Opinion
15332-21W
03-06-2024
MARY ELLEN CURTO, Petitioner v. COMMISSIONER OF INTERNAL REVENUE, Respondent
ORDER AND DECISION
Zachary S. Fried Special Trial Judge
The Petition in this section 7623 case, filed March 4, 2021, seeks review of a final determination concerning whistleblower action, issued to petitioner by the IRS WBO. On February 17, 2022, respondent filed a Motion for Summary Judgment, which contends the WBO did not abuse its discretion in denying petitioner's claim for award. On October 12, 2023, the Court ordered petitioner to respond to the motion. Petitioner has not filed any such response to respondent's motion.
Unless otherwise indicated, statutory references are to the Internal Revenue Code, Title 26 U.S.C., in effect at all relevant times, and Rule references are to the Tax Court Rules of Practice and Procedure.
It is unclear from the record on what date the final determination was issued to petitioner. The final determination is dated February 8, 2020; however, the Petition alleges that the final determination was issued on February 8, 2021, and respondent's Motion for Summary Judgment likewise references February 8, 2021, as the date the final determination was issued. Respondent's Answer, conversely, alleges that it was issued February 8, 2020. Nonetheless, the 30-day deadline to petition this Court following a determination from the Internal Revenue Service (IRS) Whistleblower Office (WBO) is not jurisdictional in nature and is subject to equitable tolling. See Myers v. Commissioner, 928 F.3d 1025, 1036-37 (D.C. Cir. 2019), rev'g and remanding 148 T.C. 438 (2017). That being so, and because respondent has not challenged the timeliness of the petition in his Answer, the exact date of the final determination need not be decided.
Background
The undisputed facts relied upon by respondent in support of his Motion for Summary Judgment, which are drawn from the pleadings, motion papers, declarations, and exhibits, are summarized below.
On May 5, 2015, the WBO received from petitioner a Form 211, Application for Award for Original Information. The Form 211 identified one target taxpayer that petitioner alleged avoided $500,000,000 in revenue through the target's nonprofit status for tax years 2012 through 2015.
Upon receipt of the Form 211, the WBO assigned a claim number to petitioner's claim and sent her an acknowledgement letter, dated May 7, 2015. Petitioner's claim was then forwarded to a classifier working on behalf of the IRS's Small Business/Self-Employed operating division (SB/SE). That classifier reviewed petitioner's claim and recommended that it be forwarded for consideration by a classifier working on behalf of the IRS's Tax-Exempt and Government Entities operating division (TEGE). The TEGE classifier received petitioner's claim and determined that it should be referred for examination.
A classifier's role is "to determine if the information on the Form 211 warrants further review." See IRM 25.2.1.3.1(2) (Mar. 10, 2023).
Once referred, the Revenue Agent (RA) assigned to the examination began examining the target taxpayer. The examination resulted in no changes, and the RA determined that the issues alleged by petitioner were not valid. The RA then returned the claim to the WBO. Based on that recommendation, an Award Recommendation Memorandum was prepared recommending denial of petitioner's claim. A final determination was then issued to petitioner denying her claim for an award and stating, in part, "[w]e reviewed the information you provided and initiated an examination of the taxpayer. However, our review didn't result in an assessment with respect to the issues you raised."
Discussion
I. Summary Judgment Standard in Whistleblower Cases
The purpose of summary judgment is to expedite litigation and avoid costly, unnecessary, and time-consuming trials. See FPL Grp., Inc. & Subs. v. Commissioner, 116 T.C. 73, 74 (2001). We may grant summary judgment where there is no genuine dispute of material fact, and a decision may be rendered as a matter of law. Rule 121(a)(2); Elec. Arts, Inc. v. Commissioner, 118 T.C. 226, 238 (2002). We construe all factual materials and inferences drawn therefrom in the light most favorable to the nonmoving party. See FPL Grp., Inc. & Subs., 116 T.C. at 74-75; Bond v. Commissioner, 100 T.C. 32, 36 (1993). The nonmoving party, however, may not rest on mere allegations or denials but must set forth specific facts showing that there is a genuine dispute for trial. Rule 121(d); Sundstrand Corp. v. Commissioner, 98 T.C. 518, 520 (1992), aff'd, 17 F.3d 965 (7th Cir. 1994). Where, as is the case here, the nonmoving party does not respond to the motion, the Court is permitted to enter a decision against that party when appropriate. Rule 121(d).
This summary judgment standard, however, "is not generally apt" when reviewing whistleblower award determinations because "we must confine ourselves to the administrative record to decide whether there has been an abuse of discretion." Van Bemmelen v. Commissioner, 155 T.C. 64, 78 (2020). Rather, in a whistleblower case where our review is confined to the administrative record, "summary judgment serves as a mechanism for deciding, as a matter of law, whether the . . . [WBO's] action is supported by the administrative record and is not arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law." Id. at 79.
II. Jurisdiction
The Tax Court is a Court of limited jurisdiction and may exercise jurisdiction only to the extent authorized by Congress. See I.R.C. § 7442; e.g., McCrory v. Commissioner, 156 T.C. 90, 93 (2021). When certain statutory requirements are met, section 7623(b)(1) requires payment of an award to an individual (commonly referred to as a whistleblower) who provides information concerning underpayments of tax if the Commissioner, on the basis of that information, "proceeds with any administrative or judicial action" that results in the collection of proceeds. Section 7623(b)(4) provides that this Court has jurisdiction over an appeal of "[a]ny determination regarding an award" under section 7623(b)(1)."
The U.S. Court of Appeals for the District of Columbia Circuit, to which any appeal of this case would ordinary lie, see section 7482(b), has confirmed that pursuant to section 7623(b)(4) this court has jurisdiction over an appeal where the WBO referred a whistleblower's submission to another office of the IRS, which initiated an examination of the issue that the whistleblower had identified, and the WBO subsequently issued a determination denying the whistleblower any award. Lissack v. Commissioner, 68 F.4th 1312, 1320-21 (D.C. Cir. 2023) (distinguishing Li v. Commissioner, 22 F.4th 1014 (D.C. Cir. 2022) (holding that the Tax Court lacks jurisdiction over the appeal of a threshold rejection of a whistleblower claim where the IRS does not proceed with any relevant administrative or judicial action against the target taxpayers)), aff'g 157 T.C. 63 (2021); see also Whistleblower 972-17W v. Commissioner, 159 T.C. 1, 7-10 (2022). Because the WBO referred petitioner's claim to both SB/SE and TEGE, TEGE proceeded with administrative action, and the WBO subsequently issued a final award decision denying petitioner's claim, this Court has jurisdiction over this case. See Whistleblower 972-17W, 159 T.C. at 7-10.
III. Respondent's Motion for Summary Judgment
As a threshold matter, petitioner did not respond to respondent's Motion for Summary Judgment, and we could grant respondent's motion on that basis alone. See Rule 121(d). However, we are convinced that on the basis of the record before us, the WBO did not abuse its discretion in this case. The administrative record in this case establishes that the WBO received petitioner's application for award, evaluated petitioner's information, which included receiving input from two IRS classifiers and, based upon the TEGE classifier's recommendation, determined that it should be referred for examination. For reasons more fully appearing in respondent's motion, the RA declined to make any changes to the target taxpayer's tax filings following the examination. Based on the RA's recommendation, the WBO determined that petitioner's claim for an award should be denied.
The IRS has the ultimate discretion in deciding whether and how to proceed with an examination of a target taxpayer based on information submitted by a whistleblower. This Court does not have the authority to police the conduct of an IRS examination, nor to direct that an examination be commenced, continued, or pursued in a manner contrary to what the IRS determines is appropriate. See Cohen v. Commissioner, 139 T.C. 299, 302 (2012), aff'd, 550 Fed.Appx. 10 (D.C. Cir. 2014). In this case, the IRS conducted an examination and determined that no changes to the target taxpayer were appropriate. This decision was within the IRS's discretion.
Petitioner has failed to show that the WBO's final determination in this case was arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law, and we therefore find that the WBO did not abuse its discretion in denying petitioner's whistleblower claim. Consequently, in the absence of any dispute as to the actions respondent took in response to petitioner's claim for award, it follows that respondent is entitled to a decision as a matter of law.
Upon due consideration, it is
ORDERED that respondent's Motion for Summary Judgment, filed March 4, 2021, is granted. It is further
ORDERED and DECIDED that respondent's determination as set forth in the final determination, a copy of which is attached to the Petition, is sustained.