The Justice Department is appealing the Tax Court’s decision in Whistleblower 21276-13W v. Commissioner and Whistleblower 21277-13W v. Commissioner, 147 T.C. No. 4 (2016). This case arose after two courageous whistleblowers stood up to the Swiss banks and exposed how the banks helped U.S. millionaires and billionaires illegally evade taxes. These whistleblowers won a hard fought victory in Tax Court—which ruled that whistleblowers who report criminal violations of the tax laws are fully protected under the IRS whistleblower program.
Prior to this decision, there was ambiguity about whether “collected proceeds” from criminal violations would be included in calculating IRS whistleblower rewards. The consequences of this Tax Court decision on the issue are massive. The largest tax fraud cases inevitably include criminal fines and penalties, and are often primarily criminal in nature. If criminal violations were excluded from the whistleblower reward calculation, the IRS program would not incentivize those whistleblowers with the most important information about the largest tax evasion schemes to report violations.