Tax Relief and Health Care Act of 2006

Signed into law by George W. Bush
December 20, 2006

The law at 26 U.S.C. § 7623(a) was originally passed in 1867, where the Secretary of the Treasury is authorized to pay informants that aid in detecting and brining to trial individuals guilty of violating internal revenue laws. The next substantive change occurred in 1996 when the program was broadened to include detection of underpayments of tax. As a short provision in a much broader Act, Congress enacted fundamental changes to the IRS informant rewards program. Most significantly, a new subsection was added to remove the absolute discretion for awards—awards are now set at 15-30 percent of the collected proceeds if certain thresholds are met. For example, the tax, penalties, interest, additions to tax, and additional amounts in dispute must exceed $2,000,000, and in the case of an individual, the individual must have gross income exceeding $200,000 for any taxable year subject to an action. The pre-amendment program still continues in parallel to the more aggressive program.

Enforcement & Remedies

IRS whistleblowers who disclose information to the IRS Whistleblower Office (using its authorized form) that leads to an administrative or judicial action will receive an award of 15-30 percent of collected proceeds of that action. This amount is based on the whistleblower’s contribution to the action. A whistleblower is not eligible for an award if convicted of conduct arising from his role in planning and initiating the action at issue.

Notable sponsors: Chuck Grassley   Ellen Tauscher