Internal Revenue Service (IRS) Rulemaking

Experienced Whistleblower Advocates Working to Expand Protections for Tax Fraud Whistleblowers

Kohn, Kohn & Colapinto’s partners seek to protect and enhance legal protections for tax fraud whistleblowers. KKC has filed rulemaking petitions to the IRS, filed extensive briefs to the IRS and testified at IRS rulemaking hearsing to strengthen the tax whistleblower program.

Kohn, Kohn & Colapinto’s experienced tax fraud whistleblower attorneys filed the following briefs in support of IRS whistleblower rights:

  • November 29, 2012: KKC filed an extensive brief on behalf of the National Whistleblower Center before the IRS strongly urging it to reward whistleblowers who exposed criminal tax frauds.
  • February 19, 2013: KKC authored an 84-page comment, on behalf of the NWC, on the proposed IRS whistleblower rules, actively opposing the criminal disqualification.
  • April 16, 2013:  One of our tax whistleblower attorneys testified at the IRS rulemaking hearing opposing the criminal reward disqualification.
  • June 5, 2014: We provided the Secretary of Treasury with an exhaustive 55-page scholarly article co-authored by KKC partner Stephen M. Kohn and Dean Zerbe that explained in detail the legal basis as to why the criminal reward disqualification was illegal and the why the IRS should not approve it.  A copy of this article, published in Tax Notes, is available here.
  • Finally, Dean Zerbe and Steve Kohn agreed to work with the legal team representing anonymous whistleblowers 21276/77-13W, to ensure that the IRS program correctly implemented the whistleblower reward laws and that any reward calculation included criminal fines and penalties.

On July 1, 2019, The Taxpayer First Act became law.  The Taxpayer First Act closed loopholes in corporate whistleblower protections. For the first time, employees who expose tax fraud, which often include violations of the Bank Secrecy Act and anti-money laundering law, are protected from retaliation.

Summary of Taxpayer First Act anti-retaliation provisions:

  • The right to reinstatement and double back-pay;
  • No mandatory arbitration;
  • Expeditious administrative remedies with the right to go to federal court for a jury trial;
  • Compensatory damages such as special damage, attorneys fees, and costs, awarded only to a whistleblower who prevails in an employment case.

The Taxpayer First Act also enhances the existing IRS whistleblower reward program by permitting full and open communication between the IRS Whistleblower Office and whistleblowers. Due to a broad reading of other provisions in the tax code concerning taxpayer secrecy, before this amendment, this type of communication was regularly stifled. The change will facilitate the cooperation between whistleblowers and the IRS necessary to fully prosecute tax frauds.

Kohn, Kohn & Colapinto partners worked closely with whistleblower attorney Dean Zerbe, Senior Policy Analyst at the National Whistleblower Center, and the National Whistleblower Center for several years promoting these reforms.

The modern IRS whistleblower award law (Section 7623(b) of the Internal Revenue Code) was created in 2006 and championed by Senator Charles E. Grassley (R-IA). The law provides that whistleblowers are mandated to receive 15-30% of proceeds collected by the U.S. government due to the information given by the whistleblower.  The IRS has also been extremely successful in protecting the confidentiality and anonymity of tax whistleblowers.

The below is a summary of what the IRS has collected over the last five years:

Total Amounts of Awards Amounts Collected Awards as Percentage
of Amounts Collected
FY 2018 $312,207,590 $1,441,255,859 21.7%
FY 2017 $33,979,873 $190,583,750 17.8%
FY 2016 $61,390,910 $368,907,298 16.6%
FY 2015 $103,486,236 $501,317,481 20.6%
FY 2014 $52,281,628 $309,990,568 16.9%

Source, 2018: IRS Whistleblower Program FY 2018 report
Source, 2017 – 2014: https://www.kkc.com/handbook/tax-cheats.

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