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Tax Court Protects Identity of IRS Whistleblower

December 21, 2011

On December 8, 2011, the United States Tax Court issued an opinion in Whistleblower v. Commissioner of Internal Revenue granting an IRS whistleblower’s motion for a protective order permitting the whistleblower to maintain his or her anonymity. The court stated:

We conclude that granting [the whistleblower’s] request for anonymity strikes a reasonable balance between [the whistlebower’s] privacy interests as a confidential informant and the relevant social interest, taking into account the nature and severity of the asserted harm from revealing [the whistleblower’s] identity and relatively weak public interest in knowing [the whistleblower’s] identity.

The U.S. Tax Court also discussed the long history of granting anonymity to whistleblowers, including the Second Circuit’s discussion of the informer anonymity privilege in Socialist Workers Party v. Attorney General (In re United States) as:

… an ancient doctrine with its roots in the English common law, founded upon the proposition that an informer may well suffer adverse effects from the disclosure of his identity. Illustrations of how physical harm may befall one who informs can be found in the reported cases. However, the likelihood of physical reprisal is not a prerequisite to the invocation of the privilege. Often, retaliation may be expected to take more subtle forms such as economic duress, blacklisting or social ostracism. The possibility that reprisals of some sort may occur constitutes nonetheless a strong deterrent to the wholehearted cooperation of the citizenry which is a requisite of effective law enforcement.

Courts have long recognized, therefore, that, to insure cooperation, the fear of reprisal must be removed and the most effective protection from retaliation is the anonymity of the informer.

Internal quotations and citations omitted. In the Tax Court’s first decision regarding anonymous whistleblower claims, the court ruled in favor of the anonymous whistleblower and established an important precedent for those future whistleblowers who expose their employer’s tax fraud.