In recent years, whistleblower cases have proven to be essential to the battle against tax fraud in the United States. In 2006, Congress passed a provision that would allow citizens to file claims with the Internal Revenue Service (IRS) to recover lost tax revenue that had been fraudulently withheld. The Tax Court could intervene on behalf of a relator, or whistleblower, but only in reviewing the awarded damages. Since Congress only authorized the review of the award rather than the merit of the cases, many are turned down by the IRS. One example of the IRS’ resistance to pursing whistleblower cases is in William Prentice Cooper, III v. Commissioner, 136 T.C. No. 30 (June 20, 2011). The IRS declined the relator’s request to pursue a case because the agency believed it did not meet the criteria required for litigation. The IRS cannot be expected to take every whistleblower case that comes through the door, but in the current climate of fiscal uncertainty, it could be worth millions to the government to re-evaluate certain cases and subject them to closer scrutiny.
As noted by Finch McCranie, LLP, whistleblowers have recovered $97 million for the U.S. government WITHOUT the help of the Justice Department. That is more than the combined salaries of both the members of the United States Senate and House, according to Pat Burns of Taxpayers Against Fraud. This was done without the Justice Department because the government declined to pursue the cases, even when presented with meritorious information. If the IRS has the opportunity to recover tax funds for the government, which it is required to do, why is the agency passing on the opportunity to increase the chances of a successful lawsuit?
The Internal Revenue Service says in its mission statement that it seeks to ensure that citizens meet their tax responsibilities and enforce the laws that Congress passes to ensure fairness and integrity for all. As a result, the IRS is subject to the mercy of Congress, even though its responsibilities are supposed to be nonpolitical.
This political control over the IRS also showed itself when the agency caved to Republican pressure over private campaign donations as gifts.
As noted by Dan Froomkin of the Huffington Post, in this case Republican members of the Senate Budget Committee and the House Ways and Means Committee believed that the IRS was pursuing a liberal agenda by auditing the gifts of donors who have contributed to 501(c)(4)s. They tried to justify their argument by noting that the provision the IRS cited had not historically been enforced. Even if this is the case, it only highlighted the IRS’ failures in the past, but not the present. When Congress passes a law, all of its provisions must be enforced by the IRS. If the provision for declaring gift contributions was never intended to be enforced, then Congress should not have included it in the legislation.
The IRS will always be subject to the laws of Congress, and as a result, the business of politics will get in the way of the agency’s ability to effectively carry out its mission. With Republican donors traditionally holding interests in private companies and firms, they are more inclined to put pressure on the IRS to decline whistleblower cases, seeing as they have the potential to have an adverse effect on these companies. Is it right to allow fraud to continue and additional government revenue to be lost as a result of political interests? More attention should be given to whistleblower since they are not only privy to information that could expose illegal actions, but also they could bring in the additional tax revenue that would help this country combat the devastating fiscal crisis that we are inching closer and closer towards today.
Egan Young, Attorneys-at-Law, represents whistleblowers nationwide. For a free confidential consultation, please call Eric L. Young, Esquire at (215) 367-5151 or email to firstname.lastname@example.org.