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Senator Grassley Criticizes Proposed New IRS Whistleblower Regulations

The Internal Revenue Code has contained a limited qui tam whistleblower provision for many years. The Tax Relief and Health Care Act of 2006 greatly expanded these provisions.  The new provisions are contained in section 7623(b) of the Code.  Among other things, a whistleblower can receive an awared equal to 15% to 30% of the taxes recovered by the IRS.

In December 2012, the IRS proposed extensive new regulations implementing section 7623(b).  While the regulations are certainly a step in the right direction, they have been criticized by Senator Chuck Grassley of Iowa, who authored section 7623(b).  In his letter to the IRS commenting on the proposed regulations, Senator Grassley stated:

I was cautiously optimistic that the new regulations would make real strides in advancing the whistleblower program.  I hoped they would provide some assurance to whistleblowers that they are seen as a valuable asset for addressing tax fraud.  Unfortunately, these proposed regulations are likely to further concerns in the whistleblower community that the IRS and Treasury view whistleblowers with hostility.

Senator Grassley's letter goes on to list his specific concerns.

It will be interesting to see how the IRS responds to these criticisms.  But even if the IRS issues the regulation as currently written, the ability of whistleblowers to report tax fraud and to receive rewards will be significantly enhanced.

David C. Holmes is a Houston employment lawyer with The Law Offices of David C. Holmes