GAO Report Urges Enhanced IRS Whistleblower Protections

In a report released November 30, 2015, the Government Accountability Office found that the IRS Whistleblower Office had recovered $2 billion in tax revenue that would have been lost without the efforts of whistleblowers.  But despite this success, the GAO concluded that the IRS Whistleblower Office is plagued by administrative issues, and recommended that Congress pass new employment protections for tax whistleblowers.

The Tax Relief and Health Care Act of 2006 created the Whistleblower Office within the IRS.  It manages and tracks claims made under two programs, one for claims of under $2 million (26 U.S.C. 7623(a)) and the other for claims of more than $2 million (26 U.S.C. 7623(b)).  The 7623(b) program was also created by the Tax Relief and Health Care Act of 2006.

Tax whistleblowers have helped the IRS collect nearly $2 billion in additional revenue since the first 7623(b) claim was paid in 2011 under the expanded program that awards whistleblowers between 15 percent and 30 percent of collected proceeds.  Since that time, the Whistleblower Office has awarded more than $315 million to whistleblowers.

Sen. Chuck Grassley authored the legislation that created the expanded whistleblower program in 2006.  But Senator Grassley has been publicly critical of the performance of the Whistleblower Office, calling its performance “inexcusable” in 2012.  Recently, Sen. Grassley called on Congress to take up the recommendations in the GAO report, saying it was important for the IRS to “put out a welcome mat” for whistleblowers.

Sen. Grassley, Chairman of the Senate Judiciary Committee, was the founding chairman of the Whistleblower Protection Caucus in February 2015.  The GAO report noted that as of August 31, 2015, no bills providing protection to IRS whistleblowers from retaliation by their employer had been introduced.

The GAO report found that the IRS is not adequately using its capabilities to track and monitor claims.  In addition, shortcomings in its claims processing resulted in inaccuracies in its payments of around $100,000.  The report also noted that the Whistleblower Office has been ineffective in communicating with whistleblowers, Congress, and other stakeholders.

Most significantly, the GAO report found that the IRS’s protections for whistleblowers were inadequate.  In addition to a mail error possibly resulting in the disclosure of whistleblowers’ identities, IRS whistleblowers lack protections against retaliation available to whistleblowers under the False Claims Act, Dodd-Frank Act, and other statutes.  Unlike other whistleblower programs, no law protects tax whistleblowers against retaliation from their employers.  A tax whistleblower who is discharged, demoted, suspended, or otherwise retaliated against by his employer because he provided information to the IRS has no cause of action to bring a lawsuit in federal court.

The GAO report concluded that “[s]ome level of legal protections may provide additional assurances to potential whistleblowers and could encourage those with high-value inside information about tax noncompliance to come forward.”

The report stressed the importance of protecting whistleblowers’ identities and personal information. Specifically, GAO found that “strengthening controls in areas such as mailings and file retention can further prevent accidental disclosures of whistleblower information that could bring them harm.”

The Secretary of the Treasury has submitted proposals for whistleblower protections in the IRS’s fiscal years 2014, 2015, and 2016 Congressional Budget Justifications, and has discussed them in recent Whistleblower Office annual reports to Congress.  Treasury estimates that such protections would not result in additional costs for the IRS.

With both the Republican chairman of the Judiciary Committee and the Obama administration calling for enhanced protections for IRS whistleblowers, such measures should draw bipartisan support on Capitol Hill.

Tagged: Enforcement Bodies, Internal Revenue Service (IRS)