[00:00:01] Speaker 03: Face number 20-1245, Mandy Mobley Lee, a balance versus commissioner of internal revenue. [00:00:07] Speaker 03: Ms. [00:00:07] Speaker 03: Lee for the balance, Mr. John Choi for the epaulee, Mr. Manas, and Ms. [00:00:11] Speaker 03: Carrillo. [00:00:14] Speaker 04: Ms. [00:00:14] Speaker 04: Lee, please proceed. [00:00:17] Speaker 02: Thank you, Judge Henderson. [00:00:19] Speaker 02: May it please the court. [00:00:21] Speaker 02: This is a case of an abuse of discretion. [00:00:24] Speaker 02: I humbly request that this court review the tax court's decision to grant opposing counsel's motion for summary judgment. [00:00:31] Speaker 02: Both opposing counsel and amicus have raised jurisdictional concerns. [00:00:36] Speaker 02: However, jurisdiction is not a barrier preventing this court from hearing the merits of this case. [00:00:43] Speaker 02: Therefore, when this court has been satisfied that no jurisdictional issue exists, I request that we proceed to the merits of this case. [00:00:54] Speaker 02: This court has jurisdiction, exclusive jurisdiction, to hear tax court decisions [00:01:01] Speaker 02: under 26 USC section 7482A1. [00:01:08] Speaker 02: This jurisdiction allows this court to review cases that are grants of summary judgment, which is what we have here. [00:01:21] Speaker 02: The record will show that the commissioner did not meet his burden of showing that there was no issue of material fact. [00:01:31] Speaker 02: The WO rejection grounds lacked sound basis, in fact, and the WO rejection decision was not supported by the administrative record. [00:01:44] Speaker 02: Therefore, this court should reverse the grant of summary judgment and remand the case for further proceedings in the tax court. [00:01:55] Speaker 05: But can you tell me how [00:02:03] Speaker 05: If you got the relief you want, how would that give you any kind of remedy? [00:02:10] Speaker 02: It would give me the opportunity to be heard, Your Honor. [00:02:14] Speaker 05: The opportunity to be heard, but you have been heard. [00:02:17] Speaker 05: You've been heard by the office. [00:02:19] Speaker 05: You've been heard by the tax court. [00:02:20] Speaker 05: You've been heard by this court. [00:02:25] Speaker 02: Your Honor, although I have had audiences with both [00:02:29] Speaker 02: courts and the W.O. [00:02:31] Speaker 02: My position is that the W.O. [00:02:33] Speaker 02: did not consider the information which was submitted and the tax court or the tax care and tax relief and health care act of 2006 requires that they analyze my claim and either investigate or assign it and they didn't either. [00:02:52] Speaker 05: Well, but I mean, they definitely looked at it. [00:02:55] Speaker 05: We have a record here of things that they've looked and want to be careful about what we talked about. [00:02:59] Speaker 05: We have a record of things that look into. [00:03:00] Speaker 05: So you want them to, it's not that you want to be heard, it's that you want them to do still more examination. [00:03:07] Speaker 05: Is that right? [00:03:10] Speaker 02: Your honor, I want to exercise my legal right of review under the APA. [00:03:19] Speaker 05: Um, so, but you had reviews. [00:03:22] Speaker 05: So you want, what you want to say is we wanted more review, right? [00:03:27] Speaker 05: You don't deny that they reviewed what you submitted to them. [00:03:30] Speaker 05: You just wanted them to look further, look at more stuff. [00:03:35] Speaker 02: I want them to consider everything that was presented to them. [00:03:41] Speaker 02: Uh, and the record will show that they did not. [00:03:46] Speaker 05: And once that happens, where does the statute give you a remedial right? [00:03:51] Speaker 05: They have actually, they have analyzed the information you gave them to, for a court to dictate sort of the contours of the examination, because normally that sort of enforcement stuff is discretionary with the executive branch. [00:04:11] Speaker 02: Yes, Judge Mallette, discretionary decisions are unreviewable. [00:04:16] Speaker 02: However, and that is something that I believe opposing counsel did raise. [00:04:21] Speaker 02: That is not the situation in this case. [00:04:23] Speaker 02: For example, the commissioner could have issued a $1 reward and I would not have a legal remedy to ask the tax court to review that award, but that is not the case here. [00:04:37] Speaker 05: Are you claiming that your injury is that you didn't get an award? [00:04:41] Speaker 02: No, Your Honor, my injury is that the W.O. [00:04:49] Speaker 02: did not consider, they foreclosed my possibility of receiving an award because they did not consider everything that was presented to them. [00:05:00] Speaker 02: But even if they considered it, that wouldn't give you an award. [00:05:04] Speaker 02: That would be their determination, Your Honor. [00:05:08] Speaker 05: But they would have to consider it. [00:05:10] Speaker 05: And then they would have to choose to exercise their prosecutorial discretion to go after a taxpayer, which courts can't order. [00:05:17] Speaker 05: Correct. [00:05:18] Speaker 05: And then they would have to prevail. [00:05:20] Speaker 05: Courts can't order that. [00:05:22] Speaker 05: They'd have to actually win the case. [00:05:24] Speaker 05: And then they would make a discretionary judgment whether to give you something. [00:05:29] Speaker 05: That's the chain of events that would lead to you receiving an award. [00:05:34] Speaker 02: You are correct, Judge Millett. [00:05:36] Speaker 02: And that is what I'm requesting, is that due process be served in this case. [00:05:44] Speaker 02: Your Honor, the tax court does have jurisdiction to review W.O. [00:05:49] Speaker 02: rejections. [00:05:51] Speaker 02: Opposing counsel raised that they did not. [00:05:57] Speaker 02: However, the leading authority, Apruzzese versus the commissioner, shows that [00:06:03] Speaker 02: This court approved or affirmed that case just last year. [00:06:08] Speaker 02: And this court's affirmation does suggest that inherent in every subsection A rejection is a corresponding subsection B one determination. [00:06:20] Speaker 02: And this corresponding determination assures that the tax court retains jurisdiction over subsection A rejections. [00:06:31] Speaker 02: In addition, subsection B was added [00:06:34] Speaker 02: by the Tax Relief and Healthcare Act of 2006. [00:06:41] Speaker 02: However, the whistleblower office was created in 1867 and the tax court has always had review of those rejections. [00:06:53] Speaker 02: There are two cases out of the court of federal claims that support this position, DeCosta versus the United States and Lloyd versus the United States. [00:07:06] Speaker 02: Therefore, the tax court did properly review the WO's decision, but they erred when they granted the motion for summary judgment. [00:07:18] Speaker 02: Therefore, I am requesting that this court reverse the motion for summary judgment and remand the case for further proceedings in the tax court. [00:07:29] Speaker 02: All right, are there any further questions? [00:07:34] Speaker 04: Oh, I will go for Mr. Johnshoy. [00:07:41] Speaker 06: Good morning. [00:07:41] Speaker 06: May it please the court. [00:07:43] Speaker 06: My name is Matthew John Troy, and I represent the appellee, the commissioner of the Internal Revenue Service. [00:07:50] Speaker 06: I'll just start briefly by addressing some of the points raised. [00:07:53] Speaker 06: I think the record reflects that all of the materials submitted were reviewed, but the WBO, in its discretion over the evaluation and investigation, decided not to go beyond those materials [00:08:09] Speaker 06: and it has no obligation to do so. [00:08:11] Speaker 06: There was no action initiated, which also means there was no attempt to collect proceeds, which means there can be no award and there's then no award to be reviewed. [00:08:22] Speaker 06: sort of getting to the jurisdictional issue. [00:08:26] Speaker 06: After initial briefing, this court appointed an amicus and amicus submitted a brief indicating that the tax court lacked jurisdiction. [00:08:34] Speaker 06: Having reviewed amicus's briefing and also reevaluating the language of the statute, the government changed its view and now argues the tax court did not have jurisdiction to review the whistleblower office's decision regarding a appellant's claim. [00:08:49] Speaker 06: And just to briefly summarize, the amicus opined the tax court lacked jurisdiction over pre-action or threshold rejections because such initial rejections were not award determinations. [00:09:01] Speaker 06: And for them to be an award determination, there would at least need to have been an action taken against the target taxpayer and proceeds collected. [00:09:08] Speaker 06: Only then would you have an award determination under B1-3 that could be reviewed under B4. [00:09:15] Speaker 06: B4 is the section of the statute that includes the grant of jurisdiction. [00:09:19] Speaker 06: The government, while agreeing with amicus, has put forward as its primary argument that this court should find that the requirements in B5 are jurisdictional. [00:09:29] Speaker 06: This argument complements amicus's argument, but it's not based on it. [00:09:35] Speaker 06: And so we think the two stand side by side and on their own. [00:09:40] Speaker 06: So B5 sets for some threshold requirements that must be met for all of subsection B to apply, which means that the jurisdictional grant in B4 is limited by B5 and wouldn't apply in cases where the threshold requirements are not met. [00:09:56] Speaker 06: Similarly, there's no- How does that make- How do we know then? [00:09:59] Speaker 05: I'm sorry, finish your sentence. [00:10:01] Speaker 06: I was just gonna say that similarly, there's no non-discretionary awards where the B5 requirements aren't met. [00:10:07] Speaker 06: All of subsection B is knocked out. [00:10:10] Speaker 05: That doesn't make B5 jurisdictional, right? [00:10:15] Speaker 05: It could just be a claims processing rule. [00:10:19] Speaker 06: Well, Your Honor, we think it is jurisdictional. [00:10:21] Speaker 06: That is, B5 clearly applies to B4, and B4 has no application where the threshold requirements in B5 are not met. [00:10:32] Speaker 05: I know, but there are, you know, this isn't the only statute in the US code that has a lot of sections, including one on jurisdiction and then another later on in that same list of subsections says, here's something that applies to this entire provision. [00:10:51] Speaker 05: And so if we adopt your theory, we are adopting a rule [00:10:57] Speaker 05: not just for this statute, but for a lot of other statutes, including some where that very question, that very jurisdictional question has been rejected, the very jurisdictional interpretation, that if there's another subsection, one, two, three, four down from the jurisdictional one, and it says it supplies to the entire provision, that that will be treated as jurisdictional. [00:11:19] Speaker 05: That's been rejected under other statutes. [00:11:21] Speaker 05: That same reading has been rejected under other statutes. [00:11:23] Speaker 05: And so that would be the difficulty with just assuming that when you've got one subsection provision that says this applies to the whole subsection, and another provision of that subsection is jurisdictional, that the one that applies to all is jurisdictional as opposed to claims by the system. [00:11:44] Speaker 06: Well, Your Honor, I'm not familiar with those other specific cases, but I think it would be best to proceed on a case by case basis and statute by statute. [00:11:53] Speaker 06: And I think that this statute specifically links B5 back to B4 and to all of B. How does it do that in a way? [00:12:04] Speaker 05: If we go statute by statute, we have to have a reason. [00:12:06] Speaker 05: And your argument, as I understood it, was that, well, it applies to the whole subsection. [00:12:12] Speaker 05: And that argument will get us in trouble under other statutes. [00:12:16] Speaker 06: Your Honor, there's a reason it applies to the whole subsection though. [00:12:20] Speaker 06: Had they simply said that B4 would not apply or the statutory grant that B4 would not apply, that would have left in place the awards. [00:12:29] Speaker 06: So here by saying the subsection will not apply, right, where there's no action, you're not only knocking out the ability to review and the granted jurisdiction, you're also getting rid of the awards that would have been reviewed. [00:12:42] Speaker 06: So this is sort of negating the whole thing and it clearly does apply back to B-4. [00:12:48] Speaker 00: In any event, B-4 is a jurisdictional view of what's going on here and that B-4 is good enough to knock this out of court. [00:12:59] Speaker 00: Does the government now accept that position? [00:13:03] Speaker 06: Yes, yes, we do. [00:13:05] Speaker 06: We think the amicus is certainly correct that an award determination under B. [00:13:11] Speaker 06: 1 through 3 is required for there to be jurisdiction and that that would not occur in cases where there has not been an action. [00:13:18] Speaker 00: And there is no jurisdiction for the tax court to review the threshold determination. [00:13:22] Speaker 06: Right, right. [00:13:23] Speaker 06: There would need to be an action and a collection of proceeds under the amicus's theory. [00:13:27] Speaker 06: Under our theory, in addition to an action, there also needs to be an amount in dispute in excess of $2 million. [00:13:35] Speaker 06: These threshold requirements. [00:13:36] Speaker 05: I just want to be crystal clear, because the United States changed its position in response to the amicus, but then chose to offer a whole different theory. [00:13:44] Speaker 05: But the United States also agrees with the amicus reading of the statute. [00:13:52] Speaker 05: reading of B4 as requiring the type of determination. [00:13:57] Speaker 05: I mean, it's only to review how much money you were given or not given under the preceding three sections. [00:14:05] Speaker 05: You don't disagree with that? [00:14:07] Speaker 06: I want to be clear. [00:14:08] Speaker 06: No, no. [00:14:09] Speaker 06: And if I could just explain why we also argued B5 is the only difference between awards under A and B are whether the threshold requirements are met. [00:14:19] Speaker 06: So these requirements are the distinguishing factor. [00:14:25] Speaker 04: I see my time is expired. [00:14:29] Speaker 04: Do you have more questions? [00:14:32] Speaker 05: I mean, my sound might have clicked out for a second, so I thought I saw you talking but didn't hear anything for your last couple sentences. [00:14:40] Speaker 06: Mr. John Choi. [00:14:42] Speaker 06: Let me try to repeat. [00:14:43] Speaker 06: So the reason we've raised the complementary argument is because we believe that the difference between awards, purely discretionary awards that could still be made under A and the sort of non-discretionary awards under B is these threshold requirements and the tax court's failure to inquire about the threshold requirements [00:15:03] Speaker 06: is what's caused them to, in a sense, review all award determinations as though there be award determinations when, in fact, they're not. [00:15:15] Speaker 04: All right. [00:15:17] Speaker 04: If there are no more questions, then Mr. Manas. [00:15:24] Speaker 01: Hello. [00:15:24] Speaker 01: Good morning. [00:15:25] Speaker 01: Robbie Manas. [00:15:26] Speaker 01: The tax court lacked jurisdiction under 7623B4, and that's all this court needs to reach here. [00:15:34] Speaker 01: Under B4, what can be reviewed is a determination that was made under paragraphs one through three or should have been made under paragraphs one through three, and that's not an issue here. [00:15:45] Speaker 01: The decision was labeled as under A, and there is no argument that the rules of B1 through three apply. [00:15:54] Speaker 01: The argument is instead that the whistleblower office, as Judge Mallette mentioned, didn't exercise its evaluative function well enough and should look at more information or should do a further review of the claim. [00:16:10] Speaker 01: But it's conceded that there was review, there was some look at the claim, and there was a determination made that it was speculative and not credible. [00:16:20] Speaker 01: And that's not something that the statute speaks to as being reviewed [00:16:25] Speaker 01: that can be reviewed by the tax court. [00:16:28] Speaker 01: That is an enforcement or non-enforcement decision by the agency. [00:16:32] Speaker 05: Can you help me understand how this statute fits together, and in particular, what counts as a determination? [00:16:40] Speaker 05: If you just look at B12 and three, that gives you one sense of a determination. [00:16:53] Speaker 05: But B1 says, if the secretary proceeds with any administrative or judicial action described in subsection A. And subsection A talks about criminal prosecutions, is what it sounds like. [00:17:09] Speaker 05: It talks about guilt. [00:17:10] Speaker 05: Maybe it doesn't mean criminal, but it talks about guilt. [00:17:13] Speaker 05: Or in A1, it says detecting underpayments of tax. [00:17:20] Speaker 05: Is that a form of action to which B1 is referring? [00:17:25] Speaker 01: Yes. [00:17:26] Speaker 05: But just detecting underpayment of tax is not going forward with the proceeding. [00:17:32] Speaker 01: Right. [00:17:34] Speaker 01: But I believe then, I mean, then you have the rest of the statute, both at A and B, that talks about actually collecting proceeds based off that action. [00:17:45] Speaker 01: So even though it's maybe not contained discreetly within [00:17:49] Speaker 01: One, detecting underpayments of tax. [00:17:52] Speaker 01: The rest of the statute speaks to the proceeds requirements. [00:17:54] Speaker 01: So there has to be something further. [00:17:59] Speaker 05: Is that detecting underpayment of tax? [00:18:02] Speaker 05: Is that something that they, is that just what they do within their own office? [00:18:05] Speaker 05: Like if you send this off to some office of the IRS and if they find, like under Ms. [00:18:11] Speaker 05: Lee's theory, if they had examined further as she wants and internally detected [00:18:18] Speaker 05: under payment of tax. [00:18:20] Speaker 05: That counts as the type of administrative action for purposes of B. Is that right? [00:18:28] Speaker 05: It's just, I get that you say that we can't pay you unless we can only pay out of proceeds, so we got to get proceeds too, is your theory. [00:18:35] Speaker 01: But that counts. [00:18:37] Speaker 01: I think that's correct. [00:18:38] Speaker 01: Yes, it's an internal administrative proceeding by the IRS that [00:18:44] Speaker 01: could involve looking at a whistleblower's complaint or just independently the agency is finding an underpayment of tax and then collects that money administratively against the target taxpayer. [00:19:00] Speaker 05: And so that's now, so I was trying to figure out how, you know, there's this, the note for a 6B, which imposes [00:19:10] Speaker 05: you know, the job of this office is to analyze information received from any individual. [00:19:14] Speaker 05: It says individual described in 7623B. [00:19:17] Speaker 05: And so, sorry, I'm trying to help me piece this whole thing together. [00:19:23] Speaker 05: So the individual described in 7623B would include an individual under 7623A. [00:19:32] Speaker 01: Well, you've hit on a confusing and I think an artful drafting of the statute and the statutory note. [00:19:40] Speaker 01: You're right that the statutory note refers to the individual in B, which is a bit odd because the whole presupposition of the B rules is that there actually is already an action with proceeds. [00:19:52] Speaker 01: And so how can you know when you're supposed to analyze in the first place? [00:19:56] Speaker 05: So it suggests that you don't get that far down the line under B actually. [00:20:00] Speaker 01: Right, and I don't think that's the right inference to make, although I do think it's in artfully worded that note. [00:20:07] Speaker 01: I think it just refers to, if you look at subsections A and B, B is the only one that refers to an actual individual. [00:20:15] Speaker 01: Although it's clearly talking about whistleblowers, it doesn't actually speak in terms of an individual person. [00:20:20] Speaker 01: It's just talking about, you know, [00:20:23] Speaker 01: the secretary paying such sums as he deems necessary for these actions. [00:20:29] Speaker 01: And so I think it's referring to B because that's what the individual is described. [00:20:36] Speaker 01: And it's just referring to someone involved in the whistleblower process, not somebody who's necessarily entitled to an award under B or even necessarily going to merit application of these rules B through one through three. [00:20:50] Speaker 01: the individual who's given information and is sort of referenced in subsection B, so someone who's involved in the whistleblower process. [00:20:59] Speaker 01: I think that's the best way to make sense of this language in the statutory note. [00:21:03] Speaker 05: So it creates, yeah, I'm just trying to figure out because like you explained in your brief, B seems very much about [00:21:14] Speaker 05: actions that have produced proceeds, but the obligation to analyze information received clearly precedes that process. [00:21:27] Speaker 05: Do you think it's right that, is there any reason Ms. [00:21:33] Speaker 05: Lee wouldn't be covered by 406B that she had, or the office had an obligation to analyze the information that was provided? [00:21:44] Speaker 01: Not at all. [00:21:45] Speaker 01: I think that statutory note clearly applies to Ms. [00:21:48] Speaker 01: Lee and any whistleblower who submits information. [00:21:51] Speaker 01: And so there is a command to investigate and analyze the information. [00:21:57] Speaker 01: But here that duty was discharged. [00:22:01] Speaker 01: There was conceitedly some investigation and analysis. [00:22:04] Speaker 01: That's what led to the rejection. [00:22:06] Speaker 01: It'd be a different case if there was none at all then maybe there was some form of some form of review somewhere that could take place under the statutory note and then some sort of other jurisdictional provision, but it wouldn't be before because before doesn't talk about that sort of action. [00:22:25] Speaker 05: But then sort of the tax court theory has been, once we can see that people who just submit information like Ms. [00:22:31] Speaker 05: Lee are individuals covered by B, and those are the individuals referenced in B, as far as six B kind of drives us there, then at any point when you cut off further consideration, the IRS cuts off further consideration, it's kind of determining no recovery, right? [00:22:54] Speaker 01: Right, but it's more of a, it's a, we're sort of in this weird world where it's not a consideration of an award when there's already been an action taking place and proceeds. [00:23:04] Speaker 05: Administrative actions count as actions of its purely internal administrative actions reviewing papers count as actions because that's what 7623 a. [00:23:13] Speaker 01: So to be clear on that point, I do think that's right, but my understanding is that the IRS has regulations defining what an action is and it's not just any, there has to be actually a formal sort of administrative detection of underpayments against the target taxpayer. [00:23:32] Speaker 01: It's not merely enough just to look at the whistleblower's claim. [00:23:36] Speaker 05: So that would look like a letter to the taxpayer taxpayer. [00:23:42] Speaker 01: I believe so. [00:23:42] Speaker 01: I'm not exactly sure what formal would take, but there would be some sort of formal sort of action against the target taxpayer himself or herself. [00:23:51] Speaker 05: So we don't need to decide whether in a case like that, if they just said we've detected it, but we're not doing anything more. [00:24:01] Speaker 05: whether that would be reviewed as a determination under B that would qualify under B4. [00:24:08] Speaker 05: We don't need to decide that because I didn't have it in this case. [00:24:11] Speaker 01: Certainly, this court can just rest on the fact that there's no action whatsoever and leave for another day any further questions about whether there also needs to be proceeds or anything else or this B5 question of these threshold monetary amounts. [00:24:28] Speaker 01: There is no action here, and that's enough, too. [00:24:31] Speaker 01: and the jurisdictional inquiry. [00:24:35] Speaker 04: All right. [00:24:35] Speaker 04: Any more questions? [00:24:38] Speaker 04: OK. [00:24:38] Speaker 04: How much time does Miss Lee have left, Madam Clerk? [00:24:42] Speaker 03: Miss Lee has three minutes left. [00:24:47] Speaker 02: All right. [00:24:49] Speaker 02: Thank you, Your Honors. [00:24:50] Speaker 02: I disagree with Mr. Montes' suggestion that there was no action taken here. [00:24:57] Speaker 02: In fact, the W.O. [00:24:59] Speaker 02: issued a letter [00:25:01] Speaker 02: which was a rejection letter and cited section 76, 23A. [00:25:06] Speaker 02: And the award in question is a $0 award. [00:25:12] Speaker 02: It is a foreclosure of an award. [00:25:15] Speaker 02: And by saying that a claim is rejected under subsection A, then that is also saying that the whistleblower is not entitled to a mandatory award, which is what subsection B provides. [00:25:31] Speaker 02: I request that we proceed to the merits if the panel is satisfied that there is no jurisdictional issue. [00:25:46] Speaker 04: Well, that doesn't necessarily mean you have two minutes left. [00:25:50] Speaker 04: You can say what you want. [00:25:53] Speaker 02: Thank you, Judge Peterson. [00:25:56] Speaker 02: Regarding the decision of the WL, [00:26:02] Speaker 02: without going into specifics, not everything that was submitted was considered. [00:26:10] Speaker 02: And reviewing the record will show that their decision was not based in, the grounds for their decision were not based in sound fact. [00:26:21] Speaker 02: And the administrative record does not support the decision to reject the claim. [00:26:28] Speaker 02: Therefore, the W.O.' [00:26:32] Speaker 02: 's rejection was an abuse of discretion and it should be reviewed and the case remanded to the tax court for further proceedings. [00:26:46] Speaker 04: All right, if there are no further questions. [00:26:49] Speaker 04: Mr. Manhas, you were appointed by the court and we want to thank you for your very able assistance. [00:26:59] Speaker 04: So Madam Clerk, if you'll adjourn court.