Whistleblower 972-17W
Case Information
*1 United States Tax Court
v. COMMISSIONER OF INTERNAL REVENUE,
Respondent
————— Docket No. 972-17W. Filed July 13, 2022.
—————
Whistleblower WB provided information to the IRS regarding three target taxpayers. The Government initiated actions against the target taxpayers and collected proceeds, but the Whistleblower Office denied WB’s claim for an award under I.R.C. § 7623(b). WB petitioned our Court for review.
The Court ordered R to file with the Court redacted and unredacted copies of the administrative record, which included returns and return information of the target taxpayers. R filed a redacted copy of the administrative record and requested that the Court excuse him from filing an unredacted copy to protect I.R.C. § 6103 information. The Court ordered R to submit the unredacted copy for review in camera. R moved the Court to modify its order, arguing that I.R.C. § 6103 does not permit R to disclose to the Court the information R redacted.
Held : On these facts, consistent with Li v. Commissioner , 22 F.4th 1014 (D.C. Cir. 2022), the Tax Court has jurisdiction to hear this case.
Held, further , I.R.C. § 6103(h)(4)(A) authorizes R to submit the unredacted administrative record to the Court. Served 07/13/22
—————
George Munoz , for petitioner.
Bartholomew Cirenza and Ryan Z. Sarazin , for respondent.
OPINION
TORO, Judge
: Section 6103(a) provides that returns and return information generally must be kept confidential and that officers and employees of the United States are precluded from disclosing returns and return information unless specifically authorized by the Code. One such authorization appears in section 6103(h)(4).
Section 6103(h)(4) permits, in certain circumstances, the disclosure of returns or return information in the context of a federal or state judicial or administrative proceeding that pertains to tax administration. Among other things, disclosure is authorized in a judicial proceeding that “arose out of, or in connection with, determining the taxpayer’s civil or criminal liability, or the collection of such civil liability, in respect of any tax imposed [by the Code].” I.R.C. § 6103(h)(4)(A).
In this whistleblower case, the Court ordered the Commissioner of Internal Revenue to submit for in camera review an unredacted copy of the administrative record on which the case is based. The Commissioner moved that the order be modified, arguing that section 6103(a) precludes him from complying. The Commissioner reasons that the administrative record includes returns and return information that the Code does not authorize him to disclose. Regarding section 6103(h)(4), the Commissioner agrees that this case is a judicial proceeding pertaining to tax administration, but contends that the other requirements of section 6103(h)(4) have not been satisfied with respect to the materials he wishes to protect from disclosure.
After assuring ourselves that we have jurisdiction in light of the recent decision of the U.S. Court of Appeals for the District of Columbia Circuit in Li v. Commissioner , 22 F.4th 1014 (D.C. Cir. 2022), we consider the Commissioner’s contentions. We conclude that section 6103(h)(4)(A) authorizes disclosing in this proceeding the returns and return information that the Commissioner seeks to withhold. This is so because this case “arose . . . in connection with” determining the civil and criminal tax liabilities of the taxpayers whose returns and return information are at issue. Accordingly, section 6103 does not preclude the Commissioner from submitting to the Court an unredacted copy of the administrative record. We will therefore deny the Commissioner’s Motion.
Background
The following facts are derived from the pleadings, the parties’
motion papers, the declarations and exhibits attached thereto, and the
redacted administrative record filed with the Court. These facts are
stated solely for the purpose of ruling on the motion before us and not
as findings of fact in this case.
Whistleblower 769-16W v.
Commissioner
,
Petitioner is a whistleblower who provided information to the Internal Revenue Service (IRS) regarding three individuals (taxpayers 1, 2, and 3). The Government pursued actions against all three individuals (targets) (including criminal actions with respect to two of the targets) and ultimately collected proceeds from each of them. But the IRS Whistleblower Office (WBO) denied the whistleblower’s claim for an award under section 7623(b). The WBO acknowledged to the whistleblower that “[t]he IRS reviewed the information you provided as part of an ongoing investigation/examination of the taxpayer(s).” But, the WBO explained, “that review did not result in the assessment of additional tax, penalties, interest or other amounts with respect to the issues you raised.” The WBO further noted that “[t]he IRS did assess additional tax, penalties, interest or additional amounts but the information you provided was not relevant to those issues.” The whistleblower petitioned our Court for review.
In general, our Court reviews whistleblower cases based on the administrative record. See Kasper v. Commissioner , 150 T.C. 8, 20 (2018). Accordingly, the Court ordered the Commissioner to file with the Court redacted and unredacted copies of the administrative record compiled by the WBO. The Commissioner filed a redacted copy of the administrative record and requested that the Court excuse him from filing an unredacted copy “to protect . . . section 6103 information and . . . other identifying information.” The Court ordered the Commissioner to submit to the Court, for review in camera, any documents that the Commissioner wished to redact to preserve a privilege or protect taxpayer information.
In response, the Commissioner moved the Court to modify its order, requesting that the Court strike the portion of the order that directed the Commissioner to submit the entire unredacted administrative record for review in camera. The Commissioner argued that there is no exception in section 6103 that would permit him to disclose the redacted information to the Court. The whistleblower filed a response opposing the Commissioner’s Motion. The Court then ordered the parties to file separate memoranda addressing the applicability of section 6103 to this case. We now consider the merits of the Commissioner’s request.
Discussion
I. Section 7623 Background
Section 7623 provides for awards to individuals (commonly referred to as whistleblowers) who submit information to the Government about third parties who have underpaid their taxes or otherwise violated the internal revenue laws. Section 7623(a) authorizes discretionary payments in certain circumstances, while section 7623(b) provides for nondiscretionary (i.e., mandatory) awards.
Under section 7623(b)(1), a whistleblower generally is entitled to a mandatory award if the Secretary of the Treasury proceeds with an administrative or judicial action based on information provided by the whistleblower and collects proceeds as a result of the action. The amount of the award generally is between 15 and 30% of the collected proceeds, depending on the extent to which the whistleblower substantially contributed to the action. I.R.C. § 7623(b)(1).
In some circumstances, a mandatory whistleblower award under section 7623(b)(1) may be reduced or denied. Specifically, section 7623(b)(2) provides for the potential reduction of an award if the Secretary’s action is based principally on publicly available information rather than the whistleblower’s information, while section 7623(b)(3) provides for the reduction or denial of an award based on the whistleblower’s culpability for the tax underpayments underlying the award. Additionally, section 7623(b)(5) sets out certain monetary thresholds that must be satisfied for section 7623(b) to apply in the first instance.
II. Jurisdiction
A. General Principles
Like all federal courts, we are a court of limited jurisdiction.
Whistleblower 21276-13W v. Commissioner
,
The relevant jurisdictional provision in a whistleblower case is section 7623(b)(4). It provides that “[a]ny determination regarding an award under [section 7623(b)](1), (2), or (3) may . . . be appealed to the Tax Court (and the Tax Court shall have jurisdiction with respect to such matter).” I.R.C. § 7623(b)(4). Determinations under those provisions generally are made by the WBO, which reviews whistleblower claims to determine whether an award will be paid and, if so, decides the amount of the award. See, e.g. , I.R.C. § 7623(b)(1), (2)(A), (3).
B. Tax Court Precedent
Based on the plain text of section 7623(b)(4), it is clear that our Court has jurisdiction over any appeal of a determination that a award by the Whistleblower Office shall depend upon the extent to which the individual substantially contributed to such action.
6
whistleblower is entitled to an award under section 7623(b)(1).
Additionally, we have interpreted section 7623(b)(4) as granting our
Court jurisdiction over cases where the WBO rejects or denies a
whistleblower’s claim.
[3]
See Lacey v. Commissioner
,
C. Li v. Commissioner
In Li , the D.C. Circuit disagreed—at least in part—with our prior interpretations of section 7623(b)(4). Pointing to the statutory text, the court of appeals concluded that the Tax Court does not have jurisdiction to review the WBO’s threshold rejection of a whistleblower claim. Id. at 1017. The D.C. Circuit reasoned that the WBO makes an award determination “under [section 7623](b)(1)” when the IRS actually proceeds with an action based on a whistleblower’s information. Id. In the case of a rejection, the WBO rejects the whistleblower’s claim at the threshold, without the IRS’s ever taking action against the target taxpayer. Id. Therefore, the D.C. Circuit concluded, the WBO’s decision to reject a claim is not an award determination under section 7623(b)(1), (2), or (3), and the Tax Court does not have jurisdiction to review that decision under section 7623(b)(4). Id. (“The WBO did not forward Li’s Form 211 to an IRS examiner for further action, and the IRS did not take any action against the target taxpayer. There was no proceeding and thus no ‘award determination’ by the IRS for Li’s whistleblower information. Therefore, the Tax Court had no jurisdiction to review the WBO’s threshold rejection of Li’s Form 211.”).
D. Application to This Case
The D.C. Circuit’s decision in Li addressed threshold rejections, and the court explicitly noted that it did not decide whether our Court would have jurisdiction over a case in which the IRS proceeded against a target taxpayer based on a whistleblower’s information, but the WBO wrongly denied the whistleblower’s application for an award. Id. at 1017 n.2. This essentially is what the whistleblower alleges took place in the case before us. Based on the text of section 7623(b) and the reasoning in Li , we conclude that we have jurisdiction to review the WBO’s determination.
As we have described, section 7623(b)(4) grants the Tax Court jurisdiction over an appeal of “[a]ny determination regarding an award under [section 7623(b)](1), (2), or (3).” Section 7623(b)(1) provides that a whistleblower generally is entitled to an award when the Secretary proceeds with an action based on information provided by the whistleblower and collects proceeds.
In Li , the D.C. Circuit determined that we did not have jurisdiction because the most basic threshold specified in section 7623(b)(1) had not been crossed—i.e., the IRS had not proceeded with an action against the target taxpayers. By contrast, the parties in the case before us agree that the Commissioner proceeded with an action. Indeed, here the Commissioner collected proceeds with respect to each of the three target taxpayers identified by the whistleblower. But the WBO determined that the whistleblower was not entitled to an award despite these facts. The question we must decide is whether that determination constituted “[a]ny determination regarding an award under [section 7623(b)](1).” Consistent with Li , we conclude that it did.
The D.C. Circuit observed in Li that “an award determination by the IRS arises only when the IRS ‘ proceeds with any administrative or judicial action described in subsection (a) based on information brought to the Secretary’s attention by [the whistleblower] . . . .’ ” Li v. Commissioner , 22 F.4th at 1017 (quoting I.R.C. § 7623(b)(1)). A determination that no award is warranted even though the IRS has proceeded with an action and collected proceeds in that action is still a “determination regarding an award.” Indeed, it would make little sense for Congress to authorize judicial review for whistleblowers who receive wrongfully reduced awards, but not for whistleblowers who are wrongfully denied an award altogether after the threshold requirements of section 7623(b)(1) are met.
The inclusion in section 7623(b)(4) of an express reference to section 7623(b)(3) supports this conclusion. Section 7623(b)(4) specifically establishes our jurisdiction to review determinations under section 7623(b)(3). As relevant here, section 7623(b)(3) provides that the WBO shall “deny any award” if a claim is brought “by an individual who planned and initiated the actions that led to the underpayment of tax” on which the award would be based and that individual “is convicted of criminal conduct arising from [that] role.” The combined effect of section 7623(b)(3) and (4) is that a whistleblower who has been denied an award on the ground that the whistleblower was convicted of criminal conduct arising from planning the actions that led to the understatement of tax may challenge that determination in our Court even though the WBO issued no award. Put another way, paragraphs (3) and (4) of section 7623(b) make clear that a WBO determination not to grant an award after the IRS has taken action against a target taxpayer and collected proceeds as a result of the action can be subject to our review.
Similarly, and consistent with
Li
, we hold that when the WBO
determined that the whistleblower here was not entitled to an award
even though the Government had proceeded with actions against the
target taxpayers and collected proceeds, the WBO made a determination
regarding an award under section 7623(b)(1). By the terms of section
7623(b)(4), we have jurisdiction over an appeal of that determination.
Based on certain statements in
Li
, one might argue that all the
elements of section 7623(b)(1)—including the requirement that any
action be in fact “based on the whistleblower’s information”—are
jurisdictional. But that’s not what the D.C. Circuit decided in
Li
; rather,
its holding is confined to threshold rejections in which the IRS takes no
action.
See Li v. Commissioner
,
Specifically, if we were to read Li as requiring our Court to make a factual determination that the IRS proceeded against a target and collected proceeds from that target “based on” the whistleblower’s information simply to establish our jurisdiction over the appeal of the WBO decision, then every case in which the WBO denies a claim on the ground that the information provided by the whistleblower was not useful to the IRS would require a full determination of the merits before we would know whether we had jurisdiction to begin with. Put a different way, if our jurisdiction to review the WBO’s decision not to make an award in a case that involved both an examination of the taxpayer and the collection of proceeds exists only if it turns out (contrary to the WBO’s conclusion) that the recovery was in fact “based on” the whistleblower’s information, then (in cases involving the fact pattern now before us) the whistleblower would win on the merits in virtually every case over which we have jurisdiction (except perhaps those subject to section 7623(b)(3)), and we would have no jurisdiction in virtually every case that the whistleblower would otherwise lose on the merits. I.R.C. § 7623(b)(1) (providing that if the Secretary proceeds with an action based on the whistleblower’s information, the whistleblower “shall” receive an award).
Additionally, any proceeding to establish whether an action was
“based on” the whistleblower’s information for jurisdictional purposes
would raise complicated questions regarding the scope and standard of
our review. In particular, while we generally review whistleblower
determinations for abuse of discretion based on the administrative
record,
see Kasper
, 150 T.C. at 20, 22, courts in other contexts have
employed different standards when jurisdictional and merits issues are
intertwined,
see, e.g.
, 2 James W. Moore et al., Moore’s Federal Practice
§ 12.30[3], at 12-50.2(11) (3d ed. 2021) (“When the jurisdictional facts
are too intertwined with the merits to permit the determination to be
made independently, the court should either employ the standard
applicable to a motion for summary judgment (if the material
jurisdictional facts are undisputed) or leave the jurisdictional
determination to trial.”);
see also
,
e.g.
,
Herbert v. Nat’l Acad. Of Sci.
, 974
F.2d 192, 198 (D.C. Cir. 1992) (“[T]hough the trial court may rule on
disputed jurisdictional facts at any time, if they are inextricably
intertwined with the merits of the case it should usually defer its
jurisdictional decision until the merits are heard.” (citing
Land v. Dollar
,
Having established that we have jurisdiction to hear this case, we next consider whether section 6103 authorizes the Commissioner to submit an unredacted copy of the administrative record to the Court. As discussed further below, we conclude that it does.
III. Section 6103
A. General Principles
As we have said, section 6103(a) provides that returns and return
information generally must be kept confidential unless disclosure is
specifically authorized by the Code.
Mescalero Apache Tribe v.
Commissioner
,
A return or return information may be disclosed in a Federal or State judicial or administrative proceeding pertaining to tax administration, but only— (A) if the taxpayer is a party to the proceeding, or the proceeding arose out of, or in connection with, determining the taxpayer’s civil or criminal liability, or the collection of such civil liability, in respect of any tax imposed under this title;
(B) if the treatment of an item reflected on such return is directly related to the resolution of an issue in the proceeding; [or]
(C) if such return or return information directly relates to a transactional relationship between a person who is a party to the proceeding and the taxpayer which directly affects the resolution of an issue in the proceeding . . . . [7]
The statute then proceeds to provide its own limitation on disclosure: A “return or return information shall not be disclosed as provided in subparagraph (A), (B), or (C) if the Secretary determines that such disclosure would identify a confidential informant or seriously impair a civil or criminal tax investigation.” I.R.C. § 6103(h)(4) (flush text).
There is no dispute that the documents the Commissioner has
redacted in this case are either returns or return information protected
by section 6103(a).
[8]
Similarly, the parties agree that this case is a
federal judicial proceeding that pertains to tax administration.
[9]
See
Confidential Informant 92-95-932X v. United States
,
The Commissioner argues that portions of the returns and return information included in the administrative record fall within subparagraph (B) because they are directly related to the resolution of an issue in this proceeding—i.e., whether the WBO erred when it denied the whistleblower’s claim for an award. The Commissioner did not redact these “directly related” items when he filed the administrative record with our Court, but he did redact other information that in his view was not directly related to the resolution of this proceeding.
With respect to the redacted information, the whistleblower
contends that subparagraphs (A), (B), and (C) of section 6103(h)(4) all
authorize disclosure. The Commissioner contends that none of the three
subparagraphs applies. As explained further below, we agree with the
whistleblower that subparagraph (A) authorizes disclosure of the
redacted information and therefore do not address the potential
application of subparagraphs (B) and (C).
See Tavery
,
B. Section 6103(h)(4)(A)
Section 6103(h)(4)(A) authorizes the disclosure of tax returns or return information in a federal judicial proceeding pertaining to tax administration if “the taxpayer is a party to the proceeding, or the proceeding arose out of, or in connection with, determining the taxpayer’s civil or criminal liability.” At issue here are returns and return information of taxpayers 1, 2, and 3, who are not parties to this case. Accordingly, section 6103(h)(4)(A) will apply only if this case “arose out of, or in connection with” determining the civil or criminal liabilities of taxpayers 1, 2, and 3 in respect of any tax imposed under the Code.
1.
“In Connection With”
Because the phrase “arose in connection with determining a
taxpayer’s civil or criminal liability” is broader than the phrase “arose
out of determining the taxpayer’s civil or criminal liability,”
see, e.g.
,
N.
Am. Butterfly Ass’n v. Wolf
,
We begin with first principles. As the Supreme Court has explained:
In statutory interpretation disputes, a court’s proper starting point lies in a careful examination of the ordinary meaning and structure of the law itself. Schindler Elevator Corp. v. United States ex rel. Kirk ,563 U.S. 401 , 407 (2011). Where . . . that examination yields a clear answer, judges must stop. Hughes Aircraft Co. v. Jacobson ,525 U.S. 432 , 438 (1999).
Food Mktg. Inst. v. Argus Leader Media
,
Section 6103 does not define the phrase “in connection with.” But when section 6103(h)(4)(A) was enacted in 1978, see Revenue Act of 1978, Pub. L. No. 95-600, § 503, 92 Stat. 2763, 2880, the term “connection” was defined broadly (and in relevant part) to mean any link, association, or relationship, see, e.g. , Connection , The American Heritage Dictionary of the English Language, New College Edition (1976) (“2. Anything that joins, relates, or connects; a bond; a link. 3. An association, alliance, or relation . . . .”); see also Fort Howard Corp. & Subs. v. Commissioner , 103 T.C. 345, 351–52 (1994) (citing Webster’s Third New International Dictionary 480 (1986)), supplemented by 107 T.C. 187 (1996).
This definition is consistent with interpretations of the phrase “in
connection with” by various courts over time, including ours. The Tax
Court has interpreted the phrase “in connection with” as meaning
“related to.”
See Adams Challenge (UK) Ltd. v. Commissioner
, 154 T.C.
37, 63 (2020) (analyzing relevant cases and concluding that there is no
appreciable difference between the two phrases). Courts of appeals,
including the D.C. Circuit, have reached the same conclusion.
See, e.g.
,
Azima v. RAK Inv. Auth.
,
specifically, (a) the relation between things that depend on, involve, or follow each other”); Connection , The Random House College Dictionary (1980) (“3. anything that connects; link; bond. 4. association; relationship . . . .”); Connection , The American Heritage Dictionary of the English Language (3d ed. 1992) (defining “connection,” in relevant part, to mean “[o]ne that connects; a link,” “[a]n association or a relationship,” or a “reference or relation to something else”); Connection , The American Heritage Dictionary of the English Language (5th ed. 2016) (same).
Additionally, modern dictionaries sometimes define “in connection with” as an idiom meaning “in relation to.” See, e.g ., Connection , The American Heritage Dictionary of the English Language (5th ed. 2016). For additional authorities, see also Huntsman v. Commissioner , 905 F.2d
1182, 1184 (8th Cir. 1990) (interpreting “in connection with” to mean having “an
‘association’ or ‘relation’ with”),
rev’g
15
We are mindful, however, that, as the Supreme Court observed in
interpreting another statute involving the disclosure of personal
information, “[t]he phrase ‘in connection with’ ” can also be read as
“essentially ‘indeterminat[e]’ because connections, like relations, ‘ “stop
nowhere.” ’ ”
Maracich v. Spears
,
Applying these principles in the context of section 6103, we have no difficulty concluding that this case arose “in connection with” (i.e., in relation to) determining the civil or criminal liabilities of taxpayers 1, 2, and 3 and is therefore within the scope of section 6103(h)(4)(A). When, as here, a whistleblower provides information to the IRS on a target taxpayer and the IRS proceeds with an action and collects proceeds from that target taxpayer, the decision whether to grant the whistleblower an award—as well as our eventual review of that decision—is inextricably linked with determining the target taxpayer’s civil or criminal liability for at least two reasons.
To begin with, the IRS’s action in determining the target taxpayer’s liability and the outcome of that action (including the collection of additional tax) are clear but-for causes of the proceeding before the Court. Indeed, under the reasoning of Li v. Commissioner , 22 F.4th at 1017, the existence of an IRS action to determine the liabilities of the target taxpayer is a prerequisite to our jurisdiction to hear any whistleblower case, including this one. In that very direct sense, therefore, this case arose “in connection with” the IRS actions that determined the taxpayers’ liabilities: we could not hear the case without the actions.
Additionally, what the IRS determined with respect to the target
taxpayers and what it collected from those taxpayers are key inquiries
in analyzing the merits of this proceeding, which is focused on
evaluating “the extent to which the [whistleblower] substantially
statute from assuming near-infinite breadth.” (first citing
N.Y. State Conf. of Blue
Cross & Blue Shield Plans,
contributed to [the IRS’s] actions,” I.R.C. § 7623(b)(1)—i.e., the actions
to “detect[ ] underpayments of tax, or . . . detect[ ] and bring[ ] to trial and
punishment persons guilty of violating the internal revenue laws or
conniving at the same,” I.R.C. § 7623(a)(1) and (2). Essentially, the
particulars of the IRS’s actions that determined the target taxpayer’s
liabilities will decide the outcome of this case. Given this reality, it is
hard to see how one can resist the conclusion that this judicial
proceeding arose in connection with (and is quite closely related to)
determining the target taxpayers’ liabilities or the collection of those
liabilities. The entire case is predicated on the whistleblower’s assertion
that the whistleblower’s efforts gave rise to (or at least contributed to)
the IRS’s actions against the target taxpayers and substantially
contributed to the IRS’s determination that more tax was owed and to
its ultimate collection. In that context, the proceeding has a very strong
“logical or causal connection” to the IRS’s determination of the target
taxpayers’ liability and, as then-Judge Alito concluded in a similar
context, arose in connection with (or in relation to) that determination.
John Wyeth & Brother Ltd.
,
In short, the strength of the connection present here is more than
enough to satisfy the “quite broad” standard recognized by the case
law,
[15]
see Azima
,
2. The Commissioner’s Arguments The Commissioner appears to acknowledge that the plain text of section 6103(h)(4)(A) supports our conclusion, conceding in his briefing that his own interpretation is “narrower in scope than the plain language implies.” Resp’t’s Mem. 17–18 (Doc. 121). But he contends that section 6103(h)(4)(A) is ambiguous. And, given that predicate, the Commissioner urges us to turn to legislative history and the purpose of section 6103 to discern its meaning. These, the Commissioner argues, prove that the use of the phrase “arose out of, or in connection with” in section 6103(h)(4)(A) “must denote” the following circumstances:
[P]roceedings in which the party seeking disclosure of a nonparty’s return information faces some legally enforceable liability, obligation, or sanction at the hands of the government (as opposed to a non-government litigant); and, where the party and non-party have a relationship or connection that existed prior to, and independent of, the proceedings themselves.
Resp’t’s Mem. 22–23. The Commissioner goes on to conclude that whistleblower cases do not satisfy this standard.
We need not decide whether the predicate of the Commissioner’s
arguments—that section 6103(h)(4)(A) is ambiguous—is correct. Even
if we were to grant that predicate for the sake of analysis,
but see Food
Mktg. Inst.
,
a. Legislative History The Commissioner argues that examples from the legislative history of a parallel provision in section 6103(h) show that Congress had a more limited understanding of section 6103(h)(4)(A). [17] We are not persuaded.
We note first that the legislative history relates to a parallel
provision, not the one actually before us. But even if one accepts that
legislative history as probative to the meaning of the text before us, the
conference report the Commissioner cites simply provides some
illustrative examples of circumstances that would fall within the
parallel provision.
See
H.R. Rep. No. 95-1800, at 293 (1978) (Conf. Rep.),
reprinted in
1978-3 C.B. (Vol. 1) 521, 627.
[18]
The conference report does
not purport to provide an exhaustive account of the provision’s
application or discuss circumstances that would not be covered.
See id.
In other words, the legislative history provides no indication that it was
“clearly intended to be an all-inclusive expression of what [either the
parallel provision or] the section [before us] covers.”
Ryan v. Bureau of
Alcohol, Tobacco & Firearms
,
Even for those Members of this Court who consider legislative history, silence in the legislative history, “no matter how ‘clanging,’ ” cannot defeat the better reading of the text and statutory context. Sedima, S.P.R.L. v. Imrex Co. ,473 U.S. 479 , 495, n.13 (1985). If the text is clear, it needs no repetition in the legislative history; and if the text is ambiguous, silence in the legislative history cannot lend any clarity. Avco Corp. v. Department of Justice , 884 F.2d 621, 625 (DC. Cir. 1989).
In short, even “[f]or those who consider legislative history relevant,”
Warger v. Shauers
,
b. Statutory Purpose The Commissioner also invokes the purpose of section 6103, arguing that our interpretation of section 6103(h)(4)(A) would allow “the unfettered disclosure” of return information to “any whistleblower who might file a Tax Court appeal,” resulting in “wholesale, unregulated access to return information of any taxpayer that a whistleblower might choose to target.” Resp’t’s Mem. 19–20. This outcome, the Commissioner contends, would be contrary to the overarching purpose of section 6103, which in the Commissioner’s view is to “restrict access to return information within well-defined limits.” [19] Id. at 18. We disagree for at least four reasons.
First, the general rule of section 6103 and that provision’s
numerous exceptions reflect Congress’s balancing of competing
interests: (1) the interest of taxpayers in maintaining the confidentiality
of their returns and return information and (2) the interests of others
whose rights might be affected by the information.
See, e.g.
,
Gardner
,
Second, with respect to the exception in section 6103(h)(4)(A)
specifically, Congress selected a broad phrase when it drafted the
provision.
See United States v. Am. Trucking Ass’ns
,
Third, the flush text in section 6103(h)(4) gives the Secretary authority to prevent disclosure “if the Secretary determines that such disclosure would identify a confidential informant or seriously impair a civil or criminal tax investigation.” Thus, Congress did not leave the Secretary powerless with respect to disclosures in judicial proceedings. For example, if the Secretary determines in a particular whistleblower case that disclosure of a target taxpayer’s return or return information would seriously impair a tax investigation, the information could be protected from disclosure. But the Secretary has not made such a determination in this case. And the text shows that the bar Congress set for the Secretary’s exercise of her discretion is high. Thus, it would not be enough for a potential disclosure simply to “impair” a tax investigation. The disclosure must “seriously” do so, indicating that Congress generally favored disclosure over nondisclosure in this context return information is disclosed. But, until Congress does so, this Court must apply the rules currently reflected in the statute.
when the other requirements of the statute are satisfied. In view of the text and structure of the statute, we are unauthorized to create additional exceptions based on amorphous purpose considerations.
Fourth, we do not share the Commissioner’s broad view of our holding. A number of rules in addition to section 6103 limit the information available to whistleblowers in the Tax Court. For a start, to commence a case a whistleblower must appeal a WBO determination to the Court, and we must have jurisdiction to hear the case. See the discussion in Part II.D above. Under Li v. Commissioner , 22 F.4th at 1017, this means the IRS must have at least proceeded with an action against the target taxpayer. When the IRS does not take action—in a rejection case, for example—whistleblowers generally will not have access to returns or return information in a Tax Court proceeding.
Next, even if a whistleblower surmounts this jurisdictional
hurdle, the information available in a whistleblower case generally will
be limited to the administrative record the WBO develops or a properly
supplemented record, because that is the record that is subject to the
Court’s review.
See Kasper
,
Contrary to the Commissioner’s contention, therefore, we do not hold here that every whistleblower should receive unfettered access to the return information of every target the whistleblower names. Instead, we hold that where (1) a whistleblower submits information to the IRS identifying a target taxpayer, (2) the IRS proceeds with an action against the taxpayer and collects proceeds, (3) the WBO makes a determination regarding the whistleblower’s entitlement to an award related to that action (including a determination that no award is warranted), (4) the whistleblower seeks our review of the WBO’s determination, (5) our jurisdiction to perform that review depends on the IRS action that determined the target taxpayer’s tax liability, and (6) the correctness of the WBO’s determination (and therefore the outcome of the case before us) turns on the details of the IRS action, then the whistleblower case “arose . . . in connection with” determining the taxpayer’s liability as required by section 6103(h)(4)(A). In these specific circumstances, we conclude that section 6103 does not prohibit disclosure of the taxpayer’s returns and return information that the WBO has included in the administrative record supporting its determination.
c. Regulatory Arguments The Commissioner concludes his analysis of section 6103(h)(4)(A) by arguing that the current whistleblower regulations are consistent with his position. Specifically, he contends that, “to the extent that existing regulations allow for limited disclosure of . . . return information to whistleblowers,” these disclosures are authorized by section 6103(h)(4)(B) or (C) rather than section 6103(h)(4)(A). Resp’t’s Mem. 27.
We read the relevant regulations differently. For one thing,
regulations under section 6103 authorize the WBO to disclose returns
and return information to a whistleblower “to the extent necessary to
conduct a whistleblower administrative proceeding,” citing section
6103(h)(4). Treas. Reg. § 301.6103(h)(4)-1(b). The regulations provide
some illustrative examples of information that may be shared, but
specifically state the examples are not exclusive.
See id.
Additionally, regulations under section 7623 elaborate that a
whistleblower who signs a confidentiality agreement may schedule an
appointment with the WBO to review any information in the
administrative claim file that is not protected by common law or
statutory privileges.
[23]
Treas. Reg. § 301.7623-3(c)(4)(i)(B). Initially, the
proposed regulations limited the information that could be viewed in
this manner to “pertinent” information in the file,
see
Prop. Treas. Reg.
§ 301.7623-3(c)(5), 77 Fed. Reg. 74,798, 74,809 (Dec. 18, 2012), but in
response to a comment that “the whistleblower should be able to review
all non-privileged information in the administrative claim file, whether
or not it is deemed pertinent,” the final regulations dropped the term,
s
ee
T.D. 9687, 2014-
Apparently then, the regulations would have authorized the Commissioner to share the administrative claim file underlying this case, including nonpertinent portions of the file, with the whistleblower during the whistleblower administrative proceeding associated with the whistleblower’s claims. Disclosures under section 6103(h)(4)(B) and (C) are limited by statute to materials “directly related to the resolution of an issue in the proceeding,” but disclosures under section 6103(h)(4)(A) are not. This strongly indicates that the regulations rely on section 6103(h)(4)(A) to authorize disclosures in whistleblower administrative proceedings. [24] And we see no basis in the statute for concluding that section 6103(h)(4)(A) authorizes broader disclosure in administrative proceedings than in judicial proceedings. In other words, if the regulations would have authorized the Commissioner to share the administrative claim file with the whistleblower during the whistleblower administrative proceeding, we see no basis in section 6103(h) for the Commissioner to provide less information in a subsequent judicial proceeding. Thus, the regulations reinforce our conclusion that section 6103(h)(4)(A) authorizes disclosure of the administrative record in this case.
d. Final Considerations From a broader perspective, the arguments the Commissioner offers in support of his position reflect an approach that “is a relic from a ‘bygone era of statutory construction.’ ” Food Mktg. Inst. , 139 S. Ct. at 2364. The Commissioner spends little time with the statutory text or its ordinary meaning, pivoting almost immediately to legislative history and purported general policies underlying section 6103(a) (which, as we have described, offer him no help). He provides no analysis of the structure or the exceptions to section 6103(a), which are legion and of course were enacted by Congress. Cf. Maracich , 570 U.S. at 52–70 (relying on the structure of the statute and all the relevant provisions to determine the meaning of the text at issue). Moreover, the holdings of several of the cases the Commissioner cites in support of his policy points turn out to support the whistleblower’s position. And, as described in the preceding section, the same can be said of the regulations. Therefore, while the Commissioner’s concern regarding his responsibilities under section 6103 is laudable, we cannot agree with his interpretation of the statute.
Our conclusion does not leave taxpayer information contained in the administrative record the WBO creates without protection. For example, Rule 27 provides guidance for redacted filings and states that, for good cause, the Court may require further redactions or issue a protective order. Rule 27(a), (d). And Rule 103(a) states that, on a party’s motion and for good cause shown, “the Court may make any order which justice requires to protect a party or other person from same section of the Taxpayer First Act that added section 6103(k)(13) to the Code also amended section 6103(k)(6) to exclude from its reach disclosures covered by the newly added section 6103(k)(13). The contrast in Congress’s approach with respect to section 6103(k)(6)—express amendment—and Congress’s approach with respect to section 6103(h)(4)—absolute silence—confirms that the adoption of section 6103(k)(13) did not affect the authority under section 6103(h)(4).
annoyance, embarrassment, oppression, or undue burden or expense.” The Commissioner remains free to pursue redaction of the administrative record pursuant to these rules. But he cannot maintain that section 6103 prohibits him from complying with the Court’s orders.
Finally, our further review of section 6103(h)(4)(A) as applicable to this case leads us to conclude that section 6103 considerations do not warrant an in camera review of the redacted materials. Congress has already made a determination with respect to them as far as section 6103 is concerned. They may be disclosed. Unless the Secretary determines that providing the unredacted information “would identify a confidential informant or seriously impair a civil or criminal tax investigation,” I.R.C. § 6103(h)(4) (flush text), the Commissioner may not resist disclosure by appealing to section 6103(a). The Commissioner remains free of course to propose more targeted redactions under Rule 27(a) and (d) and Rule 103(a), and we will allow him time to do so if he considers that appropriate.
IV. Conclusion
To summarize, the Commissioner’s interpretation of section 6103(h)(4)(A) cannot stand in the face of the broadly worded statutory exception, the structure of the statute, and the statute’s other provisions. If Congress had meant to limit the exception as the Commissioner suggests, it could have used more exacting language and given different textual and structural clues. The facts of this case fall well within the bounds of the exception Congress provided, and we must therefore decline the Commissioner’s invitation to impose stricter requirements.
To reflect the foregoing,
An appropriate order will be issued.
Reviewed by the Court.
KERRIGAN, FOLEY, GALE, GUSTAFSON, MORRISON, BUCH, NEGA, PUGH, ASHFORD, URDA, COPELAND, JONES, GREAVES, MARSHALL, and WEILER, JJ. , agree with this opinion of the Court.
PARIS, J. , did not participate in the consideration of this opinion.
Notes
[1] Unless otherwise indicated, all statutory references are to the Internal Revenue Code, Title 26 U.S.C. (I.R.C. or Code), in effect at all relevant times, all regulation references are to the Code of Federal Regulations, Title 26 (Treas. Reg.), in effect at all relevant times, and all Rule references are to the Tax Court Rules of Practice and Procedure.
[2] Section 7623(b)(1) provides: If the Secretary proceeds with any administrative or judicial action described in subsection (a) based on information brought to the Secretary’s attention by an individual, such individual shall, subject to paragraph (2), receive as an award at least 15 percent but not more than 30 percent of the proceeds collected as a result of the action (including any related actions) or from any settlement in response to such action (determined without regard to whether such proceeds are available to the Secretary). The determination of the amount of such
[3] For a discussion of rejections and denials, see Rogers v. Commissioner , 157 T.C. 20, 22–31 (2021).
[4] Absent a stipulation by the parties, this case would be appealable to the D.C.
Circuit. I.R.C. § 7482(b)(1) (flush text) (providing that the D.C. Circuit is the
proper appellate venue for review of Tax Court decisions in cases in which no other
venue rule applies);
see also Kasper
,
[5] Because the IRS had not proceeded with an action, it also had not collected proceeds.
[6] The parties agree that the IRS took action and collected proceeds in this case, and so we need not decide whether, under Li , we would have jurisdiction to review a WBO denial in a case in which the IRS proceeded with an action, but did not collect proceeds, or in which the IRS did not proceed with an action. A case presenting both these fact patterns is currently pending before the D.C. Circuit. Kennedy v. Commissioner , T.C. Memo. 2021-3, appeal docketed , No. 21-113 (D.C. Cir. June 7, 2021).
[7] Section 6103(h)(4)(D) also authorizes disclosure “to the extent required by order of a court pursuant to section 3500 of title 18, United States Code, or rule 16 of the Federal Rules of Criminal Procedure.” The parties agree that section 6103(h)(4)(D) is not relevant here.
[8] Section 6103(b)(1) and (2) provides detailed definitions for both terms.
Church of Scientology of Cal. v. IRS
,
[9] Section 6103(b)(4) provides a broad definition of “tax administration.”
See,
e.g.
,
Gardner v. United States
, 213 F.3d 735, 739 (D.C. Cir. 2000) (referring to the
“broad language” of the provision);
United States v. Mangan
,
[10] As the Commissioner recognizes, the courts of appeals have reached different
conclusions on whether section 6103(h)(4)(B) permits the disclosure of returns only or
returns
and
return information.
Compare United States v. NorCal Tea Party Patriots
(
In re United States
), 817 F.3d 953, 962 (6th Cir. 2016) (concluding that section
6103(h)(4)(B) permits the disclosure of returns only),
and In re United States
, 669 F.3d
1333, 1339–40 (Fed. Cir. 2012) (per curiam) (suggesting the same),
with Tavery v.
United States
,
[11] Dictionary definitions of “connection” have remained relatively consistent over time. See, e.g. , Connection , Webster’s New Twentieth Century Dictionary of the English Language (2d ed. 1966) (defining “connection,” in relevant part, as “that which connects or unites; a tie; a bond; means of joining” and “a relation; association;
[13]
Maracich
involved the interpretation of the Driver’s Privacy Protection Act
of 1994 (DPPA). 18 U.S.C. §§ 2721–2725. The DPPA governs the disclosure of
personal information in the records of state motor vehicle departments (DMV).
Maracich
,
[14] The Supreme Court has “eschewed uncritical literalism leading to results
that no sensible person could have intended” “when confronted with capacious
phrases” like “in connection with,” “related to,” and “arising from.”
Jennings v.
Rodriguez
, 138 S. Ct. 830, 840 (2018) (Alito, J.) (plurality opinion) (cleaned up)
(collecting authorities);
see also FERC v. Elec. Power Supply Ass’n
,
[15] The connection here, for example, is at least as strong as the connection in Mont , 139 S. Ct. at 1832, in which the Supreme Court held that “the phrase [imprisonment] ‘in connection with a conviction’ encompasses a period of pretrial detention for which a defendant receives credit against the sentence ultimately imposed” because the “pretrial incarceration is directly tied to the conviction when it is credited toward the new sentence.”
[16] We note in this regard that the Supreme Court has interpreted similar
statutory text to allow for the disclosure of sensitive third-party information in the
context of litigation.
See Maracich
,
[17] The parallel provision, section 6103(h)(2)(A), deals with the disclosure of returns and return information to the Department of Justice for use in connection with investigations and state and federal proceedings.
[18] The conference report states, in relevant part: [T]he return of a taxpayer who is not a party to the proceeding may be made available to the Department of Justice if the proceeding arose out of, or in connection with, determining the taxpayers’ civil or criminal tax liability or the collection of civil tax liability. This provision would apply in such situations as where the taxpayer’s liability may have given rise to transferee liability or where the taxpayer did not (or was unable to) intervene in a summons enforcement case. H.R. Rep. No. 95-1800, at 293 (Conf. Rep.), 1978-3 C.B. (Vol. 1) at 627.
[19] We note that several cases cited by the Commissioner to support his view of
the purpose of section 6103 actually support the whistleblower.
See, e.g.
,
McSurely v.
McAdams
, 502 F. Supp. 52 (D.D.C. 1980) (applying a broad exception to permit
disclosure);
Shell Petroleum, Inc. v. United States
,
[20] Congress is, of course, free to change the balance it has struck and, if it considers it advisable, establish greater protections for targets of whistleblower claims, including, for example, providing that such targets be notified before their returns or
[21] The Commissioner argues that interpreting section 6103(h)(4)(A) “as being
broadly inclusive of any and all proceedings connected in any way whatsoever with the
non-party’s tax liability” would render section 6103(h)(4)(B) and (C) superfluous. But
we do not so hold, and our interpretation does not create superfluity. For example, in
an employer’s employment tax dispute, returns or return information of the employer’s
employees potentially could satisfy the requirements of section 6103(h)(4)(B) or (C),
see, e.g.
,
Mescalero Apache Tribe
,
[22] This conclusion is consistent with the Supreme Court’s observation in
Maracich
,
[23] The regulations define the “administrative claim file” broadly to include a list of enumerated materials, see Treas. Reg. § 301.7623-3(e)(2)(i)–(viii), as well as “[a]ll other information considered by the official making the award determination,” id. subdiv. (ix).
[24] We note that the regulations predate the 2019 enactment of section 6103(k)(13), see Taxpayer First Act of 2019, Pub. L. No. 116-25, § 1405(a), 133 Stat. 981, 997–98 (2019), and therefore that section 6103(k)(13) did not provide the authorization for their adoption. Section 6103(k)(13) applies to proceedings before the Secretary that precede a whistleblower’s appeal to our Court. I.R.C. § 6103(k)(13) (permitting the disclosure of return information to a whistleblower related to the investigation of a target taxpayer in certain circumstances, requiring the Secretary to provide status updates to whistleblowers at certain times, and, upon a whistleblower’s request, requiring the Secretary to provide updates on the status of the investigation and disclose the reasons for any award determination under section 7623(b)). As the Commissioner observed in briefing, section 6103(k)(13) “permits disclosures to be made ‘to any individual providing information relating to any purpose described in paragraph (1) or (2)’ [of section 7623(a)]. It does not authorize disclosures to the Court.” Resp’t’s Mot. To Modify Order 9 (Doc. 114). The Commissioner is right that section 6103(k)(13) says nothing about disclosures to the Court. That topic is covered by section 6103(h)(4). Consistent with this understanding, when Congress adopted section 6103(k)(13), it did not restrict the scope of section 6103(h)(4), even though the