An Open Letter Demanding that Proposed IRS Whistleblower Devastation Rule – “Flunking The Loving Test” – Be Rejected
In the last decade, brave whistleblowers who come forward to report fraud against our government have received a tiny share of the funds recovered by the government. Now the IRS wants to take away that meager incentive for information leading to the conviction of these tax cheats. This untenable position by the IRS may be enacted unless everyone reading this letter takes immediate action.
Most whistleblowers are not motivated solely by the financial reward. Even if financial gain was a motive for reporting tax fraud, it is the taxpayers who win – always. The small share of the reclaimed funds (usually less than 17% of the monies recovered) that goes to the person who reports, provides information, documentation, and evidence, earns that share as many whistleblowers are fired, shunned by their peers and live in constant fear and upset during the years that it takes for the government to decide whether to intervene in a case or bring an action.
One example is the Swiss banking fraud. For decades the IRS has known that the Swiss banking giants helped tens of thousands of U.S. citizens evade paying lawful income and corporate taxes to the United States. The IRS, while clearly aware of the schemes, could do NOTHING to the banks or the citizens who employed their services until a whistleblower came forward recently and broke the silence. He provided the government with the tools, documents, and intelligence needed to FINALLY take down the great Swiss cheaters. Our Government (through the IRS) collected and will continue to collect billions of dollars that would otherwise have gone unpaid. Both civil and criminal penalties have been assessed against the Swiss banks and bankers and the whistleblower received more than two-hundred million in reward dollars.
Perhaps as a reaction to the large sum paid to that whistleblower, the IRS is now proposing to refuse to pay any whistleblower a reward if the tax cheat is criminally prosecuted. WHAT???? So the IRS rule would refuse to pay any financial reward for the reporting of the very worst tax cheats. It would appear that the IRS is really trying to discourage the reporting of tax fraud. Why would the IRS want to discourage the reporting of fraud? Sounds like politics and big business at its worst. Whatever it is – it is clearly wrong and contrary to what is best for the United States and us, as citizens. The IRS’s assertion that the Rule is required by the recent case of Loving v. IRS, 742 F.3d 1013 (D.C. Cir. Feb. 11, 2014), is incorrect and a misinterpretation of the decision. Indeed, Loving had nothing to do with the whistleblower rules or whistleblower percentage awards.
Urgent Action is Needed!
Contact the IRS via this online form and tell that them that we will not tolerate this untenable and inexplicable rule. Or you may copy and paste the following text and send your own email to one of the addresses provided below:
Whistleblowers are the backbone of the federal fight against fraud. They deserve to be paid the award provided by law and good conscience. The IRS must not enact its rule that would eliminate awards to whistleblowers where criminal sanctions are imposed. As a taxpayer, I insist that this Rule be rejected by the IRS.
As the National Whistle Blowers’ Center has written:
The Department of Treasury is poised to approve a final rule that will have a devastating impact on the IRS Whistleblower Program. The Treasury Department, along with the IRS office of general counsel, has concocted a rule to exclude whistleblowers from coverage if the violation of the law they report is criminally prosecuted. Tax fraud whistleblowers will only receive rewards for information that results in civil or administrative penalties. If a whistleblower has solid evidence of a major fraud that triggers a criminal prosecution, he or she will get nothing. The proposed regulation undermines Congress’s intent that whistleblowers who report tax fraud be protected and rewarded.
This proposed rule, which we have learned is on the verge of final approval, could not have come at a worse time. The IRS and the Justice Department are effectively using the threat of whistleblower disclosures to force international banks to plead guilty to tax fraud violations for illegally harboring non-disclosed offshore accounts. If the proposed rule is approved, the threat that international bankers will become whistleblowers will become toothless.
The National Whistleblower Center’s letter to Jacob Lew, Secretary of the Department of the Treasury is representative of the position that all of us may want to take. In the letter, the NWC explains why the IRS has misinterpreted this single case.
The effect of this rule, if enacted, will be to eviscerate the IRS whistleblower program. We at Baum Hedlund Aristei & Goldman urge each of you to Immediately contact the IRS and tell that them that we will not tolerate this untenable and inexplicable rule.
You can write (postal mail) to:
1111 Constitution Ave. NW
Washington, DC 20004
Office of the Commissioner
1111 Constitution Avenue, NW
Washington, DC 20224-0002
Tel: (202) 622-9511
Fax: (202) 622-5756
Chief of Staff
Crystal Philcox, Acting
Tel: (202) 927-5600
Office of Legislative Affairs [OLA] Cathy Barre
Tel: (202) 622-3720
Congressional Correspondence Branch Chief
Mary L. Dash
Tel: (202) 927-9613
Fax: (202) 622-3048
We represent whistleblowers in Federal False Claims Act, IRS, and SEC cases.