                                                        WHISTLEBLOWER 11332–13W, PETITIONER v.
                                                         COMMISSIONER OF INTERNAL REVENUE,
                                                                    RESPONDENT
                                                    Docket No. 11332–13W.                              Filed June 4, 2014.

                                                  Whistleblower W reported a tax fraud scheme, involving
                                               W’s employer and related entities, to the Government. W pro-
                                               vided the Government with information regarding the tax
                                               fraud scheme from June 2006 through the fall of 2009. W’s
                                               information formed the basis of the Government’s action
                                               against the target taxpayers. W filed a Form 211, Application
                                               for Award for Original Information, in 2008 and submitted to
                                               R documentary evidence related to W’s involvement in the
                                               Government’s investigation. W resubmitted Form 211 in 2011
                                               seeking an award under I.R.C. sec. 7623(b). Shortly there-
                                               after, the Government settled with one of the target taxpayers
                                               and recovered more than $30 million in taxes, penalties and
                                               interest. R granted W a discretionary award determination
                                               under I.R.C. sec. 7623(a) and denied W’s request for an award
                                               under I.R.C. sec. 7623(b). W filed the petition seeking review
                                               of R’s award determination. R filed a motion to dismiss for
                                               lack of jurisdiction. R argues that this Court lacks jurisdiction
                                               to review R’s award determination because R proceeded
                                               against the target taxpayers using information W provided
                                               before the effective date of I.R.C. sec. 7623(b), Dec. 20, 2006.
                                               W opposes R’s motion on the grounds that W provided
                                               information to the Government both before and after the
                                               effective date of I.R.C. sec. 7623(b). Held: The Court has juris-
                                               diction to review R’s whistleblower claim award determina-
                                               tions where W has alleged that W provided information to R
                                               before and after the effective date of I.R.C. sec. 7623(b). Held,
                                               further, W satisfied W’s pleading burden by alleging facts that
                                               R proceeded with an action against the target taxpayers using
                                               information brought to R’s attention by W both before and
                                               after the effective date of I.R.C. sec. 7623(b), Dec. 20, 2006.
                                               Held, further, R’s motion to dismiss will be denied.

                                           Sealed, for petitioner.
                                           Sealed, for respondent.

                                                                                   OPINION

                                       KROUPA, Judge: This case 1 is before the Court on respond-
                                     ent’s motion to dismiss for lack of jurisdiction. We decide for
                                     the first time whether the Court has jurisdiction to review
                                       1 This Court previously granted the whistleblower’s motion to seal the

                                     record in this case and motion to proceed anonymously.

                                     396




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                                     (396)              WHISTLEBLOWER 11332–13W v. COMMISSIONER                                     397


                                     respondent’s whistleblower claim award determinations
                                     where the whistleblower provided information both before
                                     and after the enactment of the Tax Relief and Health Care
                                     Act of 2006 (TRHCA), 2 Pub. L. No. 109–432, div. A, sec. 406,
                                     120 Stat. at 2958, effective December 20, 2006. We hold that
                                     we do. 3

                                                                                Background
                                        The following background is drawn from the petition and
                                     respondent’s motion to dismiss for lack of subject matter
                                     jurisdiction and responses filed by both parties. We note that
                                     the background is stated solely for purposes of ruling on the
                                     pending motion to dismiss and is not a finding of facts.
                                        Petitioner is a whistleblower that reported a tax fraud
                                     scheme to the Government. During the whistleblower’s
                                     employment, the whistleblower learned of a tax structure
                                     involving the whistleblower’s employer and several related
                                     entities and subsidiary companies (targets). When the
                                     whistleblower raised concerns over the tax structure to the
                                     whistleblower’s employer, the whistleblower’s employer used
                                     physical force and armed men to intimidate the whistle-
                                     blower and prevent disclosure. The whistleblower was subse-
                                     quently fired. In 2005 the whistleblower attempted to report
                                     the tax scheme to the Government. The whistleblower’s
                                     efforts were met with no response. The whistleblower eventu-
                                     ally reached Government officials interested in the whistle-
                                     blower’s information. In June 2006 the whistleblower met
                                     informally with Department of Justice (DOJ) representatives
                                     in Washington, D.C., regarding the tax scheme. The whistle-
                                     blower provided the DOJ representatives with generic
                                     information regarding the targets and the tax scheme at this
                                     first meeting. The whistleblower met with the Internal Rev-
                                     enue Service (IRS) and the DOJ representatives several more
                                     times in the summer and fall of 2006. At each meeting the
                                           2 Tax
                                               Relief and Health Care Act of 2006, Pub. L. No. 109–432, div. A,
                                     sec. 406, 120 Stat. at 2958, codified at sec. 7623(b).
                                        3 All section references are to the Internal Revenue Code in effect at all

                                     relevant times, and all Rule references are to the Tax Court Rules of Prac-
                                     tice and Procedure, unless otherwise indicated. All amounts are rounded
                                     to the nearest dollar.




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                                     398                 142 UNITED STATES TAX COURT REPORTS                                     (396)


                                     whistleblower provided additional documents and details
                                     regarding the tax scheme.
                                        The whistleblower continued to provide additional informa-
                                     tion regarding the targets’ activities and was in regular con-
                                     tact with the IRS and the DOJ representatives after
                                     December 20, 2006. On multiple occasions, the IRS and the
                                     DOJ representatives asked the whistleblower for informa-
                                     tion, after December 2006, related to particular areas of
                                     inquiry and details regarding transactions and the targets.
                                     As the whistleblower learned additional information
                                     regarding the targets’ actions, the whistleblower reported
                                     that information to the IRS and the DOJ representatives.
                                     The whistleblower provided information to the IRS and the
                                     DOJ representatives continually until the fall of 2009.
                                     Notably, the whistleblower’s assistance in this investigation
                                     jeopardized the safety of the whistleblower and the whistle-
                                     blower’s family. As discussed in detail in Whistleblower
                                     11332–13W v. Commissioner, T.C. Memo. 2014–92, the
                                     whistleblower received several threats of physical harm from
                                     the targets.
                                        The whistleblower filed a Form 211, Application for Award
                                     for Original Information, in 2008 and submitted to the IRS
                                     Whistleblower Office (Whistleblower Office) documentary evi-
                                     dence related to the targets’ actions that the whistleblower
                                     had previously disclosed. Subsequently, the whistleblower
                                     resubmitted Form 211 in 2011 seeking an award under sec-
                                     tion 7623(b). Shortly thereafter, the Government entered into
                                     a Non-Prosecution Agreement with one of the targets that
                                     led to the Government recovering more than $30 million in
                                     taxes, penalties and interest. The Whistleblower Office
                                     granted the whistleblower a discretionary award determina-
                                     tion under section 7623(a) and denied the whistleblower’s
                                     request for an award under section 7623(b).
                                        The whistleblower timely filed the petition seeking review
                                     of respondent’s award determination. Respondent filed a
                                     motion to dismiss for lack of jurisdiction on the ground that
                                     respondent’s award determination is not subject to judicial
                                     review. Respondent argues that this Court lacks jurisdiction
                                     to review respondent’s award determination because he pro-
                                     ceeded against the targets using information the whistle-




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                                     (396)              WHISTLEBLOWER 11332–13W v. COMMISSIONER                                     399


                                     blower provided before the effective date of section 7623(b), 4
                                     December 20, 2006. 5 The whistleblower objected to the
                                     motion, asserting that the whistleblower is entitled to
                                     judicial review of respondent’s award determination because
                                     the whistleblower provided information both before and after
                                     the effective date of section 7623(b). We agree with the
                                     whistleblower. We leave for another day whether the whistle-
                                     blower is entitled to a larger award.

                                                                                 Discussion
                                        This case presents an issue of first impression. We decide
                                     for the first time whether the Court has jurisdiction to
                                     review respondent’s whistleblower claim award determina-
                                     tion where the claim is based on information the whistle-
                                     blower provided both before and after the enactment of
                                     TRHCA sec. 406, 120 Stat. at 2958. 6
                                     I. Overview of the Court’s Jurisdiction and the Whistleblower
                                        Program
                                        We begin with the Tax Court’s jurisdiction. The Tax Court
                                     is a court of limited jurisdiction and may exercise jurisdiction
                                     only to the extent authorized by Congress. Judge v. Commis-
                                     sioner, 88 T.C. 1175, 1180–1181 (1987); Naftel v. Commis-
                                     sioner, 85 T.C. 527, 529 (1985). The Tax Court is without
                                     authority to enlarge upon that statutory grant. See Phillips
                                     Petroleum Co. v. Commissioner, 92 T.C. 885, 888 (1989). We
                                     nevertheless have jurisdiction to determine whether we have
                                     jurisdiction. Hambrick v. Commissioner, 118 T.C. 348 (2002);
                                     Pyo v. Commissioner, 83 T.C. 626, 632 (1984); Kluger v.
                                     Commissioner, 83 T.C. 309, 314 (1984).
                                        Our Rules are silent as to deciding a motion to dismiss for
                                     lack of subject matter jurisdiction. Thus, we look to the Fed-
                                     eral Rules of Civil Procedure. See Rule (1)(b); Estate of Miller
                                     v. Commissioner, T.C. Memo. 1994–25. When deciding a
                                     motion to dismiss based on lack of subject matter jurisdic-
                                       4 As discussed infra, sec. 7623(b)(4) for the first time granted this Court

                                     jurisdiction to hear a whistleblower’s petition for review of the Commis-
                                     sioner’s award determination.
                                       5 The amendments enacting sec. 7623(b) apply to information provided

                                     on or after December 20, 2006.
                                       6 Codified, in part, at sec. 7623(b).




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                                     400                 142 UNITED STATES TAX COURT REPORTS                                     (396)


                                     tion, a court must construe the undisputed allegations of the
                                     complaint in a manner favorable to the plaintiff. See Dacosta
                                     v. United States, 82 Fed. Cl. 549, 552 (2008). Where jurisdic-
                                     tion turns on contested facts, allegations in the petition are
                                     generally taken as true for purposes of deciding a motion to
                                     dismiss for lack of jurisdiction. See, e.g., O’Brien v. Commis-
                                     sioner, 40 B.T.A. 280 (1939). The issue is whether the claim-
                                     ant is entitled to offer evidence to support the claims, not
                                     whether the claimant will ultimately prevail on the merits.
                                     See Scheuer v. Rhodes, 416 U.S. 232, 236 (1974); see also
                                     Reynolds v. Army and Air Force Exch. Serv., 846 F.2d 746,
                                     747 (Fed. Cir. 1988). We turn now to an overview of our
                                     jurisdiction regarding whistleblower claims.
                                        The Secretary has long had the discretion to pay awards
                                     to persons providing information that aids in (1) detecting
                                     underpayments of tax and (2) detecting and bringing to trial
                                     and punishment persons guilty of violating the internal rev-
                                     enue laws. Sec. 7623(a). The discretionary whistleblower
                                     awards have been arbitrary and inconsistent, however,
                                     because of a lack of standardized procedures and limited
                                     managerial oversight. See Treasury Inspector General for
                                     Tax Administration Report 2006–30–092, The Informants’
                                     Rewards Program Needs More Centralized Management
                                     Oversight (June 2006). It took an average of seven years for
                                     a discretionary award to be paid and an average of six
                                     months for a claim to be rejected. Id. at 8–9. Moreover, most
                                     rejected claims did not provide the rationale for the
                                     reviewer’s decision because of concerns about disclosing con-
                                     fidential return information to the whistleblower. Id. at 7.
                                        Congress enacted TRHCA in 2006 to address perceived
                                     problems with the discretionary award regime. TRHCA sec.
                                     406(a), 120 Stat. at 2958, amended section 7623 to require
                                     the Secretary to pay nondiscretionary whistleblower awards
                                     under certain circumstances and to provide this Court with
                                     jurisdiction to review such award determinations. A whistle-
                                     blower is now entitled to a minimum nondiscretionary award
                                     of 15% of the collected proceeds if the Commissioner proceeds
                                     with administrative or judicial action using information pro-
                                     vided in a whistleblower claim. 7 Sec. 7623(b)(1).
                                       7 The award is reduced in certain circumstances. For example, the award

                                     is reduced where the whistleblower planned or initiated the actions that




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                                       TRHCA also directed the Secretary to issue guidance for
                                     the operation of a Whistleblower Office administered by the
                                     IRS. 8 TRHCA sec. 406(b)(1), 120 Stat. at 2959. The Whistle-
                                     blower Office is responsible for reviewing submitted whistle-
                                     blower claims or assigning them to the appropriate IRS office
                                     for review. Id. sec. 406(b)(1)(B), 120 Stat. at 2960. The
                                     Whistleblower Office is authorized to seek additional assist-
                                     ance from the whistleblower if necessary. Id. sec.
                                     406(b)(1)(C), (2).
                                       The Commissioner released guidance to taxpayers on filing
                                     nondiscretionary whistleblower award claims in early 2008.
                                     See Notice 2008–4, 2008–1 C.B. 253. Whistleblowers seeking
                                     an award must fully complete and submit a Form 211. Id.
                                     sec. 3.02, 2008–1 C.B. at 254. The Whistleblower Office will
                                     acknowledge receipt of the claim in writing. Id. sec. 3.05,
                                     2008–1 C.B. at 255. The Whistleblower Office will send cor-
                                     respondence to the whistleblower once a determination
                                     regarding the claim has been made. Id. sec. 3.11, 2008–1
                                     C.B. at 256. Whistleblower Office determinations regarding
                                     awards may be appealed to this Court within 30 days from
                                     the issuance of the nondiscretionary award determination.
                                     Id.; see also sec. 7623(b)(4). Awards will not be paid, how-
                                     ever, until there is a determination of the tax liability and
                                     the amounts owed are collected. Notice 2008–4, sec. 3.08,
                                     2008–1 C.B. at 255. The Commissioner also issued proce-
                                     dural guidance on how whistleblower claims will be proc-
                                     essed. See Internal Revenue Manual (IRM) pt. 25.2.2 (Dec.
                                     30, 2008). 9 In general, whistleblower claims will be denied
                                     where the information provided does not: (a) identify a Fed-
                                     eral tax issue upon which the IRS will act; (b) result in the
                                     detection of an underpayment of taxes; or (c) result in the

                                     led to the underpayment of tax. Sec. 7623(b)(2) and (3). Furthermore, an
                                     award is available only if the individual taxpayer had gross income exceed-
                                     ing $200,000 for any year at issue and if the amount in dispute (including
                                     tax, penalties, additions to tax and additional amounts) exceeds $2 million.
                                     TRHCA sec. 406(a)(1), 120 Stat. at 2958.
                                       8 The 2006 legislation also requires the Secretary to provide an annual

                                     report to Congress on whistleblower claims filed and awards issued under
                                     sec. 7623. TRHCA sec. 406(c), 120 Stat. at 2960.
                                       9 Internal Revenue Manual pt. 25.2.2 (Dec. 30, 2008) was updated on

                                     June 18, 2010, to provide additional guidance for evaluating a whistle-
                                     blower claim.




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                                     collection of proceeds. See id. pt. 25.2.2.12(2) (June 18, 2010).
                                     The whistleblower will be notified by the Whistleblower
                                     Office once an award decision has been made. See id. pt.
                                     25.2.2.5(13) (Dec. 30, 2008).
                                     II. Analysis
                                        We must now decide whether the Court has jurisdiction to
                                     review respondent’s award determination. Respondent argues
                                     that this Court does not have jurisdiction to review his
                                     award determination because the whistleblower provided the
                                     information to the Whistleblower Office before the enactment
                                     of section 7623(b). See Wolf v. Commissioner, T.C. Memo.
                                     2007–133 (holding that the Court lacked jurisdiction to
                                     review a determination regarding a whistleblower award
                                     because the information was provided before December 20,
                                     2006). Thus, respondent argues that this Court lacks juris-
                                     diction to review his award determination because he pro-
                                     ceeded against the targets using information the whistle-
                                     blower provided before December 20, 2006. The whistle-
                                     blower argues that this Court has jurisdiction to review
                                     respondent’s award determination because the whistleblower
                                     alleged that respondent proceeded against the targets using
                                     information the whistleblower provided both before and after
                                     December 20, 2006. See sec. 7623(b).
                                        We hold that the whistleblower satisfied the whistle-
                                     blower’s pleading burden by alleging facts that respondent
                                     proceeded with an action against the targets using informa-
                                     tion brought to respondent’s attention by the whistleblower
                                     both before and after December 20, 2006. This is consistent
                                     with TRHCA’s intent to provide whistleblowers with judicial
                                     review of award determinations. We now turn to the gov-
                                     erning law.
                                        A whistleblower who satisfies the requirements of section
                                     7623(b) is entitled to receive at least 15% but no more than
                                     30% of the collected proceeds or from a settlement with the
                                     taxpayer. Additionally, the Commissioner must proceed 10
                                        10 The Commissioner’s proposed regulations explain that the term ‘‘pro-

                                     ceeds’’ includes when ‘‘the IRS initiates a new action that it would not
                                     have initiated, expands the scope of an ongoing action that it
                                     would not have expanded, or continues to pursue an ongoing action that
                                     it would not have continued but for the information provided.’’ 77 Fed.
                                     Reg. 74800 (Dec. 18, 2012).




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                                     (396)              WHISTLEBLOWER 11332–13W v. COMMISSIONER                                     403


                                     with an administrative or judicial action based on informa-
                                     tion brought to the Commissioner’s attention by the whistle-
                                     blower. See sec. 7623(b)(1). The IRM states that action by the
                                     IRS includes the modification of a pending or planned exam-
                                     ination or investigation as a result of information provided
                                     by the whistleblower. IRM pt. 25.2.2 (June 18, 2010).
                                        Additionally, the Tax Court has exclusive jurisdiction over
                                     appeals of award determinations where a whistleblower pro-
                                     vided information both before and after the effective date of
                                     TRHCA. See, e.g., Dacosta, 82 Fed. Cl. at 554 (determining
                                     that the Tax Court had exclusive jurisdiction over the
                                     whistleblower’s claim). The Court of Federal Claims’ decision
                                     in Dacosta is directly on point. In Dacosta the court dis-
                                     missed the case because the court found that the Tax Court
                                     had exclusive jurisdiction over the whistleblower claim and
                                     the court could not transfer the case to the Tax Court. Id. at
                                     557 (referencing 28 U.S.C. sec. 1631). Nevertheless, the
                                     Dacosta court’s analysis and rationale are persuasive. In
                                     Dacosta, as here, the claimants provided the Commissioner
                                     with information both before and after the enactment of
                                     TRHCA. Id. at 551. The Government moved to dismiss for
                                     lack of subject matter jurisdiction and argued that the
                                     information submitted by the claimants in 2007 was identical
                                     to the information submitted in 2003. Id. at 553. The
                                     Government further argued that, even if claimants provided
                                     new and different information, the Commissioner did not
                                     proceed using the later application and documents. Id. The
                                     court rejected the Government’s arguments and determined
                                     that the claimants alleged sufficient facts to avail themselves
                                     of section 7623(b)(1) for jurisdictional purposes. Id. at 554.
                                     The court concluded that the claimants’ alleged facts, if
                                     proven at trial, would establish that the Commissioner acted
                                     on information provided by the claimants after the amend-
                                     ments to section 7623. Id.
                                        The parties dispute whether respondent proceeded against
                                     the targets using the whistleblower’s post-December 20,
                                     2006, information. The whistleblower’s allegations are suffi-
                                     cient to establish jurisdiction. The whistleblower alleged that
                                     the whistleblower provided the IRS and the DOJ with
                                     information from at least June 2006 through the fall of 2009.
                                     The post-December 2006 information was not simply confirm-
                                     atory details. Rather, the whistleblower provided the IRS




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                                     404                 142 UNITED STATES TAX COURT REPORTS                                     (396)


                                     and the DOJ with the facts that formed the basis and grava-
                                     men of respondent’s action against the targets. The whistle-
                                     blower alleged that the whistleblower provided the IRS and
                                     the DOJ with information related to particular areas of
                                     inquiry and details regarding the transactions and the tar-
                                     gets.
                                        Taking the contested factual allegations in the petition as
                                     true, they establish that from June 2006 through the fall of
                                     2009 the whistleblower was in constant contact with the IRS
                                     and the DOJ and provided them with the basis of and details
                                     on the targets’ tax avoidance scheme. Whether respondent
                                     used this information to proceed against the targets is not a
                                     question for the present motion. The whistleblower has
                                     alleged sufficient jurisdictional facts to avail the whistle-
                                     blower of section 7623(b)(1) for jurisdictional purposes and to
                                     overcome a motion to dismiss for lack of jurisdiction. If the
                                     whistleblower’s alleged facts are proved at trial, they would
                                     establish that respondent proceeded against the targets
                                     using information the whistleblower provided after December
                                     20, 2006. If these facts are established, the whistleblower is
                                     entitled to judicial review of respondent’s award determina-
                                     tion.
                                        We hold, consistent with the rationale of Dacosta, that this
                                     Court has jurisdiction to review an award determination
                                     where a whistleblower has alleged that the whistleblower
                                     provided information both before and after the enactment of
                                     section 7623(b).
                                        We have considered all remaining arguments the parties
                                     made and, to the extent not addressed, we conclude they are
                                     irrelevant, moot or meritless.
                                        For the foregoing reasons, we shall deny respondent’s
                                     motion to dismiss.
                                                                                 An appropriate order will be issued.

                                                                               f




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