It was a fairly busy week at the Tax Court June 15, with seven designated orders of which three involved whistleblower actions. The lessons that can be gleaned from them go beyond just the whistleblower statute (IRC § 7623). They touch on two issues of increasing importance in non-deficiency cases: the administrative record and delays in the IRS reaching a “determination.” Let’s start by looking at the determination issue.
Can A Writ of Mandamus Get You Into Tax Court? Whistleblower 3425-19W v. C.I.R., Dkt. # 3425-19W (here)
Usually, the “ticket” someone needs to get into Tax Court entails a “determination” by the IRS of some variety -for example a Notice of Deficiency (determining, believe it or not, a deficiency) or a Notice of Determination in a Collection Due Process case (which can determine any number of things, but usually whether to sustain a levy or lien). There are, however, some tickets to Tax Court that jump past requiring a determination from the IRS, particularly when the IRS has taken a while to conclusively respond.
One such ticket is Innocent Spouse relief with jurisdiction invoked under 6015(e)(1)(A)(I)(ii). Because of the Taxpayer First Act’s changes to the Tax Court’s scope of review (See IRC 6015(e)(7)(A)), there remain some unresolved issues for how the Court is supposed to review claims that come in without a determination being reached. PT has covered these issues here and here, among others.
This order raises a very interesting question about whether a Whistleblower action may also get into Tax Court without a determination being reached, albeit in a very different manner than the Innocent Spouse avenue. Unlike IRC § 6015, the Whistleblower statute does not expressly provide that the Tax Court has jurisdiction at a set point of time after filing a whistleblower claim. In fact, the statute could be read as saying that the Tax Court only has jurisdiction after a final determination is reached by the IRS (see IRC § 7623(b)(4)). “Whistleblower 3425-19W” had not received a determination by the time the petition was filed… easy “Dismiss for Lack of Jurisdiction” win by IRS, right?
In many instances, petitioners might not care that much about the IRS dragging their feet on reaching a determination. Almost uniformly if you have a chance of getting money from the government there is a limit on how long the IRS can delay reaching a decision before you have access to Court (this would be true, for example, in the aforementioned Innocent Spouse cases, but also in a claim for refund in federal court: see IRC § 6532(a)(1)). In collection actions the best you can really do is not owe since the Tax Court has held that it doesn’t have refund jurisdiction (see Greene-Thapedi v. Commissioner, 126 T.C. 1 (2006)), so there is (generally) less of an issue with the IRS failing to reach a timely determination.
But what about whistleblower actions? Whistleblowers want a cut of the proceeds they helped the IRS to collect: could the IRS just let the whistleblower claim languish forever, without reaching a determination of any variety -essentially a de facto denial of an award, but without court review? I have no idea how long it has been since “Whistleblower 3425-19W” made a claim for a whistleblower award, but let’s assume it has been years since the IRS has made a determination one way or another. What recourse does this individual have?
Creatively, perhaps, the individual in limbo can have the Tax Court order the IRS to reach a determination through a writ of mandamus. At least, that’s what Whistleblower 3425-19W is trying to do here. It isn’t clear (yet) if that will work out, for a number of reasons. Two that come to mind are (1) the general requirements for a writ of mandamus, and (2) the ever-looming metaphysical issue of exactly what jurisdictional limits are imposed on the Tax Court.
A refresher may be helpful for those that only dimly remember the phrase “writ of mandamus” from Marbury v. Madison. At its simplest, a writ of mandamus is a court order that (in this context) an agency take or refrain from taking a particular action. It isn’t something you see frequently in the tax context: it is an “extraordinary” remedy that has separation of power concerns written all over it. At least three threshold conditions must be met for a court to even considering issuing a writ of mandamus: (1) no other means to relief without the writ, (2) petitioner demonstrates clear and indisputable right to the writ, and (3) even when those two conditions are met, the Court has to think that a writ is appropriate under the given circumstances. See Cheney v. U.S. Dist. Court for D.C., 542 U.S. 367, 380 (2004).
This to my mind, these conditions rule out most Tax Court cases.
(As an aside, I have actually been counsel on a tax case in federal district court where the complaint sought a writ of mandamus. If nothing else, it appears to kick the DOJ into action. Our case settled favorably without ever getting anywhere even close to the merits.)
But even if there is a good argument that a writ of mandamus would generally be appropriate, you run into a second issue if your forum is the Tax Court: does the Tax Court have the power to issue a writ for the matter at hand? The All Writs Act, (28 U.S.C. 1651(a)) is really short. Go ahead and read it for yourself. And it seems straightforward: when a Court needs to issue a writ, it can do so. The Act applies to (1) the Supreme Court, and (2) all Courts established by Acts of Congress (generally referred to as Article I Courts). The Tax Court is an Article I court, established by Congress, so one would think that solves the issue of whether the Tax Court can issue writs.
Here, however, we may have something of a Catch-22. The Tax Court (maybe) doesn’t have jurisdiction over the underlying Whistleblower action until a final determination is issued. So in this instance, unless there is some variety of quasi stand-alone jurisdiction under the All Writs Act, you (arguably) never could set foot in the door of the Tax Court to ask that they issue such a writ without the determination (that you are arguing should be issued) in the first place.
Judge Toro’s order is short (essentially a page) and is largely just asking for the parties to address this question by looking at the All Writs Act and, especially, Telecommunications Research and Action Center [TRAC] v. F.C.C., 750 F.2d. 70 (D.C. Cir. 1984).
TRAC appears to provide some guidance on this issue, though in a different and somewhat confusing context. TRAC involved the lack of a final order from the FCC. Apparently by statute the Court of Appeals has original jurisdiction over final orders from the FCC in these matters (see 28 U.S.C. 2342(1)). Without such a final order, did the Court of Appeals have jurisdiction to issue a writ (such writ producing a final order, and thus essentially enabling jurisdiction)? TRAC didn’t end up conclusively answering the question, because the Court never ended up having to issue a writ or deciding it didn’t have the power to: the FCC basically promised it would reach a determination sooner rather than later, and the Court kept things in a holding pattern until it happened.
However, TRAC did provide a wealth of analysis, replete with Supreme Court citations, on why it likely had jurisdiction to issue such a writ. Some of the key quotes from the TRAC decision that petitioners may want to consider include:
“Lack of finality [i.e. a final FCC order] however, does not automatically preclude our jurisdiction.” (Referencing Abbot Laboratories v. Gardner, 387 U.S. 136, 149-50, (1967) for the proposition that the finality doctrine should be flexibly applied).
“In other words, [the All Writs Act] empowers a federal court to issue writs of mandamus necessary to protect its prospective jurisdiction.” (In the context of an appellate court issuing writs in district court cases where appeal has not yet been perfected.)
Finally, TRAC also finds support for the proposition that it has jurisdiction to issue a writ of mandamus because the Court of Appeals has “exclusive” jurisdiction over these FCC final orders… which is arguably the same as the Tax Court in whistleblower actions.
The Tax Court has something of a reputation for taking a narrow view of its jurisdiction, and the jurisdictional barriers to entry. We’ll see if the whistleblower arena breaks some new ground.
While Judge Toro’s order in Whistleblower 3425-19W was short but brought up a lot of questions, Vallee is long (20 pages) but likely not worth as much detailed analysis. However, it is worth mentioning for those who want to get a glimpse into the inner workings of the IRS, and how different areas of the IRS might collaborate on complicated cases. As a practitioner, Vallee may be helpful in determining what to ask for in discovery (or possibly a FOIA request), where particularity is important.
Vallee also highlights the importance of closely reading the IRS administrative record, noting potential inconsistencies, and putting them at issue (in this instance, mostly having to do with emails). In Vallee the petitioner’s close reading of the administrative record doesn’t ultimately lead to a winning case, only a delay of losing. Nevertheless it stands for the proposition that the need to keep good records can cut both ways in some tax contexts, and practitioners shouldn’t let the IRS off the hook when their records can be put at issue (see designated orders covered here).
Doyle & Moynihan provides another important practical lesson: how to actually raise the issue of the administrative record in motion practice. In Doyle & Moynihan, the petitioners think the IRS has omitted certain information from the administrative record that should be in it (from personal experience I know this can certainly happen). Petitioners try two different methods to bring this to the Tax Court’s attention: (1) a motion to strike the declaration of the IRS Whistleblower Officer certification, and (2) a request for a pretrial conference. Neither are (in this instance) the proper way to go.
The motion to strike (which Judge Gustafson characterizes as, in fact, a sur-reply to an IRS motion of summary judgment) fails because the correct approach is not to strike the IRS certification of the record, but to propose a supplement of the record with the allegedly missing material. So really, at this point, the motion isn’t asking the Court to do what you want it to do. And it isn’t time to ask the Court for what you actually want it to do either, because there is an outstanding summary judgment motion to be decided.
The second approach (a pretrial conference) also is shot down – though as a general rule Judge Gustafson appears to welcome the approach of requesting a pretrial conference. In this instance, however, the issues that petitioners want to raise in the pretrial conference go beyond the pleadings and the issues that the Tax Court is currently dealing with. Take it one day and one issue at a time (it is possible the case will/can be resolved without getting at the issues petitioner wants to discuss). Valuable advice we can all use right now…