax proceeds,’ Cooper v. Comm’r of Internal Revenue, 136 T.C. 597, 600 (2011), appellant was not eligible for a whistleblower award under 26 U.S.C § 7623(b).”  Following the decision of the DC Circuit, George O’Donnell sought certiorari, which was denied.