What This Bill Does
This bill changes how the IRS handles whistleblower awards. It modifies the rules for reviewing whistleblower award decisions, protects whistleblower privacy in court, adds interest payments to delayed awards, and ensures whistleblower awards are not reduced by automatic budget cuts.
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Who It Affects
People who report tax violations to the IRS and receive financial awards for helping recover unpaid taxes.
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Key Provisions
* The Tax Court must conduct a complete new review of whistleblower award decisions based on the original case file and any new evidence, rather than simply reviewing an appeal (Sec. 2)
* Whistleblowers can request to keep their identities private in Tax Court proceedings unless the court finds an unusually strong public interest that outweighs harm to the whistleblower (Sec. 4)
* If the IRS does not notify a whistleblower of their preliminary award within 12 months of when all money is collected and tax issues are settled, the award must include interest calculated at the IRS overpayment rate (Sec. 6)
* Whistleblower awards cannot be reduced by automatic government budget cuts (Sec. 3)
* The IRS annual report to Congress must list and describe the top 10 tax avoidance schemes reported by whistleblowers each year (Sec. 5)
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What Changes
Tax Court review of whistleblower awards becomes a fresh review rather than an appeal. Whistleblowers gain privacy protections in court. Delayed awards will earn interest. Whistleblower awards become protected from budget cuts. The IRS will publicly identify major tax schemes that whistleblowers uncover.
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Important Definitions
None defined in bill text.
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Effective Date
Most provisions apply to cases pending or filed after the bill becomes law. The interest provision takes effect 180 days after the bill becomes law. Budget cut protections apply to budget orders issued after December 31, 2022.
II
118TH CONGRESS
1ST SESSION
S. 625
To amend the Internal Revenue Code of 1986 to modify and reform rules
relating to investigations and whistleblowers, and for other purposes.
IN THE SENATE OF THE UNITED STATES
MARCH 2, 2023
Mr. GRASSLEY (for himself, Mr. WYDEN, Mr. WICKER, and Mr. CARDIN) in-
troduced the following bill; which was read twice and referred to the Com-
mittee on Finance
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 2023’’.
5
SEC. 2. STANDARD AND SCOPE OF REVIEW OF WHISTLE-
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BLOWER AWARD DETERMINATION.
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(a) IN GENERAL.—Paragraph (4) of section 7623(b)
8
of the Internal Revenue Code of 1986 is amended—
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(1) by striking ‘‘appealed to’’ and inserting ‘‘re-
1
viewed by’’; and
2
(2) by adding at the end the following: ‘‘Any re-
3
view by the Tax Court under the preceding sentence
4
shall be de novo and shall be based on the adminis-
5
trative record established at the time of the original
6
determination and any additional newly discovered
7
or previously unavailable evidence.’’.
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(b) CONFORMING AMENDMENT.—The heading of
9
paragraph (4) of section 7623(b) of the Internal Revenue
10
Code of 1986 is amended by striking ‘‘APPEAL’’ and in-
11
serting ‘‘REVIEW’’.
12
(c) EFFECTIVE DATE.—The amendments made by
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this section shall apply to cases under section 7623(b)(4)
14
of the Internal Revenue Code of 1986 which are pending
15
on, or filed on or after, the date of the enactment of this
16
Act.
17
SEC. 3. EXEMPTION FROM SEQUESTRATION.
18
(a) IN GENERAL.—Section 255 of the Balanced
19
Budget and Emergency Deficit Control Act of 1985 (2
20
U.S.C. 905) is amended—
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(1) by redesignating subsection (k) as sub-
22
section (l); and
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(2) by inserting after subsection (j) the fol-
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lowing:
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‘‘(k) AWARDS TO WHISTLEBLOWERS.—An award au-
1
thorized under section 7623 of the Internal Revenue Code
2
of 1986 shall be exempt from reduction under any order
3
issued under this part.’’.
4
(b) APPLICABILITY.—The amendment made by this
5
section shall apply to any sequestration order issued under
6
the Balanced Budget and Emergency Deficit Control Act
7
of 1985 (2 U.S.C. 900 et seq.) after December 31, 2022.
8
SEC. 4. WHISTLEBLOWER PRIVACY PROTECTIONS.
9
(a) IN GENERAL.—Paragraph (6) of section 7623(b)
10
of the Internal Revenue Code of 1986 is amended by add-
11
ing at the end the following new subparagraph:
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‘‘(D) WHISTLEBLOWER
ANONYMITY
BE-
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FORE THE TAX COURT.—Notwithstanding sec-
14
tions 7458 and 7461, the Tax Court shall grant
15
a whistleblower’s request to proceed anony-
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mously before the Court for all proceedings
17
under this section absent a finding by the Tax
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Court that a heightened societal interest exists
19
for disclosing the whistleblower’s identity, ex-
20
ceeding the normal interest in knowing a peti-
21
tioner’s identity. Should the Tax Court find
22
that such a heightened societal interest exists,
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such interest shall be balanced against the po-
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•S 625 IS
tential harm disclosure could cause to the whis-
1
tleblower.’’.
2
(b) EFFECTIVE DATE.—The amendments made by
3
this section shall apply to petitions filed with the Tax
4
Court which are pending on, or filed on or after, the date
5
of the enactment of this Act.
6
SEC. 5. MODIFICATION OF IRS WHISTLEBLOWER REPORT.
7
(a) IN GENERAL.—Section 406(c) of division A of the
8
Tax Relief and Health Care Act of 2006 is amended by
9
striking ‘‘such use,’’ in paragraph (1) and inserting ‘‘such
10
use (which shall include a list and descriptions of the top
11
tax avoidance schemes, not to exceed 10, disclosed by
12
whistleblowers during such year),’’.
13
(b) EFFECTIVE DATE.— The amendment made by
14
this section shall apply to reports the due date for which
15
are after the enactment of this Act.
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SEC. 6. INTEREST ON WHISTLEBLOWER AWARDS.
17
(a) IN GENERAL.—Section 7623(b) of the Internal
18
Revenue Code of 1986 is amended by redesignating para-
19
graphs (5) and (6) as paragraphs (6) and (7), respectively,
20
and by inserting after paragraph (4) the following new
21
paragraph:
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‘‘(5) INTEREST.—
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‘‘(A) IN GENERAL.—If the Secretary has
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not provided notice to an individual described in
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paragraph (1) of a preliminary award rec-
1
ommendation before the applicable date, the
2
amount of any award under this subsection
3
shall include interest from such date at the
4
overpayment rate under section 6621(a).
5
‘‘(B) EXCEPTION.—No interest shall ac-
6
crue under this paragraph after the date on
7
which the Secretary provides notice to the indi-
8
vidual of a preliminary award recommendation.
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‘‘(C) APPLICABLE DATE.—For purposes of
10
this paragraph, the applicable date is the date
11
that is 12 months after the first date on
12
which—
13
‘‘(i) all of the proceeds resulting from
14
actions subject to the award recommenda-
15
tion have been collected, and
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‘‘(ii) either—
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‘‘(I) the statutory period for fil-
18
ing a claim for refund has expired, or
19
‘‘(II) the taxpayers subject to the
20
actions and the Secretary have agreed
21
with finality to the tax or other liabil-
22
ities for the periods at issue, and ei-
23
ther the taxpayers have waived the
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right to file a claim for refund or any
1
claim for refund has been resolved.’’.
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(b) EFFECTIVE DATE.—
3
(1) IN GENERAL.—The amendments made by
4
this section shall take effect 180 days after the date
5
of the enactment of this Act.
6
(2) SPECIAL RULE.—In the case of a claim for
7
a whistleblower award under section 7623(b) of the
8
Internal Revenue Code of 1986 with respect to
9
which, as of the date described in paragraph (1)—
10
(A) the Secretary of the Treasury has not
11
provided notice to the individual of a prelimi-
12
nary award recommendation as described in
13
paragraph (5)(A) of such section, as added by
14
this Act, and
15
(B) the applicable date provided in para-
16
graph (5)(C) of such section, as so added, has
17
passed,
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the applicable date for purposes of such paragraph
19
(5)(C) is the date that is 12 months after the date
20
described in paragraph (1).
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SEC. 7. CORRECTION REGARDING DEDUCTIONS FOR AT-
1
TORNEY’S FEES.
2
(a) IN GENERAL.—Section 62(a)(21)(A)(i) of the In-
3
ternal Revenue Code of 1986 is amended by striking
4
‘‘7623(b)’’ and inserting ‘‘7623’’.
5
(b) EFFECTIVE DATE.—The amendment made by
6
this section shall apply to taxable years ending after the
7
date of the enactment of this Act.
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Æ
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