IRS Whistleblower Program Improvement Act of 2021

I 117TH CONGRESS 1ST SESSION H. R. 4107 To amend the Internal Revenue Code of 1986 to modify and reform rules relating to investigations and whistleblowers, and for other purposes. IN THE HOUSE OF REPRESENTATIVES JUNE 23, 2021 Mr. THOMPSON of California (for himself and Mr. KELLY of Pennsylvania) introduced the following bill; which was referred to the Committee on Ways and Means, and in addition to the Committee on the Budget, for a period to be subsequently determined by the Speaker, in each case for consideration of such provisions as fall within the jurisdiction of the com- mittee concerned A BILL To amend the Internal Revenue Code of 1986 to modify and reform rules relating to investigations and whistle- blowers, and for other purposes. Be it enacted by the Senate and House of Representa- 1 tives of the United States of America in Congress assembled, 2 SECTION 1. SHORT TITLE. 3 This Act may be cited as the ‘‘IRS Whistleblower 4 Program Improvement Act of 2021’’. 5 VerDate Sep 11 2014 01:50 Jul 10, 2021 Jkt 019200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\H4107.IH H4107 kjohnson on DSK79L0C42PROD with BILLS 2 •HR 4107 IH SEC. 2. STANDARD AND SCOPE OF REVIEW OF WHISTLE- 1 BLOWER AWARD DETERMINATION. 2 (a) IN GENERAL.—Paragraph (4) of section 7623(b) 3 of the Internal Revenue Code of 1986 is amended— 4 (1) by striking ‘‘appealed to’’ and inserting ‘‘re- 5 viewed by’’, and 6 (2) by adding at the end the following: ‘‘Any re- 7 view by the Tax Court under the preceding sentence 8 shall be de novo and shall be based on the adminis- 9 trative record established at the time of the original 10 determination and any additional newly discovered 11 or previously unavailable evidence.’’. 12 (b) CONFORMING AMENDMENT.—The heading of 13 paragraph (4) of section 7623(b) of the Internal Revenue 14 Code of 1986 is amended by striking ‘‘APPEAL’’ and in- 15 serting ‘‘REVIEW’’, 16 (c) EFFECTIVE DATE.—The amendments made by 17 this section shall apply to cases under section 7623(b)(4) 18 of the Internal Revenue Code of 1986 which are pending 19 on, or filed on or after, the date of the enactment of this 20 Act. 21 SEC. 3. EXEMPTION FROM SEQUESTRATION. 22 (a) IN GENERAL.—Section 255 of the Balanced 23 Budget and Emergency Deficit Control Act of 1985 (2 24 U.S.C. 905) is amended— 25 VerDate Sep 11 2014 01:50 Jul 10, 2021 Jkt 019200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\H4107.IH H4107 kjohnson on DSK79L0C42PROD with BILLS 3 •HR 4107 IH (1) by redesignating subsection (k) as sub- 1 section (l); and 2 (2) by inserting after subsection (j) the fol- 3 lowing: 4 ‘‘(k) AWARDS TO WHISTLEBLOWERS.—An award au- 5 thorized under section 7623 of the Internal Revenue Code 6 of 1986 shall be exempt from reduction under any order 7 issued under this part.’’. 8 (b) APPLICABILITY.—The amendment made by this 9 section shall apply to any sequestration order issued under 10 the Balanced Budget and Emergency Deficit Control Act 11 of 1985 (2 U.S.C. 900 et seq.) after December 31, 2020. 12 SEC. 4. WHISTLEBLOWER PRIVACY PROTECTIONS. 13 (a) IN GENERAL.—Paragraph (4) of section 7623(b) 14 of the Internal Revenue Code of 1986, as amended by sec- 15 tion 2, is further amended— 16 (1) by striking ‘‘DETERMINATION.—Any deter- 17 mination’’ and inserting ‘‘DETERMINATION.— 18 ‘‘(A) IN GENERAL.—Any determination’’, 19 and 20 (2) by adding at the end the following new sub- 21 paragraph: 22 ‘‘(B) PRESUMPTION OF ANONYMITY.—For 23 purposes of Rule 345(a) of the Tax Court Rules 24 of Practice and Procedure (as in effect on the 25 VerDate Sep 11 2014 01:50 Jul 10, 2021 Jkt 019200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\H4107.IH H4107 kjohnson on DSK79L0C42PROD with BILLS 4 •HR 4107 IH date of the enactment of the IRS Whistleblower 1 Program Improvement Act of 2021), and any 2 successor rule, with respect to any action under 3 this paragraph there shall be a rebuttable pre- 4 sumption that a whistleblower would be subject 5 to retaliation, physical harm, social and profes- 6 sional stigma, or economic distress which out- 7 weighs the counterbalancing societal interests in 8 knowing the whistleblower’s identity.’’. 9 (b) EFFECTIVE DATE.—The amendments made by 10 this section shall apply to petitions filed under Rule 345(a) 11 of the Tax Court Rules of Practice and Procedure which 12 are pending on, or filed on or after, the date of the enact- 13 ment of this Act. 14 SEC. 5. MODIFICATION OF IRS WHISTLEBLOWER REPORT. 15 (a) IN GENERAL.—Section 406(c) of division A of the 16 Tax Relief and Health Care Act of 2006 is amended by 17 striking ‘‘such use,’’ in paragraph (1) and inserting ‘‘such 18 use (which shall include a list and descriptions of the top 19 tax avoidance schemes, not to exceed 10, disclosed by 20 whistleblowers during such year),’’. 21 (b) EFFECTIVE DATE.— The amendment made by 22 this section shall apply to reports the due date for which 23 are after the enactment of this Act. 24 VerDate Sep 11 2014 01:50 Jul 10, 2021 Jkt 019200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\H4107.IH H4107 kjohnson on DSK79L0C42PROD with BILLS 5 •HR 4107 IH SEC. 6. INTEREST ON WHISTLEBLOWER AWARDS. 1 (a) IN GENERAL.—Section 7623(b) of the Internal 2 Revenue Code of 1986 is amended by redesignating para- 3 graphs (5) and (6) as paragraphs (6) and (7), respectively, 4 and by inserting after paragraph (5) the following new 5 paragraph: 6 ‘‘(5) INTEREST.— 7 ‘‘(A) IN GENERAL.—If the Secretary has 8 not provided notice to an individual described in 9 paragraph (1) of a preliminary award deter- 10 mination before the applicable date, the amount 11 of any award under this subsection shall include 12 interest from such date at the overpayment rate 13 under section 6621(a). 14 ‘‘(B) EXCEPTION.—No interest shall ac- 15 crue under this paragraph after the date on 16 which the Secretary provides notice to the indi- 17 vidual of a preliminary award determination. 18 ‘‘(C) APPLICABLE DATE.—For purposes of 19 this paragraph, the applicable date is the date 20 that is 12 months after the first date on 21 which— 22 ‘‘(i) all of the proceeds resulting from 23 actions subject to the award determination 24 have been collected, and 25 ‘‘(ii) either— 26 VerDate Sep 11 2014 01:50 Jul 10, 2021 Jkt 019200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\H4107.IH H4107 kjohnson on DSK79L0C42PROD with BILLS 6 •HR 4107 IH ‘‘(I) the statutory period for fil- 1 ing a claim for refund has expired, or 2 ‘‘(II) the taxpayers subject to the 3 actions and the Secretary have agreed 4 with finality to the tax or other liabil- 5 ities for the periods at issue, and ei- 6 ther the taxpayers have waived the 7 right to file a claim for refund or any 8 claim for refund has been resolved.’’. 9 (b) EFFECTIVE DATE.—The amendments made by 10 this section shall take effect on the date of the enactment 11 of this Act. 12 SEC. 7. RETENTION OF COLLECTED PROCEEDS TO FUND 13 PROGRAM COSTS. 14 (a) IN GENERAL.—Section 7623 of the Internal Rev- 15 enue Code of 1986 is amended by adding at the end the 16 following new subsection: 17 ‘‘(e) RETENTION OF COLLECTED PROCEEDS TO 18 FUND PROGRAM COSTS.— 19 ‘‘(1) IN GENERAL.—The Secretary may retain 20 annually up to 3 percent of the amount of proceeds 21 collected as a result of actions described in sub- 22 section (a) (including any related actions) or from 23 any settlements in response to such actions to be 24 used for program costs (within the meaning of sec- 25 VerDate Sep 11 2014 01:50 Jul 10, 2021 Jkt 019200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6201 E:\BILLS\H4107.IH H4107 kjohnson on DSK79L0C42PROD with BILLS 7 •HR 4107 IH tion 6307(d)(2)) associated with administering the 1 whistleblower programs under this section, including 2 reimbursing the applicable divisions of the Internal 3 Revenue Service for costs associated with inves- 4 tigating whistleblower claims, except that the 5 amount so retained in any year shall not exceed 6 $10,000,000. The Secretary shall keep adequate 7 records regarding amounts so retained and used. 8 ‘‘(2) COORDINATION RULES.—The amount 9 credited as paid by any taxpayer, and any award to 10 a whistleblower, shall be determined without regard 11 to this subsection. 12 ‘‘(3) ADJUSTMENT FOR INFLATION.—In the 13 case of calendar years beginning after 2022, the 14 $10,000,000 amount in paragraph (1) shall be in- 15 creased by an amount equal to— 16 ‘‘(A) such dollar amount, multiplied by 17 ‘‘(B) the cost-of-living adjustment deter- 18 mined under section 1(f)(3) for the calendar 19 year in which the taxable year begins, deter- 20 mined by substituting ‘2021’ for ‘2016’ in sub- 21 paragraph (A)(ii) thereof. 22 If any increase under the preceding sentence is not 23 a multiple of $10,000, such increase shall be round- 24 ed to the next lowest multiple of $10,000.’’. 25 VerDate Sep 11 2014 01:50 Jul 10, 2021 Jkt 019200 PO 00000 Frm 00007 Fmt 6652 Sfmt 6201 E:\BILLS\H4107.IH H4107 kjohnson on DSK79L0C42PROD with BILLS 8 •HR 4107 IH (b) EFFECTIVE DATE.—The amendment made by 1 this section shall apply to proceeds collected after the date 2 of the enactment of this Act. 3 SEC. 8. CORRECTION REGARDING DEDUCTIONS FOR AT- 4 TORNEY’S FEES. 5 (a) IN GENERAL.—Section 62(a)(21)(A)(i) of the In- 6 ternal Revenue Code of 1986 is amended by striking 7 ‘‘7623(b)’’ and inserting ‘‘7623’’. 8 (b) EFFECTIVE DATE.—The amendment made by 9 this section shall apply to taxable years ending after the 10 date of the enactment of this Act. 11 Æ VerDate Sep 11 2014 01:50 Jul 10, 2021 Jkt 019200 PO 00000 Frm 00008 Fmt 6652 Sfmt 6301 E:\BILLS\H4107.IH H4107 kjohnson on DSK79L0C42PROD with BILLS