                              T.C. Memo. 2018-133



                        UNITED STATES TAX COURT



                WILLIAM MARK SCOTT, Petitioner v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



      Docket No. 1224-17W.                        Filed August 22, 2018.


      William Mark Scott, pro se.

      Philip Edward Blondin, Patricia P. Davis, and Kevin G. Gillin, for

respondent.

                          MEMORANDUM OPINION


      JACOBS, Judge: This case is before the Court on respondent’s motion for

summary judgment filed April 11, 2018, pursuant to Rule 121.1 Petitioner filed his

response in opposition to motion for summary judgment on May 7, 2018. For the


      1
       Unless otherwise noted, all Rule references are to the Tax Court Rules of
Practice and Procedure, and all section references are to the Internal Revenue
Code of 1986, as amended.
                                         -2-

[*2] reasons discussed infra, we conclude that there is no dispute as to a material

fact and thus this case is ripe for summary adjudication.

                                     Background

      Petitioner is the former Director of the Internal Revenue Service (IRS)

Office of Tax Exempt Bonds (Tax Exempt Bonds). He worked for more than 19

years at the IRS and the IRS Office of Chief Counsel; he has more than 30 years’

experience in the area of tax-exempt municipal bonds.

      On February 18, 2014, the IRS Whistleblower Office (Whistleblower

Office) received a Form 211, Application for Award for Original Information,

with an attached narrative and exhibits, from petitioner. The Form 211 alleges

that certain tax-exempt bonds issued by a U.S. city’s industrial development

agency (Agency) did not qualify for tax exempt treatment. The Form 211 alleged

that the bonds violated the general arbitrage yield restriction rules of section

1.148-2, Income Tax Regs., and thus concluded that the bonds were “taxable

private activity bonds”. The Form 211 noted that a prior examination of the bonds

was closed without any adjustments.

      Petitioner’s claim was assigned claim No. 2014-006300, and the

Whistleblower Office sent petitioner a letter acknowledging receipt of his Form

211 on or about April 22, 2014. On May 16, 2014, petitioner’s Form 211 was
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[*3] forwarded for review to a subject matter expert in the IRS Tax Exempt and

Government Entities Division (TE/GE). On May 27, 2014, the Form 211 was

further forwarded to a tax-exempt bond subject matter expert, Randy Torres, for

additional review and recommendation.

      On August 21, 2014, Mr. Torres sent a Form 11369, Confidential

Evaluation Report on Claim for Reward, to the Whistleblower Office. The Form

11369 stated that the bond issuance

      is not recommended for another examination since the 2012
      examination addressed and tested arbitrage issues and did not identify
      an arbitrage issue. The Whistleblower assumes the bond yield
      calculation was miscalculated because the Net Benefit test did not
      include the SIDA fee as an investment fee. The WB did not provide
      any schedules, documents or a bond yield calculation to show bond
      yield was computed incorrectly.[2]

      Upon receipt of the Form 11369, on October 29, 2014, Whistleblower

Office Analyst Steven Mitzel prepared an award recommendation memorandum

which recommended denial of petitioner’s claim based on the tax-exempt bond

subject matter expert’s decision not to pursue petitioner’s claim. Subsequently,

Analyst Mitzel sent petitioner a preliminary denial letter on December 8, 2014.

On February 10, 2015, petitioner responded to Analyst Mitzel’s letter. The

      2
       Petitioner objects to the admission of the above quoted portion of the Form
11369 on the grounds of hearsay. We admit it as a record kept in the course of a
regularly conducted activity of an organization. See Fed. R. Evid. 803(6).
                                        -4-

[*4] response encouraged respondent to reconsider the proposed denial and to

proceed with an examination of the bonds based on petitioner’s information.

      Upon receipt of petitioner’s response, Analyst Mitzel forwarded the

response to TE/GE for additional consideration. On May 1, 2015, TE/GE

requested that the Whistleblower Office return petitioner’s claim to it to allow a

different person to review the merits of the claim. On February 16, 2016, the

reviewing tax-exempt bonds subject matter expert, James Held, sent a new Form

11369 to the Whistleblower Office, recommending the IRS not open a new

examination of the bond issuance for the following reasons.

      1.     A full-scope examination had previously been conducted revealing no
             issues associated with the bond issue.

      2.     The arbitrage report provided in the prior examination indicated a
             negative rebate liability.

      3.     No indications of fraud, abusive transactions, or other tax law
             violations were found.

      4.     Petitioner, under penalties of perjury, stated in his claim “My review
             has not identified any fraudulent activities” and “My review has not
             uncovered any specific allegation of a tax law violation. Instead, I am
             challenging the tax law conclusion reached by the law firm in this
             matter, whose opinion has been and continues to be relied upon by
             everyone involved in the transaction, including holders of the bonds,
             the issuer and the Obligor”.

      5.     No credible evidence was provided by petitioner indicating that a
             violation of the tax laws occurred. “Instead, he merely has a
                                          -5-

[*5]         difference of opinion that does not constitute credible evidence and
             does not warrant the reopening of the bond issuance.”

Whistleblower Office Analyst Joel Calandreli reviewed this Form 11369 on

September 22, 2016. On October 6, 2016, petitioner sent the Whistleblower

Office a letter containing additional information, which was forwarded to the tax-

exempt bonds subject matter expert. On October 12, 2016, the Whistleblower

Office received an email response from the tax-exempt bonds subject matter

expert, wherein the expert stated that the additional information did not change his

conclusion not to reopen the examination of the Agency.

       On December 12, 2016, the Whistleblower Office prepared an updated

award recommendation memorandum and on December 13, 2016, the

Whistleblower Office issued petitioner a final denial. Efficient in its use of details

specific to petitioner’s claim, the final denial states:

       The claim has been recommended for denial because the IRS took no
       action based on the information that you provided. Common reasons
       for declining to act on information include statute of limitations
       issues, limited resources, or a conclusion that there are no material
       issues.

                                       Discussion

       Summary judgment serves to “expedite litigation and avoid unnecessary and

expensive trials.” Fla. Peach Corp. v. Commissioner, 90 T.C. 678, 681 (1988).
                                         -6-

[*6] Either party may move for summary judgment upon all or any part of the legal

issues in controversy, but we may grant summary judgment only if there is no

genuine dispute as to any material fact. Rule 121(a) and (b); Naftel v.

Commissioner, 85 T.C. 527, 529 (1985). The moving party bears the burden of

showing that there is no genuine dispute of material fact, and the Court views all

factual materials and inferences in the light most favorable to the nonmoving

party. Dahlstrom v. Commissioner, 85 T.C. 812, 821 (1985). Rule 121(d)

provides that where the moving party properly makes and supports a motion for

summary judgment, “an adverse party may not rest upon the mere allegations or

denials of such party’s pleading” but rather must set forth specific facts, by

affidavits or otherwise, “showing that there is a genuine dispute for trial.”

      A whistleblower award under section 7623(b) generally depends on two

prerequisites: (1) the Commissioner’s commencing an administrative or judicial

action and (2) the collection of proceeds. Cohen v. Commissioner, 139 T.C. 299,

302 (2012), aff’d, 550 F. App’x 10 (D.C. Cir. 2014); Cooper v. Commissioner,

136 T.C. 597, 600 (2011). We have held that we may not order the Commissioner

to commence an administrative or judicial action. See Cohen v. Commissioner,

139 T.C. at 302; Cooper v. Commissioner, 136 T.C. at 600-601.
                                        -7-

[*7] In his motion for summary judgment, and supported by the declaration of

Analyst Calandreli, respondent detailed all of the actions taken by the

Whistleblower Office and the Tax Exempt Bonds agents. Respondent stated that

the IRS reviewed petitioner’s submission and supplemental submission but took

no action and collected no proceeds.

      Petitioner contends that respondent, in fact, commenced an administrative

action and collected proceeds related to the bond issuances. In the declaration

attached to his response in opposition to respondent’s motion for summary

judgment, petitioner states that he “obtained specific information and records

regarding two separate attempts by TEB [Tax Exempt Bonds] to disguise the

collection of proceeds on examinations initiated through submissions of Forms

211. The information and records collected relate specifically to Whistleblower

Office Claim No. 2015-005991 and Claim No. 2015-006729.” Petitioner asserts

that the IRS issued no-change letters to the governmental issuer of the bonds, but

the Tax Exempt Bonds division subsequently took administrative actions “so as to

collect millions in tax dollars from the beneficial owners of the bonds.” Petitioner

further asserts that in connection with these two claim numbers: “I have been

informed that TEB had failed to report these administrative actions and collections

on the Forms 11369 sent to the IRS Whistleblower Office”. Continuing, he states:
                                        -8-

[*8] “I have been informed that the IRS Whistleblower Office had been working

on denial letters based upon TEB’s erroneous Forms 11369 prior to receiving the

results of my independent research.” Petitioner further states: “I have been told

that the treatment of whistleblowers by TEB has been subject to active

consideration of a possible review by the Treasury Inspector General for Tax

Administration.”

      In his response in opposition to respondent’s motion for summary judgment,

petitioner posits: “[b]ased on recent history, TEB would not have reported

administrative actions against the beneficial owners of the bonds on the Forms

11369.” Petitioner asserts that the administrative file does not preclude the

possibility of administrative actions against the beneficial owners of the bonds or

other possible collections. Consequently, petitioner argues:

      Given that respondent failed to complete the administrative file, and
      petitioner is legally unable to force the third-party conduit borrower
      to execute an affidavit or declaration, or to produce records prior to
      the date set for trial, respondent’s request for summary judgment is
      premature. W.L Gore & Assoc. v. Commissioner, T.C. Memo. 1995-
      96; Rule 121(e).

      Respondent’s motion for summary judgment should be denied as
      reasonable doubts as to material facts exist that are not included
      within the administrative file, including whether TEB took actions to
      collect directly from the actual taxpayers and whether the related
      action has been completed and resulted in a collection.
                                         -9-

[*9] Petitioner’s statements are not compelling. First, we note that petitioner has

no personal knowledge of the IRS actions upon which he reports. He states that

he has been informed of the IRS’ alleged malfeasance in other situations and

presents what he has been told as true in this situation. Rule 121(d) provides that

“[s]upporting and opposing affidavits or declarations shall be made on personal

knowledge, shall set forth such facts as would be admissible in evidence, and shall

show affirmatively that the affiant or declarant is competent to testify to the

matters stated therein.” Our Rule 121 is modeled in large part after rule 56 of the

Federal Rules of Civil Procedure. Shiosaki v. Commissioner, 61 T.C. 861, 862

(1974). Consequently, “‘sheer hearsay’ * * * ‘counts for nothing’” on summary

judgment. Greer v. Paulson, 505 F.3d 1306, 1315 (D.C. Cir. 2007) (quoting

Gleklen v. Democratic Cong. Campaign Comm., Inc., 199 F.3d 1365, 1369 (D.C.

Cir. 2000)).

      This is not the end of our analysis. Even though petitioner’s evidence

would not be admissible at trial, summary judgment evidence need not be in a

form that would be admissible at trial, so long as it is capable of being converted

into admissible evidence. Gleklen, 199 F.3d at 1369. But beyond the hearsay

issue, petitioner’s statements also suffer from relevancy problems. Even if

petitioner can establish that there was malfeasance in the other cases, i.e., Claim
                                        - 10 -

[*10] No. 2015-005991 and Claim No. 2015-006729, petitioner has presented no

evidence, admissible or otherwise, that such occurrences in fact occurred in his

case. Petitioner’s argument is missing a vital step; petitioner asserts malfeasance

in another case, then a gap of uncertainty, then his conclusion that malfeasance

exists in this case.

       Petitioner appeals to Rule 121(e), citing the difficulty in acquiring factual

information in this case. Rule 121(e) provides the rule for instances when

affidavits or declarations are unavailable:

       If it appears from the affidavits or declarations of a party opposing the
       motion that such party cannot for reasons stated present by affidavit
       or declaration facts essential to justify such party’s opposition, then
       the Court may deny the motion or may order a continuance to permit
       affidavits or declarations to be obtained or other steps to be taken or
       may make such other order as is just. If it appears from the affidavits
       or declarations of a party opposing the motion that such party’s only
       legally available method of contravening the facts set forth in the
       supporting affidavits or declarations of the moving party is through
       cross-examination of such affiants or declarants or the testimony of
       third parties from whom affidavits or declarations cannot be secured,
       then such a showing may be deemed sufficient to establish that the
       facts set forth in such supporting affidavits or declarations are
       genuinely disputed.

In his response to respondent’s motion for summary judgment, petitioner asserts

that the administrative file is incomplete but that he has no means to acquire
                                       - 11 -

[*11] further documents and he is unable to force the Agency to execute an

affidavit or declaration or produce records.

      In Whistleblower 14106-10W v. Commissioner, 137 T.C. 183, 188-189

(2011), we stated:

      Rule 121(e) is modeled in large part after former rule 56(f) of the
      Federal Rules of Civil Procedure (redesignated rule 56(d) in 2009
      with nonsubstantive changes). In Keebler Co. v. Murray Bakery
      Prods., 866 F.2d 1386 (Fed. Cir. 1989), applying former rule 56(f),
      the court held that the plaintiff could not avoid summary judgment by
      requesting discovery. The court characterized the plaintiff’s
      opposition as saying, in effect: “we have no factual basis for opposing
      summary judgment, but, if you stay proceedings, we might find
      something.” Id. at 1389. The court observed: “If all one had to do to
      obtain a grant of a Rule 56(f) motion were to allege possession by
      movant of ‘certain information’ and ‘other evidence’, every summary
      judgment decision would have to be delayed while the non-movant
      goes fishing in the movant’s files.” Id. * * *

      To conclude, we hold that there is no genuine issue as to any material fact

and we may render a decision as a matter of law. As previously noted, the IRS

examined the bonds issued by the Agency and the examination was closed without

any adjustments. Respondent, via sworn affidavit, states that no proceeds were

collected and petitioner presented no evidence that any such proceeds were

collected in this matter. Consequently, we shall grant respondent’s motion for

summary judgment, filed April 11, 2018.
                                       - 12 -

[*12] In the light of the foregoing,


                                                An appropriate order and decision

                                       will be entered.
