Proposed Legislation to Enact "IRS Whistleblower Program Improvement Act of 2023" (3/12/23)

Senator Grassley (for himself and for Senators Wyden, Wicker, and Carden) has introduced a bill titled ‘‘IRS Whistleblower Program Improvement Act of 2023,’’ here. Senator Grassley’s press release about the bill is here. If enacted, which I speculate is likely, the following significant changes to the WB Program will apply (note that Senator Grassley’s press release is light on details):

• amend § 7623(e)(7) to change the standard for review of whistleblower awards to de novo based upon “the administrative record established at the time of the original determination and any additional newly discovered or previously unavailable evidence.’’ Bill § 2. This standard and scope of review are the same as for innocent spouse Tax Court review under § 6015(e)(7), which has recently been interpreted in relevant part as to evidence outside the administrative record. Thomas v. Commissioner, 160 T.C. ___ No. 4  (2023), here. The effective date is for cases "pending on, or filed after, the date of enactment."

• exempt whistleblower awards from sequestration by adding 2 U.S.C. § 905(k). Bill § 3. This provision applies to any sequestration order issued after December 31, 2022. The IRS website for Whistleblower Award Sequestration, here, says that the sequestration rate for 2023 is 5.7% that applies “unless and until a law is enacted that cancels or otherwise affects the sequester, at which time the sequestration reduction rate is subject to change.”

• add § 7623(b)(6)(D) to provide a general rule that the Tax Court is to grant whistleblower requests for anonymity absent “a finding by the Tax Court that a heightened societal interest exists for disclosing the whistleblower’s identity, exceeding the normal interest in knowing a petitioner’s identity.” Bill § 4. The effective date is for “petitions filed with the Tax Court which are pending on, or filed on or after, the date of the enactment of this Act.” I am not sure how this will apply to WB petitions already filed naming the whistleblower.

• requiring the Whistleblower Office annual report to list “the top tax avoidance schemes, not to exceed 10, disclosed by whistleblowers during such year.” Bill § 5.

• requiring the interest on the WB award if the award payment is delayed substantially beyond the IRS’s collection of the taxpayer’s collected proceeds with finality. Bill § 6. The effective date is generally 180 days after enactment of the bill.

• A correcting amendment to § 62(a)(21)(A)(i), providing deductions from gross income in calculating adjusted gross income, is made to change “7623(b)” to “7623” which would have the effect of including the discretionary award under § 7623(a) for attorney’s fees. Bill § 7. This change is effective for “taxable years ending after the date of the enactment of this Act.”