IRS amends whistleblower regulations to expand eligible whistleblowers and potentially increase award amounts


Whistleblower incentives and awards are not unique to the False Claims Act or Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. On August 12, 2014, the Internal Revenue Service (“IRS”)issued long-awaited guidance for its own whistleblower program. As in the past, the IRS will continue to pay at least 15 and not more than 30 percent of the “collected proceeds” resulting from information provided by a whistleblower. The new regulations define several key terms and facilitate awards.

The new definitions expand the scope of persons eligible to seek awards by removing a provision which excluded state and local employees (unless federal law prohibits those employees from acting as whistleblowers). The regulations also expand the potential base against which the IRS applies the percentage award.  The definition of “collected proceeds” will now include reductions in net operating losses and carryovers, with the likely result of increasing award amounts. The regulations also adopt fixed award percentages of 15, 18, 22, 26 and 30 percent. All awards will start at 15 percent. The Whistleblower Office will then consider enumerated factors to determine whether to increase the award to either 22 or 30 percent before then considering additional, qualifying factors that may warrant decreases to 18, 22, or 26 percent. This approach adopts methods the Department of Justtice, Securities and Exchange Commission, and Commodity Futures Trading Commission use to make awards under the False Claims Act and Dodd-Frank. The IRS hopes to make consistent awards by this process.

The regulations also clarify how whistleblowers can participate in the award process. Whistleblowers will have 30 days to respond to a preliminary award determination, preliminary denial letter or preliminary award recommendation letter. The Whistleblower Office will provide a detailed report to the whistleblower, and whistleblowers may review information in the administrative claim file after signing a confidentiality agreement. Whistleblowers may also appeal awards to the Tax Court.

The new regulations took effect August 12, 2014. Please click here to view the regulations in their entirety.


DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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