The Recent Supreme Court Ruling Regarding Whistleblowers
On June 16, 2023, the U.S. Supreme Court ruled in United States, ex rel. Polansky v. Executive Health Resources, Inc. The Supreme Court decided that the Department of Justice has broad authority to dismiss whistleblower lawsuits filed under the False Claims Act (“FCA”) when the government initially allowed a whistleblower to file suit. On first glance, it sounds as if this diminishes a whistleblower’s right and lowers their success. This ruling did not do that. The DOJ only dismissed the case after years of litigation and they dismissed the case, citing that the DOJ questioned the petitioner’s likelihood of success.
This case is a rare instance. The FCA’s qui tam provision allows whistleblowers to file suit on behalf of the government. Whistleblower’s rarely enable this provision. The usual process is that the whistleblower, an individual, notifies Treasury that a taxpayer is violating the Internal Code by filing Form 211 (Application for Award for Original Information).
The Building Blocks Of The Whistleblower Program
Section 7623 authorizes the Secretary to “pay such sums as he deems necessary for … detecting and bringing to trial and punishment persons guilty of violating the internal revenue laws.” Under Section 7623(b), a whistleblower is entitled to a non-discretionary award of between 15 and 30 percent of proceeds if the IRS “proceeds with any administrative or judicial action … based on information brought to the Secretary’s attention by an individual ….” 26 U.S.C. §7623(b). Under Section 7623, individuals can blow the whistle on any underpayment of taxes, international or domestic. It is important to note that only reports of underpayment of taxes of over $2 million are automatically eligible for the program.
Once the whistleblower office processes the claim, a subject matter expert investigates the facts, and they determine whether it should be forwarded to an examination team. The examination team will then decide whether or not to audit. Once the examination concludes, if it results in the collection of proceeds, the whistleblower office makes a preliminary award determination. The amount of the award, if any, is determined by the whistleblower office, and depends on the extent to which the whistleblower substantially contributed to the IRS action. Even when the whistleblower’s case is denied the whistleblower is allowed to appeal the decision in US Tax Court, giving them a chance to make their case.
The Rising Popularity of the Whistleblower Program
Whistleblowing is becoming more prominent and regular. The Fiscal Year 22 Annual Report from the IRS Whistleblower Office shows that the IRS paid whistleblowers 132 awards totaling $37.8 million from proceeds collected of $172.7 million. Further, the Whistleblower Office received 5,084 submissions and built 12,597 claims.
Whistleblower claims are continually increasing, and the government is noticing and making it easier for whistleblowers to make claims. On December 29, 2022, President Biden signed a new whistleblower law that significantly increases the risk of international whistleblower claims. In situations in which people are concerned about money laundering regarding crypto currency they can file a Suspicious Activity Report online through the Bank Secrecy Act (“AML Act). The AML Act provides incentives and allows whistleblowers to file claims in connection to various new spaces, including the cryptocurrency space.
Understanding the Whistleblower Program
Employers need to be aware that if they are violating the Internal Revenue Code a whistleblower has the right, and even a financial incentive, to report it. Whistleblowers need to know that they have the right to notify the Internal Revenue Service. In June, the Supreme Court ensured that cases brought by individual taxpayers do not become frivolous.
Credit: Source link
