T.C. Memo. 2017-105
UNITED STATES TAX COURT
CYNTHIA GONZALEZ, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 182-13W. Filed June 7, 2017.
Cynthia Gonzalez, pro se.
Rachel G. Borden and John T. Arthur, for respondent.
MEMORANDUM OPINION
GUY, Special Trial Judge: This whistleblower action, commenced pursuant
to section 7623(b)(4),1 is before the Court on respondent’s motion for summary
1
Unless otherwise indicated, section references are to sections of the
Internal Revenue Code, as amended and in effect at all times relevant to this
proceeding, and Rule references are to the Tax Court Rules of Practice and
(continued...)
-2-
[*2] judgment, filed August 7, 2015, first supplement to motion for summary
judgment, filed April 4, 2016,2 and second supplement to motion for summary
judgment, supported by a declaration (submitted by Program Analyst Steven
Mitzel (PA Mitzel)), filed May 17, 2016. PA Mitzel’s declaration states that he
was assigned to process petitioner’s whistleblower claim in November 2012 and
describes the events (with a review of the documents contained in the
Whistleblower Office administrative file) that led him to recommend to the
Director of the Whistleblower Office that petitioner’s whistleblower claim be
denied.
On September 15, 2015, petitioner filed a letter in opposition to
respondent’s motion, and on May 2, 2016, she filed a response to respondent’s
first supplement to motion for summary judgment.
1
(...continued)
Procedure.
2
Attached to respondent’s first supplement to motion for summary judgment
are documents contained in the Internal Revenue Service (IRS) Whistleblower
Office (Whistleblower Office) administrative file.
-3-
[*3] Background3
On or about October 2, 2009, petitioner submitted to the Whistleblower
Office a Form 211, Application for Award for Original Information, alleging that,
during the taxable years 2004, 2006, and 2007, a corporation (taxpayer 1) and an
individual taxpayer/controlling shareholder (taxpayer 2) had understated taxable
income and that taxpayer 2 had claimed deductions for personal expenses and had
failed to report constructive dividends.4 The Whistleblower Office assigned claim
Nos. 2010-000210, 2010-000211, 2011-011077, and 2011-011129 to petitioner’s
claims.
The Whistleblower Office forwarded the information petitioner had
provided to the IRS Large Business and International Division (LB&I) for
consideration. Following a review of that information, the LB&I began
examinations of taxpayers 1 and 2, taxpayer 3 (taxpayer 2’s spouse) and two
partnerships (taxpayers 4 and 5). Revenue Agent Diane Todd conducted the
examinations and, upon completion of her work, forwarded to the Whistleblower
3
The following facts are drawn from the pleadings and other documents in
the record in this case and are not in dispute.
4
We refer to the target taxpayers in generic terms to protect the identity of
taxpayers who are not parties to this suit. See Rule 345(b).
-4-
[*4] Office five Forms 11369, Confidential Evaluation Report on Claim for
Award, dated October 2, 2009, along with various attachments.
The first Form 11369 and its attachments indicate that taxpayer 1 agreed to
the assessment and collection of income tax deficiencies of $19,249 and $13,572
for the taxable years 2009 and 2010, respectively, attributable to the
recharacterization and disallowance of portions of the deductions that taxpayer 1
had claimed for advertising and promotion expenses. No penalties were assessed.
Taxpayer 1 subsequently remitted to the IRS the additional taxes along with
statutory interest of $1,525.68 and $506.58, for 2009 and 2010, respectively, for a
total of $34,853.26.
The second Form 11369 and its attachments indicate that the IRS did not
assert or determine an underpayment of tax or attempt to assess or collect any
amounts from taxpayers 2 or 3 for the taxable year 2008 as a result of the
information that petitioner provided.
The third Form 11369 and the related documents indicate that the IRS did
not assert or determine an underpayment of tax or attempt to assess or collect any
amount from taxpayer 5 for the taxable year 2008 as a result of the information
that petitioner provided.
-5-
[*5] The fourth and fifth Forms 11369 contain information that is already
included in the third Form 11369 but include references to taxpayers 4 and 5.
Although the preparation and compilation of the fourth and fifth Forms 11369
leave something to be desired, when considered together the documents indicate
that the IRS did not assert or determine any adjustments to items reported by
taxpayers 4 or 5 for the taxable year 2008, nor did the IRS assert or determine an
underpayment of tax or attempt to assess or collect any amount from any taxpayers
identified by petitioner other than taxpayer 1.
In the light of the information contained in the Forms 11369 and the
attachments thereto, PA Mitzel recommended that petitioner’s claims for a
whistleblower award be denied. On December 6, 2012, the Whistleblower Office
issued to petitioner a final determination stating in pertinent part: “Under Internal
Revenue Code Section 7623, an award may be paid only if the information
provided results in the collection of additional tax, penalties, interest or other
proceeds. In this case, the information you provided did not result in the
collection of any proceeds. Therefore, you are not entitled to an award.”5
5
Contrary to the statement in the final determination, the record reflects that
the IRS collected tax proceeds from taxpayer 1 as a result of the information that
petitioner provided to the Whistleblower Office.
-6-
[*6] Petitioner invoked the Court’s jurisdiction under section 7623(b)(4) by
filing a timely petition for review of the final determination. Respondent filed an
answer to the petition, followed by a motion for leave to file an amended answer.
Although the Court directed petitioner to file an objection, if any, to respondent’s
motion for leave, she failed to do so. Consequently, the Court granted
respondent’s motion and filed respondent’s amended answer, which included
affirmative allegations in support of respondent’s assertion that the “amounts in
dispute” in this matter did not exceed the $2 million threshold prescribed in
section 7623(b)(5)(B) as a prerequisite for a whistleblower award.6
Discussion
Summary judgment is intended to expedite litigation and avoid unnecessary
and expensive trials. See FPL Grp., Inc. & Subs. v. Commissioner, 116 T.C. 73,
74 (2001). Summary judgment may be granted with respect to all or any part of
the legal issues in controversy “if the pleadings, answers to interrogatories,
depositions, admissions, and any other acceptable materials, together with the
6
Respondent subsequently filed a motion for entry of an order that undenied
allegations be deemed admitted in accordance with Rule 37(c). Although the
Court directed petitioner to file a reply to respondent’s amended answer, she failed
to do so. Consequently, the Court granted respondent’s Rule 37(c) motion, and
petitioner was deemed to have admitted the affirmative allegations in respondent’s
amended answer.
-7-
[*7] affidavits or declarations, if any, show that there is no genuine dispute as to
any material fact and that a decision may be rendered as a matter of law.” Rule
121(a) and (b); see Elec. Arts, Inc. v. Commissioner, 118 T.C. 226, 238 (2002).
The moving party bears the burden of proving that no genuine dispute exists as to
any material fact and that he is entitled to judgment on the substantive issues as a
matter of law. See, e.g., Espinoza v. Commissioner, 78 T.C. 412, 416 (1982).
Section 7623(b) provides for mandatory whistleblower awards if certain
requirements are met. A whistleblower award under section 7623 generally is
dependent on two preliminary prerequisites: (1) the Commissioner’s commencing
an administrative or judicial action and (2) the collection of tax proceeds. See
Cohen v. Commissioner, 139 T.C. 299, 302 (2012), aff’d, 550 F. App’x 10 (D.C.
Cir. 2014); Cooper v. Commissioner, 136 T.C. 597, 600 (2011).
Section 7623(b)(4) establishes the Court’s jurisdiction to review
whistleblower awards. Under that provision, upon the filing of a timely petition
for review, the Court is vested with jurisdiction to review any determination
regarding a whistleblower award under subsection (b).
There is no dispute that the information that petitioner provided to the IRS
led to an examination of the target taxpayers and that the IRS subsequently
assessed and collected tax from one of those taxpayers. Qualification for a
-8-
[*8] whistleblower award under section 7623(b) is limited in relevant part,
however, by section 7623(b)(5)(B), which provides that subsection (b) shall apply
with respect to “any action--if the tax, penalties, interest, additions to tax, and
additional amounts in dispute exceed $2,000,000.”7
Section 301.7623-2(e)(2), Proced. & Admin. Regs. (effective August 12,
2014, after the events in dispute in this case transpired), provides in pertinent
part:
(2) Amount in dispute.--(i) In general.--For purposes of section
7623(b)(5) and §§ 301.7623-1 through 301.7623-4, the term amount
in dispute means the greater of the maximum total of tax, penalties,
interest, additions to tax, and additional amounts that resulted from
the action(s) with which the IRS proceeded based on the information
provided, or the maximum total of such amounts that were stated in
formal positions taken by the IRS in the action(s). * * *
Respondent avers that section 301.7623-2(e)(2), Proced. & Admin. Regs., is
consistent with IRS guidance in effect when petitioner submitted her
whistleblower claim. See Internal Revenue Manual pt. 25.2.2.9.2(3) (June 18,
2010).
7
In Lippolis v. Commissioner, 143 T.C. 393, 398-401 (2014), the Court
explained that the provisions of sec. 7623(b)(5) are not a prerequisite to the
Court’s jurisdiction but rather create an affirmative defense that must be pleaded
in the answer and proved by the Commissioner. As discussed above, respondent
pleaded in the amended answer that the amounts in dispute in the actions taken by
the IRS as a result of the information that petitioner provided to the Whistleblower
Office did not exceed the $2 million threshold of sec. 7623(b)(5)(B).
-9-
[*9] As a preliminary matter, we acknowledge that the documents contained in
the Whistleblower Office administrative record suggest that the $2 million
threshold of section 7623(b)(5)(B) has not been met here. The first Form 11369
and the attachments thereto indicate that the examination of taxpayer 1 resulted in
relatively minor proposed adjustments to deductions that taxpayer 1 had claimed
for advertising and promotion expenses for the taxable years 2009 and 2010. The
remaining Forms 11369 indicate that the examinations of taxpayers 2, 3, 4, and 5
resulted in no proposed tax adjustments.
Nevertheless, we are not satisfied that respondent, as the moving party and
as the party asserting an affirmative defense, see Lippolis v. Commissioner, 143
T.C. 393, 398-401 (2014), has established the facts necessary to show that he is
entitled to judgment as a matter of law. In particular, although we know the
contents of the Whistleblower Office administrative file, respondent’s motion and
related documents do not address whether additional records may exist in other
IRS departments and offices that are relevant to the question whether the “amount
in dispute” in this matter exceeded $2 million. Absent an affidavit or a declaration
from an appropriate IRS representative stating that a diligent and comprehensive
search of IRS records has been conducted, all appropriate personnel have been
contacted, and there is no record that the IRS has asserted an underpayment of tax
-10-
[*10] or made any effort to assess or collect tax in excess of $2 million from the
taxpayers identified in petitioner’s claims or any taxpayers related to those
taxpayers, respondent has failed to show that there is no dispute as to a material
fact and that a decision may be rendered in his favor as a matter of law.
Consequently, we will deny respondent’s motion as supplemented.8
To reflect the foregoing,
An order will be issued
denying respondent’s motion
as supplemented.
8
This opinion is being released concurrently with, and applies the same
analysis as that used in, Lippolis v. Commissioner, T.C. Memo. 2017-104.