Opinion
36014-21W
06-14-2024
MARIA CLAUDIA ESTORGE, Petitioner v. COMMISSIONER OF INTERNAL REVENUE, Respondent
ORDER
Courtney D. Jones, Judge
Pending before the Court in this whistleblower case is respondent's Motion to Dismiss for Lack of Jurisdiction (Motion to Dismiss) (Doc. 13). For the reasons discussed below, we will deny the motion.
On July 11, 2023, petitioner filed a Motion to Compel Production of Documents (Motion to Compel) (Doc. 27). Because respondent subsequently filed the administrative record (Doc. 39) and that filing complied with Rule 93 of the Tax Court Rules of Practice and Procedure, we will deny the Motion to Compel as moot.
In the Motion to Dismiss, respondent represented that the Internal Revenue Service (IRS) did not take any action regarding the target taxpayer and, as such, did not collect any proceeds based on the information petitioner provided. Petitioner filed an Objection to the Motion to Dismiss (Doc. 14) in which she disputed respondent's representations. She alleged that the IRS examined the target taxpayer and collected proceeds as a result of the exam.
To resolve the factual dispute, i.e., whether the IRS examined the target taxpayer and collected proceeds, the Court held a hearing on April 3, 2023, in San Francisco, California. At the hearing, each party appeared and was heard. Petitioner testified under oath. Respondent acknowledged that the IRS examined the target taxpayer and collected proceeds. According to respondent, IRS transcripts show that the IRS examined the taxpayer because of an internal IRS metric-the discriminant index function (DIF) score-related to the taxpayer's 2016 tax year.
Petitioner insists that the exam was prompted by the information she provided to the IRS Whistleblower Office (WBO). After the Court heard the motion, we ordered respondent to advise the Court of respondent's position on our jurisdiction in view of (1) respondent's representations at the hearing that the IRS examined and collected proceeds from the target taxpayer and (2) the judgment (or status of the proceedings) of the U.S. Court of Appeals for the D.C. Circuit in Lissack v. Commissioner (No. 21-1268). In Status Reports dated May 10 and July 11, 2023, respondent reported that his position was unchanged.
Respondent subsequently filed a First Supplement to Motion to Dismiss (Doc. 43) in which respondent confirmed that the IRS examined the target taxpayer and collected proceeds of $224,500.
In an Order dated August 22, 2023 (Doc. 31), we observed that we always have jurisdiction to decide whether we have jurisdiction. Whistleblower 972-17W, 159 T.C., slip op. at 3 (July 13, 2022). We indicated our belief that review of the entire administrative record would aid in our determination of whether we have jurisdiction in this case. Accordingly, we held the Motion to Dismiss in abeyance and directed the parties to file the administrative record.
But upon further consideration, we observe that review of the administrative record is not necessary to resolve respondent's Motion to Dismiss. In Whistleblower 972-17W, we held that the WBO has made a determination regarding an award under section 7623(b)(1) when it determines that a whistleblower is not entitled to an award even though the Government proceeded with actions against the target taxpayers and collected proceeds. Id. at 5.
Unless otherwise indicated, statutory references are to the Internal Revenue Code, Title 26 U.S.C. (Code), in effect at all relevant times.
We distinguished Whistleblower 972-17W from Li v. Commissioner in which the U.S. Court of Appeals for the D.C. Circuit held that we lack jurisdiction over threshold rejections. 22 F. 4th 1014, 1017 (D.C. Cir. 2022). As we explained, Whistleblower 972-17W is distinct from Li because the IRS proceeded and collected proceeds in the former case, not the latter. 159 T.C., slip op. at 5. ("A case like this one, where the IRS has both acted and collected proceeds, raises jurisdictional considerations not present in Li.") Accordingly, we held that we have jurisdiction in such situations. Id.
Then last year in Lissack v. Commissioner, 64 F. 4th 1312 (D.C. Cir. 2023), the U.S. Court of Appeals for the D.C. Circuit considered Li's scope. The D.C. Circuit found that the IRS's conduct of an examination was sufficient to distinguish Lissack from Li. Id. at 1320-1321. Accordingly, the D.C. Circuit held that we had jurisdiction over Lissack's appeal. Id.
In the instant case, respondent admits that the IRS proceeded and collected proceeds from the target taxpayer. In light of these facts, it is clear that the WBO made a determination regarding an award under section 7623(b)(1) when it determined that petitioner was not entitled to an award. Whistleblower 972-17W, 159 T.C., slip op. at 5. By the terms of section 7623(b)(4), we have jurisdiction over an appeal of that determination. Id. And as the D.C. Circuit held under Lissack, the fact that the IRS conducted an examination in this case is sufficient to distinguish it from Li. 64 F. 4th at 1320-132. Accordingly, we will deny respondent's Motion to Dismiss.
In respondent's First Supplement to Motion to Dismiss (Doc. 43), respondent asserts that the proceeds in dispute in this case do not meet the $2 million threshold for a mandatory award under section 7623(b)(5)(B). Respondent suggests that the lack of sufficient proceeds-in-dispute deprives this Court of jurisdiction. But we have held that the $2 million threshold set out in section 7623(b)(5) is not jurisdictional; it must be raised as an affirmative defense. Lippolis v. Commissioner, 143 T.C. 393, 397-400 (2014).
Consistent with our holding in Lippolis, we have held that respondent must plead the affirmative defense in his answer and satisfy his burden of proof. Rogers v. Commissioner, 157 T.C. 20, 27 (2021). In this case, respondent did not plead in his Answer (Doc. 2) that the action here fails to satisfy the monetary thresholds under section 7623(b)(5). Accordingly, that section does not preclude us from considering the case on the merits. Id. at 34. Before we do so, however, we will give the parties an opportunity to meet and confer, to ascertain whether they can reach an agreement that resolves this case.
If we proceed to the merits, we will decide whether there has been an abuse of discretion and our review will be confined to the administrative record. Kasper v. Commissioner, 150 T.C. 8 (2018); Van Bemmelen v. Commissioner, 155 T.C. 64 (2020). During such review, we will consider respondent's assertion that the exam of the target taxpayer was prompted by the DIF score. We will, of course, consider petitioner's Motion to Supplement (Doc. 38).
In view of the foregoing, it is
ORDERED that respondent's Motion to Dismiss (Doc. 13), as supplemented by respondent's First Supplement to Motion to Dismiss (Doc. 43), is denied. It is further
ORDERED that petitioner's Motion to Compel (Doc. 27) is denied as moot. It is further ORDERED that petitioner's Motion to Supplement (Doc. 38) is held in abeyance. It is further
ORDERED that on or before July 15, 2024, the parties shall meet and confer to determine whether they can reach an agreement that resolves this case. It is further
ORDERED that on or before July 31, 2024, the parties shall file a status report (jointly if possible, otherwise separately) as to the then-present status of this case.