143 T.C. 393
Tax Ct.2014Background
- Petitioner filed a whistleblower claim under I.R.C. § 7623(b)(4) after IRS collected $844,746 from the target.
- IRS letter approved an award under § 7623(a) of about $126,712; no § 7623(b) award was initially approved.
- § 7623(b)(5)(B) requires that the amount in dispute exceed $2,000,000 for § 7623(b) applicability.
- Respondent moved to dismiss for lack of jurisdiction arguing petitioner did not meet the $2 million threshold.
- Court denied the motion, finding the $2 million requirement is not jurisdictional and is an affirmative defense.
- Court allowed respondent 60 days to seek leave to amend the answer to raise § 7623(b)(5)(B).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Is the $2 million requirement jurisdictional? | Lippolis argues the threshold is jurisdictional based on text and history. | Commissioner contends it is a nonjurisdictional limit, an affirmative defense. | Not jurisdictional; treated as an affirmative defense. |
| Who bears the burden to prove the $2 million defense? | Burden not clearly allocated; need more information. | Duties and records may be confidential; whistleblower bears burden. | Commissioner bears the burden of proof on the defense. |
| Should the court dismiss for lack of jurisdiction pending amendment? | Await further evidence on amount in dispute. | Amend to raise the defense should be allowed. | Motion to dismiss denied; leave to amend granted. |
Key Cases Cited
- Breman v. Commissioner, 66 T.C. 61 (1976) (Tax Court jurisdiction limits clarified)
- Ray v. Kertes, 285 F.3d 287 (3d Cir. 2002) (burden allocation for affirmative defenses)
- ITSI T.V. Prods., Inc. v. Agricultural Ass’ns, 3 F.3d 1292 (9th Cir. 1993) (peculiarly within the knowledge of one party; burden of proof on that party)
- Covey Co., 316 F.3d 337 (2d Cir. 2003) (affirmative defenses; practicality and fairness)
- Arbaugh v. Y&H Corp., 546 U.S. 500 (2006) (bright-line jurisdictional analysis; proximity alone not determinative)
- Reed Elsevier, Inc. v. Muchnick, 559 U.S. 154 (2010) (textual and historical approach to jurisdiction)