UNITED STATES TAX COURT

T.C. Memo. 2021-143

UNITED STATES TAX COURT

WHISTLEBLOWER 15977-18W, Petitioner v.

COMMISSIONER OF INTERNAL REVENUE, Respondent

Docket No. 15977-18W.

Filed December 29, 2021.

[Sealed].

Sarah A. Herson and Mark A. Nelson, for respondent.

MEMORANDUM OPINION

GUY, Special Trial Judge: Petitioner initiated this whistleblower action

under section 7623(b)(4) seeking review of a determination by the Internal

Revenue Service (IRS) Whistleblower Office (WBO) rejecting petitioner’s claim

for an award. Unless otherwise indicated, all section references are to the Internal

Served 12/29/21

-2[*2] Revenue Code, as amended and in effect at all relevant times, and all Rule

references are to the Tax Court Rules of Practice and Procedure.

Pending before the Court are: (1) respondent’s motion for summary

judgment, with a supporting declaration submitted by Keith Dehart, a manager in

the WBO Initial Claims Evaluation Unit (ICE), (2) petitioner’s motion to remand,

including a request for the opportunity to perfect the claim, with a supporting

declaration, and (3) respondent’s motion for leave to file amendment to answer to

petition, as amended (sometimes motion for leave).

Petitioner filed a response in opposition to respondent’s motion for summary

judgment, with a declaration, followed by a supplemental response and

supplemental declaration. Petitioner likewise filed an objection to respondent’s

motion for leave, with a declaration. Respondent filed a reply to petitioner’s

response to respondent’s motion for summary judgment and a response in

opposition to petitioner’s motion to remand.

As explained in detail below, we will deny petitioner’s motion to remand,

deny respondent’s motion for leave, and grant respondent’s motion for summary

judgment.

-3[*3]

Background

The administrative record, as certified by respondent, comprises petitioner’s

Form 211, Application for Award for Original Information, narrative statements

and exhibits petitioner submitted in support of the claim, and four documents the

WBO generated in connection with the evaluation and rejection of petitioner’s

claim: (1) a letter acknowledging receipt of petitioner’s Form 211, (2) a claim

action listing transcript, (3) an award recommendation memorandum (ARM)

prepared by a classification researcher, and (4) a final ARM prepared by a tax

examining technician.

I.

Petitioner’s Form 211

In early September 2017 the WBO received petitioner’s Form 211, which

was signed and dated July 29, 2017. Petitioner provided information to the WBO

attempting to show that a certain individual (target) was a dual citizen of the

United States and Country X and was subject to, but failed to pay, substantial

amounts of various Federal taxes. In support of that claim petitioner provided a

copy of the target’s birth certificate showing that the target was born in the United

States, information about the target’s parents’ activities in the United States at the

time of the target’s birth, details about how the target rose to a position of

prominence and influence in Country X, and information about the target’s various

-4[*4] assets and family wealth. In the space on Form 211 reserved for the target’s

Social Security number, petitioner entered “N/A Foreign National”.

Petitioner could find no public record that the target ever exercised any of

the fundamental rights or privileges of a U.S. citizen, including obtaining a Social

Security number or a passport. Petitioner also emphasized that there was no public

record that the target ever renounced U.S. citizenship. With these points in mind,

petitioner opined that the target may not have been aware of the target’s status as a

U.S. citizen, and if so, petitioner suggested that the target could not have

knowingly surrendered U.S. nationality under any of the provisions related to

expatriating acts set forth in 8 U.S.C. sec. 1481 (2018).1

II.

WBO Administrative Action

A. Acknowledgement Letter

After receiving petitioner’s Form 211, the WBO sent an acknowledgment

letter to petitioner assigning WBO claim No. 2018-000013 to the claim.

Although petitioner seems to treat the terms “national of the United States”

and “citizen of the United States” as interchangeable, one may be a national though

not a citizen. See 8 U.S.C. sec. 1101(a)(22) (2018). We note here that the

distinction makes no meaningful difference in this case.

1

-5[*5] B. Transcript

The WBO maintained a transcript that provides a chronological list of the

actions taken by various WBO personnel in respect of petitioner’s claim, including

comments related to those actions.

On October 2, 2017, Julie Skidmore, a tax examining technician, made the

following transcript entries: “UNABLE TO LOCATE TP’S SSN. Could not

research WB for employee-Foreign citizen”, “Sent to Classifier”, and “3210 was

done for this. Large claim.”

On October 4, 2017, Bret Thurman made the following transcript entry: “1st

Read: Forward to Classification”. Mr. Thurman is not identified in the record, but

he apparently served as a classifier and was charged with determining whether

petitioner’s information warranted further review. See Internal Revenue Manual

(IRM) pt. 25.2.2.4.2 (Aug. 7, 2015).

On October 11, 2017, Scott Martin, a classifier assigned to the Small

Business/Self Employed Operating Division (SB/SE), made the following

transcript entries: “Classifier: Allegations meet 7623(a) criteria”, “Classifier:

Claim Rejected”, and “Reject the Claim: Allegations are not specific, credible or

are speculative -- Allegations are not credible.”

-6[*6] On October 17, 2017, Ashlee Brown, a tax examining technician, made the

following transcript entries: “Award Recommendation Memo” and “Streamlined

approval under Delegation Order, dated July 14, 2016”.

C. ARM/Classification

The record includes an ARM dated October 11, 2017, which characterized

petitioner’s claim as arising under “IRC 7623(a)/(b)”.2 The ARM stated that the

“[a]lleged amount in dispute is not greater than $2,000,000”, summarized the

whistleblower’s allegations, and recommended that the claim be rejected as

follows: “Reject the Claim: Allegations are not specific, credible, or are

speculative -- Allegations are not credible”. The ARM included a section

captioned “Basis for the Recommendation” which stated:

[Target’s name] -- UNKNOWN

• Failure to identify person(s) believed to have failed to comply

with the Internal revenue laws.

• Form 211 documents are trying to show citizenship of the TP

and that taxes should have been paid in the United States.

• WB did not provide bank statements, financial records, or

source documents that would allow the Service to determine

amounts, tax years, where business income was allocated,

(related entities?), nature or validity of the allegation, etc.

Although the ARM does not indicate who prepared it, the timing and

substance of Mr. Martin’s transcript entries outlined above lead us to conclude that

he prepared it.

2

-7[*7]

• No specific and credible information about a federal tax issue

or non-compliance. Rejecting the claim per IRM 25.2.2.4.1 for

failing to include specific and credible information to support a

potential tax violation/allegation as well as documentation to

support the claim[.]

D. ARM/Tax Examining Technician

Ms. Brown subsequently prepared an ARM for submission to Kathy

Wolsey, an ICE manager. The ARM recommended that petitioner’s claim be

rejected and included a summary recommendation stating: “Recommendation for

rejection by Classification. Approval to issue the rejection letter authorized under

Delegation Order, dated July 14, 2016.” The section of the ARM captioned “Basis

for the Recommendation” included the same statements that Mr. Martin had

entered in his version of the ARM (quoted above).

E. Final Decision Letter

The WBO issued a letter to petitioner dated October 16, 2017, titled “FINAL

DECISION UNDER SECTION 7623(a)”, which states in relevant part: “The

Whistleblower Office has made a final decision to reject your claim for an award.

The claim has been rejected because the information provided was speculative

and/or did not provide specific or credible information regarding tax

underpayments or violations of internal revenue laws.”

-8[*8] III.

Pleadings

Petitioner filed a petition with the Court on August 16, 2018.3 The Court

subsequently granted petitioner leave to amend the petition in August 2020.

Respondent did not raise an affirmative defense in either the answer to the petition

or the answer to the petition, as amended.

After the pleadings were closed, respondent filed the motion for summary

judgment pending before the Court. More recently, respondent filed the previously

mentioned motion for leave.

Discussion

I.

Jurisdiction

Section 7623(a) authorizes the Secretary to pay discretionary whistleblower

awards from collected proceeds. In contrast, section 7623(b) makes whistleblower

Petitioner resided outside of the United States when the petition was filed.

In Myers v. Commissioner, 928 F.3d 1025, 1036-1037 (D.C. Cir. 2019), rev’g and

remanding 148 T.C. 438 (2017), the Court of Appeals for the D.C. Circuit held that

the 30-day period for filing a petition to initiate a whistleblower action is subject to

equitable tolling. The D.C. Circuit is the appellate venue for this case. See sec.

7482(b)(1) (penultimate sentence). We thus follow its precedent. See Golsen v.

Commissioner, 54 T.C. 742, 757 (1970), aff’d, 445 F.2d 985 (10th Cir. 1971).

Consistently with Myers, we hold that we have jurisdiction to consider this case.

And since neither party has questioned the filing of the petition after the 30-day

period or addressed the subject of equitable tolling, we will proceed to consider the

pending motions.

3

-9[*9] awards mandatory if certain statutory requirements are met. See Van

Bemmelen v. Commissioner, 155 T.C. 64, 71 (2020). Section 7623(b)(4) vests the

Court with jurisdiction to review “[a]ny determination regarding an award under

paragraph (1), (2), or (3)” of subsection (b), including rejections and denials of

claims for awards. See Lacey v. Commissioner, 153 T.C. 146, 163-164 (2019).

Although the determination letter in this case is titled “FINAL DECISION

UNDER SECTION 7623(a)”, the classifier who evaluated petitioner’s information

characterized petitioner’s claim as arising under “IRC 7623(a)/(b)”. In the absence

of any argument from either party to the contrary, we conclude that petitioner

properly invoked the Court’s jurisdiction under section 7623(b). See, e.g., Lacey

v. Commissioner, 153 T.C. at 163-164; Lippolis v. Commissioner, 143 T.C. 393,

396 n.2 (2014).

We note that the final decision at issue in this case uses the ambiguous

“and/or” formulation that often makes it difficult to discern the WBO’s

reasoning. See Lacey v. Commissioner, 153 T.C. at 170; Alber v. Commissioner,

T.C. Memo. 2020-20, at *8 n.5. In this case, however, the classifier explicitly

premised his rejection recommendation on several bases, among them the

conclusion that petitioner provided “[n]o specific and credible information about a

federal tax issue or non-compliance.” The WBO tax examining technician adopted

- 10 [*10] the same text in the ARM, and it likewise appears in the WBO’s final

decision. Consequently, we will review the WBO’s rejection of petitioner’s claim

under that rationale.

II.

Standard and Scope of Review

In reviewing a determination of the WBO, we generally limit our review to

the administrative record and we leave the WBO administrative determination

undisturbed unless the determination is found to be arbitrary, capricious, an abuse

of discretion, or otherwise not in accordance with law. See Van Bemmelen v.

Commissioner, 155 T.C. at 72, 79. We do not substitute our judgment for that of

the WBO, but instead simply ensure that the determination remains within the

bounds of reasoned decision making. Id. at 72. We cannot compel the IRS to

commence an audit or to provide an explanation of its decision not to commence

an audit. See Cohen v. Commissioner, 139 T.C. 299, 302-303 (2012), aff’d, 550 F.

App’x 10 (D.C. Cir. 2014).

III.

Petitioner’s Motion To Remand

In connection with petitioner’s opposition to respondent’s motion for

summary judgment, petitioner filed a motion to remand, with a supporting

declaration. Petitioner contends that the Court should remand the matter because

the WBO failed to properly develop the administrative record and the WBO

- 11 [*11] determination does not rise to the level of reasoned decision making.

Petitioner further asserts that, if the matter is remanded to the WBO, petitioner

should be given the opportunity to perfect the claim.

Respondent filed a response in opposition to petitioner’s motion to remand.

Respondent contends that the administrative record supports the WBO’s final

decision and there is no need to remand the matter for further development. We

agree with respondent.

In Whistleblower 769-16W v. Commissioner, 152 T.C. 172, 181-182

(2019), we held that in appropriate circumstances the Court may remand a

whistleblower case to the WBO for further consideration. The Supreme Court has

observed that remand may be appropriate if the administrative record does not

support the agency action, if the agency failed to consider all relevant factors, or if

the reviewing court cannot evaluate the challenged agency action on the basis of

the record presented. See Fla. Power & Light Co. v. Lorion, 470 U.S. 729, 744

(1985).

As discussed in detail below, the administrative record is sufficiently

developed and adequately supports the WBO’s determination to reject petitioner’s

claim for an award. Consistent with our holding that respondent is entitled to

judgment as a matter of law, we will deny petitioner’s motion to remand.

- 12 [*12] Petitioner’s request to be permitted to perfect the claim is likewise

misplaced. Section 301.7623-1(c)(4), Proced. & Admin. Regs., provides in

relevant part that, if the whistleblower does not provide specific and credible

information, the WBO has the discretion to reject the claim or inform the

whistleblower of any deficiencies and provide the whistleblower an opportunity to

perfect the claim for award. The regulation goes on to state that, if the WBO

rejects the whistleblower’s claim for lack of specific and credible information, as

was the case here, the whistleblower may perfect and resubmit the claim. Id.; see

Rogers v. Commissioner, 157 T.C. 20, 29-30 (2021); Lacey v. Commissioner, 153

T.C. at 161 n.15. Under the circumstances, petitioner may elect to perfect and

resubmit the claim to the WBO, but the WBO is not obliged to permit petitioner to

do so within the context of this action.

IV.

Respondent’s Motion for Leave

Respondent recently filed a motion for leave to file an amendment to answer

to the petition, as amended, and lodged an amendment to answer with the Court.

Respondent maintains that he should be granted leave to file an amendment to

answer to raise an affirmative defense related to the monetary thresholds set forth

in section 7623(b)(5). Petitioner objects to respondent’s motion for leave.

- 13 [*13] Because we conclude below that respondent is entitled to judgment as a

matter of law, we will deny respondent’s motion for leave as moot.

V.

Respondent’s Motion for Summary Judgment

Respondent contends that the administrative record supports the WBO

determination to reject petitioner’s claim and that respondent is entitled to

judgment as a matter of law. Petitioner opposes respondent’s motion and

maintains that the WBO determination represents an abuse of process, is based on

a clearly erroneous assessment of the facts, is not within the bounds of reasoned

decision making, and is not adequately explained.

Summary judgment serves to “expedite litigation and avoid unnecessary and

expensive trials.” Fla. Peach Corp. v. Commissioner, 90 T.C. 678, 681 (1988).

The Court may grant summary judgment with respect to all or any part of the legal

issues in controversy if the record shows that there is no genuine dispute as to any

material fact and that a decision may be rendered as a matter of law. Rule 121(a)

and (b); Naftel v. Commissioner, 85 T.C. 527, 528-529 (1985). This summary

judgment standard “is not generally apt” when reviewing whistleblower award

determinations, however, because we “confine ourselves to the administrative

record to decide whether there has been an abuse of discretion.” Van Bemmelen v.

Commissioner, 155 T.C. at 78. In a so-called record rule whistleblower case,

- 14 [*14] “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.

In accordance with section 7623 and the regulations thereunder, the WBO

performs an initial evaluation of a whistleblower’s submission to determine

whether the claim, on its face, meets certain minimum standards. See Van

Bemmelen v. Commissioner, 155 T.C. at 80-81. In this regard section 301.76231(c)(1), Proced. & Admin. Regs., provides in relevant part:

(c) Submission of information and claims for award.

(1) Submitting information. To be eligible to receive an award under

section 7623 and §§ 301.7623-1 through 301.7623-4, a whistleblower

must submit to the IRS specific and credible information that the

whistleblower believes will lead to collected proceeds from one or

more persons whom the whistleblower believes have failed to comply

with the internal revenue laws. In general, a whistleblower’s

submission should identify the person(s) believed to have failed to

comply with the internal revenue laws and should provide substantive

information, including all available documentation, that supports the

whistleblower’s allegations. * * * Submissions that provide

speculative information or that do not provide specific and credible

information regarding tax underpayments or violations of internal

revenue laws do not provide a basis for an award. * * *

And as discussed above, section 301.7623-1(c)(4), Proced. & Admin. Regs.,

provides in relevant part that, if the whistleblower does not provide specific and

credible information, the WBO has the discretion to reject the claim. See IRM

- 15 [*15] pt. 25.2.2.4.1(4) (Aug. 7, 2015) (stating that a claim will be rejected if the

Form 211 does not contain a credible Federal tax issue or lacks specific and

credible information).

In reviewing the WBO’s determination, we may consider any

“contemporaneous explanation of the agency decision” in the record. Tourus

Records, Inc. v. DEA, 259 F.3d 731, 738-740 (D.C. Cir. 2001) (quoting Camp v.

Pitts, 411 U.S. 138, 143 (1973)). As we noted in Kasper v. Commissioner, 150

T.C. 8, 24 (2018) (quoting Bowman Transp., Inc. v. Ark.-Best Freight Sys., Inc.,

419 U.S. 281, 286 (1974)): “Administrative law tells a court to ‘uphold a decision

of less than ideal clarity if the agency’s path may reasonably be discerned.’”

The administrative record shows that the WBO followed proper procedures

in this case. The WBO forwarded petitioner’s information to SB/SE for review,

SB/SE evaluated the information and recommended that the WBO reject the claim

because, among other reasons, petitioner did not provide specific and credible

information. The WBO in turn accepted that recommendation and issued a final

decision rejecting petitioner’s claim. While the documentary record underlying the

WBO determination is relatively sparse, we are satisfied that the WBO did not

abuse its discretion in concluding that petitioner’s claim, and the information

offered in support of that claim, was not specific or credible.

- 16 [*16] The information that petitioner provided to the WBO, which is largely

derived from publicly available sources, established that the target was born in and

briefly resided in the United States as an infant, the target’s parents were citizens

of Country X, and the target later rose to a position of substantial prominence and

influence in Country X. Petitioner could find no public record that the target ever

exercised any of the fundamental rights or privileges of a U.S. citizen, including

obtaining a Social Security number or a passport. At the same time, petitioner was

unable to find any record that the target ever renounced U.S. citizenship.

In sum, petitioner did not provide specific and credible information sufficient to

establish that the target was a citizen of the U.S. at birth. 4 Moreover, as petitioner

seems to have recognized in the materials submitted to the WBO, even assuming

for the sake of argument that the target was a citizen of the United States at birth,

the fact that the target rose to a position of prominence and influence in Country X

casts serious doubt on the proposition that the target retained U.S. citizenship

status into adulthood.

U.S. Const. amend. XIV, sec. 1, provides in relevant part: “All persons

born or naturalized in the United States, and subject to the jurisdiction thereof, are

citizens of the United States and of the State wherein they reside.” See 8 U.S.C.

sec. 1401(a) (a person born in the United States and subject to the jurisdiction

thereof is a national and a citizen of the United States).

4

- 17 [*17] Consistent with the foregoing, and on the record presented, we conclude that

the WBO did not abuse its discretion in rejecting petitioner’s claim for lack of

specific and credible information. Accordingly, we will grant respondent’s motion

for summary judgment.

An appropriate order and decision

will be entered.