On July 17, 2025, in Dee v. Commissioner, Docket No. 377-20W, Special Trial Judge Diana Leyden with the United States Tax Court granted the IRS’ motion for summary judgment filed on February 24, 2023 and denied the petitioner’s cross-motion for summary judgment filed on May 16, 2023 and thus, choosing to sustain the Commissioner’s Final Determination dated December 9, 2019. The Court found that the Administrative Record adequately supported respondent’s contention that the IRS Whistleblower Office (WBO) applied the regulations properly and determined that the basis of petitioner’s information was from news articles and other publicly available information and not on the disclosure by petitioner of specific allegations (i.e., petitioner was not viewed as having provided original source information). In doing so, the Court concludes that the WBO did not abuse its discretion in applying the favors in Regulation 301.7623-4(c)(2), and thus, that the IRS was entitled to judgment as a matter of law. Thus, Whistleblower Dee was not viewed as having been an original source whistleblower.
The whistleblower Dee’s claim dates back to a Form 211 filed with the WBO on December 18, 2009. The Court reports that the whistleblower Dee used publicly available news stories that had reported that a taxpayer had paid for sexual liaison, to then assert in a Form 211 that the taxpayer’s management company and the vice president of the company committed tax violations. The WBO assigned a claim number to this submission, but declined to take action against either the management company or the vice president identified by the whistleblower. Instead, the IRS initiated examinations against the taxpayer and the taxpayer’s wholly owned S corporation, and as a result of those exams, adjustments were made by the IRS appeals office, and the IRS collected $7,628,393.08. The WBO determined that petitioner was entitled to an award “for less substantial contribution under Section 7623(b)(2) and in accordance with the procedures under Regs Section 301.7623-4(c)(2), awarded petitioner an award of 1% of the collected proceeds. When applying the -4(c)(2) factors, positive factors were analyzed, and while it was determined that the whistleblower acted promptly to inform the IRS or the taxpayer of the tax noncompliance, all of the other -4(c)(2) factors were found to not apply by the IRS WBO. Those factors include: whether the information provided an issue or transaction of a type previously unknown to the IRS (all of the reported issues were claimed to be common and well known to the IRS); whether the iinformation provided identified taxpayer behavior that the IRS was unlikely to identify or that was particularly difficult to detect through the IRS’s exercise of reasonable diligence (the IRS would have identified the taxpayers in question and the alleged issues independently of the WB as often happens in similar situations where a celebrity is in the news, the issues not viewed as particularly difficult); that the information provided thoroughly presented the factual details of tax noncompliance in a clear and organized manner (here the claim viewed as rather speculative and generic in nature that did not save IRS work and resources); that the whistleblower (or the whistleblower’s legal representative, if any) provided exceptional cooperation and assistance (here, the whistleblower not participating in any capacity during the audit); the information providing identified assets of the taxpayer that could be used to pay liabilities; the information provided identified transactions or parties to transaction that enabled the IRS to understand tax implications that might not otherwise have been understood by the IRS (here, the reported information was not detailed, was generic, and applicable to any number of different taxpayers, with no tax implications the IRS might not have understood); and the information providing an impact on the behavior of the taxpayer (which did not appply because the taxpayer appealed all audit adjustments instead of promptly correcting its improper positions). No negative factors were viewed as applying. For the whistleblower, the IRS WBO’s final determination was for an award of $71,783.23.
The Tax Court analyzed how in whistleblower cases the usual standard for summary judgment “is generally not apt” because, in these cases, there is no trial on the merits. Van Bemmelen v. Commissioner, 155 T.C. 64, 78-79 (2020). In these cases, where the Tax Court looks to review agency action under the APA, the Court usually confines itself to the administrative record to decide whether there has been an abuse of discretion. In this case, petitioner had moved to supplement the record on July 8, 2024, which the Court denied by Order served March 27, 2025.
The dispute before the Court was whether the amount of the award was correct, based on petitioner’s argument that the IRS WBO’s final determination was in errort “because while certain facts were aggregated from media reports,” the whistleblower claims that his claim involved extensive research and analysis of a multitude of public data and produced mountains of original information and analysis in support of his claims. Op., at 5 of 6. Respondent argued that the administrative record suppors the final determination and that there are no genuine disputes as to material facts and respondent properly applied the -4(b) factors in awarding 1%. Notably, the whistleblower did not challenge the validity of the -4(c)(2) regulation (Award for Less Substantial Contribution).
