# United States Tax Court

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URL: https://www.frixlaw.com/law-library/documents/agency%3Atax-court%3A2744af363c3483f5

## Record

- **Collection:** Agency decision
- **Document type:** Agency decision

## Text

United States Tax Court
T.C. Memo. 2026-5
WHISTLEBLOWER 11099-13W,
Petitioner
v.
COMMISSIONER OF INTERNAL REVENUE,
Respondent
—————
Docket No. 11099-13W.

Filed January 13, 2026.
—————

P applied for a whistleblower award, alleging a
scheme under which T manipulated its inventory
purchases to inflate artificially its cost of goods sold, which
T determined using the last-in, first-out (LIFO) inventory
accounting method. R investigated P’s allegations but
could not confirm them. T subsequently changed its
inventory accounting method from LIFO to first-in, firstout (FIFO). P seeks a whistleblower award based on the
additional tax he claims T reported and paid because of T’s
cessation of its allegedly manipulative inventory purchases
and the change to its inventory accounting method.
A whistleblower is eligible for an award only if R
“proceeds with any administrative or judicial action . . .
based on information” supplied by the whistleblower and
collects proceeds “as a result of the action.” I.R.C.
§ 7623(b)(1). R has moved for summary judgment that he
did not abuse his discretion in denying P’s application for
an award because the administrative record “evinces that
[P’s] information could not be substantiated; that the [IRS]
was unable to detect the tax noncompliance alleged by [P];
and that it collected no proceeds from the investigation of
[P’s] claim.” Moreover, R adds, even accepting as fact P’s
allegations that T abandoned manipulative inventory
practices and then abandoned LIFO, those facts are

Served 01/13/26

2
[*2]

immaterial, because self-assessed amounts reported by
taxpayers on original returns are not, for purposes of I.R.C.
§ 7623(b)(1), “proceeds collected.”
The parties have filed additional motions addressed
at a possible trial and at the administrative record for
review.
Held: R collected no proceeds on account of T’s
allegedly abandoning manipulative inventory purchasing
practices and voluntarily changing its inventory
accounting method from LIFO to FIFO. We follow Lewis v.
Commissioner, 154 T.C. 124, 134 (2020) (“[R]eported, paid
tax is not collected proceeds . . . .”).
Held, further, accordingly, R did not abuse his
discretion in denying P’s application for an award, and we
will grant R’s Motion for Summary Judgment.
Held, further, we will deny P’s Motions addressed to
the scope and supplementation of the record for review
because, as we rely on Lewis in disposing of R’s Motion for
Summary Judgment, the additions to the record that P
requests would not change our disposition of that Motion.
Held, further, because we will grant R’s Motion for
Summary Judgment, we will deny as moot the parties’
various motions requesting the inclusion or exclusion of
evidence at trial.
—————

Henry S. Lovejoy, Usman Mohammad, Bryan C. Skarlatos, and Brian
C. Wille, for petitioner.
Amanda L. Myers, Patricia P. Davis, William D. White, Rachel
G. Borden, and Russell Scott Shieldes, for respondent.

3
[*3]

MEMORANDUM OPINION

HALPERN, Judge: This is a case brought under section
7623(b)(4), appealing respondent’s determination not to make a socalled whistleblower award to petitioner for information he provided
that he alleges led to the collection of incremental tax and other
amounts. 1 Respondent has filed a Motion for Summary Judgment that
the Internal Revenue Service (IRS) Whistleblower Office (WBO) did not
abuse its discretion in denying petitioner an award. In support of the
Motion, respondent relies on the pleadings, the Declaration of one of his
employees, Steven J. Mitzel (Declaration), and an Exhibit attached to
the Declaration. Petitioner objects to our granting the Motion.
In addition to the Motion for Summary Judgment, we have
pending six Motions: three by petitioner and three by respondent.
Petitioner’s Motions are:
1. Motion to Determine Scope of the Administrative Record
(Motion to Determine Scope).
2. Motion to Supplement the Administrative Record (Motion to
Supplement).
3. Motion to Admit Deposition Testimony of Respondent’s
Current and Former Employees for Substantive Purpose at Trial
(Motion to Admit).
Respondent’s Motions are:
1. Motion in Limine to Exclude Leslie J. Schneider’s Expert
Report and Opinion Testimony.
2.
Motion in Limine to Exclude Witness Testimony and
Documents Outside the Scope of the Administrative Record.
3. Motion in Limine to Exclude Testimony of Former IRS
Whistleblower Program Manager Robert Gardner.

1 Unless otherwise indicated, statutory references are to the Internal Revenue
Code, Title 26 U.S.C., as amended, regulation references are to the Code of Federal
Regulations, Title 26 (Treas. Reg.), and Rule references are to the Tax Court Rules of
Practice and Procedure.

4
[*4] Each party objects to our granting any of his opponent’s three
listed Motions.
We will address the six additional Motions after addressing the
Motion for Summary Judgment. For the reasons explained below, we
will grant the Motion for Summary Judgment and deny all six additional
Motions.
Background
Mr. Mitzel’s Declaration
The Declaration is an unsworn declaration made from personal
knowledge under penalty of perjury. Among the various facts that Mr.
Mitzel declares to be true are the following.
Since December 2015, Mr. Mitzel has been the program manager
for the WBO. As program manager and in his former job as a
management analyst for the WBO, he reviewed the information
submitted as part of petitioner’s whistleblower claim. He also collected
and reviewed documents from the WBO’s administrative claim file and
contacted IRS examination team personnel to obtain relevant
information. He then reviewed whether a judicial or administrative
action occurred and whether any proceeds were collected on the basis of
petitioner’s information. Ultimately, he recommended that petitioner’s
claim for award be denied. All the information that he considered in
making his recommendation is contained in the WBO’s administrative
claim file. True and correct copies of the documents constituting the
WBO’s administrative claim file are attached to the Declaration.
WBO’s Administrative Claim File
The following facts are supported by documents in the WBO’s
administrative claim file. The file contains 906 numbered pages
comprising a multitude of emails, reports, forms, and other documents.
Application for a Whistleblower Award
In July 2008, petitioner’s counsel filed with the WBO an IRS
Form 211, Application for Award for Original Information. The
application informed the IRS of a purported tax evasion scheme carried
out by a target corporation and its affiliates (without distinction,
Target). The purported scheme, as described by petitioner, involved
Target’s purchases and sales of inventory that, on account of Target’s

5
[*5] use of a last-in, first-out (LIFO) inventory accounting method,
allowed it to artificially inflate its cost of goods sold for tax purposes
(sometimes, LIFO Scheme). Petitioner claimed that Target used the
LIFO Scheme to defer income tax indefinitely. He claimed that he was
employed by one of the Target affiliated corporations that traded
commodities that were integral to the LIFO Scheme.
Initial Consideration by WBO and Assignment to the Field
Upon receipt in the WBO, petitioner’s application was assigned to
an analyst, Robert G. Gardner, for evaluation. By mid-October 2008,
Mr. Gardner had determined that the application met the requirements
for processing as a claim under section 7623(b). He forwarded the
application to one of the IRS’s then-existing operating divisions, the
Large and Mid-Size Business Division (LMSB), directing it to Cynthia
Ogden, a senior program analyst and subject matter expert with respect
to Target’s line of business. He requested that LMSB proceed with an
examination or investigation if appropriate. In late October 2008,
petitioner’s counsel provided the WBO with additional information
pertinent to petitioner’s application, including that Target was
continuing the LIFO Scheme in 2008.
In March 2009, Ms. Ogden provided petitioner’s information to
Revenue Agent An Tran in LMSB Group 1604. Ms. Tran oversaw a team
already examining Target’s returns for its 2006 and 2007 tax years
(06/07 audit cycle).
The team began investigating petitioner’s
information but then suspended its investigation sometime in or after
January 2010, deferring the investigation to another team examining
Target’s 2008 and 2009 tax returns (08/09 audit cycle). Ms. Tran wrote
a report (Tran Report) that recited the team’s actions before the team
suspended its examination. Ms. Tran reported contacts and attempted
contacts with ex-employees of Target. One ex-employee told the team
that his severance agreement with Target required him to notify Target
before discussing any Target-related matter. Ms. Tran also reported
that Target had become aware of the IRS’s attempts to contact Target’s
ex-employees, which caused Target to tell the team that such contacts
were in contradiction to the audit procedures agreed to by the IRS and
that Target required the examination team first to obtain information
from current employees of Target.
In February 2010, petitioner’s counsel again wrote the WBO, to
provide it with additional information relevant to petitioner’s
application. Among other things, counsel informed the WBO that,

6
[*6] although petitioner was no longer employed by a Target affiliate,
he had become aware that Target had terminated the LIFO Scheme. He
believed that the termination was a direct result of the information that
he had shared with the IRS. He further believed that, because of
Target’s termination of the LIFO Scheme in 2009, Target would realize
additional taxable income in excess of $1 billion for 2009 and have an
increased tax bill of up to $400 million for that year.
The examination team investigating Target for the 08/09 audit
cycle took up petitioner’s claim. In August 2012, the team concluded
that it could not substantiate petitioner’s claim about the LIFO Scheme.
The senior revenue agent on the team prepared an analysis (Revenue
Agent Analysis), which, in substantial part, is as follows:
REVENUE AGENT ANALYSIS
ISSUE:
Whether the taxpayer’s inventory program properly
complied with IRC 471.
FACTS:
The whistleblower clearly identified an esoteric tax issue
revolving around the taxpayer’s LIFO Inventory Program
which he claims is in clear violation of IRC 471. The issue
reflects trades done during the yearend period were
“coupled,” that is, a buy before year end matched with a
sale after year end at same or a related price . . . . [M]y
observations regarding the Whistleblower’s testimony to
the IRS officials are described below:
•

The Whistleblower specifically addressed the fact
that his job description was to provide the
trading floor with legal expertise mainly from an
ethics standpoint because of the taxpayer’s
previous trading irregularities which resulted in
a major fine with the Federal Government.
Furthermore, it appears in his interview with
IRS officials he lacked the education, knowledge
and applicable expertise necessary to properly
understand corporate accounting and federal tax
issues mainly in regard to the appropriate
reporting requirements from an IRS standpoint.

7
[*7]

•

He did not provide us with a clear understanding
of what a hypothetical “forward contract” would
look like in the books & records of the taxpayer
in order for us to discover the scheme as
described in his claim.

•

The testimony by the Whistleblower never
mentioned how the collusion between the traders
and the tax department was executed from a
paperwork and/or accounting entry perspective.
In addition, he did not provide us with neither
[sic] an example of the paperwork flowchart
required by the tax department from the traders
nor a specific third-party name or outside
corporate parties mainly responsible for the
execution of these alleged “coupled” trades at
year end.

•

The Financial Product expert on our audit team
felt that the Whistleblower did not properly
disclose the true nature of the internal
mechanism the traders devised to accomplish
this specific scheme especially the alleged
collusion between parties which, of course, would
be in violation of IRC 471.

As such, our examination techniques were
hampered based on the limited starting knowledge from
the aforementioned testimony by the Whistleblower. In
addition, we lacked the necessary accounting format,
workpapers and lead files the taxpayer was utilizing in
order to accomplish these specific trades in house and,
more importantly, the names of the corporate outside third
parties responsible for executing this particular scheme.
Finally, we felt our hands were tied in properly developing
IDR’s [Information Document Requests] because of our
lack of knowledge on how the taxpayer devised the system
in order to avoid detection by their own internal auditors.
*

*

*

*

* * *

8
[*8]

CONCLUSION
It has been determined that our investigation techniques
failed to discover any . . . [documentation of the LIFO
Scheme] which, of course, is a clear violation of IRC 471.
As such, the Whistleblower claim filed on 7/02/2008 should
be disallowed based on the fact that the aforementioned
trades were not discovered resulting in no adjustment
being made to inventory and/or Cost Of Goods Sold during
our 200812 & 200912 audit cycle.

Application for Change in Accounting Method
In March 2012, Target filed with the IRS Form 3115, Application
for Change in Accounting Method, to change its inventory accounting
method from LIFO to first-in, first-out (FIFO) effective for tax year
2011. 2
WBO Final Consideration and Award Determination
Form 11369, Confidential Evaluation Report on Claim for Award,
is a tool used by an IRS operating division to inform the WBO of the
results of its investigation of a whistleblower’s information. Internal
Revenue Manual (IRM) 25.2.2.6(14) (June 18, 2010). It is used to assist
the WBO director in making an award determination. Id.
On January 19, 2011, Katherine Onken in the WBO (who had
succeeded Mr. Gardner, who had been promoted to WBO program
manager), received from Joe Ann Booker, Ms. Ogden’s successor in the
IRS Large Business & International Division (LB&I), a Form 11369 that
she had completed for the 06/07 audit cycle (06/07 Audit Cycle Form
11369). Ms. Onken reviewed information from the examination team
reporting on every agreed and unagreed adjustment in the 06/07 audit
cycle to confirm that no adjustments were proposed or assessed against
Target related to petitioner’s claims.

2 Taxpayers using LIFO are required to annually report a “LIFO reserve,”
which is the difference between their reported ending inventory and what their ending
inventory would have been had they used FIFO. When converting from LIFO to FIFO,
a taxpayer must, under section 481(a), “recapture” (i.e., recognize as income) that
entire amount. As a result of its change from LIFO to FIFO, Target estimated on its
Form 3115 that it would be recognizing section 481(a) income in excess of $9 billion.

9
[*9] On August 21, 2012, Ms. Onken received from Senior Revenue
Agent William R. Stevenson, Jr., a Form 11369 that he had completed
for the 08/09 audit cycle (08/09 Audit Cycle Form 11369). 3 Both Mr.
Stevenson and his manager had signed the form on August 10, 2012.
Appended to the form was the Revenue Agent Analysis. Mr. Stevenson
informed Ms. Onken that Target continued to use LIFO for tax years
2008 and 2009 but had filed Form 3115 to change its inventory
accounting method from LIFO to FIFO effective for tax year 2011.
In early 2013, responsibility for petitioner’s whistleblower claim
was passed to Mr. Mitzel (then a WBO senior analyst). On March 15,
2013, Mr. Mitzel reviewed the then-existing WBO administrative claim
file, apparently containing the 06/07 Audit Cycle and 08/09 Audit Cycle
Forms 11369, the Tran Report, the Revenue Agent Analysis, and
supporting documents.
He asked for, and reviewed, additional
information, including a copy of the Form 3115 by which Target had
applied to change from LIFO to FIFO accounting for inventory
beginning in 2011. Mr. Mitzel was satisfied that the issues petitioner
raised were not part of the audit adjustments made by the examination
teams for the 06/07 and 08/09 audit cycles. He confirmed that, although
Target’s case was open in Appeals, none of the unagreed issues in
Appeals related to the LIFO inventory or any other inventory
computation.
On April 12, 2013, Mr. Mitzel checked a box on the 08/09 Audit
Cycle Form 11369 recommending that no award be made to petitioner
and emailed Mr. Gardner, then WBO program manager, his
recommendation. He advised Mr. Gardner:
Attached is a Form 11369 recommending 0 award for the
informant. The allegations involved year end LIFO
inventory manipulation. The examination team examined
the issue but could not substantiate the allegations. The
Taxpayer has subsequently elected to convert to the FIFO
method of accounting.

3 While box 4, Tax Years Involved, of Form 11369 reports “200712 & 200812”
as the years involved, the attached Revenue Agent Analysis reports “no adjustment
being made to inventory and/or Cost of Goods Sold during our 200812 & 200912 audit
cycle.” We assume the box 4 entry to be in error.

10
[*10] Again, on April 12, 2013, a few minutes after emailing Mr.
Gardner his recommendation, Mr. Mitzel sent him another email,
stating the following:
While assembling the claim file I read a 2/18/2010 letter
from the WB [power of attorney]. The WB claims that the
[taxpayer] ended its LIFO inventory practices in 2009. The
WB wants the increased income reported on the 2009
return treated as collected proceeds. I cannot confirm that
the alleged practices ended in 2009. The taxpayer did
change from LIFO to FIFO for six subsidiaries for the 2011
tax year.
On April 15, 2013, Mr. Gardner emailed WBO Director Stephen
A. Whitlock, stating that he concurred with Mr. Mitzel’s
recommendation that petitioner’s claim be rejected. He added: “The
team did examine the issue but was unable to substantiate the
allegations on the inventory issue and the issue was no changed.”
On April 16, 2013, after reviewing Messrs. Mitzel’s and Gardner’s
recommendations and attached materials from the WBO’s
administrative claim file, Mr. Whitlock determined that petitioner was
not entitled to an award.
The next day, April 17, 2013, Mr. Gardner, reflecting Mr.
Whitlock’s determination that petitioner was not entitled to an award,
signed a letter to petitioner informing him that his application for an
award had been denied (sometimes, Determination). In pertinent part,
the letter states:
We have considered your application for an award dated
June 22, 2008. Under Internal Revenue Code Section 7623,
an award may be paid only if the information provided
results in the collection of additional tax, penalties,
interest or other proceeds. In this case, the information
you provided did not result in the collection of any
proceeds. Therefore, you are not eligible for an award.

11
[*11] Petition
The Petition, mailed May 17, 2013, was filed on May 20, 2013. 4
The Petition assigns error to the Determination. In brief, the Petition
avers that, contrary to the Determination, petitioner provided material
information previously unknown by respondent that resulted, or will
result, in the collection of proceeds in excess of $2 million.
Discussion
I.

Introduction
A.

Section 7623

Section 7623 provides for both discretionary and mandatory
awards to individuals (i.e., whistleblowers) who submit information
about third parties that have underpaid their tax or otherwise violated
the internal revenue laws. Section 7623(a) authorizes discretionary
awards, which are not subject to Tax Court review. By contrast, section
7623(b) authorizes nondiscretionary awards, which may be subject to
our review.
“If the Secretary proceeds with any administrative or judicial
action described in subsection (a) based on information brought to [his]
attention” by a whistleblower, section 7623(b)(1) provides that the
whistleblower, subject to exceptions not relevant here, shall receive an
award of 15% to 30% of the “proceeds collected as a result of the action
(including any related actions) or from any settlement in response to
such action.” 5 Section 7623(b)(4) grants the Tax Court jurisdiction to
4 The Petition was timely filed.

See §§ 7623(b)(4) (providing 30 days to appeal
determination to the Tax Court), 7502(a)(1) (treating timely mailing as timely filing).
5 The Bipartisan Budget Act of 2018 (Budget Act), Pub. L. No. 115-123,
§ 41108(a), 132 Stat. 64, 158, amended some of the terminology in section 7623. Among
other things, the Budget Act added subsection (c), which defines the term “proceeds,”
and made conforming amendments to paragraphs (1) and (2)(A) of subsection (b). The
amendments apply to whistleblower claims “with respect to which a final
determination for an award has not been made before” February 9, 2018, the date of
enactment of the Budget Act. Id. subsec. (d), 132 Stat. at 158–59. In Lewis v.
Commissioner, 154 T.C. 124, 133 (2020), we held that, “for purposes of the effective
date of the [2018] amendments, ‘a final determination for an award’ does not occur
until after the whistleblower award can no longer be further challenged in this Court
or elsewhere.” This case remains sub judice, so the amendments substituting the term
“proceeds collected” for the term “collected proceeds” are pertinent. Nevertheless,

12
[*12] review any “determination regarding an award under
paragraph (1).” See also Whistleblower 14376-16W v. Commissioner,
T.C. Memo. 2024-22, at *26 (holding that, because the WBO referred the
whistleblower’s claim to another office of the IRS, which proceeded with
administrative action, and the WBO subsequently issued a final award
decision denying the whistleblower’s claim, we had jurisdiction over the
case), supplementing T.C. Memo. 2017-181.
B.

Scope and Standard of Review

In reviewing a determination by the WBO, we look to the
Administrative Procedure Act (APA) for both the scope and standard of
our review. Kasper v. Commissioner, 150 T.C. 8, 18, 22 (2018). The
general rule under the APA is that we confine our review to the
administrative record compiled by the agency. See Van Bemmelen v.
Commissioner, 155 T.C. 64, 72 (2020); Kasper, 150 T.C. at 14–15, 20. In
other words, the scope of our review is delineated by the so-called record
rule, which is “the general rule of administrative law that a court can
engage in judicial review of an agency action based only on consideration
of the record amassed by the agency (the administrative record).”
Kasper, 150 T.C. at 14 n.8 (quoting Ewing v. Commissioner, 122 T.C. 32,
58 (2004) (Halpern and Holmes, JJ., dissenting), vacated, 439 F.3d 1009
(9th Cir. 2006)). Moreover, “[a]bsent a substantial showing made with
clear evidence to the contrary, an agency is presumed to have properly
designated the administrative record.” Van Bemmelen, 155 T.C. at 74;
see also Oceana, Inc. v. Ross, 920 F.3d 855, 865 (D.C. Cir. 2019) (“[T]he
designation of the Administrative Record, like any established
administrative procedure, is entitled to a presumption of administrative
regularity.” (quoting Bar MK Ranches v. Yuetter, 994 F.2d 735, 740 (10th
Cir. 1993))).
We review for abuse of discretion, which means we do not
substitute our judgment for the WBO’s but decide whether its
determination was “arbitrary, capricious, an abuse of discretion, or
otherwise not in accordance with law.” Van Bemmelen, 155 T.C. at 72
(quoting Kasper, 150 T.C. at 21). In conducting this analysis, we do not
substitute our judgment for that of the agency but instead confine
ourselves to ensuring that its determination was “within the bounds of
reasoned decisionmaking.” Id. (quoting Dep’t of Com. v. New York, 139
because this case and some of the authority we rely on predate the Budget Act, and
because we perceive no difference for purposes of this case between the terms “collected
proceeds” and “proceeds collected,” we do not adhere to the change in terminology and
use the two terms without distinction.

13
[*13] S. Ct. 2551, 2569 (2019)). With respect to factual matters, that
includes accepting the agency’s determinations so long as they are not
clearly erroneous. See Kasper, 150 T.C. at 23. 6
II.

Motion for Summary Judgment
A.

Summary Judgment Standard

Either party may move for summary judgment upon all or any
part of the legal issues in controversy. Rule 121(a)(1). Ordinarily, under
Rule 121(a)(2), the Court must grant summary judgment when there is
no genuine dispute as to any material fact and the movant is entitled to
judgment as a matter of law. That standard is not apt, however, where,
as here—in a whistleblower case—we must confine ourselves to the
administrative record to decide whether there has been an abuse of
discretion. See Rule 121(j) (“In cases in which judicial review is based
solely on the administrative record, [paragraph (a)(2) is] not
applicable.”); Van Bemmelen, 155 T.C. at 79.
B.

Administrative Record

Because we will deny petitioner’s Motion to Determine Scope and
his Motion to Supplement, we hold that the WBO’s administrative claim
file is the administrative record for review. See Van Bemmelen, 155 T.C.
at 74 (holding that, absent substantial evidence to the contrary, the
agency is presumed to have properly designated the administrative
record).

6 Earlier in this case, petitioner moved for partial summary judgment that both

the scope and standard of review are de novo. We denied that Motion by Order, and
petitioner then moved pursuant to section 7482(a)(2)(A) and Rule 193 that we amend
the Order to add the enabling statement described in Rule 193(a) allowing for
immediate appeal of the Order to the U.S. Court of Appeals for the District of Columbia
Circuit (Motion to Amend Order). Before we acted on the Motion to Amend Order,
petitioner instigated an appeal of the Order to the D.C. Circuit. During the pendency
of that appeal, we denied the Motion to Amend Order “without prejudice for petitioner
to remake it if he believes that circumstances warrant.” Subsequently, without
addressing the merits of the appeal, the D.C. Circuit granted the appellee’s Motion to
Dismiss the Appeal. See In re: Sealed Case, No. 22-1022 (D.C. Cir. June 29, 2022), our
dkt. entry No. 578. In responding to the Motion for Summary Judgment, petitioner
argues that, if we deny the Motion, we should certify the Order for immediate appeal.
Because we will grant the Motion, we need not consider that argument.

14
[*14] C.

Summary of the Parties’ Arguments
1.

Respondent’s Arguments

Respondent moves for summary judgment as a matter of law on
the grounds that the undisputed material facts establish that the WBO
did not abuse its discretion in denying petitioner’s application for an
award under section 7623. “The administrative record,” respondent
argues, “evinces that petitioner’s information could not be
substantiated; that the [IRS] was unable to detect the tax
noncompliance alleged by petitioner; and that it collected no proceeds
from the investigation of petitioner’s claim.”
2.

Petitioner’s Arguments

Petitioner identifies the principal issues raised by the Motion as
“whether [Target’s] act in abandoning [the LIFO] scheme in 2009, and
in renouncing its use of LIFO in 2012, qualify as compensable acts under
§ 7623(b)(1).” He answers in the affirmative:
[S]o long as [Target’s] actions caused it to pay more tax
(which it indisputably did), and so long as [petitioner] can
tie that change to action that the IRS took using
information that he supplied to them (which he
indisputably can), then the “additions to tax” that [Target]
paid as a result constitute “collected proceeds” under the
Whistleblower Statute.
D.

Respondent’s Answers to Petitioner’s Arguments
1.

Collected Proceeds Do Not Include Self-Assessed
Amounts Reported in a Taxpayer’s Original Returns.

Respondent answers petitioner’s claim that Target’s acts of
abandoning the LIFO Scheme in 2009 and in renouncing LIFO in 2012
qualify as compensable acts under section 7623(b)(1). It is pure
conjecture, respondent says, for petitioner to claim that Target was
motivated to change its behavior and its tax reporting on account of the
IRS’s investigation of petitioner’s information during the 06/07 audit
cycle. On the basis of that conjecture, respondent reads petitioner as
arguing that “amounts reported in [Target’s] subsequent original
returns are ‘collected proceeds’ resulting from an administrative action
under I.R.C. § 7623(b).” Respondent answers that, even if petitioner’s
conjecture were correct, it would be “immaterial because . . . self-

15
[*15] assessed amounts reported in a taxpayer’s original return are not
‘collected proceeds,’” and no award may be made to petitioner as a
matter of law. Respondent gives three explanations why, as a matter of
law, that is so.
2.

Under the Statute, Tax Noncompliance Must Be
Detected Before Collected Proceeds Result from an
IRS Action.

The prerequisites to a mandatory award under section 7623(b),
respondent says, are “both the initiation of an administrative or judicial
action and collection of tax proceeds,” Cooper v. Commissioner, 136 T.C.
597, 600 (2011), and “the IRS must actually detect tax noncompliance
based on the whistleblower’s information.” “It is undisputed,” he adds,
“that the IRS was unable to detect the purported scheme alleged by
petitioner.” LB&I’s investigation of petitioner’s information, respondent
says, was concluded by the 08/09 audit cycle examination team. In
August 2012, the team concluded that it could not substantiate
petitioner’s claim about the LIFO Scheme. The senior revenue agent on
that team prepared the Revenue Agent Analysis in which he concluded:
It has been determined that our investigation techniques
failed to discover any . . . [documentation of the LIFO
Scheme] which, of course, is a clear violation of IRC 471.
As such, the Whistleblower claim filed on 7/02/2006 should
be disallowed based on the fact that the aforementioned
trades were not discovered resulting in no adjustment
being made to inventory and/or Cost Of Goods Sold during
our 200812 & 200912 audit cycle.
The 08/09 audit cycle examination team was unable to identify
any improper yearend purchases, respondent continues, “let alone
conclude what the tax effect would be if [Target] ceased those
hypothetical purchases.” Moreover, even if the Court were to find fault
with the examination team’s investigation of petitioner’s information,
respondent says that the appropriate remedy would not be to make an
award to petitioner but to “order a reexamination with no assurance that
the IRS could suddenly detect years later what it was unable to prove
even existed in a comprehensive examination.” And that action,
respondent adds, “would exceed the [Court’s] jurisdiction conferred by
§ 7623(b)(4). E.g., Cooper III, 136 T.C. at 600.”

16
[*16]

3.

A Taxpayer’s Voluntary Change in Reporting in
Subsequent Tax Years is Not an Action Taken by the
IRS.

Respondent argues that “petitioner seeks amounts associated
with a non-compulsory Form 3115, Application for Change in Method of
Accounting, filed by [Target] in 2012.” Filing that form and changing its
inventory accounting method from LIFO to FIFO were “indisputabl[y]
. . . voluntary taxpayer-initiated changes.” And while the IRS may have
collected more tax in 2011, the year of change, and in subsequent years,
than it would have collected but for those voluntary acts, the additional
collections do not constitute collected proceeds within the meaning of
section 7623(b)(1). “Section 7623(b)(1),” respondent points out, “requires
that any tax, penalties, interest, additions to tax, and/or additional
amounts collected by the Secretary must result from an administrative
or judicial action described in I.R.C. § 7623(a) before they can constitute
‘collected proceeds.’” “An administrative action,” respondent adds,
must be an action taken by the IRS. See e.g., Treas. Reg.
§ 301.7623-2(a)(2) (an administrative action is “all or a
portion of an Internal Revenue Proceeding”).[7]
7 When, in April 2013, Mr. Gardner signed the Determination, rules
interpreting section 7623 were provided by Treasury Regulation § 301.7623-1(a)
(2012). On August 12, 2014, the Secretary removed that regulation and promulgated
Treasury Regulation §§ 301.7623-1 through -4 (2014 Regulations), applicable to
whistleblower information submitted on or after that date and to claims for awards
under section 7623(b) that “are open” as of that date. T.D. 9687, 2014-36 I.R.B. 486
(Aug. 12, 2014); see Treas. Reg. §§ 301.7623-1(f), -2(f), -3(f), and -4(e). In Kasper, 150
T.C. at 19 n.11, we found that, because the WBO had denied the whistleblower’s
application for an award no later than September 2011, the 2014 Regulations were
inapplicable but, we added, “they can provide helpful insight.” We discuss supra note 5
the effective date of amendments made by the Budget Act to the terminology of section
7623: “The amendments apply with respect to whistleblower claims ‘with respect to
which a final determination for an award has not been made before’ February 9, 2018,
the date of enactment of the Budget Act.” We cite Lewis, 154 T.C. at 133, for its holding
that “‘a final determination for an award’ does not occur until after the whistleblower
award can no longer be further challenged in this Court or elsewhere.” The reasoning
behind our holding in Lewis could similarly lead to the conclusion that a
whistleblower’s award claim remains open until the WBO’s determination on an award
can no longer be further challenged. The 2014 Regulations would, thus, be applicable
to petitioner’s award claim. The parties have not addressed that possibility, although
each has cited various provisions of the 2014 Regulations; respondent relies on Kasper
to conclude that the 2014 Regulations “can be persuasive authority” or are
“instructive.” Petitioner goes further, citing the 2014 Regulations as “current (and now
effective).” We see no need today to address a dispute with respect to the applicable

17
[*17] Accordingly, an original return filed by a taxpayer is not an
“administrative or judicial action from which an award can
be paid.” Whistleblower 16158-14W, 148 T.C. [at 304]
(holding that “[t]he mere fact that the taxpayer filed an
original return in not a civil proceeding by the
Commissioner).”
Respondent concludes:
The IRS ceased investigating petitioner’s allegations
after the 08-09 cycle; the team that examined the Taxpayer
in subsequent cycles did not possess or utilize petitioner’s
information; and the IRS has not examined the purported
scheme in any subsequent cycles. Accordingly, it is
indisputable that the IRS has taken no action based on
petitioner’s information since tax year 2009. This Court
has repeatedly recognized that “Congress did not authorize
the Court to direct the Secretary to proceed with an
administrative or judicial action.” E.g., Cooper III, 136
T.C. at 600. Because the IRS did not proceed with an
action, no award can be paid from any amounts associated
with the Taxpayer’s voluntary change in reporting under
section 7623(b).
4.

Whistleblower 16158-14W Supports Respondent’s
Position.

Pointing to Whistleblower 16158-14W v. Commissioner, 148 T.C.
300, 308 (2017), respondent claims the Tax Court has already considered
and rejected petitioner’s interpretation of the term “collected proceeds,”
i.e., that the term encompasses self-assessed amounts reported in a
taxpayer’s original return. In Whistleblower 16158-14W, 148 T.C. at 308,
we determined: “Collected proceeds do not include self-reported amounts
collected when a taxpayer changes its reporting for years that are not
part of the action.” Respondent sets forth in some detail the facts and
our analysis in that case, and we will do likewise.
In Whistleblower 16158-14W, the whistleblower, an employee of
the taxpayer, informed the WBO that for 2006, 2007, and 2008, the
taxpayer had failed to withhold tax on payments of interest and
dividends that it had made to foreign persons. As is the case here, the
regulations since the parties have not. As we did in Kasper, we will treat the 2014
Regulations as providing helpful insight into the meaning of the statute.

18
[*18] IRS expanded an ongoing examination to include the
whistleblower’s information but ultimately determined to make no
adjustment for the examination years on the basis of the whistleblower’s
information. Id. at 302. Apparently learning that the taxpayer had
come into compliance, the whistleblower supplemented his award
application, arguing that his information had caused the taxpayer to
correctly withhold tax and report its withholding obligations for tax
years after the examination years. That, the whistleblower continued,
caused the IRS to collect additional tax that should be considered
“‘collected proceeds’ under section 7623(b)(1).” Id. at 301. The IRS did
not examine any additional years because of the whistleblower’s
submissions, and in June 2014, the WBO notified the whistleblower that
he was entitled to no award because the information that he had
provided had not resulted in the collection of any proceeds. Id. at 302.
He petitioned us for review.
The Commissioner moved for summary judgment arguing that he
was entitled to such as a matter of law because the information provided
by the whistleblower did not lead to the collection of any proceeds and,
therefore, the whistleblower was not entitled to an award. The
whistleblower responded that the information he had provided caused
the taxpayer to change its withholding practices for years after the
Commissioner’s examination and, further, that change in its
withholding practices led the Commissioner to collect additional tax that
should be considered “collected proceeds” within the meaning of section
7623(b)(1).
We began our analysis by observing that, for an award under
section 7623(b)(1), the Secretary must proceed with an administrative
or judicial action. Id. at 304. There was no dispute, we continued, that
the Commissioner had taken an administrative action with respect to
the taxpayer’s 2006 through 2008 tax years. The Commissioner had
taken no action for years after 2008. “The mere fact that the taxpayer
filed an original return,” we added, “is not a civil proceeding by the
Commissioner. Thus, there is no administrative or judicial action from
which an award can be paid.” Id. The whistleblower argued that the
Commissioner collected proceeds because the taxpayer came into
compliance and withheld tax for years after the examination years,
“which can be attributed back to the years for which there was an
action.” Id. Rejecting the whistleblower’s argument, we held: “Collected
proceeds do not include self-reported amounts collected when a taxpayer
changes its reporting for years that are not part of the action.” Id.
at 308. We granted the Commissioner’s motion for summary judgment.

19
[*19] Relying on Whistleblower 16158-14W, respondent concludes that
“any amounts that were self-assessed by [Target] when it voluntarily
changed from LIFO to FIFO in 2012 are not ‘collected proceeds’ under
I.R.C. § 7623(b). This failure to satisfy a fundamental prerequisite for
an award under I.R.C. § 7623(b) is fatal to petitioner’s case.”
After making that argument, in a supplemental round of briefing
by the parties respondent adds that, in Lewis, 154 T.C. at 134, we
broadened our holding in Whistleblower 16158-14W to hold that
“reported, paid tax is not collected proceeds” even if “an ongoing audit
was expanded to include the year of the reported, paid tax.”
E.

Petitioner’s Arguments
1.

Statute Requires an Award

As we have summarized, petitioner believes that we should deny
the Motion because he is entitled to a share of the additional tax that
Target reported and paid—and that it would not otherwise have
reported and paid—but for respondent’s acting on his claim. Because of
that action, he continues, Target (1) terminated the LIFO Scheme it had
theretofore been pursuing and (2) switched its inventory accounting
method from LIFO to FIFO. 8
Petitioner believes that his award claim falls squarely within the
class of claims covered by the whistleblower statute. While petitioner
concedes that “[t]he Whistleblower Statute embodies Congress’s intent
to detect and deter tax-related wrongdoing,” he argues that the term
“collected proceeds” is afforded a “broad and sweeping” meaning under
the law, one which encompasses varied payments based upon the
information that a whistleblower has provided. Congress did not, he
argues, “condition recovery under § 7623(b)(1) on a finding that the tax
laws have been violated.” Nor, he adds, did it exclude from the meaning
8 Petitioner answered the Motion for Summary Judgment with his
Memorandum of Law in Opposition to Respondent’s Motion for Summary Judgment.
Subsequently, he filed his Supplemental Memorandum of Law in Opposition to
Respondent’s Motion for Summary Judgment. Petitioner explained that he was filing
the Supplemental Memorandum to address pertinent decisions of the Tax Court
subsequent to his Memorandum of Law—notably Van Bemmelen, 155 T.C. 64,
Whistleblower 769-16W v. Commissioner, 152 T.C. 172 (2019) (addressing remand in
whistleblower cases), Berenblatt v. Commissioner, 160 T.C. 534 (2023), and Lewis, 154
T.C. 124—and to align his arguments with the “framework” set forth in Kasper, 150
T.C. 8, “whose holdings [he] continue[s] to believe to be flawed.” In setting forth his
argument, we rely principally on petitioner’s Supplemental Memorandum.

20
[*20] of proceeds “tax payments that are ostensibly ‘voluntary’ in
nature.”
2.

Arbitrary, Capricious, and Abuse of Discretion

Petitioner also claims that we should deny the Motion because the
WBO acted in an arbitrary and capricious manner, and abused its
discretion, when it denied his application for an award. The WBO,
petitioner says, denied him an award “based on its reading of two Form
11369s—[the 06/07 Audit Cycle Form 11369 and the 08/09 Audit Cycle
Form 11369].” Both forms, he continues, “are filled with glaring
deficiencies—omitting key facts and failing to provide accurate
information on a myriad of issues, including, most importantly, the very
grounds on which [petitioner] was seeking an award.” Those two forms
and “a handful of other documents,” petitioner claims,
represent the entirety of the materials the [WBO] received
from the IRS’s field office. . . . This is significant, not only
because it shows the paucity of information the [WBO] had
before it when it rejected petitioner’s claim, but because it
demonstrates that the [WBO] rejected [petitioner’s] claim
without understanding the basis he had advanced for an
award.
The 08/09 Audit Cycle Form 11369, for example, “says nothing about
[Target’s] change to FIFO in 2012, nor does it raise the possibility that
the change was linked to the IRS’s resumed investigation.”
Summing up, petitioner argues:
Whether viewed individually or collectively, [the
WBO’s] glaring oversights constitute “abuses of discretions
[sic]” under prevailing law. See, e.g., Kasper, supra, 150
T.C. at 22-23 ([WBO] abuses discretion when its decision is
based on “a clearly erroneous assessment of the facts”);
Whistleblower 769-16W v. Commissioner, 152 T.C. 172,
178 (2019) (same); see also Honeywell Technology
Solutions, Inc. v. Department of Air Force, 779 F.Supp.2d
14, 25 (D.D.C. 2011) (abuse of discretion where record
evidenced that agency failed to address contractor’s
arguments against disclosure of information in FOIA
matter); Whittaker v. Commissioner, T.C. Memo. 2023-59,
2023 WL 3451557, at *8 (2023) (abuse of discretion where
record evidenced that IRS failed to address taxpayer’s

21
[*21] arguments regarding their inability to obtain a loan
against their home).
3.

Whistleblower 16158-14W and Lewis

Petitioner would distinguish Whistleblower 16158-14W, 148 T.C.
300, and Lewis, 154 T.C 124, on the grounds that those two cases
“merely recognize that a whistleblower is ineligible for awards
predicated on a taxpayer’s filing of correct and accurate original income
tax returns for future years that are not under audit.” “Unlike the claims
in [those cases], which sought an award for changes in taxpayer
behavior that post-dated the IRS investigation,” petitioner alleges that
his “claims involve changes that took place while the IRS’s investigation
was ongoing.”
4.

Remand

Finally, petitioner asks that, if we deny the Motion for Summary
Judgment because, in some way, the administrative record is faulty, we
forgo remanding the case to the WBO for further proceedings but,
instead, certify the Order for immediate appeal to the D.C. Circuit. 9
Because we will grant the Motion for Summary Judgment, we have no
need to consider petitioner’s request.
F.

Discussion
1.

Introduction

Mr. Whitlock determined that the IRS collected no proceeds for
Target’s 2006 through 2009 tax years on the basis of petitioner’s
information. Nevertheless, says petitioner, notwithstanding that the
examination teams did not substantiate the LIFO Scheme, Target
became aware that the IRS was investigating its inventory practices.
That knowledge, he surmises, caused Target to abandon the scheme
when it reported its income for 2009 and, voluntarily, to change its
inventory accounting method from LIFO to FIFO in 2012. On the
premise that Target would not have taken those actions but for the
examinations prompted by his information, petitioner argues that he
should share in the added tax Target paid for 2009 and in the recapture
9 See supra note 6 (discussing (1) the Order, by which we denied petitioner’s
Motion for Partial Summary Adjudication That Appropriate Scope and Standard of
Review Here Are “De Novo,” and (2) petitioner’s unsuccessful attempt to appeal that
denial).

22
[*22] of Target’s LIFO reserve and other proceeds collected because of
Target’s voluntary accounting method change. 10
Relying on
Whistleblower 16158-14W, 148 T.C. at 308, respondent answers
concisely: “Even . . . accept[ing] all of petitioner’s speculative allegations
as fact they are ultimately immaterial because self-assessed amounts
reported by taxpayers in future years are not ‘proceeds collected by the
Government.’”
2.

Whistleblower 16158-14W and Lewis

Petitioner does not say that we erred in Whistleblower 16158-14W
but argues that our holding there is inapplicable on the facts before us.
He reads our holding in Whistleblower 16158-14W that collected
proceeds do not include self-reported amounts as limited to a situation
where the taxpayer changes its reporting only “after the IRS’s
investigation of the taxpayer had concluded.” To the contrary, he claims
that Target changed from LIFO to FIFO “while the IRS’ investigation
was ongoing, . . . when [Target] learned that its inventory purchasing
practices were under scrutiny.” (Emphasis added.) Apparently,
petitioner views Target’s change from LIFO to FIFO as having taken
place during the 08/09 audit cycle examination. Petitioner may so
conclude because Target submitted Form 3115 to apply for the
accounting method change in March 2012, which preceded—in August
of that year—the 08/09 audit cycle examination team’s concluding its
examination by submitting Form 11369 to the WBO.
Petitioner reads Whistleblower 16158-14W without understanding that, in Lewis, 154 T.C. 124, we extended our holding in
Whistleblower 16158-14W to exclude from collected proceeds selfreported tax paid with respect to a year to which an ongoing audit was
extended. In Lewis, the whistleblower (Mr. Lewis) claimed that the
WBO abused its discretion in excluding from collected proceeds
reported, paid tax when an ongoing audit was expanded to include the
year of the reported, paid tax. Mr. Lewis, who had been employed as a
financial manager at a closely held corporation, filled out an award
application (Form 211) claiming, among other things, that his former
employer was paying and deducting as wages substantial sums paid to
the corporation’s owners’ son who no longer worked at the corporation
(wage issue). Id. at 125–26. On the basis of the Form 211, the
10 See supra note 2 and accompanying text (discussing recapture of the LIFO
reserve). Moreover, if inventory costs were rising, FIFO accounting would, for that
reason alone, accelerate income from sales.

23
[*23] Commissioner began an audit of the corporation’s 2010 tax year.
The Commissioner did not include the corporation’s 2011 tax year in the
audit because the corporation had not yet filed its 2011 return. On the
basis of communications with the revenue agent conducting the audit,
the corporation knew the Commissioner’s position on the wage issue
before it filed its 2011 return. When it filed that return, it did not deduct
any wages paid to the son. Id. at 126–27. The Commissioner expanded
his examination of the corporation to include 2011 and eventually
entered into a closing agreement for 2010 and 2011. Under the closing
agreement, the Commissioner and the corporation agreed that the 2010
wage deduction to the son was disallowed. Deductions for 2011 totaling
$15,961 were disallowed. Id. at 127.
After the audit, a revenue agent on the audit team completed a
Form 11369 for the corporation’s 2010 and 2011 tax years and submitted
it to the WBO. The revenue agent opined that the corporation’s change
in reporting for the wage issue provides “additional award
consideration.” Id. at 128. He wrote that the corporation would have
continued to claim the wage deduction if not for the whistleblower’s
information and computed that the wage deduction would have reduced
the corporation’s 2011 tax by $180,460. The revenue agent did not on
the Form 11369 compute an amount of collected proceeds. Id. The WBO
eventually determined that Mr. Lewis was entitled to a section 7623(b)
mandatory award based, in part, on $5,872 of corporate tax collected for
2011. In determining the corporate tax collected for 2011, the WBO did
not include any of the $180,460 tax reduction that the revenue agent
computed would have resulted had the corporation for 2011 claimed a
deduction for wages paid to the son. See id. at 129.
Mr. Lewis disagreed with that decision and appealed the WBO’s
award determination. We articulated the question before us as whether
the WBO abused its discretion in excluding from the collected proceeds
used to determine Mr. Lewis’s award the tax proceeds resulting from the
corporation’s decision not to deduct the son’s wages for 2011. We
recognized that, in Whistleblower 16158-14W, we had held that collected
proceeds do not include proceeds from a target’s change in reporting for
a future tax year that was not under audit at the time of the
whistleblower award determination. See id. at 133–34. Mr. Lewis
apparently drew from the reference in our holding to future years not
under audit at the time of the award determination that we meant to
exclude from collected proceeds additional tax from future, voluntary
changes in reporting. He sought to distinguish Whistleblower 1615814W on the grounds that he was claiming an award for the corporation’s

24
[*24] change in reporting that was not a voluntary act. It was
involuntary because the Commissioner was auditing the corporation’s
2010 return, and the corporation knew of the wage issue before it filed
its 2011 return changing its reporting. That, together with the
Commissioner’s addition of the 2011 return to the audit assured the
corporation’s compliance. Id. at 133–34. Ergo, the corporation did not
act voluntarily and, according to Mr. Lewis, Whistleblower 16158-14W
was distinguishable.
We answered:
The whistleblower information likely contributed to the
corporation’s decision not to deduct the wages for 2011.
However, the same can be said about the target’s decision
to change its reporting in Whistleblower 16158-14W. We
held there that reported, paid tax is not collected proceeds
and see no need to narrow that holding in this case on the
basis that an ongoing audit was expanded to include the
year of the reported, paid tax.
Id. at 134. 11
3.

Facts Before Us

Indeed, while respondent received in March 2012 Target’s
application to change its inventory accounting method from LIFO to
FIFO—five months before the 08/09 audit cycle examination team
reported the results of its examination—nothing in WBO’s
administrative claim file indicates that the examination team expanded
its examination to include 2011 or any year for which Target may have
reported under FIFO. And even if the facts were to the contrary, we
would still be governed by our holding in Lewis, 154 T.C. at 134, that
“reported, paid tax is not collected proceeds” even if “an ongoing audit
was expanded to include the year of the reported, paid tax.”
11 The regulations, we continued, recognize that, if a whistleblower’s
information results in the collection of proceeds and also causes the taxpayer to change
its reporting for future years, the reported, paid tax, although not collected proceeds,
may constitute a positive factor in determining the award percentage applicable to the
collected proceeds. See Lewis, 154 T.C. at 134 (“The change in reporting affects the
award percentage, not the amount of collected proceeds.”); Treas. Reg. § 301.76234(b)(1)(viii). Here, however, that does not matter because the IRS determined that it
had collected no proceeds on the basis of petitioner’s information for Target’s 2006
through 2009 tax years, which were reviewed during the 06/07 and 08/09 audit cycles.

25
[*25] G.

Conclusion

Mr. Whitlock did not err in determining that the information
petitioner provided did not result in the collection of any proceeds;
therefore, he did not abuse his discretion in concluding that petitioner
was ineligible for an award. Our disposition of the six additional
Motions does not change that conclusion.
III.

The Six Additional Motions
A.

Introduction

We need spend but little time addressing the six additional
Motions. Because we will grant the Motion for Summary Judgment,
there will be no trial in this case, and we will deny as moot the parties’
various Motions requesting the inclusion or exclusion of evidence or
testimony at trial, i.e., petitioner’s Motion to Admit and respondent’s
Motions in Limine re: (1) Mr. Schneider, (2) Scope of Record, and
(3) Mr. Gardner.
B.

Motion to Determine Scope

Petitioner explains that his Motion to Determine Scope is
intended to obtain from the Court a ruling on what information
constitutes the record that respondent must make available to the Court
so that the Court may determine whether respondent unlawfully
withheld an award from petitioner. Petitioner prays for an order
declaring “that the ‘administrative record’ . . . consists of the entirety of
information before the IRS while investigating [his] claim.”
Petitioner elaborates: Although the WBO “communicate[s] award
decisions” to claimants, he (petitioner) does not recognize the WBO as
the “adjudicator of [whistleblower] claims.” He describes the WBO as “a
clearinghouse through which whistleblower claims are processed,
evaluated and assigned to IRS field offices.” The WBO, he claims, “is
entirely dependent on IRS field offices for information about whether
(and how) particular whistleblower claims are investigated (as reflected
in Form 11369s).” Documents in a WBO “claims file,” petitioner
continues, while significant, “represent only a small portion of what is
relevant in determining whether the preconditions for recovery under
the statute have been met.” Precedent from the D.C. Circuit, he argues,
requires that the administrative record in this case include “any and all
documents generated by the IRS’s exam team . . . to which it had access
to in preparing the Form 11369, which the [WBO] then used in making

26
[*26] its award determination.” “[T]he Court,” he concludes, “should
deem the ‘administrative record’ to include the entirety of information
before the IRS while investigating [his] claim.”
Petitioner is wrong that the WBO director is not the IRS official
responsible for determining whether to make an award determination
in response to a whistleblower’s claim for an award. As respondent
points out: “The director of the [WBO] is explicitly delegated the
authority from the Commissioner to make award determinations under
I.R.C. § 7623. See I.R.S. Deleg. Order 25-7 (Rev. 1), IRM 1.2.52.[2(3)]
(July 1, 2008).”
We have reached the same conclusion.
See
Whistleblower 26876-15W v. Commissioner, 147 T.C. 375, 378 (2016).
Moreover, in the context of a whistleblower-case discovery
dispute, we recently considered whether the WBO was deemed to have
indirectly considered all information coming before an IRS field office
during its examination of a whistleblower’s claim. In Berenblatt, 160
T.C. 534, after the WBO had denied Mr. Berenblatt an award, he then
petitioned the Court for review of the denial, and the Commissioner
presented us the administrative record for review. We rejected Mr.
Berenblatt’s argument that, insofar as the special agent had completed
the Form 11369 on which the WBO relied, he was the decision maker
for purposes of the record rule, and the administrative record must
include all documents available to him when he completed that form.
Id. at 551. And in response to Mr. Berenblatt’s argument that “any
relevant documents available to the WBO when it ruled on his claim are
discoverable whether or not the WBO reviewed them,” we answered
that, “[i]f any potentially available document in the IRS’s possession at
the time the WBO made its decision were discoverable, that would
render the record rule all but meaningless.” Id. at 551–52.
Our opinion in Berenblatt may be sufficient authority to deny
petitioner’s Motion to Determine Scope, but there is a more fundamental
reason to deny it. Petitioner apparently wants to broaden the record
submitted by respondent to show that (1) Target pursued the LIFO
Scheme before the IRS investigated it and (2) Target both terminated
the LIFO Scheme and switched to FIFO inventory accounting as a result
of the investigation, which was conducted on the basis of the information
petitioner provided. And that being so, Target paid more tax. But
suppose all of that were true? It would not matter. Petitioner still would
not be entitled to an award. Again, he wants a share of tax reported and
paid, and “reported, paid tax is not collected proceeds.” Lewis, 154 T.C.
at 134.

27
[*27] C.

Motion to Supplement

Petitioner asks that he be allowed to supplement the
administrative record with the following.
1) His affidavit responding to respondent’s Motion for Summary
Judgment.
2) Transcripts of depositions he took of eight current and former IRS
employees who would testify if he called them as witnesses at a
trial in this case. 12
3) A document styled “Expert Report of Leslie J. Schneider,” which
petitioner would proffer as Mr. Schneider’s expert witness report
if this case were called for trial and Mr. Schneider was accepted
as petitioner’s expert witness.”
4) Two stipulations of facts: 13 The First Stipulation of Facts and the
First Supplemental Stipulation of Facts.
5) Reports from a U.S. Government agency and securities filings by
Target and companies in like businesses.
6) All of the information before the IRS in investigating petitioner’s
claim that is not included in the WBO’s administrative claim file.
Petitioner recognizes that supplementing the administrative
record in a case governed by the record rule is the exception, not the
rule. See Theodore Roosevelt Conservation P’ship v. Salazar, 616 F.3d
497, 514 (D.C. Cir. 2010).
Nevertheless, apparently failing to
12 Petitioner took those depositions at an earlier stage in this case when he

thought that we might deny respondent’s Motion for Summary Judgment because of a
genuine dispute as to material facts, see Rule 121(a)(2), and that a trial would follow.
In anticipation of that trial, petitioner made the Motion to Admit—to admit transcripts
of the depositions he had taken and to excuse the deponents from testifying—in order
to avoid repetition of the matters covered during the depositions and to avoid the
burdens on the witnesses of traveling away from their homes to attend trial. In Van
Bemmelen, 155 T.C. at 79, we held that, “in a ‘record rule’ whistleblower case there
will not be a trial on the merits.” In light of that holding, petitioner “asks that the
administrative record be supplemented to include [the] transcripts.”
13 Petitioner asks “that the Stipulations previously agreed to by the parties . . .
be added to the administrative record.” The parties have filed four Stipulations. We
assume petitioner was referring only to the two listed Stipulations of Fact and not also
to two Stipulations regarding redacted documents.

28
[*28] understand the consequence of our holding in Lewis, petitioner
directs us to Van Bemmelen, 155 T.C. at 76, where we described a small
class of cases recognized by the D.C. Circuit in which extrarecord
evidence would be appropriate. Included in that small class is
“background information [if] needed ‘to determine whether the agency
considered all the relevant factors.’” Id. (quoting City of Dania Beach v.
FAA, 628 F.3d 581, 590 (D.C. Cir. 2010)). But given our holding in
Lewis, 154 T.C. at 134, about the meaning of the term “collected
proceeds”—“reported, paid tax is not collected proceeds”—how could any
information not in the administrative record prevent the conclusion that
the WBO did not abuse its discretion in denying petitioner an award?
Petitioner has not persuaded us that any supplementation of the
administrative record is called for or would change the conclusion that
respondent collected no proceeds because of the information petitioner
provided.
IV.

Conclusion

Mr. Whitlock did not abuse his discretion in denying petitioner’s
application for a whistleblower award. We will grant respondent’s
Motion for Summary Judgment. We will deny the parties’ six additional
Motions.
To reflect the foregoing,
An appropriate order and decision will be entered.

---

Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/agency%3Atax-court%3A2744af363c3483f5. Public record. Not legal advice.