                              T.C. Memo. 2019-141



                        UNITED STATES TAX COURT



                VINCENT J. APRUZZESE, Petitioner v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



      Docket No. 12151-17W.                      Filed October 21, 2019.



      Vincent J. Apruzzese, pro se.

      Gregory H. Becker, Bartholomew Cirenza, Kimberly A. Daigle, Patricia P.

Davis, and Kevin G. Gillin, for respondent.



                          MEMORANDUM OPINION


      VASQUEZ, Judge: This whistleblower award case is before the Court on a

motion for summary judgment filed by the Internal Revenue Service (IRS or

respondent). For the below reasons we will grant respondent’s motion.
                                           -2-

[*2]                                   Background

       The following facts are based on the parties’ pleadings and motion papers,

including the declarations and exhibits attached thereto. See Rule 121(b).1

Petitioner resided in Florida when he filed his petition.

       On September 16, 2011, petitioner and a coclaimant2 submitted Form 211,

Application for Award for Original Information, to the IRS Whistleblower Office

(WO). On the Form 211 petitioner stated that he and his coclaimant were involved

in a lawsuit against an estate (target). Petitioner alleged that the target had

understated its Federal estate tax by several million dollars by failing to include

several assets on its estate tax return.3 Petitioner also alleged that the target had

undervalued other assets on the estate tax return.

       After receiving petitioner’s Form 211 the WO assigned petitioner a claim

number and acknowledged receipt of the claim by letter dated September 27, 2011.




       1
         All Rule references are to the Tax Court Rules of Practice and Procedure,
and all section references are to the Internal Revenue Code in effect at all relevant
times. We round all monetary amounts to the nearest dollar.
       2
           The coclaimant is not a party to this case.
       3
         Petitioner premised part of this allegation on the belief that the decedent
of the target had sold assets in exchange for invalid installment notes.
                                        -3-

[*3] The WO sent petitioner’s Form 211 information to the Estate & Gift Unit

(E&G) of the IRS Small Business/Self-Employed Division.

      The target’s estate tax return was already under examination when petitioner

submitted his information to the WO. Before receiving petitioner’s information,

E&G Attorney Bryan Babcock was preparing to issue the target a “No Change”

letter. However, upon reviewing petitioner’s information, Mr. Babcock changed

course and pursued information pertaining to the lawsuit referenced in petitioner’s

Form 211. Subsequently, Mr. Babcock’s discovery that the target had used “tax

affecting” business valuations prompted him to select four of the decedent’s gift

tax returns for examination.

      At the conclusion of the expanded examination, the IRS and the target

agreed to adjustments to the estate tax return and gift tax returns. The IRS

assessed tax and interest of $424,019, which the target promptly paid. Mr.

Babcock submitted Form 11369, Confidential Evaluation Report on Claim for

Award, to the WO. Therein Mr. Babcock stated that petitioner had “substantially

contributed to the examination of the estate tax return.”

      Thereafter the WO assigned petitioner’s claim to Senior Tax Analyst

Elizabeth Borenstein. After reviewing petitioner’s case file, including Mr.

Babcock’s Form 11369, Ms. Borenstein issued petitioner a Preliminary Award
                                          -4-

[*4] Recommendation Under Section 7623(a) (preliminary award

recommendation) recommending a preliminary award of $43,424 (22% of one-

half4 of the collected proceeds less a 6.9% sequestration reduction).

      In a letter to Ms. Borenstein dated March 22, 2017, petitioner expressed

disagreement with the preliminary award recommendation. Petitioner did not

dispute the proposed award percentage or the amount of the collected proceeds.

Instead he objected to respondent’s adjustments to the target’s returns, writing:

      With all due respect, I believe that the IRS has failed to fully
      comprehend the scope of the failure of the representatives of * * *
      [the target] to accurately reflect the assets and liabilities of * * * [the
      target] to the IRS, and accordingly has failed to properly determine
      the amount of additional taxes owed by * * * [the target].

      On May 2, 2017, the WO issued petitioner a Final Decision Under Section

7623(a) (final decision). Therein respondent advised petitioner that, after

consideration of his comments, the whistleblower award would remain $43,424.

      On May 30, 2017, petitioner filed the petition to commence this case, in

which he alleged that respondent’s adjustments to the target’s returns were

inadequate. An amendment to the petition followed on July 26, 2017, in which

petitioner urged the Court to reverse the final decision and order the IRS to re-

      4
         The WO divided the collected proceeds by one-half because petitioner
submitted the Form 211 with a coclaimant. As stated supra note 2, the coclaimant
is not a party to this case.
                                        -5-

[*5] examine the target. Respondent subsequently filed a motion for summary

judgment and amendment to motion for summary judgment, to which petitioner

objected. The Court heard oral argument on the motion in Tampa, Florida.

                                    Discussion

I.    Summary Judgment

      Summary judgment is intended to expedite litigation and avoid unnecessary

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

The Court may grant summary judgment “upon all or any part of the legal issues in

controversy” when there is no genuine dispute as to any material fact and a

decision may be rendered as a matter of law. Rule 121(a) and (b); see Sundstrand

Corp. v. Commissioner, 98 T.C. 518, 520 (1992), aff’d, 17 F.3d 965 (7th Cir.

1994). In deciding whether to grant summary judgment, we construe factual

materials and inferences drawn from them in the light most favorable to the

nonmoving party. Sundstrand Corp. v. Commissioner, 98 T.C. at 520. However,

the nonmoving party “may not rest upon the mere allegations or denials” of his

pleadings but instead “must set forth specific facts showing that there is a genuine

dispute for trial.” Rule 121(d); see Sundstrand Corp. v. Commissioner, 98 T.C.

at 520.
                                        -6-

[*6] Finding no material facts to be in genuine dispute, we conclude that this

case may be adjudicated summarily.

II.   Jurisdiction

      Section 7623(b) provides for nondiscretionary (i.e., mandatory)

whistleblower awards if certain requirements are met. Section 7623(b)(4)

provides that “[a]ny determination regarding an award under paragraph (1), (2),

or (3) may, within 30 days of such determination, be appealed to the Tax Court

(and the Tax Court shall have jurisdiction with respect to such matter).” This

statute is unusual as a jurisdiction-conferring provision because it does not

prescribe any particular form of notice to the would-be petitioner. Whistleblower

4496-15W v. Commissioner, 148 T.C. 425, 431 (2017); Whistleblower

23711-15W v. Commissioner, T.C. Memo. 2018-34, at *8.

      In prior cases “[w]e have held that the name or label of a document does not

control whether the document constitutes a determination” and that “our

jurisdiction is established when the Commissioner issues a written notice that

embodies a determination.” Cooper v. Commissioner, 135 T.C. 70, 75 (2010). A

written notice informing a claimant that the IRS has considered information that

he submitted and has decided whether the information qualifies the claimant for an

award generally will be sufficient. See Comparini v. Commissioner, 143 T.C. 274,
                                        -7-

[*7] 278-279 (2014); see also Myers v. Commissioner, 928 F.3d 1025, 1032 (D.C.

Cir. 2019), rev’g and remanding on other grounds 148 T.C. 438 (2017). In a

whistleblower action, we have jurisdiction only with respect to the

Commissioner’s award determination or denial thereof. Smith v. Commissioner,

148 T.C. 449, 454 (2017).

      The final decision in this case does not reference section 7623(b) but rather

section 7623(a), which provides for discretionary awards. However, the final

decision states that the WO considered petitioner’s information and “made a final

decision” to give petitioner an award of $43,424. Inherent in that decision is

respondent’s determination that petitioner is not entitled to a mandatory section

7623(b) award exceeding $43,424. In a petition filed within 30 days of the date of

the final decision, petitioner challenged that determination. This matter is clearly

within the scope of our jurisdiction authorized by Congress in section 7623(b)(4).

See Smith v. Commissioner, 148 T.C. at 453-454 (reviewing challenge to a final

decision).
                                        -8-

[*8] III.    Analysis

       Section 7623(a) authorizes the Secretary5 to pay awards for “detecting

underpayments of tax” or “detecting and bringing to trial and punishment persons

guilty of violating the internal revenue laws or conniving at the same”. Awards

under section 7623(a) are discretionary. However, Congress has provided for

nondiscretionary awards to whistleblowers where the Secretary “proceeds with

any administrative or judicial action described in subsection (a)” and specified

additional requirements are met. Sec. 7623(b)(1).

       Section 7623(b)(1) provides that, “[i]f the Secretary proceeds with any

administrative or judicial action described in subsection (a) based on information

brought to the Secretary’s attention by an individual,” that individual will, subject

to certain conditions, receive an award of 15% to 30% of the proceeds collected.

The size of the award depends on the extent to which the whistleblower

“substantially contributed to such action.” Sec. 7623(b)(1) (last sentence) and (2).




       5
         The term “Secretary” means “the Secretary of the Treasury or his
delegate”, sec. 7701(a)(11)(B), and the term “or his delegate” means “any officer,
employee, or agency of the Treasury Department duly authorized by the Secretary
of the Treasury directly, or indirectly by one or more redelegations of authority, to
perform the function mentioned or described in the context”, sec.
7701(a)(12)(A)(i).
                                         -9-

[*9] Under this statutory scheme a whistleblower cannot qualify for a

nondiscretionary award unless two conditions are met. First, the Secretary must

“proceed[] with an[] administrative or judicial action described in subsection (a)

based on information brought to the Secretary’s attention” by the whistleblower.

Sec. 7623(b)(1). Second, the Secretary must derive proceeds from this action. Id.;

see Cohen v. Commissioner, 139 T.C. 299, 303 (2012) (“We can provide relief

under section 7623(b) only after the Commissioner has initiated an administrative

or judicial action and collected proceeds.”), aff’d, 550 F. App’x 10 (D.C. Cir.

2014); Cooper v. Commissioner (Cooper II), 136 T.C. 597, 600 (2011) (“[A]

whistleblower award is dependent upon both the initiation of an administrative or

judicial action and collection of tax proceeds.”).

      While we have jurisdiction to review the Commissioner’s award

determination, we do not have authority to “review the Commissioner’s

determinations of the alleged tax liability to which the claim pertains.” Cohen v.

Commissioner, 139 T.C. at 302. Nor do we have authority “to direct the Secretary

to proceed with an administrative or judicial action.” Cooper II, 136 T.C. at 600.

      We review the Secretary’s determination as to whether a whistleblower is

entitled to an award by applying an abuse-of-discretion standard. Kasper v.

Commissioner, 150 T.C. 8, 22 (2018). Abuse of discretion exists when a
                                        - 10 -

[*10] determination is arbitrary, capricious, or without sound basis in fact or law.

Murphy v. Commissioner, 125 T.C. 301, 320 (2005), aff’d, 469 F.3d 27 (1st Cir.

2006). In ascertaining whether the Secretary abused his discretion, we generally

confine our review to the administrative record. Kasper v. Commissioner, 150

T.C. at 20.

      We conclude that the WO did not abuse its discretion in awarding petitioner

no more than the amount stated in the final decision. The administrative record

shows that the WO forwarded petitioner’s information to E&G, which had already

commenced an examination of the target. Mr. Babcock, the E&G attorney

assigned to the examination, was preparing to issue the target a “No Change” letter

but changed course when he received petitioner’s information. Using petitioner’s

information, Mr. Babcock pursued new leads that ultimately led to the assessment

of estate and gift tax and interest of $424,019. In a Form 11369 submitted to the

WO, Mr. Babcock stated that petitioner “significantly contributed” to the

examination of the target’s estate tax return.

      On the basis of Mr. Babcock’s Form 11369 and other documents in the

claim file, WO Senior Tax Analyst Borenstein recommended that petitioner be

awarded $43,424 (22% of one-half of the collected proceeds less a 6.9%

sequestration reduction). After considering petitioner’s written response to the
                                           - 11 -

[*11] preliminary award recommendation, the WO issued the final decision

advising petitioner that the whistleblower award would remain $43,424.

          Petitioner does not allege any material dispute as to these facts. He does

not, for example, dispute the amount of proceeds respondent collected from the

target. Nor does he contend that his contribution to the examination merited more

than a 22% award. See sec. 7623(b)(1) (authorizing nondiscretionary awards

between 15% and 30% of collected proceeds depending on the extent to which

whistleblower “substantially contributed”).

          Instead petitioner alleges that the amount respondent collected was

“woefully inadequate” because the assets in the target’s gross estate were

purportedly more valuable than respondent determined. Petitioner urges the Court

to order respondent to re-examine the target’s estate tax return for additional

deficiencies and, if necessary, order respondent to proceed to trial against the

target.

          In Cooper II, 136 T.C. at 598, an attorney-whistleblower alleged that certain

taxpayers had failed to pay millions of dollars in estate and generation-skipping

transfer tax. The whistlebower provided the IRS with information pertaining to

the estate. Id. The WO forwarded the information to the appropriate IRS office,

which decided not to pursue administrative or judicial action against the taxpayer.
                                        - 12 -

[*12] Id. at 599. Because there was no administrative or judicial action that led to

the collection of proceeds, the WO determined that the whistleblower was not

entitled to an award. Id. Like petitioner in this case, the Cooper II whistleblower

appealed the WO’s determination and asked this Court to direct the Commissioner

“to undertake a complete re-evaluation of the facts in this matter, begin an

investigation, open a case file, and take whatever other steps are necessary to

detect an underpayment of tax.” See id. at 600. Granting the IRS’ motion for

summary judgment, the Court in Cooper II explained: “Our jurisdiction under

section 7623(b) does not contemplate that we redetermine the tax liability of the

taxpayer. * * * [A]lthough Congress authorized the Court to review the

Secretary’s award determination, Congress did not authorize the Court to direct

the Secretary to proceed with an administrative or judicial action.” Id.

      The same principle applies to the case at bar. Although petitioner’s

information led to administrative action against the target and the collection of

proceeds therefrom, petitioner and the Cooper II whistleblower share the same

overarching grievance--that the IRS allowed the target to pay less in tax than it

should have. Petitioner is asking the Court to redress this grievance by ordering

respondent to re-examine the target. We do not have this authority. See Cohen v.

Commissioner, 139 T.C. at 302; Cooper II, 136 T.C. at 600-601.
                                         - 13 -

[*13] Because petitioner has not shown that he was entitled to a larger award than

respondent determined, the WO did not abuse its discretion in making its

determination. We will therefore grant summary judgment for respondent.

         We have considered all the other arguments made by the parties, and to the

extent not discussed above, find those arguments to be irrelevant, moot, or without

merit.

         To reflect the foregoing,


                                                  An appropriate order and decision

                                        will be entered.
