Thomas Shands v. Commissioner of Internal Revenue

In 2006, Congress amended 26 U.S.C. § 7623(b)(1) to require the Internal Revenue Service (“IRS”) to issue a whistleblower award when it recovers proceeds as a result of administrative or judicial action based on information provided by a whistleblower. The amendment divests the IRS of any discretion to deny an award under § 7623(b)(1) when the statutory conditions are met. The IRS maintains that it can avoid the § 7623(b)(1) mandate by denying a whistleblower award based on an assertion that it took no action on the whistleblower’s information. The IRS further contends that such a denial is insulated from judicial review. According to the IRS, an assertion that it took no action based on whistleblower information deprives the United States Tax Court of subject matter jurisdiction to review the denial under Li v. Commissioner of Internal Revenue, 22 F.4th 1014 (D.C. Cir. 2022). The questions presented are as follows: I. Whether the IRS can deprive the United States Tax Court of subject matter jurisdiction to review the IRS’s denial of a mandatory whistleblower award under § 7623(b)(1) by claiming it took no action? II. Whether the IRS can deny a mandatory whistleblower award under § 7623(b)(1) by claiming it took no action, even when the undisputed facts demonstrate that the IRS did take action?