Tax Court Cannot Reopen Whistleblower Award Claim

By James A. Beavers, J.D., LL.M., CPA, CGMA

Procedure & Administration

In a case of first impression, the Tax Court held that it could not reopen a whistleblower claim where the IRS decided not to pursue the case and never instituted an action or collected any proceeds.


Raymond Cohen, a CPA, filed a whistleblower claim with the IRS regarding alleged tax law violations when his wife served as an executrix for an estate. The estate held uncashed stock dividend checks issued by a public corporation. Cohen’s wife requested the corporation honor those checks and pay all unpaid dividends. The corporation would not release dividends without Cohen’s wife presenting an original check issued within the last 10 years.

Cohen suspected that the corporation customarily retained possession of unclaimed proceeds resulting from uncashed dividend checks and unredeemed bonds (unclaimed assets). In 2009, he requested information from the New York state comptroller under New York’s Freedom of Information Law. The comptroller provided Cohen the amount of uncashed dividends that the corporation had reported for certain stocks. The corporation had not reported any uncashed dividends for those stocks from 2005 to 2008.

Cohen also reviewed allegations in pleadings from a civil proceeding against the corporation (see generally Frankel v. Cole, No. 06-cv-439 (E.D.N.Y. 9/7/07)). Cohen asserted that the allegations in that civil case corroborate his allegation that the corporation possesses unclaimed assets worth more than $700 million. According to Cohen, the corporation was obligated by law to turn over the unclaimed assets to the state and, in addition, the unclaimed assets the corporation retained constituted unreported income for federal tax purposes.

Based on this information, Cohen filed a whistleblower claim with the IRS. The IRS notified him that the matter had been assigned to its Whistleblower Office in Ogden, Utah. The Whistleblower Office evaluated the claim to determine whether an investigation was warranted and an award was appropriate. A few weeks later, the Whistleblower Office informed Cohen that he was not eligible for an award because no proceeds were collected. He requested the Whistleblower Office to reconsider the claim, but the Whistleblower Office refused, noting that he based his claim on publicly available information.

Cohen filed a petition and an amended petition in Tax Court, requesting that the court order the IRS to reopen the claim. Cohen contended that the IRS abused its discretion by not acting on his information. The IRS argued that the Tax Court can provide relief under Sec. 7623(b) with respect to a whistleblower claim only after the IRS initiates an administrative or judicial action and collects proceeds.

The Tax Court’s Decision

The Tax Court held that no relief is available under Sec. 7623(b) when a taxpayer alleges that the IRS denied a whistleblower claim without initiating an administrative or judicial action or collecting proceeds. Therefore, it could not reopen Cohen’s case.

The Tax Court, citing its decision in Cooper, 136 T.C. 597, 600 (2011), explained that its jurisdiction under Sec. 7623(b) does not contemplate that it review the IRS’s determinations of the alleged tax liability to which a whistleblower claim pertains, and Sec. 7623 does not confer authority on the court to direct the IRS to commence an administrative or judicial action. According to the Tax Court, Cohen had simply not met the threshold for relief in the statute, so none was available. However, the Tax Court addressed three arguments Cohen made why he should nonetheless be provided relief.

First, Cohen argued that he was entitled to relief because the IRS did not comply with the Administrative Procedure Act (APA). The Tax Court found that this argument failed because the APA did not create a right of action or expand the court’s jurisdiction. Second, Cohen contended that he was entitled to a legal and factual explanation of the IRS’s denial of the claim. The Tax Court’s reply to this argument was that the statute did not require this and the court itself had never held that an explanation was required. Finally, Cohen claimed that he was entitled to relief on equitable grounds. The Tax Court rejected this argument on the grounds that it is not a court of equity and Sec. 7623 does not provide for equitable relief.


As the Tax Court correctly concludes, under Sec. 7623, the IRS controls whether a whistleblower claim is worthy of being pursued, and, if it decides it is not, the person filing the claim is out of luck. Although it seems clear the IRS made the right decision in this case, the fact that the law provides for no review, administratively or judicially, of an IRS decision not to pursue a case is certain to continue to cause controversy. This is especially true given the general perception that the program has not been as effective as hoped, in large part due to the poor performance of the IRS Whistleblower Office in handling claims (see, e.g., Treasury Inspector General for Tax Administration Rep’t No. 2012-30-045 (April 30, 2012), and Government Accountability Office Rep’t GAO-11-683 (August 2011)).

Cohen , 139 T.C. No. 12 (2012)


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