What This Bill Does
This bill changes the rules for how the Internal Revenue Service handles whistleblower programs and whistleblower awards. The bill modifies how whistleblower award decisions are reviewed in Tax Court (a special court that handles tax cases), adds privacy protections for whistleblowers, and requires interest payments on delayed award decisions.
Who It Affects
Individuals who report tax violations to the IRS and receive whistleblower awards. The Internal Revenue Service and Tax Court. The Secretary of the Treasury.
Key Provisions
• Tax Court must review whistleblower award decisions from scratch using all available evidence, rather than just looking at whether the original decision followed proper procedures (Sec. 2)
• Whistleblower awards cannot be reduced by budget cuts ordered by the federal government (Sec. 3)
• Whistleblowers can ask Tax Court to keep their identity secret during court cases, unless the court finds a strong public reason to reveal who they are (Sec. 4)
• The IRS must include in its yearly whistleblower report a list and descriptions of the top 10 tax avoidance schemes reported by whistleblowers that year (Sec. 5)
• If the IRS takes more than 12 months after collecting money from a tax case to tell a whistleblower about their preliminary award, the whistleblower's payment must include interest at the overpayment rate (Sec. 6)
What Changes
The way Tax Court handles whistleblower award cases changes from an appeal process to a full review process. Whistleblower awards become protected from federal budget reduction orders. Whistleblowers gain the right to stay anonymous in Tax Court proceedings unless a heightened public interest exists. The IRS reporting requirements expand to include information about the top tax avoidance schemes. Whistleblowers will receive interest payments on delayed awards. Attorneys' fee deductions for whistleblowers become available under broader circumstances.
Important Definitions
Whistleblower: A person who reports tax violations to the IRS.
Sequestration: Automatic budget cuts ordered by the federal government.
De novo review: A complete fresh review where the court looks at all evidence without being bound by the original decision.
Overpayment rate: The interest rate the government pays when it owes money to taxpayers.
Effective Date
Most changes apply to cases pending or filed on or after the bill becomes law (Sec. 2, 4). Whistleblower award exemptions from budget cuts apply to any budget cuts ordered after December 31, 2022 (Sec. 3). The IRS report changes apply to reports due after the bill becomes law (Sec. 5). Interest on awards takes effect 180 days after the bill becomes law (Sec. 6). Attorney's fee deductions apply to tax years ending after the bill becomes law (Sec. 7).
I
118TH CONGRESS
1ST SESSION H. R. 1336
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
MARCH 3, 2023
Mr. KELLY of Pennsylvania (for himself and Mr. THOMPSON of California)
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-
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tives of the United States of America in Congress assembled,
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SECTION 1. SHORT TITLE.
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This Act may be cited as the ‘‘IRS Whistleblower
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Program Improvement Act of 2023’’.
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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)
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of the Internal Revenue Code of 1986 is amended—
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(1) by striking ‘‘appealed to’’ and inserting ‘‘re-
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viewed by’’; and
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(2) by adding at the end the following: ‘‘Any re-
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view by the Tax Court under the preceding sentence
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shall be de novo and shall be based on the adminis-
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trative record established at the time of the original
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determination and any additional newly discovered
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or previously unavailable evidence.’’.
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(b) CONFORMING AMENDMENT.—The heading of
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paragraph (4) of section 7623(b) of the Internal Revenue
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Code of 1986 is amended by striking ‘‘APPEAL’’ and in-
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serting ‘‘REVIEW’’.
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(c) EFFECTIVE DATE.—The amendments made by
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this section shall apply to cases under section 7623(b)(4)
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of the Internal Revenue Code of 1986 which are pending
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on, or filed on or after, the date of the enactment of this
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Act.
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SEC. 3. EXEMPTION FROM SEQUESTRATION.
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(a) IN GENERAL.—Section 255 of the Balanced
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Budget and Emergency Deficit Control Act of 1985 (2
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U.S.C. 905) is amended—
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(1) by redesignating subsection (k) as sub-
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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-
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thorized under section 7623 of the Internal Revenue Code
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of 1986 shall be exempt from reduction under any order
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issued under this part.’’.
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(b) APPLICABILITY.—The amendment made by this
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section shall apply to any sequestration order issued under
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the Balanced Budget and Emergency Deficit Control Act
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of 1985 (2 U.S.C. 900 et seq.) after December 31, 2022.
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SEC. 4. WHISTLEBLOWER PRIVACY PROTECTIONS.
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(a) IN GENERAL.—Paragraph (6) of section 7623(b)
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of the Internal Revenue Code of 1986 is amended by add-
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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-
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tions 7458 and 7461, the Tax Court shall grant
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a whistleblower’s request to proceed anony-
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mously before the Court for all proceedings
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under this section absent a finding by the Tax
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Court that a heightened societal interest exists
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for disclosing the whistleblower’s identity, ex-
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ceeding the normal interest in knowing a peti-
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•HR 1336 IH
tioner’s identity. Should the Tax Court find
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that such a heightened societal interest exists,
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such interest shall be balanced against the po-
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tential harm disclosure could cause to the whis-
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tleblower.’’.
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(b) EFFECTIVE DATE.—The amendments made by
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this section shall apply to petitions filed with the Tax
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Court which are pending on, or filed on or after, the date
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of the enactment of this Act.
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SEC. 5. MODIFICATION OF IRS WHISTLEBLOWER REPORT.
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(a) IN GENERAL.—Section 406(c) of division A of the
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Tax Relief and Health Care Act of 2006 is amended by
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striking ‘‘such use,’’ in paragraph (1) and inserting ‘‘such
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use (which shall include a list and descriptions of the top
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tax avoidance schemes, not to exceed 10, disclosed by
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whistleblowers during such year),’’.
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(b) EFFECTIVE DATE.— The amendment made by
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this section shall apply to reports the due date for which
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are after the enactment of this Act.
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SEC. 6. INTEREST ON WHISTLEBLOWER AWARDS.
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(a) IN GENERAL.—Section 7623(b) of the Internal
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Revenue Code of 1986 is amended by redesignating para-
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graphs (5) and (6) as paragraphs (6) and (7), respectively,
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and by inserting after paragraph (4) the following new
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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-
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ommendation before the applicable date, the
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amount of any award under this subsection
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shall include interest from such date at the
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overpayment rate under section 6621(a).
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‘‘(B) EXCEPTION.—No interest shall ac-
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crue under this paragraph after the date on
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which the Secretary provides notice to the indi-
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vidual of a preliminary award recommendation.
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‘‘(C) APPLICABLE DATE.—For purposes of
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this paragraph, the applicable date is the date
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that is 12 months after the first date on
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which—
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‘‘(i) all of the proceeds resulting from
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actions subject to the award recommenda-
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tion have been collected, and
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‘‘(ii) either—
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‘‘(I) the statutory period for fil-
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ing a claim for refund has expired, or
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‘‘(II) the taxpayers subject to the
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actions and the Secretary have agreed
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with finality to the tax or other liabil-
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•HR 1336 IH
ities for the periods at issue, and ei-
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ther the taxpayers have waived the
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right to file a claim for refund or any
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claim for refund has been resolved.’’.
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(b) EFFECTIVE DATE.—
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(1) IN GENERAL.—The amendments made by
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this section shall take effect 180 days after the date
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of the enactment of this Act.
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(2) SPECIAL RULE.—In the case of a claim for
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a whistleblower award under section 7623(b) of the
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Internal Revenue Code of 1986 with respect to
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which, as of the date described in paragraph (1)—
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(A) the Secretary of the Treasury has not
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provided notice to the individual of a prelimi-
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nary award recommendation as described in
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paragraph (5)(A) of such section, as added by
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this Act, and
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(B) the applicable date provided in para-
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graph (5)(C) of such section, as so added, has
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passed,
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the applicable date for purposes of such paragraph
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(5)(C) is the date that is 12 months after the date
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described in paragraph (1).
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SEC. 7. CORRECTION REGARDING DEDUCTIONS FOR AT-
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TORNEY’S FEES.
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(a) IN GENERAL.—Section 62(a)(21)(A)(i) of the In-
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ternal Revenue Code of 1986 is amended by striking
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‘‘7623(b)’’ and inserting ‘‘7623’’.
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(b) EFFECTIVE DATE.—The amendment made by
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this section shall apply to taxable years ending after the
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date of the enactment of this Act.
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Æ
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