Lawmakers Ask IRS to Clarify Position on Collected Proceeds

April 26, 2017

The Honorable Steve Mnuchin
Secretary of the Treasury
U.S. Department of the Treasury
1500 Pennsylvania A venue, NW
Washington, D.C. 20220

Dear Sec. Mnuchin,

The IRS Whistleblower Program plays a vital role in uncovering tax fraud, evasion and noncompliance. Since 2007, the program has resulted in the collection of more than $3.4 billion in unpaid taxes and other proceeds.

The Whistleblower program incentivizes individuals to come forward with first-hand knowledge of tax evasion schemes by promising an award of the collected proceeds that result from any administrative or judicial action taken based on the information provided. (See 26 U.S. Code § 7623 (b)(1): "If the Secretary proceeds with any administrative or judicial action . . . based on information brought to the Secretary's attention by an individual, such individual shall . . . receive as an award at least 15 percent but not more than 30 percent of the collected proceeds (including penalties, interest, additions to tax, and additional amounts) resulting from the action (including any related actions) or from any settlement in response to such action.).

As written, the law is clear that whistleblower awards are to be fifteen to thirty percent of the collected proceeds recovered, including penalties, interest, additions to tax, and additional amounts. Despite the law's plain language, it appears that the IRS has taken the position that collected proceeds should not include amounts collected apart from taxes.

We are concerned that this narrow IRS position threatens the success of the Whistle blower Program. Individuals may be reluctant to come forward with actionable information if they lack the confidence that they would be fully and justifiably compensated for their efforts.

As you are aware, whistleblowing in tax fraud cases is not easy, fast, or without substantial risk. Whistle blowers are often forced to leave their professions once they provide information of tax fraud. Potential whistleblowers need to know that the program will protect them by fairly compensating them, as per the intent of the law.

We believe that the IRS has the opportunity to make the correct policy decision by clarifying that the phrase collected proceeds, as referenced in the statue, is to include any fines, penalties, or additional amounts collected based on information provided by a whistleblower. This decision would bolster the IRS in its efforts to go after the worst tax cheats, strengthen the IRS Whistleblower Program, and send the right message to whistleblowers that they will be protected.

Sincerely,

Pat Meehan
Member of Congress

Darin LaHood
Member of Congress

Erik Paulsen
Member of Congress

Jason Smith
Member of Congress

Carlos Curbled
Member of Congress

Ted Poe
Member of Congress

John Katko
Member of Congress

Dan Donovan
Member of Congress