The recent turnover of Swiss bank account data highlights the role of whistleblowers in U.S. enforcement. There was the UBS banker, Bradley Birkenfeld, Tax Analysts' 2009 person, whose whistleblowing brought the extent of offshore tax evasion to the attention of the Department of Justice and the Internal Revenue Service (IRS). As his reward for filing a claim with the IRS for a Whistleblower reward related to his disclosures, Birkenfeld was given a 40-month sentence for conspiring to commit tax fraud because of his counseling of UBS clients. Then, there was Rudolf Elmer, manager of the Caribbean operations of Julius Baer, who turned over information on more than 2,000 undeclared foreign bank accounts to WikiLeaks. It is still too early to tell whether Elmer and Birkenfeld will receive whistleblower awards, but if they do, they stand to be awarded billions of dollars.
The authority to pay rewards to whistleblowers has existed for many years, having its origin in Congress-enacted legislation in 1867. The original whistleblower law provided the authority "to pay such sums as [the Secretary] deems necessary for detecting and bringing to trial and punishment persons guilty of violating the internal revenue laws . . . ." In 1996, the Taxpayer Bill of Rights expanded the statute allowing the IRS to pay awards for "detecting underpayments of tax" and changed the source of funds to pay awards from the IRS operating budget to proceeds collected from the taxpayer (other than interest). However, the payment of awards to whistleblowers and the amount were completely discretionary.
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