The Taxpayer First Act (the "Act") became law on July 1, 2019, and contains a variety of changes to IRS procedures and related matters. As part of these changes, the Act provides additional rights and protections for whistleblowers (i.e., in this context, a person who informs the IRS that a person or organization is evading or underpaying taxes).
Mandating Better Communication Between the IRS and Whistleblowers
The Act mandates transparency and better communication between the IRS and whistleblowers by requiring the IRS to provide notice to a whistleblower within 60 days of the matter (for which the whistleblower provided information) being referred for audit or examination or the taxpayer making a payment of tax with respect to such matter. In addition, the Act requires the IRS to provide a whistleblower, upon written request by the whistleblower, with (i) information pertaining to the status of any investigation related to the matter that the whistleblower provided information, and (ii) in a case where the whistleblower receives an award from the IRS for providing information, the reasons that the IRS determined that the whistleblower was entitled to the amount of such award (rather a greater reward). However, the Act allows the IRS to withhold information from the whistleblower relating to the status of an investigation or the calculation of the whistleblower's award if providing such information would "seriously impair Federal tax administration."
Protecting Whistleblowers from Retaliation
The Act protects employees (whistleblowers) who provide information regarding their employers to the IRS from retaliatory action by those employers, including discharge, demotion, suspension, threats, harassment, or otherwise discrimination against the employee. A whistleblower that alleges retaliatory action by its employer may file a complaint with the Secretary of Labor, and, if the Secretary does not issue a final decision within 180 days of the filing of the complaint, the whistleblower may generally bring an action in the appropriate U.S District Court for remedies including reinstatement, 200% of back pay (with interest), and compensation for other special damages including litigation costs, and reasonable attorney's fees. Although it is not clear, it appears that, if the Secretary of Labor determines that a whistleblower's rights were not violated, the whistleblower may seek review of that determination in the United States Court of Appeals. Similarly, it appears that an employer aggrieved by the Secretary of Labor's determination that a violation did occur may seek review of that determination in the United States Court of Appeals. If the Secretary of Labor determines that the whistleblower's rights were violated, the Secretary of Labor will order the employer that committed the violation to take affirmative action to abate the violation, reinstate the whistleblower to his or her former position (with back pay) and provide compensatory damages. In an oddity of statutory drafting, a whistleblower appears to be entitled to 100% of back pay if the Secretary of Labor determines that a violation occurred, but to 200% of back pay if the whistleblower successfully litigates in District Court following the Secretary of Labor's failure to make a determination on the whistleblower's claim.