The U.S. Tax Court has given the IRS until Sept. 24 to respond to an amicus brief in support of what could amount to an award of tens of millions of dollars for whistleblower Joseph Insinga, an informant who implicated seven major corporations in tax evasion in 2007 (Insinga v. Comr., Tax Court Order No. 4609-12W (7/31/12)).
The issue is whether the Administrative Procedures Act applies to the IRS in this case and whether inaction is tantamount to a negative determination.
The case will be closely watched by informants because of its potential to impact other slow-moving IRS whistleblower claims and also because it is the first to invoke the Administrative Procedures Act in a whistleblower case. The act confers jurisdiction on the court if agency action or failure to act aggrieves an individual.
For Insinga, it is a matter of having waited five years for the IRS to decide if it will pay him on claims he made as a former Rabobank managing director against corporations such as General Mills and Newell Rubbermaid. The IRS has already collected hundreds of millions of dollars in taxes, penalties, and interest on his information, according to the court documents.
In the original Tax Court petition, Insinga alleged that the IRS advised him that his submission was defective because the IRS had recently discovered “other sources” of the information he had furnished in April 2007.
If they deny his claim, he has the right to go to federal court and seek the court's help. However, they haven't denied his claim and they haven't approved it either.
A June 27 amicus brief filed by Dean Zerbe, attorney with Zerbe, Fingeret, Frank & Jadav, on behalf of the National Whistleblowers Center, was designed to compel the Tax Court to make a final decision without delay.
The IRS, in its March 21 motion to dismiss the case, said that the court does not have jurisdiction until the IRS issues a determination letter. There has been no denial letter issued to Insinga, nor has a determination been made in the case, IRS said. Furthermore the IRS said the statute does not set forth any time limits within which a determination must be made.
The IRS is taking the position that they don't have to pay us until the last of all the cases we reported is paid or otherwise disposed of.
Insinga has argued that he should have an award determination based on the amount the IRS has already collected from his claim—an estimated $600 million—within 90 days after the IRS was paid.
He estimated that the offshore and other tax avoidance transactions he identified would result in a total of $1.5 billion in collection of unpaid taxes, penalties and interest for the IRS.
The IRS has come under pressure from a number of sources to move whistleblower claims along. Sen. Charles Grassley (R-Iowa), for one, said the IRS's handling of the program has been inexcusable, and threatened to block two pending Treasury Department nominees from getting a confirmation vote until he got answers about implementation of the program. Grassley wrote the 2006 legislation that overhauled the whistleblower program, and has kept a lookout over its development.
IRS Deputy Commissioner for Service and Enforcement, Steven Miller, also buoyed the hopes of whistleblower community when he announced June 20 that he is reviewing the program, which will lead to “a set of expectations for timely action.”
Until that time he said the Whistleblower Office should evaluate claims within 90 days, and whistleblowers should be notified of an award decision within 90 days of when collected proceeds can be finally determined.
But all eyes are on the Tax Court, since the Miller memo is not binding. “If the court comes out and directs the IRS to make a decision in a set number of days—such as 90 days—it would really break a logjam, because there are so many folks waiting for the IRS to make a decision.