CourtUnited States Tax Court
Citation137 T.C. No. 15
Docket NumberNo. 14106-10W.,14106-10W.
Decision Date08 December 2011

137 T.C. No. 15

WHISTLEBLOWER 14106-10W, Petitioner,

No. 14106-10W.


[137 T.C. No. 2]

----,[1] for petitioner.

David A. Ingold and Ruth Mary Spadaro, for respondent.



This is an action pursuant to section 7623(b)(4) to review respondent's denial of petitioner's claim for a whistleblower award.[2] This matter is before the Court on respondent's motion for summary judgment and petitioner's motion to seal the record and proceed anonymously.

[137 T.C. No. 3]


Petitioner's Whistleblower Claim

On March 3, 2008, petitioner submitted to the Internal Revenue Service Whistleblower Office (Whistleblower Office) Form 211, Application for Award for Original Information. This submission indicated that while employed as a senior executive in a particular company (X), petitioner had become aware of a tax code violation that resulted in X's underpaying its Federal income tax by a substantial amount. By letter dated March 11, 2008, respondent acknowledged receipt of petitioner's claim.

After various written communications between the parties, by letter to petitioner dated March 13, 2010, the Whistleblower Office advised that petitioner did not qualify for an award because the submitted information did not identify a Federal tax issue upon which the Internal Revenue Service (IRS) would take action and therefore did not lead to the detection of an underpayment of tax for which an award could be made under section 7623(b). Petitioner timely petitioned this Court pursuant to section 7623(b)(4).

Petitioner's Motion for a Protective Order

Petitioner also filed, along with the petition, a motion to seal identity, case, and accompanying documents (sometimes referred to hereinafter as petitioner's motion for a protective order). The Court temporarily sealed the record and, after

[137 T.C. No. 4]

receiving respondent's response and petitioner's supplements to the motion, held a hearing on petitioner's motion. At the hearing petitioner's counsel clarified that petitioner sought to have the record sealed or, alternatively, sought permission to proceed anonymously. Petitioner submitted an affidavit alleging the basis in support of the motion to seal or proceed anonymously.[3]

According to the affidavit, while employed at X, petitioner became aware of the alleged tax underpayment referenced in petitioner's application for a whistleblower award. Petitioner submitted the whistleblower claim to the IRS. Petitioner's identity as a whistleblower has been kept confidential throughout the administrative proceedings and thus far in this judicial action.

At some point after filing the whistleblower claim, petitioner obtained new employment in a company other than X. According to the affidavit petitioner fears "economic and professional ostracism, harm, and job-related harassment if my identity is revealed because my new employer and other potential employers will not want to hire or employ a known tax whistleblower." Petitioner also asserts that X may suffer financially if the details of petitioner's claim are made public.

[137 T.C. No. 5]

Respondent's Motion for Summary Judgment

On June 6, 2011, while petitioner's motion for a protective order was still pending, respondent filed a motion for summary judgment. On July 6, 2011, petitioner filed an opposition to the granting of respondent's motion for summary judgment. Neither party has requested a hearing on respondent's motion for summary judgment, and we conclude that none is necessary.


I. Background: Judicial Review of Tax Whistleblower Claims

Since 1867 the Secretary has had legal authority to make discretionary payments for information that aids in detecting tax underpayments and fraud. See History of the Whistleblower/Informant Program, http://www.irs.gov/compliance/article/0,,id=181294,00.html. In 2006 Congress substantially amended the whistleblower program by enacting section 7623(b).[4] Under this provision, "If the Secretary proceeds with any administrative or judicial action" on the basis of information provided by a whistleblower, then, subject to various conditions, the whistleblower shall be entitled to an award of 15 to 30

[137 T.C. No. 6]

percent of the collected proceeds.[5] Sec. 7623(b); see also Cooper v. Commissioner, 135 T.C. 70, 73 (2010).

Before 2006 there was no express statutory provision for judicial review of tax whistleblower claims. See Colman v. United States, 96 Fed. Cl. 633, 638 (2011) (stating that the pre-2006 tax whistleblower law "cannot serve as the substantive law on which to predicate" jurisdiction of the Court of Federal Claims).[6] This situation changed with the enactment of section 7623(b)(4), which provides that the Tax Court shall have jurisdiction with respect to any determination regarding an award under section 7623(b)(1), (2), or (3). See DaCosta v. United States, 82 Fed. Cl. 549, 553-555 (2008) (holding that claims under section 7623(b) are within the exclusive jurisdiction of the Tax Court). This Court has held that pursuant to section 7623(b)(4) a letter from the Whistleblower Office denying a claim on the grounds that no award determination could be made under

[137 T.C. No. 7]

section 7623(b) constitutes a determination conferring jurisdiction on this Court. Cooper v. Commissioner, supra at 73.

II. Respondent's Motion for Summary Judgment

We may grant summary judgment if there is no genuine issue as to any material fact and a decision may be rendered as a matter of law. Rule 121(b); see Sundstrand Corp. v. Commissioner, 98 T.C. 518, 520 (1992), affd. 17 F.3d 965 (7th Cir. 1994); Zaentz v. Commissioner, 90 T.C. 753, 754 (1988). The moving party bears the burden of proving that there is no genuine issue of material fact, and factual inferences will be read in a manner most favorable to the party opposing summary judgment. Dahlstrom v. Commissioner, 85 T.C. 812, 821 (1985); Jacklin v. Commissioner, 79 T.C. 340, 344 (1982). When a motion for summary judgment is made and properly supported, the adverse party may not rest upon mere allegations or denials of the pleadings but must set forth specific facts showing that there is a genuine issue for trial. Rule 121(d). If the adverse party does not so respond, then a decision may be entered against such party. Id.

Respondent asserts that he is entitled to summary judgment because petitioner does not meet the threshold requirements for an award under section 7623(b). Along with his motion for summary judgment respondent filed the affidavit of Chief Counsel Attorney David A. Ingold, declaring, on the basis of his review of respondent's administrative and legal files and on the basis

[137 T.C. No. 8]

of conversations with relevant IRS personnel, that the information petitioner provided resulted in respondent's taking no administrative or judicial action against X or collecting from X any amounts of tax, interest, or penalty.

Petitioner's opposition does not address the substantive merits of respondent's motion for summary judgment but suggests that respondent's motion is premature because petitioner's motion for a protective order is still pending and because formal discovery has not yet commenced. We disagree that respondent's motion for summary judgment is premature. Pursuant to Rule 121(a) a party may move for summary judgment "at any time commencing 30 days after the pleadings are closed but within such time as not to delay the trial." And pursuant to Rule 121(b), the Court may grant summary judgment if the pleadings, answers to interrogatories, depositions, admissions, and other acceptable materials, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that a decision may be rendered as a matter of law. The pendency of petitioner's motion for a protective order is immaterial to respondent's filing or the Court's ruling upon the motion for summary judgment.

Contrary to Rule 121(d), petitioner's opposition does not set forth, by affidavits or otherwise, any specific facts showing that there is a genuine issue for trial. Nor, pursuant to Rule

[137 T.C. No. 9]

121(e), has petitioner otherwise made any showing that the facts set forth in Mr. Ingold's affidavit are genuinely disputed.[7]

Rule 121(e) is modeled in large part after former rule 56(f) of the Federal Rules of Civil Procedure (redesignated rule 56(d) in 2009 with nonsubstantive changes). In Keebler Co. v. Murray Bakery Prods., 866 F.2d 1386 (Fed. Cir. 1989), applying former rule 56(f), the court held that the plaintiff could not avoid summary judgment by requesting discovery. The court characterized the plaintiff's opposition as saying, in effect: "we have no factual basis for opposing summary judgment, but, if you stay proceedings, we might find something." Id. at 1389. The court observed: "If all one had to do to obtain a grant of a Rule 56(f) motion were to allege possession by movant of `certain information' and `other evidence', every summary judgment

[137 T.C. No. 10]

decision would have to be delayed while the non-movant goes fishing in the movant's files." Id. For similar reasons, summary judgment for respondent is not inappropriate simply because petitioner has not commenced discovery.

On the substantive merits of respondent's motion for summary judgment, Cooper v. Commissioner, 136 T.C. 597 (2011), is controlling. In that case, decided after respondent moved for summary judgment in the case before us, this Court held in closely analogous circumstances that the Commissioner was entitled to summary judgment. As this Court stated, under section 7623(b)(1) "a whistleblower award is dependent upon both the initiation of an administrative or judicial action and collection of tax proceeds." Id. at 600. "If the Secretary does not proceed, there can be no whistleblower award." Id. at 601. According to the affidavit filed in support of respondent's motion for summary...

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