Senators propose bill to strengthen IRS whistleblower program

Sen. Chuck Grassley, R-Iowa, and Ron Wyden, D-Oregon, who chairs the Senate Finance Committee, introduced a bipartisan bill Tuesday to beef up the Internal Revenue Service’s whistleblower program and protect tax tipsters.

The IRS Whistleblower Program Improvement Act includes seven measures to bolster the already successful program, which has brought in over $6 billion from individuals and businesses that were trying to avoid taxes. The bill would provide for “de novo” review in appeals heard by the U.S. Tax Court, permitting new evidence to be admitted to the record, and providing a presumption of anonymity for whistleblowers before the court. The legislation would also exempt whistleblower awards from congressional budget sequestration measures, which could reduce the amounts, and provide that interest be paid to awardees if the award has not been paid within one year. It would also bring the tax treatment of attorney’s fees into line with other whistleblower programs, and permit the IRS to retain some proceeds for the administration of the program. Lastly, the bill would improve the program’s annual report to Congress to enable lawmakers to identify areas that are most in need of attention.

While the IRS whistleblower program has encouraged tipsters to come forward by providing them with up to 30% of the tax proceeds recovered from their tips, whistleblowers have complained over the years about lack of responsiveness and prejudice against them at the agency. However, Congress has taken steps since 2006 to improve the progam by increasing the rewards, making them mandatory in some instances, setting up a dedicated IRS whistleblower office, and providing for appeals.

“The IRS whistleblower program has been a genuine success for American taxpayers,” said Grassley, who has been a longtime proponent of the program, in a statement. “We ought to do whatever we can to ensure its continued success, so tax dodgers and fraudsters pay what they owe. Toward this end, it’s vital that whistleblowers who come forward are protected and treated fairly.”

On top of the $6 billion that’s been directly recovered through the IRS whistleblower program, the program has led to additional billions of dollars from the indirect impact on taxpayer compliance, such as the IRS’s Offshore Voluntary Disclosure Program, which was created as a direct result of information brought to the IRS by whistleblowers.

“IRS whistleblowers play a critical role in protecting taxpayer dollars and finding tax cheats stealing from the American people. It would be far more difficult to uncover these illegal schemes without their courage, and our bill would strengthen protections for these brave Americans when they come forward,” Wyden said in a statement.

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The bill is supported by the National Whistleblower Center. “NWC fully supports the introduction of the IRS Whistleblower Program Improvement Act,” National Whistleblower Center Executive Director Siri Nelson said in a statement. “By adopting these important reforms to the successful IRS whistleblower awards program, Congress will provide a much improved avenue for whistleblowers who wish to come forward to report evidence of tax fraud. This is a huge step for whistleblowers and NWC thanks Senator Grassley for his continued efforts to protect whistleblowers.”