Peterfreund v. Commissioner
T.C. Memo. 2021-83

On July 7, 2021, the Tax Court issued a Memorandum Opinion in the case of Peterfreund v. Commissioner (T.C. Memo. 2021-83). The primary issue presented in Peterfreund v. Commissioner  was whether the IRS’s Whistleblower Office (WBO) abused its discretion because it did not initiate an administrative or judicial action and it did not collect any proceeds from the target taxpayer on the basis of the information the petitioner furnished.

Whistleblowin’ Jurisdiction as told by Peterfreund v. Commissioner

Peterfreund v. CommissionerThe Tax Court has jurisdiction to review final determinations by the IRS regarding whistleblower award claims including so-called rejections and denials as classified by the Whistleblower Office (WBO). See Lacey v. Commissioner, 153 T.C. 146, 163-164 (2019); see also Cooper v. Commissioner, 135 T.C. 70, 75-76 (2010). The regulations provide that a rejection is a determination limited to the whistleblower and the information provided on the face of the claim. Treas. Reg. § 301.7623-3(c)(7). On the other hand “[a] denial is a determination that relates to or implicates taxpayer information.” Treas. Reg. § 301.7623-3(c)(8).

Two Types of Whistleblowin’ Awards

Peterfreund Whistle2The Code provides for two types of whistleblower awards: discretionary and nondiscretionary. IRC § 7623(a) authorizes the IRS to pay sums necessary for “detecting underpayments of tax” or “detecting and bringing to trial and punishment persons who are guilty of violating the internal revenue laws or conniving at the same.” IRC § 7623(b)(1) provides for nondiscretionary (i.e., mandatory) awards of at least 15% and not more than 30% of the collected proceeds if certain requirements are met.

Whistleblower awards are preconditioned upon the IRS’s proceeding with an action and collecting proceeds from the target taxpayer. IRC § 7623(b)(1). If the IRS does not proceed with an administrative or judicial action and collect proceeds from the taxpayer, there can be no whistleblower award. See Cohen v. Commissioner, 139 T.C. 299, 302 (2012), aff’d per curiam, 550 F. App’x 10 (D.C. Cir. 2014). Similarly, the Tax Court has no authority to require the IRS to do its job (i.e., to commence an administrative or judicial action against the target taxpayer). Id. (citing Cooper v. Commissioner, 136 T.C. 597, 600 (2011)).

Since the IRS did not proceed with an administrative action on the basis of the information provided by petitioner, the WBO issued its final determination letter stating that the information the whistleblower “provided did not result in the collection of any proceeds.” See Perales v. Commissioner, T.C. Memo. 2017-90, at *5 (“If the IRS does not proceed with any action, there by definition can be no ‘collected proceeds’ and hence no whistleblower award.” (citing Cooper v. Commissioner, 136 T.C. at 601)).

Tax Court’s Lack of Authority to Compel IRS to Do Its Job

In his response to the IRS’s motion for summary judgment, the petitioner argues that the IRS erred in not pursuing the target taxpayer since the statute of limitations remains open indefinitely under IRC § 6501 in instances of willful tax evasion. Petitioner’s argument, however, is without consequence since this Court lacks authority to require or otherwise compel respondent to commence any administrative or judicial action against the target taxpayer. See Cohen, 139 T.C. at 302.Peterfreund Do your job


The administrative record shows that the petitioner has not met the threshold requirements for a whistleblower award. Since the Tax Court has no authority to compel action on the part of IRS (including, without limitation, doing its freaking job), the Tax Court held that the WBO did not abuse its discretion.

(T.C. Memo. 2021-83) Peterfreund v. Commissioner

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