Michael Lissack v. Commissioner of Internal Revenue

Section 7623 of Title 26 governs the Internal Revenue Service’s (hereinafter the “IRS”) ability to pay awards to whistleblowers. Prior to 2006, awards under § 7623 were entirely discretionary and failed to attract well placed whistleblowers due to the difficulty in actually receiving an award. In order to attract well placed whistleblowers, Congress amended § 7623 in 2006, requiring the IRS to pay awards where the IRS proceeds with any administrative or judicial action based on the whistleblower’s information, removing the IRS’s discretion of whether to pay an award when § 7623(b) applies. The statutory question underlying this petition is whether the IRS is required to pay an award where a whistleblower’s information causes the IRS to open an audit of the taxpayer, but the IRS ultimately makes an adjustment to an issue other than the issue raised by the whistleblower. Under well-established principles of statutory construction, the answer would appear to be yes, as the IRS has proceeded in an administrative action based on the whistleblower’s information (the audit) and collected additional proceeds from that administrative action. A panel of the D.C. Circuit answered “no” under Chevron because “the statute does not conclusively answer whether examinations into distinct tax issues” can be separate administrative actions. The questions presented are: 1. Whether, under a proper application of Chevron, § 7623(b) requires the IRS to pay an award where the only reason the IRS opened the audit of the