Whistleblower 972-17W ( 2022 )

United States Tax Court
159 T.C. No. 1WHISTLEBLOWER 972-17W,
Petitioner
v.
COMMISSIONER OF INTERNAL REVENUE,
Respondent
—————
Docket No. 972-17W. Filed July 13, 2022.
—————
Whistleblower WB provided information to the IRS
regarding three target taxpayers. The Government
initiated actions against the target taxpayers and collected
proceeds, but the Whistleblower Office denied WB’s claim
for an award under I.R.C. § 7623(b). WB petitioned our
Court for review.
The Court ordered R to file with the Court redacted
and unredacted copies of the administrative record, which
included returns and return information of the target
taxpayers. R filed a redacted copy of the administrative
record and requested that the Court excuse him from filing
an unredacted copy to protect I.R.C. § 6103 information.
The Court ordered R to submit the unredacted copy for
review in camera. R moved the Court to modify its order,
arguing that I.R.C. § 6103 does not permit R to disclose to
the Court the information R redacted.
Held: On these facts, consistent with Li v.
Commissioner, 22 F.4th 1014 (D.C. Cir. 2022), the Tax
Court has jurisdiction to hear this case.
Held, further, I.R.C. § 6103(h)(4)(A) authorizes R to
submit the unredacted administrative record to the Court.
Served 07/13/22
2
—————
George Munoz, for petitioner.
Bartholomew Cirenza and Ryan Z. Sarazin, for respondent.
OPINION
TORO, Judge: Section 6103(a) 1 provides that returns and return
information generally must be kept confidential and that officers and
employees of the United States are precluded from disclosing returns
and return information unless specifically authorized by the Code. One
such authorization appears in section 6103(h)(4).
Section 6103(h)(4) permits, in certain circumstances, the
disclosure of returns or return information in the context of a federal or
state judicial or administrative proceeding that pertains to tax
administration. Among other things, disclosure is authorized in a
judicial proceeding that “arose out of, or in connection with, determining
the taxpayer’s civil or criminal liability, or the collection of such civil
liability, in respect of any tax imposed [by the Code].” I.R.C.
§ 6103(h)(4)(A).
In this whistleblower case, the Court ordered the Commissioner
of Internal Revenue to submit for in camera review an unredacted copy
of the administrative record on which the case is based. The
Commissioner moved that the order be modified, arguing that section
6103(a) precludes him from complying. The Commissioner reasons that
the administrative record includes returns and return information that
the Code does not authorize him to disclose. Regarding section
6103(h)(4), the Commissioner agrees that this case is a judicial
proceeding pertaining to tax administration, but contends that the other
requirements of section 6103(h)(4) have not been satisfied with respect
to the materials he wishes to protect from disclosure.
1 Unless otherwise indicated, all statutory references are to the Internal
Revenue Code, Title 26 U.S.C. (I.R.C. or Code), in effect at all relevant times, all
regulation references are to the Code of Federal Regulations, Title 26 (Treas. Reg.), in
effect at all relevant times, and all Rule references are to the Tax Court Rules of
Practice and Procedure.
3
After assuring ourselves that we have jurisdiction in light of the
recent decision of the U.S. Court of Appeals for the District of Columbia
Circuit in Li v. Commissioner, 22 F.4th 1014 (D.C. Cir. 2022), we
consider the Commissioner’s contentions. We conclude that section
6103(h)(4)(A) authorizes disclosing in this proceeding the returns and
return information that the Commissioner seeks to withhold. This is so
because this case “arose . . . in connection with” determining the civil
and criminal tax liabilities of the taxpayers whose returns and return
information are at issue. Accordingly, section 6103 does not preclude
the Commissioner from submitting to the Court an unredacted copy of
the administrative record. We will therefore deny the Commissioner’s
Motion.
Background
The following facts are derived from the pleadings, the parties’
motion papers, the declarations and exhibits attached thereto, and the
redacted administrative record filed with the Court. These facts are
stated solely for the purpose of ruling on the motion before us and not
as findings of fact in this case. See Whistleblower 769-16W v.
Commissioner, 152 T.C. 172, 173 (2019).
Petitioner is a whistleblower who provided information to the
Internal Revenue Service (IRS) regarding three individuals (taxpayers
1, 2, and 3). The Government pursued actions against all three
individuals (targets) (including criminal actions with respect to two of
the targets) and ultimately collected proceeds from each of them. But
the IRS Whistleblower Office (WBO) denied the whistleblower’s claim
for an award under section 7623(b). The WBO acknowledged to the
whistleblower that “[t]he IRS reviewed the information you provided as
part of an ongoing investigation/examination of the taxpayer(s).” But,
the WBO explained, “that review did not result in the assessment of
additional tax, penalties, interest or other amounts with respect to the
issues you raised.” The WBO further noted that “[t]he IRS did assess
additional tax, penalties, interest or additional amounts but the
information you provided was not relevant to those issues.” The
whistleblower petitioned our Court for review.
In general, our Court reviews whistleblower cases based on the
administrative record. See Kasper v. Commissioner, 150 T.C. 8, 20
(2018). Accordingly, the Court ordered the Commissioner to file with
the Court redacted and unredacted copies of the administrative record
compiled by the WBO. The Commissioner filed a redacted copy of the
4
administrative record and requested that the Court excuse him from
filing an unredacted copy “to protect . . . section 6103 information and
. . . other identifying information.” The Court ordered the Commissioner
to submit to the Court, for review in camera, any documents that the
Commissioner wished to redact to preserve a privilege or protect
taxpayer information.
In response, the Commissioner moved the Court to modify its
order, requesting that the Court strike the portion of the order that
directed the Commissioner to submit the entire unredacted
administrative record for review in camera. The Commissioner argued
that there is no exception in section 6103 that would permit him to
disclose the redacted information to the Court. The whistleblower filed
a response opposing the Commissioner’s Motion. The Court then
ordered the parties to file separate memoranda addressing the
applicability of section 6103 to this case. We now consider the merits of
the Commissioner’s request.
Discussion
I. Section 7623 Background
Section 7623 provides for awards to individuals (commonly
referred to as whistleblowers) who submit information to the
Government about third parties who have underpaid their taxes or
otherwise violated the internal revenue laws. Section 7623(a)
authorizes discretionary payments in certain circumstances, while
section 7623(b) provides for nondiscretionary (i.e., mandatory) awards.
Under section 7623(b)(1), a whistleblower generally is entitled to
a mandatory award if the Secretary of the Treasury proceeds with an
administrative or judicial action based on information provided by the
whistleblower and collects proceeds as a result of the action. 2 The
2 Section 7623(b)(1) provides:
If the Secretary proceeds with any administrative or judicial action
described in subsection (a) based on information brought to the
Secretary’s attention by an individual, such individual shall, subject to
paragraph (2), receive as an award at least 15 percent but not more
than 30 percent of the proceeds collected as a result of the action
(including any related actions) or from any settlement in response to
such action (determined without regard to whether such proceeds are
available to the Secretary). The determination of the amount of such
5
amount of the award generally is between 15 and 30% of the collected
proceeds, depending on the extent to which the whistleblower
substantially contributed to the action. I.R.C. § 7623(b)(1).
In some circumstances, a mandatory whistleblower award under
section 7623(b)(1) may be reduced or denied. Specifically, section
7623(b)(2) provides for the potential reduction of an award if the
Secretary’s action is based principally on publicly available information
rather than the whistleblower’s information, while section 7623(b)(3)
provides for the reduction or denial of an award based on the
whistleblower’s culpability for the tax underpayments underlying the
award. Additionally, section 7623(b)(5) sets out certain monetary
thresholds that must be satisfied for section 7623(b) to apply in the first
instance.
II. Jurisdiction
A. General Principles
Like all federal courts, we are a court of limited jurisdiction.
Whistleblower 21276-13W v. Commissioner, 155 T.C. 21, 26 (2020). We
exercise jurisdiction only over matters that Congress expressly
authorizes us to consider. Id.; see also I.R.C. § 7442. Of course, we
always have jurisdiction to determine whether we have jurisdiction.
Whistleblower 21276-13W, 155 T.C. at 26. And we must assure
ourselves of our jurisdiction even when not asked to by the parties. Id.The relevant jurisdictional provision in a whistleblower case is
section 7623(b)(4). It provides that “[a]ny determination regarding an
award under [section 7623(b)](1), (2), or (3) may . . . be appealed to the
Tax Court (and the Tax Court shall have jurisdiction with respect to
such matter).” I.R.C. § 7623(b)(4). Determinations under those
provisions generally are made by the WBO, which reviews
whistleblower claims to determine whether an award will be paid and,
if so, decides the amount of the award. See, e.g., I.R.C. § 7623(b)(1),
(2)(A), (3).
B. Tax Court Precedent
Based on the plain text of section 7623(b)(4), it is clear that our
Court has jurisdiction over any appeal of a determination that a
award by the Whistleblower Office shall depend upon the extent to
which the individual substantially contributed to such action.
6
whistleblower is entitled to an award under section 7623(b)(1).
Additionally, we have interpreted section 7623(b)(4) as granting our
Court jurisdiction over cases where the WBO rejects or denies a
whistleblower’s claim. 3 See Lacey v. Commissioner, 153 T.C. 146, 163
n.19 (2019) (“[A] denial or rejection is a (negative) ‘determination
regarding an award’, so the Tax Court has jurisdiction where, pursuant
to the WBO’s determination, the individual does not receive an award.”),
abrogated by Li v. Commissioner, 22 F.4th 1041; see also Cooper v.
Commissioner, 135 T.C. 70, 75 (2010) (“The statute expressly permits an
individual to seek judicial review in [the Tax] Court of the amount or
denial of an award determination.” (citing Staff of Joint Comm. on
Taxation, Technical Explanation of H.R. 6408, The “Tax Relief and
Health Care Act of 2006,” at 89 (J. Comm. Print 2006)), abrogated by 22
F.4th 1041. Our Court has held that jurisdiction exists regardless of
whether the Commissioner proceeds with an action or collects proceeds
based on the whistleblower’s information. See Lacey, 153 T.C. at 169(stating that the Court’s review of a WBO determination to reject a claim
without taking action is not preempted by the absence of “action” and
“proceeds,” which will always be absent when the WBO rejects a claim
at the threshold). But the D.C. Circuit in Li v. Commissioner, 22 F.4th
1014, established new precedent on this point. 4
C. Li v. Commissioner
In Li, the D.C. Circuit disagreed—at least in part—with our prior
interpretations of section 7623(b)(4). Pointing to the statutory text, the
court of appeals concluded that the Tax Court does not have jurisdiction
to review the WBO’s threshold rejection of a whistleblower claim. Id.
at 1017. The D.C. Circuit reasoned that the WBO makes an award
determination “under [section 7623](b)(1)” when the IRS actually
proceeds with an action based on a whistleblower’s information. Id. In
the case of a rejection, the WBO rejects the whistleblower’s claim at the
threshold, without the IRS’s ever taking action against the target
taxpayer. Id. Therefore, the D.C. Circuit concluded, the WBO’s decision
to reject a claim is not an award determination under section 7623(b)(1),
(2), or (3), and the Tax Court does not have jurisdiction to review that
3 For a discussion of rejections and denials, see Rogers v. Commissioner, 157
T.C. 20, 22–31 (2021).
4 Absent a stipulation by the parties, this case would be appealable to the D.C.
Circuit. See I.R.C. § 7482(b)(1) (flush text) (providing that the D.C. Circuit is the
proper appellate venue for review of Tax Court decisions in cases in which no other
venue rule applies); see also Kasper, 150 T.C. at 11 n.1.
7
decision under section 7623(b)(4). Id. (“The WBO did not forward Li’s
Form 211 to an IRS examiner for further action, and the IRS did not
take any action against the target taxpayer. There was no proceeding
and thus no ‘award determination’ by the IRS for Li’s whistleblower
information. Therefore, the Tax Court had no jurisdiction to review the
WBO’s threshold rejection of Li’s Form 211.”).
D. Application to This Case
The D.C. Circuit’s decision in Li addressed threshold rejections,
and the court explicitly noted that it did not decide whether our Court
would have jurisdiction over a case in which the IRS proceeded against
a target taxpayer based on a whistleblower’s information, but the WBO
wrongly denied the whistleblower’s application for an award. Id. at 1017
n.2. This essentially is what the whistleblower alleges took place in the
case before us. Based on the text of section 7623(b) and the reasoning
in Li, we conclude that we have jurisdiction to review the WBO’s
determination.
As we have described, section 7623(b)(4) grants the Tax Court
jurisdiction over an appeal of “[a]ny determination regarding an award
under [section 7623(b)](1), (2), or (3).” Section 7623(b)(1) provides that
a whistleblower generally is entitled to an award when the Secretary
proceeds with an action based on information provided by the
whistleblower and collects proceeds.
In Li, the D.C. Circuit determined that we did not have
jurisdiction because the most basic threshold specified in section
7623(b)(1) had not been crossed—i.e., the IRS had not proceeded with
an action against the target taxpayers. 5 By contrast, the parties in the
case before us agree that the Commissioner proceeded with an action.
Indeed, here the Commissioner collected proceeds with respect to each
of the three target taxpayers identified by the whistleblower. But the
WBO determined that the whistleblower was not entitled to an award
despite these facts. The question we must decide is whether that
determination constituted “[a]ny determination regarding an award
under [section 7623(b)](1).” Consistent with Li, we conclude that it did.
The D.C. Circuit observed in Li that “an award determination by
the IRS arises only when the IRS ‘proceeds with any administrative or
5 Because the IRS had not proceeded with an action, it also had not collected
proceeds.
8
judicial action described in subsection (a) based on information brought
to the Secretary’s attention by [the whistleblower] . . . .’ ” Li v.
Commissioner, 22 F.4th at 1017 (quoting I.R.C. § 7623(b)(1)). A
determination that no award is warranted even though the IRS has
proceeded with an action and collected proceeds in that action is still a
“determination regarding an award.” 6 Indeed, it would make little sense
for Congress to authorize judicial review for whistleblowers who receive
wrongfully reduced awards, but not for whistleblowers who are
wrongfully denied an award altogether after the threshold requirements
of section 7623(b)(1) are met.
The inclusion in section 7623(b)(4) of an express reference to
section 7623(b)(3) supports this conclusion. Section 7623(b)(4)
specifically establishes our jurisdiction to review determinations under
section 7623(b)(3). As relevant here, section 7623(b)(3) provides that the
WBO shall “deny any award” if a claim is brought “by an individual who
planned and initiated the actions that led to the underpayment of tax”
on which the award would be based and that individual “is convicted of
criminal conduct arising from [that] role.” The combined effect of section
7623(b)(3) and (4) is that a whistleblower who has been denied an award
on the ground that the whistleblower was convicted of criminal conduct
arising from planning the actions that led to the understatement of tax
may challenge that determination in our Court even though the WBO
issued no award. Put another way, paragraphs (3) and (4) of section
7623(b) make clear that a WBO determination not to grant an award
after the IRS has taken action against a target taxpayer and collected
proceeds as a result of the action can be subject to our review.
Similarly, and consistent with Li, we hold that when the WBO
determined that the whistleblower here was not entitled to an award
even though the Government had proceeded with actions against the
target taxpayers and collected proceeds, the WBO made a determination
regarding an award under section 7623(b)(1). By the terms of section
7623(b)(4), we have jurisdiction over an appeal of that determination.
6 The parties agree that the IRS took action and collected proceeds in this case,
and so we need not decide whether, under Li, we would have jurisdiction to review a
WBO denial in a case in which the IRS proceeded with an action, but did not collect
proceeds, or in which the IRS did not proceed with an action. A case presenting both
these fact patterns is currently pending before the D.C. Circuit. See Kennedy v.
Commissioner, T.C. Memo. 2021-3, appeal docketed, No. 21-113 (D.C. Cir. June 7,
2021).
9
Based on certain statements in Li, one might argue that all the
elements of section 7623(b)(1)—including the requirement that any
action be in fact “based on the whistleblower’s information”—are
jurisdictional. But that’s not what the D.C. Circuit decided in Li; rather,
its holding is confined to threshold rejections in which the IRS takes no
action. See Li v. Commissioner, 22 F.4th at 1017. A case like this one,
where the IRS has both acted and collected proceeds, raises
jurisdictional considerations not present in Li.
Specifically, if we were to read Li as requiring our Court to make
a factual determination that the IRS proceeded against a target and
collected proceeds from that target “based on” the whistleblower’s
information simply to establish our jurisdiction over the appeal of the
WBO decision, then every case in which the WBO denies a claim on the
ground that the information provided by the whistleblower was not
useful to the IRS would require a full determination of the merits before
we would know whether we had jurisdiction to begin with. Put a
different way, if our jurisdiction to review the WBO’s decision not to
make an award in a case that involved both an examination of the
taxpayer and the collection of proceeds exists only if it turns out
(contrary to the WBO’s conclusion) that the recovery was in fact “based
on” the whistleblower’s information, then (in cases involving the fact
pattern now before us) the whistleblower would win on the merits in
virtually every case over which we have jurisdiction (except perhaps
those subject to section 7623(b)(3)), and we would have no jurisdiction
in virtually every case that the whistleblower would otherwise lose on
the merits. See I.R.C. § 7623(b)(1) (providing that if the Secretary
proceeds with an action based on the whistleblower’s information, the
whistleblower “shall” receive an award).
Additionally, any proceeding to establish whether an action was
“based on” the whistleblower’s information for jurisdictional purposes
would raise complicated questions regarding the scope and standard of
our review. In particular, while we generally review whistleblower
determinations for abuse of discretion based on the administrative
record, see Kasper, 150 T.C. at 20, 22, courts in other contexts have
employed different standards when jurisdictional and merits issues are
intertwined, see, e.g., 2 James W. Moore et al., Moore’s Federal Practice
§ 12.30[3], at 12-50.2(11) (3d ed. 2021) (“When the jurisdictional facts
are too intertwined with the merits to permit the determination to be
made independently, the court should either employ the standard
applicable to a motion for summary judgment (if the material
jurisdictional facts are undisputed) or leave the jurisdictional
10
determination to trial.”); see also, e.g., Herbert v. Nat’l Acad. Of Sci., 974
F.2d 192, 198 (D.C. Cir. 1992) (“[T]hough the trial court may rule on
disputed jurisdictional facts at any time, if they are inextricably
intertwined with the merits of the case it should usually defer its
jurisdictional decision until the merits are heard.” (citing Land v. Dollar,
330 U.S. 731 (1947))); Kerns v. United States, 585 F.3d 187, 193 (4th Cir.
2009) (“[W]hen the jurisdictional facts are inextricably intertwined with
those central to the merits, the court should resolve the relevant factual
disputes only after appropriate discovery . . . .”); Lawrence v. Dunbar,
919 F.2d 1525, 1528–29 (11th Cir. 1990) (explaining that a case in which
a fact “is a necessary predicate to the court’s subject matter jurisdiction”
as well as “an element the plaintiff must establish to win the case,” the
“proper course of action . . . is to find that jurisdiction exists and deal
with the objection as a direct attack on the merits of the plaintiff’s case”
(citations omitted) (quoting Williamson v. Tucker, 645 F.2d 404, 415 (5th
Cir. 1981)). We do not read Li, which expressly declined to reach fact
patterns in which the IRS proceeds with an action, see Li v.
Commissioner, 22 F.4th at 1017 n.2., to sweep so broadly as to require
trials on the merits to determine jurisdiction in all zero-award
whistleblower cases in which the IRS has proceeded with an action and
collected proceeds.
Having established that we have jurisdiction to hear this case, we
next consider whether section 6103 authorizes the Commissioner to
submit an unredacted copy of the administrative record to the Court. As
discussed further below, we conclude that it does.
III. Section 6103
A. General Principles
As we have said, section 6103(a) provides that returns and return
information generally must be kept confidential unless disclosure is
specifically authorized by the Code. See Mescalero Apache Tribe v.
Commissioner, 148 T.C. 291, 294 (2017). The authorization at issue here
is section 6103(h)(4), which provides, in relevant part:
A return or return information may be disclosed in a
Federal or State judicial or administrative proceeding
pertaining to tax administration, but only—
(A) if the taxpayer is a party to the
proceeding, or the proceeding arose out of, or in
connection with, determining the taxpayer’s civil or
11
criminal liability, or the collection of such civil
liability, in respect of any tax imposed under this
title;
(B) if the treatment of an item reflected on
such return is directly related to the resolution of an
issue in the proceeding; [or]
(C) if such return or return information
directly relates to a transactional relationship
between a person who is a party to the proceeding
and the taxpayer which directly affects the
resolution of an issue in the proceeding . . . .[7]
The statute then proceeds to provide its own limitation on
disclosure: A “return or return information shall not be disclosed as
provided in subparagraph (A), (B), or (C) if the Secretary determines
that such disclosure would identify a confidential informant or seriously
impair a civil or criminal tax investigation.” I.R.C. § 6103(h)(4) (flush
text).
There is no dispute that the documents the Commissioner has
redacted in this case are either returns or return information protected
by section 6103(a). 8 Similarly, the parties agree that this case is a
federal judicial proceeding that pertains to tax administration. 9 See
Confidential Informant 92-95-932X v. United States, 45 Fed. Cl. 556, 559
(2000) (holding that a whistleblower’s suit seeking, among other things,
a declaratory judgment related to a contract entered into with the IRS
was a proceeding involving tax administration); see also Treas. Reg.
§ 301.6103(h)(4)-1(a) (“A whistleblower administrative proceeding . . . is
an administrative proceeding pertaining to tax administration within
the meaning of section 6103(h)(4).”). And neither party asserts that the
7 Section 6103(h)(4)(D) also authorizes disclosure “to the extent required by
order of a court pursuant to section 3500 of title 18, United States Code, or rule 16 of
the Federal Rules of Criminal Procedure.” The parties agree that section 6103(h)(4)(D)
is not relevant here.
Section 6103(b)(1) and (2) provides detailed definitions for both terms. See
8
Church of Scientology of Cal. v. IRS, 484 U.S. 9, 12 (1987).
9 Section 6103(b)(4) provides a broad definition of “tax administration.” See,
e.g., Gardner v. United States, 213 F.3d 735, 739 (D.C. Cir. 2000) (referring to the
“broad language” of the provision); United States v. Mangan, 575 F.2d 32, 40 (2d Cir.
1978) (describing the definition as “so sweeping as to compel rejection of a restrictive
interpretation”).
12
statutorily provided restriction from disclosure set out in the flush text
of section 6103(h)(4) applies here. The only dispute, therefore, is
whether at least one of the three subparagraphs of section 6103(h)(4) set
out above applies.
The Commissioner argues that portions of the returns and return
information included in the administrative record fall within
subparagraph (B) because they are directly related to the resolution of
an issue in this proceeding—i.e., whether the WBO erred when it denied
the whistleblower’s claim for an award. 10 The Commissioner did not
redact these “directly related” items when he filed the administrative
record with our Court, but he did redact other information that in his
view was not directly related to the resolution of this proceeding.
With respect to the redacted information, the whistleblower
contends that subparagraphs (A), (B), and (C) of section 6103(h)(4) all
authorize disclosure. The Commissioner contends that none of the three
subparagraphs applies. As explained further below, we agree with the
whistleblower that subparagraph (A) authorizes disclosure of the
redacted information and therefore do not address the potential
application of subparagraphs (B) and (C). See Tavery, 32 F.3d at 1430
(noting that the exceptions in section 6103(h)(4) are disjunctive and
declining to go further once one exception was found to apply).
B. Section 6103(h)(4)(A)
Section 6103(h)(4)(A) authorizes the disclosure of tax returns or
return information in a federal judicial proceeding pertaining to tax
administration if “the taxpayer is a party to the proceeding, or the
proceeding arose out of, or in connection with, determining the
taxpayer’s civil or criminal liability.” At issue here are returns and
return information of taxpayers 1, 2, and 3, who are not parties to this
case. Accordingly, section 6103(h)(4)(A) will apply only if this case
“arose out of, or in connection with” determining the civil or criminal
10 As the Commissioner recognizes, the courts of appeals have reached different
conclusions on whether section 6103(h)(4)(B) permits the disclosure of returns only or
returns and return information. Compare United States v. NorCal Tea Party Patriots
(In re United States), 817 F.3d 953, 962 (6th Cir. 2016) (concluding that section
6103(h)(4)(B) permits the disclosure of returns only), and In re United States, 669 F.3d
1333, 1339–40 (Fed. Cir. 2012) (per curiam) (suggesting the same), with Tavery v.
United States, 32 F.3d 1423, 1430 (10th Cir. 1994) (allowing the disclosure of return
information under section 6103(h)(4)(B)). The D.C. Circuit has not spoken on this
issue.
13
liabilities of taxpayers 1, 2, and 3 in respect of any tax imposed under
the Code.
1. “In Connection With”
Because the phrase “arose in connection with determining a
taxpayer’s civil or criminal liability” is broader than the phrase “arose
out of determining the taxpayer’s civil or criminal liability,” see, e.g., N.
Am. Butterfly Ass’n v. Wolf, 977 F.3d 1244, 1260 (D.C. Cir. 2020) (“[T]he
phrase ‘arising out of ’ sweeps less broadly than ‘in connection with’ or
‘in relation to.’ ”), we turn our attention to the meaning of the phrase “in
connection with.”
We begin with first principles. As the Supreme Court has
explained:
In statutory interpretation disputes, a court’s proper
starting point lies in a careful examination of the ordinary
meaning and structure of the law itself. Schindler Elevator
Corp. v. United States ex rel. Kirk, 563 U.S. 401, 407 (2011).
Where . . . that examination yields a clear answer, judges
must stop. Hughes Aircraft Co. v. Jacobson, 525 U.S. 432,
438 (1999).
Food Mktg. Inst. v. Argus Leader Media, 139 S. Ct. 2356, 2364 (2019).
And, when the statute does not define a term, “we ask what that term’s
‘ordinary, contemporary, common meaning’ was when Congress
enacted” the relevant provision. Id. at 2362 (quoting Perrin v. United
States, 444 U.S. 37, 42 (1979)).
Section 6103 does not define the phrase “in connection with.” But
when section 6103(h)(4)(A) was enacted in 1978, see Revenue Act of
1978, Pub. L. No. 95-600, § 503, 92 Stat. 2763, 2880, the term
“connection” was defined broadly (and in relevant part) to mean any
link, association, or relationship, see, e.g., Connection, The American
Heritage Dictionary of the English Language, New College Edition
(1976) (“2. Anything that joins, relates, or connects; a bond; a link. 3. An
association, alliance, or relation . . . .”); 11 see also Fort Howard Corp. &
11 Dictionary definitions of “connection” have remained relatively consistent
over time. See, e.g., Connection, Webster’s New Twentieth Century Dictionary of the
English Language (2d ed. 1966) (defining “connection,” in relevant part, as “that which
connects or unites; a tie; a bond; means of joining” and “a relation; association;
14
Subs. v. Commissioner, 103 T.C. 345, 351–52 (1994) (citing Webster’s
Third New International Dictionary 480 (1986)), supplemented by 107
T.C. 187 (1996).
This definition is consistent with interpretations of the phrase “in
connection with” by various courts over time, including ours. The Tax
Court has interpreted the phrase “in connection with” as meaning
“related to.” See Adams Challenge (UK) Ltd. v. Commissioner, 154 T.C.
37, 63 (2020) (analyzing relevant cases and concluding that there is no
appreciable difference between the two phrases). Courts of appeals,
including the D.C. Circuit, have reached the same conclusion. See, e.g.,
Azima v. RAK Inv. Auth., 926 F.3d 870, 877 (D.C. Cir. 2019) (collecting
authorities and stating that “ ‘in connection with’ . . . is equivalent to ‘in
relation to’ ”); see also John Wyeth & Brother Ltd. v. Cigna Int’l Corp.,
119 F.3d 1070, 1074 (3d Cir. 1997) (Alito, J.) (explaining that “a dispute
‘arise[s] . . . in relation to’ ” an agreement if “the origin of the dispute is
related to that agreement, i.e., [if] the origin of the dispute has some
‘logical or causal connection’ ” to the agreement (quoting Webster’s Third
New International Dictionary 1916 (1971))). 12 Accordingly, as the
Supreme Court and the D.C. Circuit have acknowledged, the phrase “in
connection with” establishes a standard that is “quite broad.” Azima,
926 F.3d at 878; see also Mont v. United States, 139 S. Ct. 1826, 1832
(2019) (“The Court has often recognized that ‘in connection with’ can
bear a ‘broad interpretation.’ ” (quoting Merrill Lynch, Pierce, Fenner &
Smith Inc. v. Dabit, 547 U.S. 71, 85 (2006))).
specifically, (a) the relation between things that depend on, involve, or follow each
other”); Connection, The Random House College Dictionary (1980) (“3. anything that
connects; link; bond. 4. association; relationship . . . .”); Connection, The American
Heritage Dictionary of the English Language (3d ed. 1992) (defining “connection,” in
relevant part, to mean “[o]ne that connects; a link,” “[a]n association or a relationship,”
or a “reference or relation to something else”); Connection, The American Heritage
Dictionary of the English Language (5th ed. 2016) (same).
Additionally, modern dictionaries sometimes define “in connection with” as an
idiom meaning “in relation to.” See, e.g., Connection, The American Heritage
Dictionary of the English Language (5th ed. 2016).
12 For additional authorities, see also Huntsman v. Commissioner, 905 F.2d
1182, 1184 (8th Cir. 1990) (interpreting “in connection with” to mean having “an
‘association’ or ‘relation’ with”), rev’g 91 T.C. 917 (1988), and Coregis Ins. Co. v. Am.
Health Found., Inc., 241 F.3d 123, 128–29 (2d Cir. 2001) (Sotomayor, J.) (noting that
the term “relation” is defined as a “connection” or “reference” to, and that courts have
described the term “relating to” as equivalent to the phrases “in connection with” and
“associated with”).
15
We are mindful, however, that, as the Supreme Court observed in
interpreting another statute involving the disclosure of personal
information, “[t]he phrase ‘in connection with’ ” can also be read as
“essentially ‘indeterminat[e]’ because connections, like relations, ‘ “stop
nowhere.” ’ ” Maracich v. Spears, 570 U.S. 48, 59–60 (2013) (quoting N.Y.
State Conf. of Blue Cross & Blue Shield Plans v. Travelers Ins. Co., 514
U.S. 645, 655 (1995)). 13 Therefore, in interpreting that phrase, we must
as always consider “the structure of the statute and its other provisions.”
Id. at 60 (citing N.Y. State Conf. of Blue Cross & Blue Shield Plans, 514
U.S. at 656); see id. at 88 (Ginsburg, J., dissenting) (“I agree with the
Court that the words ‘in connection with’ must be contained within
reasonable bounds.”); see also Culbertson v. Berryhill, 139 S. Ct. 517, 522
(2019) (applying the same statutory interpretation principle). 14
13 Maracich involved the interpretation of the Driver’s Privacy Protection Act
of 1994 (DPPA). See 18 U.S.C. §§ 2721–2725. The DPPA governs the disclosure of
personal information in the records of state motor vehicle departments (DMV).
Maracich, 570 U.S. at 52. The DPPA prohibits the disclosure of personal information
unless the disclosure is for a purpose covered by one of 14 statutory exceptions. Id.
The provision at issue in the case, 18 U.S.C. § 2721(b)(4), allowed disclosure
[f]or use in connection with any civil, criminal, administrative, or
arbitral proceeding in any Federal, State, or local court or agency or
before any self-regulatory body, including the service of process,
investigation in anticipation of litigation, and the execution or
enforcement of judgments and orders, or pursuant to an order of a
Federal, State, or local court.
The question before the Court was whether lawyers who served as counsel in
a class action against South Carolina car dealers permissibly “obtained names and
addresses of thousands of individuals from the South Carolina DMV in order to send
letters to find plaintiffs for a lawsuit they had filed against car dealers for violations
of South Carolina law.” Maracich, 570 U.S. at 52. In a five-to-four decision, the Court
held that, “[i]n light of the text, structure, and purpose of the DPPA,” “an attorney’s
solicitation of clients is not a permissible purpose covered by the (b)(4) litigation
exception.” Id. The four dissenting justices “would read [the] statutory language to
permit use of DMV information tied to a specific, concrete proceeding, imminent or
ongoing, with identified parties on both sides of the controversy.” Id. at 81 (Ginsburg,
J., dissenting).
14 The Supreme Court has “eschewed uncritical literalism leading to results
that no sensible person could have intended” “when confronted with capacious
phrases” like “in connection with,” “related to,” and “arising from.” Jennings v.
Rodriguez, 138 S. Ct. 830, 840 (2018) (Alito, J.) (plurality opinion) (cleaned up)
(collecting authorities); see also FERC v. Elec. Power Supply Ass’n, 577 U.S. 260, 278
(2016, revised Jan. 28, 2016) (“As we have explained in addressing similar terms like
‘relating to’ or ‘in connection with,’ a non-hyperliteral reading is needed to prevent the
16
Additionally, following the Supreme Court’s lead, we must
exclude from the scope of section 6103(h)(4)(A) those proceedings that
have only a “remote relation to” the determination of a taxpayer’s
liability. Maracich, 570 U.S. at 59; see id. at 89 (Ginsburg, J.,
dissenting) (“[W]hen the Court has sought a limiting principle for
similar statutory language, it has done so to prevent the application of
a statute to matters with ‘only a tenuous, remote, or peripheral
connection’ to the statute’s core purpose.” (quoting N.Y. State Conf. of
Blue Cross & Blue Shield Plans, 514 U.S. at 661)). At the same time,
“we need not consider the outer bounds of the term ‘in connection with’ ”
when the matters under review are “directly tied” to one another. Mont,
139 S. Ct. at 1832.
Applying these principles in the context of section 6103, we have
no difficulty concluding that this case arose “in connection with” (i.e., in
relation to) determining the civil or criminal liabilities of taxpayers 1, 2,
and 3 and is therefore within the scope of section 6103(h)(4)(A). When,
as here, a whistleblower provides information to the IRS on a target
taxpayer and the IRS proceeds with an action and collects proceeds from
that target taxpayer, the decision whether to grant the whistleblower
an award—as well as our eventual review of that decision—is
inextricably linked with determining the target taxpayer’s civil or
criminal liability for at least two reasons.
To begin with, the IRS’s action in determining the target
taxpayer’s liability and the outcome of that action (including the
collection of additional tax) are clear but-for causes of the proceeding
before the Court. Indeed, under the reasoning of Li v. Commissioner, 22
F.4th at 1017, the existence of an IRS action to determine the liabilities
of the target taxpayer is a prerequisite to our jurisdiction to hear any
whistleblower case, including this one. In that very direct sense,
therefore, this case arose “in connection with” the IRS actions that
determined the taxpayers’ liabilities: we could not hear the case without
the actions.
Additionally, what the IRS determined with respect to the target
taxpayers and what it collected from those taxpayers are key inquiries
in analyzing the merits of this proceeding, which is focused on
evaluating “the extent to which the [whistleblower] substantially
statute from assuming near-infinite breadth.” (first citing N.Y. State Conf. of Blue
Cross & Blue Shield Plans, 514 U.S. at 656; and then citing Maracich, 570 U.S. at 59));
Elec. Power Supply Ass’n, 577 U.S. at 296 (Scalia, J., dissenting) (agreeing that the “so-
called ‘affecting’ jurisdiction cannot be limitless”).
17
contributed to [the IRS’s] actions,” I.R.C. § 7623(b)(1)—i.e., the actions
to “detect[ ] underpayments of tax, or . . . detect[ ] and bring[ ] to trial and
punishment persons guilty of violating the internal revenue laws or
conniving at the same,” I.R.C. § 7623(a)(1) and (2). Essentially, the
particulars of the IRS’s actions that determined the target taxpayer’s
liabilities will decide the outcome of this case. Given this reality, it is
hard to see how one can resist the conclusion that this judicial
proceeding arose in connection with (and is quite closely related to)
determining the target taxpayers’ liabilities or the collection of those
liabilities. The entire case is predicated on the whistleblower’s assertion
that the whistleblower’s efforts gave rise to (or at least contributed to)
the IRS’s actions against the target taxpayers and substantially
contributed to the IRS’s determination that more tax was owed and to
its ultimate collection. In that context, the proceeding has a very strong
“logical or causal connection” to the IRS’s determination of the target
taxpayers’ liability and, as then-Judge Alito concluded in a similar
context, arose in connection with (or in relation to) that determination.
John Wyeth & Brother Ltd., 119 F.3d at 1074 (quoting Webster’s Third
New International Dictionary 1916 (1971)).
In short, the strength of the connection present here is more than
enough to satisfy the “quite broad” standard recognized by the case
law, 15 see Azima, 926 F.3d at 878, and ensures that section 6103(h)(4)(A)
is not interpreted to assume impermissible, “near-infinite breadth,” 16
see Elec. Power Supply Ass’n, 577 U.S. at 278. We therefore conclude
that this case arose in connection with determining the civil or criminal
liabilities of taxpayers 1, 2, and 3 and that section 6103(h)(4)(A)
authorizes disclosure of the administrative record.
15 The connection here, for example, is at least as strong as the connection in
Mont, 139 S. Ct. at 1832, in which the Supreme Court held that “the phrase
[imprisonment] ‘in connection with a conviction’ encompasses a period of pretrial
detention for which a defendant receives credit against the sentence ultimately
imposed” because the “pretrial incarceration is directly tied to the conviction when it
is credited toward the new sentence.”
16 We note in this regard that the Supreme Court has interpreted similar
statutory text to allow for the disclosure of sensitive third-party information in the
context of litigation. See Maracich, 570 U.S. at 64–65 (noting that the exception under
18 U.S.C. § 2721(b)(4) “allows use of the most sensitive kind of information, including
medical and disability history and Social Security numbers” “for investigation in
anticipation of litigation and in the litigation itself” (emphasis added)).
18
2. The Commissioner’s Arguments
The Commissioner appears to acknowledge that the plain text of
section 6103(h)(4)(A) supports our conclusion, conceding in his briefing
that his own interpretation is “narrower in scope than the plain
language implies.” Resp’t’s Mem. 17–18 (Doc. 121). But he contends
that section 6103(h)(4)(A) is ambiguous. And, given that predicate, the
Commissioner urges us to turn to legislative history and the purpose of
section 6103 to discern its meaning. These, the Commissioner argues,
prove that the use of the phrase “arose out of, or in connection with” in
section 6103(h)(4)(A) “must denote” the following circumstances:
[P]roceedings in which the party seeking disclosure of a
nonparty’s return information faces some legally
enforceable liability, obligation, or sanction at the hands of
the government (as opposed to a non-government litigant);
and, where the party and non-party have a relationship or
connection that existed prior to, and independent of, the
proceedings themselves.
Resp’t’s Mem. 22–23. The Commissioner goes on to conclude that
whistleblower cases do not satisfy this standard.
We need not decide whether the predicate of the Commissioner’s
arguments—that section 6103(h)(4)(A) is ambiguous—is correct. Even
if we were to grant that predicate for the sake of analysis, but see Food
Mktg. Inst., 139 S. Ct. at 2364 (“Even [members of the Supreme Court]
who sometimes consult legislative history will never allow it to be used
to ‘muddy’ the meaning of ‘clear statutory language.’ ” (quoting Milner v.
Dep’t of Navy, 562 U.S. 562, 572 (2011))); Maracich, 570 U.S. at 76
(“[T]he surrounding text and structure of the DPPA resolve any
ambiguity in [the] phrases ‘in connection with’ and ‘investigation in
anticipation of litigation’ in (b)(4).”), the Commissioner’s arguments do
not carry the day.
a. Legislative History
The Commissioner argues that examples from the legislative
history of a parallel provision in section 6103(h) show that Congress had
19
a more limited understanding of section 6103(h)(4)(A). 17 We are not
persuaded.
We note first that the legislative history relates to a parallel
provision, not the one actually before us. But even if one accepts that
legislative history as probative to the meaning of the text before us, the
conference report the Commissioner cites simply provides some
illustrative examples of circumstances that would fall within the
parallel provision. See H.R. Rep. No. 95-1800, at 293 (1978) (Conf. Rep.),
reprinted in 1978-3 C.B. (Vol. 1) 521, 627. 18 The conference report does
not purport to provide an exhaustive account of the provision’s
application or discuss circumstances that would not be covered. See id.
In other words, the legislative history provides no indication that it was
“clearly intended to be an all-inclusive expression of what [either the
parallel provision or] the section [before us] covers.” Ryan v. Bureau of
Alcohol, Tobacco & Firearms, 715 F.2d 644, 649 (D.C. Cir. 1983) (Scalia,
J.). As the Supreme Court explained in Encino Motorcars, LLC v.
Navarro, 138 S. Ct. 1134, 1143 (2018):
Even for those Members of this Court who consider
legislative history, silence in the legislative history, “no
matter how ‘clanging,’ ” cannot defeat the better reading of
the text and statutory context. Sedima, S.P.R.L. v. Imrex
Co., 473 U.S. 479, 495, n.13 (1985). If the text is clear, it
needs no repetition in the legislative history; and if the text
is ambiguous, silence in the legislative history cannot lend
any clarity. See Avco Corp. v. Department of Justice, 884
F.2d 621, 625 (DC. Cir. 1989).
17 The parallel provision, section 6103(h)(2)(A), deals with the disclosure of
returns and return information to the Department of Justice for use in connection with
investigations and state and federal proceedings.
18 The conference report states, in relevant part:
[T]he return of a taxpayer who is not a party to the proceeding may be
made available to the Department of Justice if the proceeding arose out
of, or in connection with, determining the taxpayers’ civil or criminal
tax liability or the collection of civil tax liability. This provision would
apply in such situations as where the taxpayer’s liability may have
given rise to transferee liability or where the taxpayer did not (or was
unable to) intervene in a summons enforcement case.
H.R. Rep. No. 95-1800, at 293 (Conf. Rep.), 1978-3 C.B. (Vol. 1) at 627.
20
In short, even “[f]or those who consider legislative history relevant,”
Warger v. Shauers, 574 U.S. 40, 48 (2014), the legislative history here is
fully consistent with our interpretation of section 6103(h)(4)(A). See,
e.g., Church of Scientology of Cal. v. IRS, 792 F.2d 153, 162 n.4 (D.C.
Cir. 1986) (Scalia, J.) (“Legislative history is used to clarify the meaning
of a text, not to create extra-statutory law. If it can ever be the basis for
plainly departing from the text, it assuredly cannot be so when an
interpretation that honors both the text and the history is available.”),
aff’d, 484 U.S. 9 (1987).
b. Statutory Purpose
The Commissioner also invokes the purpose of section 6103,
arguing that our interpretation of section 6103(h)(4)(A) would allow “the
unfettered disclosure” of return information to “any whistleblower who
might file a Tax Court appeal,” resulting in “wholesale, unregulated
access to return information of any taxpayer that a whistleblower might
choose to target.” Resp’t’s Mem. 19–20. This outcome, the
Commissioner contends, would be contrary to the overarching purpose
of section 6103, which in the Commissioner’s view is to “restrict access
to return information within well-defined limits.” 19 Id. at 18. We
disagree for at least four reasons.
First, the general rule of section 6103 and that provision’s
numerous exceptions reflect Congress’s balancing of competing
interests: (1) the interest of taxpayers in maintaining the confidentiality
of their returns and return information and (2) the interests of others
whose rights might be affected by the information. See, e.g., Gardner,
213 F.3d at 738 (citing Nat’l Treasury Emps. Union v. FLRB, 791 F.2d
183, 184 (D.C. Cir. 1986)). Congress chose to include exceptions in
section 6103, demonstrating that the confidentiality of returns and
return information must sometimes give way to other interests. See id.Giving effect to those exceptions does not undermine the purpose of
section 6103 as the Commissioner contends; rather, it respects the
balance struck by Congress. 20 See Food Mktg. Inst., 139 S. Ct. at 2366;
19We note that several cases cited by the Commissioner to support his view of
the purpose of section 6103 actually support the whistleblower. See, e.g., McSurely v.
McAdams, 502 F. Supp. 52 (D.D.C. 1980) (applying a broad exception to permit
disclosure); Shell Petroleum, Inc. v. United States, 47 Fed. Cl. 812 (2000) (same).
20 Congress is, of course, free to change the balance it has struck and, if it
considers it advisable, establish greater protections for targets of whistleblower claims,
including, for example, providing that such targets be notified before their returns or
21
see also Encino Motorcars, 138 S. Ct. at 1142 (“[T]he FLSA has over two
dozen exemptions in § 213(b) alone, including the one at issue here.
Those exemptions are as much a part of the FLSA’s purpose as the
overtime-pay requirement. See [Henson v. Santander Consumer USA
Inc., 137 S. Ct. 1718,] 1725 [(2017)] (‘Legislation is, after all, the art of
compromise, the limitations expressed in statutory terms often the price
of passage’). We thus have no license to give the exemption anything
but a fair reading.”).
Second, with respect to the exception in section 6103(h)(4)(A)
specifically, Congress selected a broad phrase when it drafted the
provision. See United States v. Am. Trucking Ass’ns, 310 U.S. 534, 543
(1940) (“There is . . . no more persuasive evidence of the purpose of a
statute than the words by which the legislature undertook to give
expression to its wishes.”). As the D.C. Circuit has observed, the mere
fact that a standard is broad does not suggest that we should adopt a
more limited reading. See Azima, 926 F.3d at 878 (“[A]lthough we agree
that ‘in connection with’ is quite broad, we fail to see why that requires
us to limit its scope.”). If Congress intended to adopt a narrower
standard, it could have easily used different language or provided other
textual or structural clues. See id.; see also Maracich, 570 U.S. at 60.
Furthermore, “[e]ven if Congress did not foresee all of the applications
of the statute, that is no reason not to give the statutory text a fair
reading” in the circumstances here. Encino Motorcars, 138 S. Ct. at1143 (citing Union Bank v. Wolas, 502 U.S. 151, 158 (1991)).
Third, the flush text in section 6103(h)(4) gives the Secretary
authority to prevent disclosure “if the Secretary determines that such
disclosure would identify a confidential informant or seriously impair a
civil or criminal tax investigation.” Thus, Congress did not leave the
Secretary powerless with respect to disclosures in judicial proceedings.
For example, if the Secretary determines in a particular whistleblower
case that disclosure of a target taxpayer’s return or return information
would seriously impair a tax investigation, the information could be
protected from disclosure. But the Secretary has not made such a
determination in this case. And the text shows that the bar Congress
set for the Secretary’s exercise of her discretion is high. Thus, it would
not be enough for a potential disclosure simply to “impair” a tax
investigation. The disclosure must “seriously” do so, indicating that
Congress generally favored disclosure over nondisclosure in this context
return information is disclosed. But, until Congress does so, this Court must apply the
rules currently reflected in the statute.
22
when the other requirements of the statute are satisfied. In view of the
text and structure of the statute, we are unauthorized to create
additional exceptions based on amorphous purpose considerations.
Fourth, we do not share the Commissioner’s broad view of our
holding. 21 A number of rules in addition to section 6103 limit the
information available to whistleblowers in the Tax Court. For a start,
to commence a case a whistleblower must appeal a WBO determination
to the Court, and we must have jurisdiction to hear the case. See the
discussion in Part II.D above. Under Li v. Commissioner, 22 F.4th
at 1017, this means the IRS must have at least proceeded with an action
against the target taxpayer. When the IRS does not take action—in a
rejection case, for example—whistleblowers generally will not have
access to returns or return information in a Tax Court proceeding.
Next, even if a whistleblower surmounts this jurisdictional
hurdle, the information available in a whistleblower case generally will
be limited to the administrative record the WBO develops or a properly
supplemented record, because that is the record that is subject to the
Court’s review. See Kasper, 150 T.C. at 20; see also Van Bemmelen v.
Commissioner, 155 T.C. 64, 79 (2020) (noting that in a “ ‘record rule’
whistleblower case” we decide, “as a matter of law, whether the [WBO’s]
action is supported by the administrative record and is not arbitrary,
capricious, an abuse of discretion, or otherwise not in accordance with
law”). Nothing in section 6103(h)(4)(A) or our holding gives
whistleblowers license to seek returns or return information that the
WBO did not collect as part of its administrative process. That such
documents might exist in the hands of the IRS generally or in the files
of an examination team that audited a target taxpayer does not (without
more) make those documents part of the administrative record and
triggers no need for an evaluation under section 6103(h)(4)(A). See
Treas. Reg. § 301.7623-3(e) (describing the contents of the
administrative record in a whistleblower case).
21 The Commissioner argues that interpreting section 6103(h)(4)(A) “as being
broadly inclusive of any and all proceedings connected in any way whatsoever with the
non-party’s tax liability” would render section 6103(h)(4)(B) and (C) superfluous. But
we do not so hold, and our interpretation does not create superfluity. For example, in
an employer’s employment tax dispute, returns or return information of the employer’s
employees potentially could satisfy the requirements of section 6103(h)(4)(B) or (C),
see, e.g., Mescalero Apache Tribe, 148 T.C. at 298–99, but would be unlikely to satisfy
the requirements of section 6103(h)(4)(A) absent some related Government action to
determine the employees’ liabilities.
23
Contrary to the Commissioner’s contention, therefore, we do not
hold here that every whistleblower should receive unfettered access to
the return information of every target the whistleblower names.
Instead, we hold that where (1) a whistleblower submits information to
the IRS identifying a target taxpayer, (2) the IRS proceeds with an
action against the taxpayer and collects proceeds, (3) the WBO makes a
determination regarding the whistleblower’s entitlement to an award
related to that action (including a determination that no award is
warranted), (4) the whistleblower seeks our review of the WBO’s
determination, (5) our jurisdiction to perform that review depends on
the IRS action that determined the target taxpayer’s tax liability, and
(6) the correctness of the WBO’s determination (and therefore the
outcome of the case before us) turns on the details of the IRS action, then
the whistleblower case “arose . . . in connection with” determining the
taxpayer’s liability as required by section 6103(h)(4)(A). In these specific
circumstances, we conclude that section 6103 does not prohibit
disclosure of the taxpayer’s returns and return information that the
WBO has included in the administrative record supporting its
determination. 22
c. Regulatory Arguments
The Commissioner concludes his analysis of section 6103(h)(4)(A)
by arguing that the current whistleblower regulations are consistent
with his position. Specifically, he contends that, “to the extent that
existing regulations allow for limited disclosure of . . . return information
to whistleblowers,” these disclosures are authorized by section
6103(h)(4)(B) or (C) rather than section 6103(h)(4)(A). Resp’t’s Mem. 27.
We read the relevant regulations differently. For one thing,
regulations under section 6103 authorize the WBO to disclose returns
and return information to a whistleblower “to the extent necessary to
conduct a whistleblower administrative proceeding,” citing section
6103(h)(4). Treas. Reg. § 301.6103(h)(4)-1(b). The regulations provide
some illustrative examples of information that may be shared, but
specifically state the examples are not exclusive. See id.22 This conclusion is consistent with the Supreme Court’s observation in
Maracich, 570 U.S. at 64–65, that the exception under 18 U.S.C. § 2721(b)(4) “allows
use of the most sensitive kind of information, including medical and disability history
and Social Security numbers” “for investigation in anticipation of litigation and in the
litigation itself,” even though that exception did not allow disclosure “for the purpose
of soliciting new business.”
24
Additionally, regulations under section 7623 elaborate that a
whistleblower who signs a confidentiality agreement may schedule an
appointment with the WBO to review any information in the
administrative claim file that is not protected by common law or
statutory privileges. 23 Treas. Reg. § 301.7623-3(c)(4)(i)(B). Initially, the
proposed regulations limited the information that could be viewed in
this manner to “pertinent” information in the file, see Prop. Treas. Reg.
§ 301.7623-3(c)(5), 77 Fed. Reg. 74,798, 74,809 (Dec. 18, 2012), but in
response to a comment that “the whistleblower should be able to review
all non-privileged information in the administrative claim file, whether
or not it is deemed pertinent,” the final regulations dropped the term,
see T.D. 9687, 2014-36 I.R.B. 486, 500.
Apparently then, the regulations would have authorized the
Commissioner to share the administrative claim file underlying this
case, including nonpertinent portions of the file, with the whistleblower
during the whistleblower administrative proceeding associated with the
whistleblower’s claims. Disclosures under section 6103(h)(4)(B) and (C)
are limited by statute to materials “directly related to the resolution of
an issue in the proceeding,” but disclosures under section 6103(h)(4)(A)
are not. This strongly indicates that the regulations rely on section
6103(h)(4)(A) to authorize disclosures in whistleblower administrative
proceedings. 24 And we see no basis in the statute for concluding that
23 The regulations define the “administrative claim file” broadly to include a
list of enumerated materials, see Treas. Reg. § 301.7623-3(e)(2)(i)–(viii), as well as “[a]ll
other information considered by the official making the award determination,” id.subdiv. (ix).
24 We note that the regulations predate the 2019 enactment of section
6103(k)(13), see Taxpayer First Act of 2019, Pub. L. No. 116-25, § 1405(a), 133 Stat.
981, 997–98 (2019), and therefore that section 6103(k)(13) did not provide the
authorization for their adoption. Section 6103(k)(13) applies to proceedings before the
Secretary that precede a whistleblower’s appeal to our Court. See I.R.C. § 6103(k)(13)
(permitting the disclosure of return information to a whistleblower related to the
investigation of a target taxpayer in certain circumstances, requiring the Secretary to
provide status updates to whistleblowers at certain times, and, upon a whistleblower’s
request, requiring the Secretary to provide updates on the status of the investigation
and disclose the reasons for any award determination under section 7623(b)). As the
Commissioner observed in briefing, section 6103(k)(13) “permits disclosures to be made
‘to any individual providing information relating to any purpose described in
paragraph (1) or (2)’ [of section 7623(a)]. It does not authorize disclosures to the
Court.” Resp’t’s Mot. To Modify Order 9 (Doc. 114). The Commissioner is right that
section 6103(k)(13) says nothing about disclosures to the Court. That topic is covered
by section 6103(h)(4). Consistent with this understanding, when Congress adopted
section 6103(k)(13), it did not restrict the scope of section 6103(h)(4), even though the
25
section 6103(h)(4)(A) authorizes broader disclosure in administrative
proceedings than in judicial proceedings. In other words, if the
regulations would have authorized the Commissioner to share the
administrative claim file with the whistleblower during the
whistleblower administrative proceeding, we see no basis in
section 6103(h) for the Commissioner to provide less information in a
subsequent judicial proceeding. Thus, the regulations reinforce our
conclusion that section 6103(h)(4)(A) authorizes disclosure of the
administrative record in this case.
d. Final Considerations
From a broader perspective, the arguments the Commissioner
offers in support of his position reflect an approach that “is a relic from
a ‘bygone era of statutory construction.’ ” Food Mktg. Inst., 139 S. Ct.
at 2364. The Commissioner spends little time with the statutory text or
its ordinary meaning, pivoting almost immediately to legislative history
and purported general policies underlying section 6103(a) (which, as we
have described, offer him no help). He provides no analysis of the
structure or the exceptions to section 6103(a), which are legion and of
course were enacted by Congress. Cf. Maracich, 570 U.S. at 52–70
(relying on the structure of the statute and all the relevant provisions to
determine the meaning of the text at issue). Moreover, the holdings of
several of the cases the Commissioner cites in support of his policy
points turn out to support the whistleblower’s position. And, as
described in the preceding section, the same can be said of the
regulations. Therefore, while the Commissioner’s concern regarding his
responsibilities under section 6103 is laudable, we cannot agree with his
interpretation of the statute.
Our conclusion does not leave taxpayer information contained in
the administrative record the WBO creates without protection. For
example, Rule 27 provides guidance for redacted filings and states that,
for good cause, the Court may require further redactions or issue a
protective order. See Rule 27(a), (d). And Rule 103(a) states that, on a
party’s motion and for good cause shown, “the Court may make any
order which justice requires to protect a party or other person from
same section of the Taxpayer First Act that added section 6103(k)(13) to the Code also
amended section 6103(k)(6) to exclude from its reach disclosures covered by the newly
added section 6103(k)(13). The contrast in Congress’s approach with respect to section
6103(k)(6)—express amendment—and Congress’s approach with respect to section
6103(h)(4)—absolute silence—confirms that the adoption of section 6103(k)(13) did not
affect the authority under section 6103(h)(4).
26
annoyance, embarrassment, oppression, or undue burden or expense.”
The Commissioner remains free to pursue redaction of the
administrative record pursuant to these rules. But he cannot maintain
that section 6103 prohibits him from complying with the Court’s orders.
Finally, our further review of section 6103(h)(4)(A) as applicable
to this case leads us to conclude that section 6103 considerations do not
warrant an in camera review of the redacted materials. Congress has
already made a determination with respect to them as far as
section 6103 is concerned. They may be disclosed. Unless the Secretary
determines that providing the unredacted information “would identify a
confidential informant or seriously impair a civil or criminal tax
investigation,” I.R.C. § 6103(h)(4) (flush text), the Commissioner may
not resist disclosure by appealing to section 6103(a). The Commissioner
remains free of course to propose more targeted redactions under Rule
27(a) and (d) and Rule 103(a), and we will allow him time to do so if he
considers that appropriate.
IV. Conclusion
To summarize, the Commissioner’s interpretation of section
6103(h)(4)(A) cannot stand in the face of the broadly worded statutory
exception, the structure of the statute, and the statute’s other
provisions. If Congress had meant to limit the exception as the
Commissioner suggests, it could have used more exacting language and
given different textual and structural clues. The facts of this case fall
well within the bounds of the exception Congress provided, and we must
therefore decline the Commissioner’s invitation to impose stricter
requirements.
To reflect the foregoing,
An appropriate order will be issued.
Reviewed by the Court.
KERRIGAN, FOLEY, GALE, GUSTAFSON, MORRISON,
BUCH, NEGA, PUGH, ASHFORD, URDA, COPELAND, JONES,
GREAVES, MARSHALL, and WEILER, JJ., agree with this opinion of
the Court.
PARIS, J., did not participate in the consideration of this opinion.