The IRS recently expanded awards given to relators under the IRS whistleblower program; thereby encouraging more taxpayers to come forward to report wrongdoing. The online version of the regulations are available here.
Historically, the whistleblower could share in a case’s “collected proceeds,” which was defined to include a wide variety of monies actually received by the IRS. The problem with the definition was that it did not account for various tax attributes such as net operating losses (“NOL”) that could result in money that would otherwise be counted as “collected proceeds” being carried forward 20 years and expiring before the IRS can actually collects the funds, which means that the money also never become part of a whistleblower award.
Under the new regulations, the computational rule provides that, after there has been a final determination of tax, the IRS would compute the amount of “collected proceeds” taking into account all information known with respect to the taxpayer’s account, including all tax attributes such as NOLs.
The new rule would therefore allow the whistleblower to get credit for tax attributes like NOLs that would have previously diminished their award.
While this is a welcome incentive for whistleblowers, Senator Chuck Grassley, who authored the 2006 IRS whistleblower improvements, said that the IRS did not go far enough.
I’m also disappointed that the IRS continues to limit the categories of awards that are eligible. My intent in drafting the law was simple. If the whistleblower gives information that’s useful to the government and improves tax collection, the whistleblower should benefit. The more barriers in place, the less law-abiding taxpayers will benefit from the whistleblower function.
If you have a question about the implications of these regulations or if you think you have an IRS whistleblower claim, please contact us.