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Whistleblower 21276-13W v. Commissioner (155 T.C. No. 2)

On August 26, 2020, the Tax Court issued its opinion in Whistleblower 21276-13W v. Commissioner, 155 T.C. No. 2. The primary issue presented in Whistleblower 21276-13W was whether the Tax Court had jurisdiction to hear and determine a whistleblower-related issue rather than remand it to the IRS Whistleblower Office when remand would have been futile because there was only one possible disposition, as a matter of law, and such matter was before the court.

The Parties’ Positions in a Nutshell

The petitioners/whistleblowers asked the Tax Court to compel the IRS to pay the amounts set forth in in previous decisions and stipulations, rather than smaller amounts diminished by “sequester reductions.” The IRS replied that it has paid in full the awards to which the whistleblowers are entitled: the amounts specified in the decisions less the sequester reductions to which the parties agreed.

Jurisdiction to Determine Jurisdiction

The Tax Court always has jurisdiction to determine whether it has jurisdiction. Cooper v. Commissioner, 135 T.C. 70, 73 (2010). Further, IRC § 7623(b)(4) vests the Tax Court with jurisdiction with respect to appeals of award determinations. The Tax Court has previously held that it has the authority to remand a whistleblower action to the Whistleblower Office when that office has abused its discretion. Whistleblower 769-16W v. Commissioner, 152 T.C. 172 (2019).  Indeed, the Tax Court notes that in most cases, remand is appropriate.  Id. at 178.

Nevertheless, when remand would be “futile,” the Tax Court will not remand the case.  Remand is futile when only one disposition as possible as a matter of law. George Hyman Constr. Co. v. Brooks, 963 F.2d 1532, 1539 (D.C. Cir. 1992); accord NLRB v. Food Store Emps. Union Local 347, 417 U.S. 1, 8 (1974).  Indeed, as the Supreme Court has noted, the reviewing court must remand a case in which an administrative agency committed an error of law except where it is “crystal-clear” that the agency’s error renders a remand an unnecessary formality, because there is only one outcome under the law. Once the Tax Court decided the meaning of the term “collected proceeds,” only one disposition was possible as to the issues that were before the Tax Court.

Judgment and Caveat

The Tax Court found that the IRS’s actions were consistent with the Tax Court’s prior decisions in the case, which decisions were predicated on a deal that was struck between the IRS and the petitioners for a certain sum of money – which took into account the sequestration reduction. A deal is a deal, and, as the Tax Court concluded in similar circumstances in another whistleblower case, the whistleblowers must abide by the bargain they struck. See Whistleblower 4496-15W v. Commissioner, 148 T.C. 425, 432-437 (2017).

The Tax Court notes that such cases should serve as a cautionary tale to parties that reach partial settlements. Filing with the Tax Court complete copies of the agreements that reflect any settlements reached by the parties gives the Tax Court a fuller picture of the disputes that remain at issue and permits the Tax Court to render decisions that appropriately take into account the parties’ agreements. That, in turn, may spare the parties the inconvenience and expense of post-decision litigation avoidable through greater transparency.

(155 T.C. No. 2) Whistleblower 21276-13W v. Commissioner

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