Opinion
18179-19W
02-07-2023
SUZANNE JEAN McCRORY, Petitioner v. COMMISSIONER OF INTERNAL REVENUE, Respondent
ORDER
Elizabeth A. Copeland Judge
Pending before the Court is petitioner's Motion for Partial Summary Judgment on Claim #2018-007669, filed June 28, 2021, and petitioner's Motion for Partial Summary Judgment on Claim #2018-007667, filed July 16, 2021. Respondent filed a Response to both Motions on October 28, 2021, noting his objections. Additionally, each party has submitted a memorandum of law setting forth their views on the relevance for the present case of the opinion of the Court of Appeals for the District of Columbia Circuit in Li v. Commissioner, 22 F.4th 1014 (D.C. Cir. 2022).
Background
Petitioner mailed a Petition on October 2, 2019, for review of two letters she received from the Internal Revenue Service (IRS) Whistleblower Office (WBO), informing her that she would not receive an award under section 7623 for information she submitted to the WBO on two separate Forms 211, "Application for Award for Original Information." The first letter, regarding Claim #2018-007669, is dated September 5, 2019, and states in relevant part: "The claim has been rejected because the IRS decided not to pursue the information you provided." The second letter, regarding Claim #2018-007667, is dated September 12, 2019, and states in relevant part: "[T]he information you provided did not result in the collection of any proceeds. Therefore, you are not eligible for an award."
Unless otherwise indicated, all statutory references are to the Internal Revenue Code, Title 26 U.S.C. (I.R.C.), in effect at all relevant times, all regulation references are to the Code of Federal Regulations, Title 26 (Treas. Reg.), in effect at all relevant times, and all Rule references are to the Tax Court Rules of Practice and Procedure.
In his First Amended Answer, respondent alleged (among other things) the following:
For claim number 2018-007669, the Operating Division declined to audit the target. Specifically, the Operating Division surveyed the return and determined that the income subject to petitioner's claim was, in fact, reported. As such, the target's return was not opened for an examination.
For claim number 2018-007667, the target was audited, the income subject to petitioner's claim was considered and included as an issue in the audit, but the audit resulted in "no change" to the target's tax liability because the auditor determined that the target reported the income. Form 4549-A, Report of Income Tax Examination Changes, [which] respondent issued to the target on August 9, 2019, shows $0 adjustments to the target's income, $0 deficiency, and $0 balance due for the year in question.
In his Response to petitioner's Motions, respondent represents that he produced the entire WBO administrative record of both Claims to petitioner on June 25, 2021. Petitioner confirmed receipt of the record in her Motion of July 16, 2021 (although she noted her belief that certain items were missing).
Discussion
Section 7623(b)(4) gives the Tax Court jurisdiction to hear appeals of "[a]ny determination regarding an award" under the mandatory whistleblower award rules of section 7623(b)(1)-(3). In Li, supra, the D.C. Circuit Court interpreted section 7623(b)(1) to provide that "an award determination by the IRS arises only when the IRS 'proceeds with any administrative or judicial action described in subsection (a) based on information brought to the Secretary's attention by [the whistleblower] . . .'" Li, 22 F.4th at 1018 (quoting I.R.C. § 7623(b)(1)). Accordingly, the Tax Court lacks jurisdiction over a whistleblower appeal unless, at the least, the IRS has undertaken an audit or collection action on the basis of the whistleblower's information.
Appeals of our decisions in whistleblower cases normally lie to the Court of Appeals for the D.C. Circuit. See I.R.C. § 7482(b) (flush language). Therefore, in these cases we generally follow all on-point precedents of the D.C. Circuit Court. See Golsen v. Commissioner, 54 T.C. 742, 757 (1970), aff'd, 445 F.2d 985 (10th Cir. 1971).
I. Claim #2018-007669
Both the WBO letter of September 5, 2019, and respondent's First Amended Answer represent that the IRS undertook no audit or collection action on the basis of Claim #2018-007669. If these representations are true, then pursuant to Li we lack jurisdiction over petitioner's appeal of the WBO decision regarding this Claim.
In her memorandum of law regarding Li, petitioner argues as follows:
To deny jurisdiction to any whistleblower under the holdings of Li, the Tax Court will need evidence from Respondent to prove the negative- that no audit took place based on the whistleblower information. . . . Direct evidence of audit history is available through a database maintained by Respondent called the Audit Information Management System (AIMS) and can be used to conclusively establish whether the Tax Court has jurisdiction over any target taxpayer whistleblower matter.
Petitioner further clarified that, unlike the petitioner in Li, she is not conceding (absent further evidence) that the IRS did not proceed with an audit of the target identified in Claim #2018-007669.
It is well settled that this Court can proceed in a case only if it has jurisdiction and that either party, or the Court sua sponte, may question jurisdiction at any time. Brown v. Commissioner, 78 T.C. 215, 218 (1982). Moreover, jurisdiction must be shown affirmatively, and petitioner, as the party invoking our jurisdiction, bears the burden of proving that we have jurisdiction over this case. David Dung Le, M.D., Inc. v. Commissioner, 114 T.C. 268, 270 (2000), aff'd, 22 Fed.Appx. 837 (9th Cir. 2001). Accordingly, we decline petitioner's insistence that we order respondent to supplement the already-produced administrative record with further evidence to "prove the negative" regarding an audit of the target (such as evidence from the Audit Information Management System).
In general, respondent is entitled to rely on the presumption of regularity, which the Supreme Court has explained as follows: "The presumption of regularity supports the official acts of public officers, and, in the absence of clear evidence to the contrary, courts presume that they have properly discharged their official duties." United States v. Chem. Found., Inc., 272 U.S. 1, 14-15 (1929). Here, respondent is entitled to a presumption that the WBO would not have reported that the target of Claim #2018-007669 was not audited unless that target in fact was not audited. Petitioner may attempt to rebut this presumption by pointing to contrary evidence and/or suspicious irregularities in the administrative record. If petitioner cannot make this showing, we must dismiss her appeal of the WBO's decision on Claim #2018-007669 for lack of jurisdiction, pursuant to Li.
We express no opinion at this time on whether the presumption of regularity would attach to the WBO's representations if the IRS had not produced the administrative record to petitioner and/or this Court.
II. Claim #2018-007667
The WBO letter of September 12, 2019, and respondent's First Amended Answer represent that the IRS audited the target of Claim #2018-007667 on the basis of petitioner's information but collected no additional proceeds. The D.C. Circuit Court's opinion in Li does not explicitly hold whether the Tax Court can have jurisdiction under section 7623(b)(4) when the IRS proceeds with an audit or collection action on the basis of the whistleblower's information but collects no proceeds. The Li opinion suggests a negative answer to this question but does not make a clear holding to that effect.
"[T]he question in this case asks whether § 7623(b)(4) confers jurisdiction only when there is both an IRS action based on whistleblower information and proceeds collected from that action." Li, 22 F.4th at 1018.
In a status report filed September 7, 2022, respondent represented that this Court's decision in Kennedy v. Commissioner, T.C. Memo. 2021-3, is currently on appeal to the D.C. Circuit Court (Case No. 21-1133) and that the Government is contending in that appeal that section 7623 "requires the collection of proceeds before the [WBO] may make a 'determination regarding an award' sufficient to give rise to Tax Court jurisdiction." Because the D.C. Circuit Court's pronouncement on that question will be binding on this Court under the Golsen rule, we will hold in abeyance petitioner's Motion for Summary Judgment on Claim #2018-007667 pending a decision in the Kennedy appeal.
After due consideration, and for cause, it is
ORDERED that petitioner file a memorandum by March 9, 2023, explaining whether there are any grounds for rebutting the presumption of regularity as it applies to the WBO's representation that the target of Claim #2018-007669 was not audited on the basis of petitioner's information. It is further
ORDERED that within 60 days of the entry of judgment by the Court of Appeals for the D.C. Circuit in Kennedy v. Commissioner (Case No. 21-1133), the parties shall file joint or independent status reports and memoranda of law, in which they set forth their respective views, if any, regarding the impact on this case of the D.C. Circuit Court's ruling in Kennedy once pronounced.