T.C. Memo. 2020-75
UNITED STATES TAX COURT
JAROSLAW JANUZ WASZCZUK, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 23105-18W. Filed June 4, 2020.
Jaroslaw Januz Waszczuk, pro se.
Darrick D. Sun, for respondent.
MEMORANDUM OPINION
GOEKE, Judge: Petitioner submitted two claim forms for a whistleblower
award to the Internal Revenue Service (IRS) Whistleblower Office (WBO).
Although he filed the second form as an update to the first form, the WBO did not
treat the forms in this manner and issued two letters to petitioner both rejecting his
whistleblower claim. Petitioner timely filed the petition after receiving the second
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[*2] letter. Respondent filed a motion for partial summary judgment that the
WBO did not abuse its discretion in rejecting the claim in the second rejection
letter and a motion for leave to amend the answer to assert that petitioner did not
timely file the petition to appeal the first rejection letter. We hold the WBO did
not abuse its discretion in rejecting petitioner’s whistleblower claim and will grant
summary judgment for respondent. We will dismiss the motion for leave to amend
the answer as moot. We will enter decision for respondent.
Background
Petitioner filed Form 211, Application for Award for Original Information,
which the WBO received on March 23, 2016 (2016 Form), alleging that his former
employer, a section 501(c)(3) exempt organization (2016 target), failed to report
unrelated business income and to pay tax of $50 million over 10 years.1 He
alleged that the 2016 target conspired with two State-chartered agencies (State
agencies) and numerous State government officials in its income-producing
activity. He did not name the two State agencies as targets. Upon receipt of the
2016 Form the WBO assigned a claim number for the 2016 target. There were
multiple written communications from the WBO to petitioner during the
1
Unless otherwise indicated, all section references are to the Internal
Revenue Code in effect for all relevant times, and all Rule references are to the
Tax Court Rules of Practice and Procedure.
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[*3] immediately succeeding months, mostly the WBO confirming receipt of
petitioner’s subsequent submissions. However, the WBO did not respond to a
power of attorney form submitted by petitioner’s newly engaged attorney in June
2016 or a followup inquiry resubmitting the form in August 2016.
On August 3, 2018, after nearly two years with no communication from the
WBO, petitioner mailed to the WBO a second Form 211 (2018 Form) through the
U.S. Postal Service (USPS) with signature confirmation service. Petitioner
received confirmation from the USPS that the IRS office in Ogden, Utah, received
the 2018 Form on August 6, 2018. The WBO initial claims evaluation (ICE) unit
date-stamped it as received on August 10, 2018. In deciding whether to grant
summary judgment in favor of respondent, we draw all reasonable inferences in
petitioner’s favor and treat the 2018 Form as received on August 6, 2018.
Petitioner clearly intended the 2018 Form to be an update of the 2016 Form
rather than a new whistleblower claim. He checked the box on the 2018 Form
marked supplemental submission and identified the 2016 Form as the one
supplemented. He prepared the 2018 Form without his attorney’s assistance. He
identified three targets, the 2016 target and the two State agencies named on the
2016 Form. He alleged that the 2016 target failed to report the same unrelated
business income as alleged on the 2016 Form, but “provide[d] exact figures” of
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[*4] the level of its income-producing activity and the amount of the unreported
income. He now alleged that the 2016 target had unreported income of $85
million over 10 years. He alleged that the two State agencies collaborated with the
2016 target in its income-producing activity, committed multiple violations of
nontax Federal and State laws, and conspired to defraud State taxpayers and
consumers of $40 billion. However, he did not allege that either agency had
unreported income.
The WBO sent petitioner a letter titled “Final Decision Letter Under Section
7623(a)”, dated August 7, 2018, stating that it considered the 2016 Form and
rejected the whistleblower claim (2016 rejection letter) “because the information
provided was speculative and/or did not provide specific or credible information
regarding tax underpayments or violations of internal revenue laws.” The 2016
rejection letter informed petitioner of his right to petition this Court within 30
days. Upon receipt of the rejection letter petitioner’s attorney withdrew his
representation, and petitioner did not file a petition within the 30-day filing period.
The WBO’s actions in its review and evaluation of the 2016 Form are not part of
the administrative record before us.
The WBO mailed petitioner a letter dated August 24, 2018, stating it had
received the 2018 Form and would evaluate the information provided to determine
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[*5] whether an investigation was warranted and an award was appropriate.
Despite the clear designation of the 2018 Form as a supplement to the 2016 Form,
the WBO assigned three claimant numbers, one for each named target, including a
new number for the 2016 target.
On September 14, 2018, the ICE unit forwarded the 2018 Form to the IRS’
Tax Exempt and Government Entities (TEGE) Division for review. A TEGE
classifier reviewed petitioner’s whistleblower information, the three targets’ tax
records, IRS transcribed data, and tax and financial records of two of the targets.
She received and reviewed additional information petitioner submitted including
correspondence between petitioner and his attorney and a letter petitioner had sent
to the IRS Criminal Investigation Division, dated September 12, 2018.
The TEGE classifier recommended rejection of petitioner’s whistleblower
claim as filed on the 2018 Form. She found that the targets “appeared to be filing
and reporting unrelated business income appropriately”, the periods of limitations
for the years before 2016 were short or expired, and the IRS records “reflect[ed]
amounts reported as unrelated business income tax”. She concluded there was no
specific or credible documentation to establish that the targets had unreported
business income for 2016. The TEGE classifier prepared Form 11369,
Confidential Evaluation Report on Claim for Award, recommending rejection of
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[*6] petitioner’s claim on the 2018 Form. On the Form 11369 the classifier noted
that petitioner had previously filed a whistleblower claim against the 2016 target
and the WBO had recommended “closure” of the claim on July 26, 2018. Form
11369 does not provide any other information about the 2016 Form or the 2016
rejection letter.
Form 11369 was submitted to the ICE unit. A tax examining technician in
the ICE unit agreed with the TEGE classifier’s recommendation and prepared an
award recommendation memorandum recommending rejection of petitioner’s
claim as filed on the 2018 Form. The WBO sent petitioner a letter titled “Final
Decision Letter Under Section 7623(a)” dated October 23, 2018 (2018 rejection
letter), stating that it rejected the claim filed on the 2018 Form because the
“information provided was speculative and/or did not provide specific or credible
information regarding tax underpayments or violations of internal revenue laws.”
The IRS did not take any administrative actions on the basis of petitioner’s
whistleblower information and did not collect any proceeds.
On November 21, 2018, petitioner filed a pro se petition and attached the
2018 rejection letter. He resided in California at that time. In the petition he
asserts that he filed a whistleblower claim (the 2016 Form) on March 23, 2016,
and filed the 2018 Form as an update the 2016 Form. He identifies the claim
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[*7] number assigned to the 2016 Form and asserts that the 2018 rejection letter
does not correspond with the facts and law that he provided on the 2016 and 2018
Forms.
Discussion
I. Motion for Leave To Amend Answer
Respondent seeks to amend his answer to assert that the petition is not
timely with respect to the 2016 rejection letter. Petitioner does not seek to appeal
the 2016 rejection letter. Instead, he has clearly maintained in the pleadings and
his other filings with this Court that he filed the 2018 Form as an update to the
2016 Form. He alleged the same tax violations and the same source of unreported
income on both Forms. He represents to this Court that the 2018 Form provided
more detailed information on the targets’ alleged tax law violations and more
accurate computations of the level of the 2016 target’s income-producing activity
and unreported income. He argues that the motion for leave to amend the answer
is irrelevant on the basis of his prior pleadings, and we agree. Petitioner has not
placed the 2016 rejection letter in issue and does not seek to invoke our
jurisdiction over the 2016 rejection letter. Rather, he asks the Court to review the
WBO’s handling of both Forms on the basis of our jurisdiction over the 2018
rejection letter. He asserts that the WBO failed to evaluate the 2016 Form timely
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[*8] but does not otherwise challenge the WBO’s rejection of the claim as filed on
the 2016 Form. He admits that the 2018 Form updated the 2016 Form and
provided more detailed information.
We are a court of limited jurisdiction and may exercise jurisdiction only to
the extent authorized by Congress. Kasper v. Commissioner, 137 T.C. 37, 40
(2011); Judge v. Commissioner, 88 T.C. 1175, 1180-1181 (1987). In determining
our jurisdiction this Court and the Courts of Appeals have given our jurisdictional
provisions a broad, practical construction rather than a narrow, technical one.
Lewy v. Commissioner, 68 T.C. 779, 781 (1977). It is appropriate to construe our
whistleblower jurisdiction broadly. Our caselaw establishes that the WBO may
issue multiple appealable determinations with respect to a single whistleblower
claim that confer jurisdiction to this Court. Comparini v. Commissioner, 143 T.C.
274, 281-283 (2014).
Section 7623(b)(4) grants to the Court jurisdiction to review the WBO’s
award determinations: “Any determination regarding an award * * * may, within
30 days of such determination, be appealed to the Tax Court (and the Tax Court
shall have jurisdiction with respect to such matter).” In Myers v. Commissioner,
928 F.3d 1025 (D.C. Cir. 2019), rev’g and remanding 148 T.C. 438 (2017), the
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[*9] Court of Appeals for the D.C. Circuit held that the 30-day filing period in
section 7623(b)(4) is not jurisdictional and is subject to equitable tolling.
Presumably, an appeal in this case would lie to the Court of Appeals for the D.C.
Circuit. See sec. 7482(b)(1) (enumerating the bases to determine venue for
appellate review of our decisions and stating that if no basis applies, appeal lies to
the Court of Appeals for the D.C. Circuit). It is unnecessary to consider equitable
tolling because petitioner has not invoked our jurisdiction to review the 2016
rejection letter. Accordingly, we will dismiss respondent’s motion for leave to
amend the answer as moot and assert our jurisdiction to review the WBO’s
determination set forth in the 2018 rejection letter.
II. Summary Judgment
We will grant a motion for summary judgment where there is no genuine
dispute as to any material fact and a decision may be rendered as a matter of law.
Rule 121(b); Sundstrand Corp. v. Commissioner, 98 T.C. 518, 520 (1992), aff’d,
17 F.3d 965 (7th Cir. 1994). In deciding whether to grant summary judgment we
draw factual inferences in the light most favorable to the nonmoving party.
Sundstrand Corp. v. Commissioner, 98 T.C. at 520. Respondent seeks summary
judgment that the WBO did not abuse its discretion when it rejected petitioner’s
whistleblower claim.
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[*10] Section 7623(b)(1) provides for mandatory whistleblower awards of a
percentage of the proceeds collected where the IRS proceeds with an
administrative or judicial action and collects proceeds from the target taxpayer as a
result of the whistleblower information. We have jurisdiction to review the
WBO’s award determination. Id. para. (4). We review the WBO’s award
determination for an abuse of discretion. Kasper v. Commissioner, 150 T.C. 8, 22
(2018). Abuse of discretion occurs when a determination is arbitrary, capricious,
or without sound basis in fact or law. Murphy v. Commissioner, 125 T.C. 301,
320 (2005), aff’d, 469 F.3d 27 (1st Cir. 2006). In ascertaining whether the WBO
abused its discretion, we generally limit our review to the administrative record.
Kasper v. Commissioner, 150 T.C. at 20.
We have jurisdiction to review for abuse of discretion the WBO’s
determination to reject a claim on the basis of its failure to meet certain basic
criteria without referring the claim to an IRS operating division for further review.
Kansky v. Commissioner, T.C. Memo. 2020-43, at *6 (citing Lacey v.
Commissioner, 153 T.C. __, __ (slip op. at 33-34) (Nov. 25, 2019)). The payment
of any award requires that the IRS first proceed with an “administrative or judicial
action” and then collect proceeds from the target taxpayer. See Cohen v.
Commissioner, 139 T.C. 299, 302 (2012), aff’d, 550 F. App’x 10 (D.C. Cir. 2014).
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[*11] We do not have jurisdiction to review the IRS’ decision not to proceed with
an administrative action against a target or authority to direct the IRS to
commence an administrative or judicial action. Cooper v. Commissioner, 136
T.C. 597, 600-601 (2011). If the IRS does not proceed with an administrative or
judicial action, there can be no whistleblower award. Id. at 601. Nor can we order
the IRS to explain its decision not to audit a target. Lacey v. Commissioner, 153
T.C. at __ (slip op. at 30).
The WBO has authority to perform an initial evaluation of a whistleblower
claim to determine whether it meets minimum threshold criteria for an award and
may summarily reject a claim if it does not. Cline v. Commissioner, T.C. Memo.
2020-35, at *12. However, the WBO did not summarily reject petitioner’s claim
filed on the 2018 Form. It forwarded the 2018 Form to the TEGE, an operating
division, for further review. The WBO followed the operating division’s
recommendation to reject petitioner’s claim “because the information provided
was speculative and/or did not provide specific or credible information regarding
tax underpayments or violations of internal revenue laws.” The rejection letter
invokes the minimum threshold criteria the WBO uses to evaluate a whistleblower
claim. See sec. 301.7623-1(c)(1), (4), Proced. & Admin. Regs. (providing the
WBO determines whether the claim provides specific and credible information or
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[*12] speculative or substantive information, reports a violation of internal
revenue laws and identifies the target taxpayer, and provides information that the
whistleblower believes will lead to the collection of tax proceeds).
For her recommendation the TEGE classifier reviewed petitioner’s
whistleblower information and IRS internal records of the three targets. The
administrative record shows that the classifier evaluated the whistleblower
information and considered the allegations. She found that the targets were filing
and reporting unrelated business income appropriately and the IRS records
showed amounts reported as unrelated business income tax. She did not forward
the 2018 Form for further investigation or recommend that the IRS audit the
targets. She recommended rejection of the 2018 Form and submitted her
recommendation to the WBO. The WBO followed the classifier’s
recommendation to reject the 2018 Form.
On the basis of this record, we find that the WBO did not abuse its
discretion in rejecting petitioner’s claim. The WBO followed the TEGE
classifier’s recommendation and did not forward the claim for further
investigation. The WBO’s grounds for rejection are supported by the TEGE
classifier’s findings and recommendation. The IRS did not initiate an
administrative action against the targets and did not collect proceeds, the two
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[*13] requirements for a whistleblower award. Accordingly, petitioner is not
entitled to an award.
Petitioner argues that the WBO should have questioned representatives of
the 2016 target and requested documents to verify that it paid tax on the profits
from its unrelated income-producing activity. We do not have authority to order
the IRS or the WBO to take such action. Petitioner presents lengthy arguments in
his filings with the Court about the actions of the targets and their representatives
as well as government officials that led to the alleged unreported income. We do
not have authority to decide whether the IRS should have questioned the targets.
Our role is to decide whether there is a sound basis in fact and law for the WBO’s
determination to reject a whistleblower claim or whether the WBO acted
arbitrarily or capriciously. The WBO forwarded petitioner’s whistleblower
information to the correct operating division for review, and the operating division
found there was not sufficient information to audit the targets’ returns. Without an
audit or the collection of proceeds from the target, petitioner cannot receive an
award. The WBO’s determination to reject petitioner’s claim is supported by the
record.
To the extent that the 2018 rejection letter is a rejection of both Forms, we
find that the WBO did not abuse its discretion in determining that petitioner was
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[*14] not entitled to a whistleblower award on the basis of the information
provided with either Form. Petitioner asserts that the 2016 and 2018 Forms make
the same allegations but the 2018 Form provided more specific information. The
WBO’s actions in evaluating the 2016 Form are not in the administrative record
except that we know that the WBO rejected the 2016 Form because petitioner’s
whistleblower information was not specific and/or credible and was speculative
and the IRS did not proceed with an administrative action or collect proceeds from
the targets.
Significantly, petitioner does not argue that the 2016 Form met the
threshold criteria for an award. He admits the 2016 Form contained less specific
information than the 2018 Form.2 Rather, he understandably complains about the
delay in the WBO’s processing of his 2016 form and the suspicious timing of the
2016 rejection letter; it is dated one day after the USPS’ signature confirmation of
receipt of the 2018 Form. He argues that the WBO was hiding his claim and the
2018 Form triggered the 2016 rejection letter.
Our review of the 2018 rejection letter decides whether the WBO abused its
discretion by rejecting petitioner’s whistleblower claim. It did not. The WBO
2
This contrasts with Lacey v. Commissioner, 153 T.C. __, __ (slip op. at 34)
(Nov. 25, 2019), where we assumed that the WBO did not evaluate the additional
information in the whistleblower’s second submission.
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[*15] forwarded the 2018 Form, which contained more detailed information than
the 2016 Form, to the TEGE operating division for review. The TEGE classifier
reviewed the information and IRS records, found petitioner’s information was not
specific or credible and/or was speculative, and recommended rejection of
petitioner’s claim. The IRS did not proceed with an administrative action and did
not collect proceeds.
The administrative record establishes that the WBO did not abuse its
discretion when it rejected petitioner’s whistleblower claim in the 2018 rejection
letter as it relates to either the 2016 or 2018 Form. There is no dispute of any
material fact, and respondent is entitled to summary judgment.
To reflect the foregoing,
An appropriate order and decision
will be entered for respondent.