Whistleblowers Get Reduced Awards Based on Terms of Settlement

Whistleblowers Get Reduced Awards Based on Terms of Settlement

U.S. Tax Court

The Tax Court held that the IRS properly paid whistleblowers an award that included a reduced amount, finding that the whistleblowers “must abide by the bargain they struck” in a partial settlement agreement and as reflected in 2017 decisions by the court. The IRS and the whistleblowers agreed to a partial settlement following the court’s <a href="/lr/resolve//fv48">2015 decision</a> on their eligibility for an award. The settlement provided for immediate payment of the portions of the awards due to them and left outstanding one disputed issue. The partial settlement, which was referred to but not made part of the record, provided that any further payment “will be reduced by the sequester reduction percentage in effect at the time of payment.” In 2016 the court <a href="/lr/resolve//g7jp">sided with</a> the whistleblowers on the remaining unagreed issue and followed up in 2017 with two decisions that set the dollar amounts of the whistleblowers’ awards, with the calculation based on stipulations by the parties. The decisions, which are excerpted in the present opinion, reflected the gross amounts of the awards, including the awards the IRS paid to the whistleblowers after the issuance of the 2015 decision under the partial settlement agreement. The IRS challenged the 2017 decisions, but the D.C. Circuit dismissed the appeal on the parties’ joint stipulation. The IRS paid the remaining awards minus the sequester reductions, citing the terms of the partial settlement. The whistleblowers asked the court to enforce the 2017 decisions and require the IRS to pay the amounts established in those decisions without the sequester reductions.  Judge Emin Toro, writing for the court, held that the awards should take into account the sequester reductions. The whistleblowers maintain that under the January 2017 decisions the IRS must pay a specific amount without regard to any other considerations, Judge Toro wrote, but added that they have ignored the terms of the partial settlement and misinterpreted the court’s 2017 decisions. “The whistleblowers now seek to back out of their deal, contending that our entry of the January 2017 Decisions in specific amounts foreclosed their agreement to reduce any further award payments by the applicable sequester reduction percentage when the award payments were made,” Toro wrote. “Nothing in the January 2017 Decisions set aside this express agreement of the parties. . . . A deal is a deal.” The court further held that it has jurisdiction to hear the whistleblowers’ actions under section 7623 and the authority to enforce the 2017 decisions. Judge David Gustafson, who concurred in the result, wrote that the majority chose to address “the interesting and difficult theoretical question [of] whether we have the power to ‘enforce’ our decisions,” adding that “there [is] no controversy between the parties about this question. . . . We do not know the significance (if any) of what the Court purports to decide today.”

The Tax Court held that the IRS properly paid whistleblowers an award that included a reduced amount, finding that the whistleblowers “must abide by the bargain they struck” in a partial settlement agreement and as reflected in 2017 decisions by the court.

The Tax Court held that the IRS properly paid whistleblowers an award that included a reduced amount, finding that the whistleblowers “must abide by the bargain they struck” in a partial settlement agreement and as reflected in 2017 decisions by the court. The IRS and the whistleblowers agreed to a partial settlement following the court’s 2015 decision on their eligibility for an award. The settlement provided for immediate payment of the portions of the awards due to them and left outstanding one disputed issue. The partial settlement, which was referred to but not made part of the record, provided that any further payment “will be reduced by the sequester reduction percentage in effect at the time of payment.” In 2016 the court sided with the whistleblowers on the remaining unagreed issue and followed up in 2017 with two decisions that set the dollar amounts of the whistleblowers’ awards, with the calculation based on stipulations by the parties. The decisions, which are excerpted in the present opinion, reflected the gross amounts of the awards, including the awards the IRS paid to the whistleblowers after the issuance of the 2015 decision under the partial settlement agreement. The IRS challenged the 2017 decisions, but the D.C. Circuit dismissed the appeal on the parties’ joint stipulation. The IRS paid the remaining awards minus the sequester reductions, citing the terms of the partial settlement. The whistleblowers asked the court to enforce the 2017 decisions and require the IRS to pay the amounts established in those decisions without the sequester reductions.  Judge Emin Toro, writing for the court, held that the awards should take into account the sequester reductions. The whistleblowers maintain that under the January 2017 decisions the IRS must pay a specific amount without regard to any other considerations, Judge Toro wrote, but added that they have ignored the terms of the partial settlement and misinterpreted the court’s 2017 decisions. “The whistleblowers now seek to back out of their deal, contending that our entry of the January 2017 Decisions in specific amounts foreclosed their agreement to reduce any further award payments by the applicable sequester reduction percentage when the award payments were made,” Toro wrote. “Nothing in the January 2017 Decisions set aside this express agreement of the parties. . . . A deal is a deal.” The court further held that it has jurisdiction to hear the whistleblowers’ actions under section 7623 and the authority to enforce the 2017 decisions. Judge David Gustafson, who concurred in the result, wrote that the majority chose to address “the interesting and difficult theoretical question [of] whether we have the power to ‘enforce’ our decisions,” adding that “there [is] no controversy between the parties about this question. . . . We do not know the significance (if any) of what the Court purports to decide today.”

Sec. 7623 Expenses of detection of underpayments and fraud, etc.

United States

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Whistleblowers Get Reduced Awards Based on Terms of Settlement