WASHINGTON, D.C. | January 10, 2025 — Today, the U.S. Court of Appeals for the District of Columbia Circuit released a decision in the Internal Revenue Service (IRS) whistleblower case Lissack v. Commissioner. The Court ruled that whistleblower Michael Lissack, who provided the IRS with information on improper tax deductions made by a condominium development corporation, was not entitled to a whistleblower award because the IRS, which opened an investigation into the developer after Lissack’s disclosure, collected proceeds relating to violations different than those alleged by Lissack.
“The long-awaited Lissack decision arrived as somewhat of a damp squib for whistleblowers with good news, bad news and no-news,” says Dean Zerbe, tax whistleblower attorney and Senior Policy Analyst at National Whistleblower Center (NWC).
The no-news from the decision is that the D.C. Circuit took a pass on the question of standard of review for IRS whistleblower award cases. In an amicus brief filed in the case, NWC argued that “a review of the statute through its legislative history and relevant context leaves no doubt that the meaning of the words in the statute’s text when adopted by Congress meant to provide for de novo review for [whistleblower award] claims.”
“Congress needs to move forward on the bipartisan, bicameral IRS Whistleblower Program Improvement Act to ensure the proper standard of review of de novo as was intended by Congress when it passed the 2006 amendments to the tax whistleblower law,” adds Zerbe, who played a key role in drafting the amendments as Senior Counsel and Tax Counsel on the Senate Finance Committee for Senator Charles E. Grassley.
The good news from the decision is that the Court made clear that judicial review by the Tax Court was appropriate in the case because the IRS took some action based on the whistleblower’s submission – even if ultimately an award determination was not made.
“The D.C. Circuit in Lissack finally put to bed some of the IRS’ more fervent views on the Lissack case and the question of Tax Court jurisdiction of whistleblower appeals,” says Zerbe. “This holding by the court in Lissack will clear up questions on Tax Court jurisdiction for a number of whistleblowers.”
The bad news from the Lissack decision is that the D.C. Circuit took a narrow approach in deferring to the IRS’ definitions of the statutory terms of “any administrative action” and “any related action” in ruling that that Lissack was not entitled to an award when his disclosure caused the IRS to open an investigation into the condominium development corporation which resulted in the collection of $60 million in unpaid taxes.
“It is unfortunate that the Court’s reasoning in Lissack doesn’t reflect the reality of tax administration,” adds Zerbe. “As recent TIGTA reports have shown in the IRS audits of high-wealth taxpayers – just identifying a taxpayer who is not in compliance with the tax laws — is a difficult task for the IRS. Whistleblowers who bring to light a previously unknown tax cheat – even if not for the direct issue raised by the whistleblower – are of significant value for the IRS and overall tax enforcement. It is completely understandable that Congress wanted such whistleblowers to be awarded – as they have historically been awarded under the tax whistleblower program prior to 2006.”
“I am deeply troubled that the court in Lissack invokes Skidmore deference to the IRS interpretation of the whistleblower statute – citing the IRS’ experience and informed judgment,” adds NWC Chairman of the Board Stephen M. Kohn, who has represented a number of IRS whistleblowers alongside Zerbe. “The reality is that the IRS’ experience and informed judgment of administering a whistleblower award program has historically been absent. It is highly questionable for the courts to look at the historical IRS administration of the tax whistleblower program as a repository of wisdom on administration of whistleblower award programs.”
Mr. Zerbe and Mr. Kohn are available for comment. For more information, contact NWC at info@whistleblowers.org.
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NWC is the leading nonprofit working with whistleblowers worldwide to fight corruption and protect people and the environment. For over 30 years, NWC has won policies to protect whistleblowers from retaliation and reward them for helping deliver criminal and civil penalties against wrongdoers.
