The first 140 years

• What is now 26 USC 7623(a) has been on the books since March 1867, allowing the Secretary of the Treasury to pay such amounts as he deems necessary “for detecting and bringing to trial and punishment persons guilty of violating the internal revenue laws or conniving at the same.”
• Prior to 2006 the only substantive change since 1867 was in 1996, when a clause was added allowing payments to be made “for detecting underpayments of tax” as another basis for an informant award, and making the payments from proceeds collected rather than appropriated funds.
• The Treasury Department issued a regulation to implement the law, and the IRS has had a series of policies to define the scope and procedures for the program.
• The Courts have considered attempts to challenge award decisions under this law, and uniformly found that the discretion to make, or not make, an award is essentially not reviewable.

The Tax Relief and Health Care Act of 2006

• In December of 2006, the Tax Relief and Health Care Act of 2006 made fundamental changes to the IRS informant awards program.
• The key change in the law was the addition of a new section 7623(b), under which awards are no longer discretionary.
  • The new law says that the whistleblower shall receive 15 to 30 percent of the collected proceeds.
• The amendment added whistleblower appeal rights.
• The IRS was also required to create a Whistleblower Office reporting to the Commissioner to implement the law. 

Pre-amendment program

• The pre-amendment program was discretionary, and was governed by policies that defined award percentages and set a cap.
• The maximum award percentage was 15% of collected taxes and penalties,
• Maximum award was limited to $10 million
• Awards were generally not paid when the disclosures were based on public information, or when the informant participated in the tax non-compliance
• The whistleblower was not required to be an individual.
• There was no requirement that the informant sign a Form 211

Informant Award (Whistleblower)