In a case of first impression, the United States Tax Court held that it lacked jurisdiction under Internal Revenue Code (IRC) Section 7623(b) to review the IRS’s refusal to pursue a whistleblower’s claim. Cohen v. Commissioner, 139 T.C. No. 12 (Oct. 9, 2012)
In this case, the taxpayer, Mr. Cohen, asked the Tax Court to force the Internal Revenue Service (IRS) to proceed with his claim. The IRS’s argued that the Tax Court only had authority to review a whistleblower determination after the IRS had acted upon the claim and obtained proceeds, and therefore lacked any authority to compel it to act.
The Tax Court found that it did not have jurisdiction to compel the IRS to explain its reasons for not proceeding with Mr. Cohen’s claim. Further, IRC Section 7623(b) required both a judicial or administrative action by the IRS and the obtainment of proceeds before Tax Court review could be obtained.
Petitioner seeks relief that is unavailable because respondent never instituted an action or collected any proceeds. We can appreciate petitioner’s frustration that information that he believes is actionable was not pursued. Congress, however, has charged the Commissioner with resolving these claims and has not provided any remedies until after an administrative or judicial action and the collection of proceeds. For that reason, we will grant respondent’s motion to dismiss for failure to state a claim. We will also deny as moot petitioner’s motion for summary judgment.
Pursuant to IRC Section 7623(b)(4) and Cooper v. Commissioner, 135 T.C. 70, 75-76, a whistleblower must appeal any determination to the Tax Court within 30 days for the Tax Court to have any jurisdiction. In a whistleblower action, the Tax Court has jurisdiction only with respect to the Commissioner’s award determination.
If there is no administrative or judicial action and resulting proceeds, the IRS will prevail on a motion to dismiss or summary judgment. The Whistleblower may learn the reasons the IRS is not pursuing the claim during the course of litigation, but the Tax Court cannot compel the IRS to explain its actions or lack thereof.
The IRS can determine whether to pursue a matter or not, and no matter how promising the claim appears to be. A whistleblower cannot compel the IRS to act. The IRS can decline to move forward on potential action for a number of reasons, all of which are beyond the Tax Court’s jurisdiction.
You can read the Tax Court’s decision here.
