Stevenson v. Commissioner
T.C. Memo. 2020-137

On September 30, 2020, the Tax Court issued a Memorandum Opinion in the case of Stevenson v. Commissioner (T.C. Memo. 2020-137). The issue before the court in Stevenson v. Commissioner was whether the IRS Whistleblower Office abused its discretion in rejecting the petitioner’s claim on the ground that he did not provide information regarding any Federal tax violation.

Background to Stevenson v. Commissioner

Although there are some pro se petitioners who have surprised me with their legal acumen this year, Mr. Stevenson is not one of them. While others were playing chess, Mr. Stevenson was not even playing checkers; instead, he was rather intensely engaged in a game of charades with himself. In March 2019, the petitioner filed a Form 211 (Application for Award for Original Information). Whether he scrawled on the form with magic marker, leaving little doodles in the margins, or whether he generally made about as much sense as a screen door on a submarine is unclear. The Tax Court merely says that the text of his Form 211 was “largely incomprehensible.”

Deciphering the form, the petitioner appeared to allege that a target taxpayer, an individual, had failed to give him and ask that he fill out a Form W-9 (Request for Taxpayer Identification Number and Certification). Petitioner did not explain why this was problematic and did not allege that the target had underpaid tax or had violated any internal revenue law. Petitioner also attached to his Form 211 a one-page description of a publicly traded international bond fund. He did not allege any underpayment of tax or tax violation by the fund or its principals. Further, the Tax Court wasn’t exactly sure what the hell the connection was between the individual and the publicly traded bond fund.

Enter Mr. Martin, an IRS classifier and an unwitting pawn in the petitioner’s short-lived dalliance in the whistleblower arena. Mr. Martin ascertained that the target individual had reported his income and had no balance due. Mr. Martin recommended that the petitioner’s claim be rejected for failure to include specific and credible information to support a potential tax violation, as well as any documentation whatsoever to support the claim. To the surprise of no one, the WBO agreed with Mr. Martin’s recommendation, and in April 2019 issued a final determination letter rejecting the petitioner’s claim.

In a mysterious twist, the envelope in which the petition was delivered to the Tax Court does not bear a postmark, which begs the obvious question how in the hell did the petitioner deliver his petition to the Tax Court. My initial guess was carrier pigeon or trained burro, but the mystery adds a bit of je ne sais quoi to the otherwise bland opinion.

Timeliness not Godliness in Whistleblower Suits

Because the D.C. Circuit is the appellate venue for whistleblower cases, generally. See IRC § 7482(b)(1). The Tax Court, thus, follows its precedent. See Golsen v. Commissioner, 54 T.C. 742, 757 (1970), aff’d, 445 F.2d 985 (10th Cir. 1971). In Myers v. Commissioner, 928 F.3d 1025, 1034 (D.C. Cir. 2019), the D.C. Circuit held that IRC § 7623(b)(4) sets forth a “non-jurisdictional claim processing rule,” the violation of which does not deprive a court of authority to hear the case. The appellate court further held that the statute’s 30-day filing period “is subject to equitable tolling.” Id. at 1037.

Abuse of Discretion? Not so Much.

The Tax Court reviews the IRS’s determination as to whether a whistleblower is entitled to an award under section 7623(b)(1) by applying an abuse-of-discretion standard. Kasper v. Commissioner, 150 T.C. 8, 22 (2018). Abuse of discretion exists when a determination is arbitrary, capricious, or without sound basis in fact or law. Murphy v. Commissioner, 125 T.C. 301, 320 (2005), aff’d, 469 F.3d 27 (1st Cir. 2006). In Lacey v. Commissioner, 153 T.C. 146, 166-169 (2019), the Tax Court held that it had jurisdiction to review, for abuse of discretion, a determination by the WBO to reject a whistleblower claim for failure to meet certain basic criteria. See also, Treas. Reg. § 301.7623-1(c)(1).  The Tax Court confines its review to the administrative record in ascertaining whether the WBO abused its discretion. Kasper, 150 T.C. at 20.

IRC § 7623(a) authorizes the payment of sums necessary for “detecting underpayments of tax” or “detecting and bringing to trial and punishment persons guilty of violating the internal revenue laws or conniving at the same.” Critical to IRC § 7623(a) is that the whistleblower actually asserts a violation of the internal revenue laws. This is not generally the issue in whistleblower cases; instead, most whistleblower claims that fail on their face do so because there is no documentation or other proof that the ne’er-do-well target has violated any tax laws. Not so in Stevenson. Here, the petitioner failed to allege that the target actually violated any law, much less an internal revenue law. What was the court to do other than summarily reject the claim? Not much it turns out…

This case is a cautionary tale to all would-be whistleblowers out there. Someone may piss you off in a tangentially tax-related way, but your righteous indignation is not enough to carry the day for a whistleblower suit. Such is the lesson of Mr. Stevenson.

(T.C. Memo. 2020-137) Stevenson v. Commissioner

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