The first 140 years What is now Internal Revenue Code (IRC) Section 7623(a) has been on the books since March 1867, allowing the Secretary of the Treasury to pay such amounts as he deems necessary "for detecting and bringing to trial and punishment persons guilty of violating the internal revenue laws or conniving at the same." Prior to 2006 the only substantive change since 1867 was in 1996, when a clause was added allowing payments to be made "for detecting underpayments of tax" as another basis for an informant award and making the payments from proceeds collected rather than appropriated funds. The Treasury Department issued a regulation to implement the law, and the IRS has had a series of policies to define the scope and procedures for the program. The courts have considered attempts to challenge award decisions under this law, and uniformly found that the discretion to make, or not make, an award is essentially not reviewable. Whistleblower Program prior to enactment of Tax Relief and Health Care Act of 2006 The pre-amendment program was discretionary, and was governed by policies that defined award percentages and set a cap. The maximum award percentage was 15% of collected taxes and penalties. The maximum award amount was subject to limitations based on the date the claim was filed. Awards were generally not paid when the disclosures were based on public information, or when the whistleblower participated in the tax non-compliance. The whistleblower was not required to be an individual. There was no requirement that the whistleblower sign a Form 211. The Tax Relief and Health Care Act of 2006 On December 20, 2006, Section 406 of the Tax Relief and Health Care Act of 2006 (TRHCA 2006) added IRC Section 7623(b), which enacted significant changes in the IRS award program for whistleblowers. The TRHCA 2006 set a new framework for the consideration of whistleblower submissions and established the Whistleblower Office within the IRS to administer that framework. Final regulations - 2014 On August 12, 2014, the Treasury Department and the Internal Revenue Service (IRS) published final regulations providing comprehensive guidance for the IRS Whistleblower Program under IRC § 7623. The regulations also provided guidance on submitting information regarding underpayments of tax or violations of the internal revenue laws and filing claims for award, as well as on the administrative proceedings applicable to claims for award under IRC § 7623. The regulations also provided guidance on the determination and payment of awards; and defined key terms used in IRC § 7623. Finally, the regulations confirmed the director, officers, and employees of the Whistleblower Office are authorized to disclose return information to the extent necessary to conduct whistleblower administrative proceedings. Bipartisan Budget Act of 2018 On February 9, 2018, Section 41108 of the Bipartisan Budget Act of 2018 (BBA 2018) amended IRC § 7623, which added a new subsection: (c) Proceeds – For purposes of this Section, the term ‘proceeds’ includes — (1) penalties, interest, additions to tax, and additional amounts provided under the Internal Revenue laws, and (2) any proceeds arising from laws for which the Internal Revenue Service is authorized to administer, enforce, or investigate, including — (A) criminal fines and civil forfeiture, and (B) violations of reporting requirements. BBA 2018 also amended Section 7623(b)(5)(B) to limit Section 7623(b) to cases in which the "proceeds" in dispute exceed $2,000,000. Taxpayer First Act of 2019 On July 1, 2019, Section 1405(a) of the Taxpayer First Act of 2019 (TFA 2019) amended IRC § 7623 and § 6103 and added several important provisions to help improve whistleblower service, to ensure the continual enforcement of the tax laws in a fair and impartial manner, and to ultimately support the continued success of our nation. In addition, TFA 2019 created protections for whistleblowers against retaliation. Whistleblower Office
