Lawrence W. Doyle & John F. Moynihan v. Commissioner ( 2020 )


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    T.C. Memo. 2020-139
    UNITED STATES TAX COURT
    LAWRENCE W. DOYLE AND JOHN F. MOYNIHAN, Petitioners v.
    COMMISSIONER OF INTERNAL REVENUE, Respondent
    Docket No. 4865-19W.                          Filed October 8, 2020.
    Ps submitted to the Whistleblower Office (“WBO”) of the
    Internal Revenue Service (“IRS”), pursuant to I.R.C. sec. 7623(b)(1),
    two Forms 211, “Application for Award for Original Information”,
    with which they provided “specific credible documentation”
    supporting their allegations that several related entities (the “target”)
    failed to comply with the requirements of I.R.C. sec. 501(c)(3) for
    tax-exempt organizations. The claims were referred to two operating
    divisions of the IRS--the Tax Exempt and Government Entities
    (“TEGE”) Division and the Criminal Investigation (“CI”) Division.
    TEGE recommended denial of the claim and reported that no
    investigation of the target was underway; but CI’s report was
    equivocal as to whether it was “working with” Ps to investigate the
    target. The WBO issued a determination denying Ps’ claim on the
    ground that “the IRS took no action based on the information that you
    provided.” Ps filed a petition with this Court.
    R moved for summary judgment on the dual grounds that “the
    IRS [1] did not proceed with an administrative or judicial action
    against the [target] Entity and [2] did not collect any proceeds based
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    [*2] on petitioners’ claims.” Ps opposed the motion, arguing that the
    WBO abused its discretion by not auditing the target and by
    concluding that the IRS did not proceed with any action on the basis
    of Ps’ information.
    Held: Because the WBO’s determination was not based on the
    non-collection of proceeds, R may not rely on that supposed ground
    to defend the determination.
    Held, further, the WBO’s determination that CI did not
    “proceed[] with any * * * action” for purposes of I.R.C. sec.
    7623(b)(1) was not supported by the administrative record and thus
    constituted an abuse of discretion; and R’s motion for summary
    judgment will be denied.
    Lawrence W. Doyle and John F. Moynihan, for themselves.
    Patricia P. Davis, for respondent.
    MEMORANDUM OPINION
    GUSTAFSON, Judge: Petitioners, Lawrence W. Doyle and John F.
    Moynihan, have appealed, pursuant to section 7623(b)(4),1 the determination of
    the Whistleblower Office (“WBO”) of the Internal Revenue Service (“IRS”) that
    denies them a whistleblower award. Respondent, the Commissioner of the IRS,
    1
    Unless otherwise indicated, all section references are to the Internal
    Revenue Code of 1986 as in effect at all relevant times (codified in 26 U.S.C.),
    and all Rule references are to the Tax Court Rules of Practice and Procedure.
    -3-
    [*3] has moved for summary judgment, asserting that the WBO did not abuse its
    discretion when it denied petitioners’ claims, because the IRS did not use their
    information to conduct any examination or to collect any proceeds. Petitioners
    oppose the motion, contending that the IRS’s Criminal Investigation (“CI”)
    Division undertook an examination that is based on their information. For the
    reasons stated below, we will deny the Commissioner’s motion.
    Background
    MDA’s Form 211
    Petitioners are associated in some manner with MDA Analytics, LLC
    (“MDA”). In August 2017 MDA submitted to the WBO a Form 211, “Application
    for Award for Original Information”. Petitioners’ names appear on MDA’s
    Form 211. The form included publicly available information about several related
    entities (whom we refer to collectively as the “target”), alleging: that the target
    failed to comply with the requirements of section 501(c)(3) for tax-exempt
    organizations; that the target accepted foreign funds transfers as a “foreign agent”,
    thereby vitiating charitable tax-exempt protection; and that the target made
    material misrepresentations to the IRS and to other governmental agencies
    concerning the target’s organization and operations. The Form 211 stated that
    MDA had “[n]o relationship [to the target] other than concerned taxpayers”.
    -4-
    [*4] MDA claimed in its Form 211 (and the Commissioner does not dispute)
    that--
    Petitioners submitted approximately 100 exhibits in excess of 6,000
    pages compiled from their three-plus year investigation. Those
    exhibits and evidence lay out the clear framework of the wrongdoings
    committed by * * * [the target] and include the following:
    Applications; Determination Letters and Articles of Incorporation;
    Income Statements; Tax Returns (foreign and domestic); Consent
    Decrees; Memorandums of Understanding with foreign governments;
    Program Plans for Entity in question; Partnerships; Audits, foreign
    and domestic; Contractual Agreements with Non-Governmental
    Organizations; Reviews of State Registration Forms; IG Reports of
    Entities, foreign and domestic; Internal Legal Reviews of Entity in
    Question; Reviews of E-mail Exchanges between Entity Executives
    and Governmental Officials; Donor Tax Returns; Regulatory
    Reviews, Actions, and Subsequent Legal Settlement with Entity
    Partner; Interviews with Whistleblower and Current and Former
    Executives of Entity.
    A WBO employee made a notation that “WB” (the whistleblower) had “submitted
    specific credible documentation.”
    Petitioners’ Forms 211
    The WBO replied to MDA with a letter advising that only individuals are
    eligible to file claims for awards and that MDA’s Form 211 must be resubmitted
    by individuals. Each petitioner promptly filed his own separate Form 211, which
    the WBO received in September 2017. Both of petitioners’ Forms 211 made the
    -5-
    [*5] same statements that had been in MDA’s Form 211 and, we infer, had the
    same attachments as MDA’s Form 211.
    WBO’s first referral to TEGE
    The WBO reviewed petitioners’ Forms 211 (and their attachments) and
    referred this information to the IRS office with subject matter responsibility over
    the issues raised, i.e., the Tax Exempt and Government Entities (“TEGE”)
    Division. (Since the WBO made this referral, rather than issuing a threshold
    “rejection” of the claims, cf. 26 C.F.R. sec. 301.7623-1(c)(4), Proced. & Admin.
    Regs., we infer that the WBO continued to consider that petitioners’ claims, like
    MDA’s, presented “specific credible documentation”.)
    TEGE’s referral to CI
    A subject matter expert (“SME”) at TEGE received petitioners’ claims on
    March 16, 2018. On April 2, 2018, the SME “[r]eceived an E-Mail from Lynn
    Brinkley area Manager. Indicating that I should transfer this case and all related
    cases to CI per CI request.” The SME therefore completed a Form 11369,
    “Confidential Evaluation Report on Claim for Award”, and transferred petitioners’
    claims to CI.
    -6-
    [*6] CI’s reported decision not to investigate
    In July 2018 CI reported its decision on a Form 11369 dated July 10, 2018,
    that it declined to investigate the target or any of the issues that petitioners raised
    in their Forms 211. Line 12 of the form asked: “Was this claim surveyed or
    declined”; and the box indicating “Yes” was checked, and the blank was filled
    “Declined by Criminal Investigation”. Line 12(A) asked: “Did the whistleblower
    information result in opening any other investigation with respect to the
    taxpayer(s) identified on this Form 11369 or any other taxpayers where an issue
    unrelated to the whistleblower issue(s) was discovered”; and the box indicating
    “No” was checked. Line 12(B) asked: “Was the claim declined due to a lack of
    criminal potential”; and the box indicating “Yes” was checked, and the blank was
    filled “Individual notated in the claim who had personal knowledge denied making
    those statements in an interview with federal agents.” CI returned petitioners’
    claims to the WBO.
    When the WBO received the Form 11369 from CI, it was incomplete. An
    entry dated 07/20/2018 in the WBO’s “Claim Action Listing” stated: “Received
    F11369, missing year in box 6. Requesting F11369 have a year in box 6.” An
    entry dated 08/03/2018 notes: “2d request for completed F13369 [sic]”. An entry
    dated 08/16/2018 stated:
    -7-
    [*7] F11369 is incomplete. Response received from the field is
    unacceptable, missing SSN’s [Social Security numbers] & EIN’s
    [employer identification numbers] taxpayer and WB. Emailed SA to
    revise and told its [sic] somebody else’s job, NO ICE [initial claim
    evaluation] indicators to release.
    CI thereafter completed the form, and an entry dated 08/21/2018 recorded that the
    WBO “[r]eceived F11369 declined by CI. Per lead instructions assign back to
    TEGE.”2
    WBO’s second referral to TEGE
    After receiving petitioners’ claims from CI, the WBO, on about August 21,
    2018, again assigned the claims to TEGE for review. On September 20, 2018, the
    SME at TEGE composed an entry in his “Case Chronology Record” that stated:
    The whistleblower alleges that the Taxpayers fail[ed] to comply with
    501c3 requirements; accepted foreign funds transfers as a foreign
    agent; thereby vitiating charitable tax exempt protection, and may
    have made material misrepresentations to IRS and other
    governmental agencies in re organization and operations.
    2
    Petitioners allege--but the administrative record does not reflect--that, in
    this same general time period, one of them had a telephone conversation on
    August 1, 2018, with a Special Agent of the Federal Bureau of Investigation who
    said, “I can’t say enough about what you and your colleagues have done in filing
    your submission and providing your materials. We greatly appreciate everything
    you and your colleagues have done in your work.” Such non-record information
    might be pertinent to a motion to supplement the administrative record, see
    Van Bemmelen v. Commissioner, 155 T.C. __, __ (slip op. at 15-16) (Aug. 27,
    2020), or to a request to obtain discovery; but we do not consider such information
    in ruling on the Commissioner’s motion for summary judgment.
    -8-
    [*8] Facts: The organizations have filed all appropriate Forms 990/990PF
    and 990T for the periods of 2014-2017. A review of the organization
    web site indicates that the activities are within the scope of 501(c)(3).
    Review of the supporting documents appears to be created by the
    whistleblower organization, and not specific and credible. The
    whistleblower did not provide evidence and supporting
    documentation which is creditable. This claim were [sic] declined by
    Criminal Investigation, because individual notated in the claim who
    had personal knowledge denied making those statements in an
    interview with federal agents.
    Conclusion: These claims are being rejected[3] and not selected for
    examination, because the allegations are speculative in nature, the
    evidence submitted was not creditable, and because individual
    notated in the claim who had personal knowledge denied making
    those statements in an interview with federal agents. * * *
    On the same day, he prepared and signed a Form 11369 to the same effect. Where
    line 12 of the form asked: “Was this claim surveyed or declined”, the box
    indicating “Yes” was checked; and the blank was filled with the same three-
    paragraph narrative, quoted above, that was in the entry on his “Case Chronology
    Record”. Where line 12(A) asked: “Did the whistleblower information result in
    opening any other investigation with respect to the taxpayer(s) identified on this
    Form 11369 or any other taxpayers where an issue unrelated to the whistleblower
    3
    Although the SME stated that the claims were being “rejected”, he
    manifestly used that term in a colloquial sense, and not indicating a threshold
    “rejection” based on the face of the claims by reference to minimum criteria of
    eligibility. Cf. Lacey v. Commissioner, 
    153 T.C. 146
    , 161-163 (2019)
    (distinguishing threshold “rejection” of a claim from a merits “denial” of a claim).
    The claims were in fact thereafter “denied” in due course.
    -9-
    [*9] issue(s) was discovered”, the box indicating “No” was checked. Line 13
    asked: “Was the claim transferred or reassigned”; and the box indicating “No”
    was checked.
    WBO’s preliminary decision to deny the claim
    By October 31, 2018, petitioners’ claims were back in the WBO, assigned to
    Analyst Debra McCullum. After a review of the administrative claim file, the
    analyst issued preliminary denial letters to petitioners on October 31, 2018. Each
    letter stated:
    PRELIMINARY DENIAL LETTER
    The Whistleblower Office has considered your application for an
    award dated August 1, 2017 and made a preliminary decision to deny
    your claim. Internal Revenue Code (IRC) section 7623(b) provides
    that an award may be paid only if the Secretary proceeds with an
    administrative or judicial action based on the information provided
    and the action results in the collection of tax, penalties, additions to
    tax, and additional amounts based on the information provided.
    The claims listed above have been recommended for denial because
    the IRS took no action based on the information that you
    provided. * * *
    If you believe that the Internal Revenue Service has erred in this
    preliminary decision, please submit your written comments within
    30 days of the date of this letter to the undersigned * * *[.]
    This letter is NOT a final determination for purposes of filing a
    petition with the United States Tax Court under IRC
    section 7623(b)(4). Following the 30 day period for your comments,
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    [*10] the Whistleblower Office will issue you a final determination. Any
    comments received regarding this preliminary decision will be
    considered by the Whistleblower Office in making a final
    determination.
    Petitioners’ response to the preliminary denial
    On behalf of both petitioners, Mr. Doyle mailed a response to the WBO on
    November 20, 2018,4 which stated as follows:
    I write in strong opposition to the Preliminary Denial Letter
    and must say that it has taken me and my colleagues by utter surprise
    and amazement. With all due respect to those within the IRS
    involved in reviewing our submission and issuing the Preliminary
    Denial, there must be a significant error given that it is public
    knowledge that the IRS is clearly investigating * * * [the target], and
    is an active participant in the joint law enforcement effort being run
    out of * * * [city and State] and elsewhere within the justice system
    focused on * * * [the target]. It is also evident, based on information
    and communications referenced below, that many of the issues
    relating to tax fraud and 501(C)3 violations raised in our report are
    very much a focus of the joint FBI/IRS investigation into * * * [the
    target]. This investigation is ongoing. Our report gave rise to it and
    provided the basis for meaningful parts of it specifically within the
    realm of tax code violations and related issues of non-compliance
    within the law relating to charitable endeavors. Communications we
    have had with specific law enforcement agents, upon which I will
    expound more within this letter, confirm these very facts.
    4
    To the same effect, petitioners allege in their opposition to the
    Commissioner’s motion that, after they sent their November 20, 2018, response to
    the WBO, they “met with CI * * * on no less than five occasions, which meetings
    are not reflected in the Respondent’s administrative record”, and they support this
    allegation with their joint declaration (submitted under penalty of perjury in
    compliance with 28 U.S.C. sec. 1746 (2018)). We do not consider this non-record
    allegation in ruling on the Commissioner’s motion for summary judgment.
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    [*11]          Our submission sets out evidence of a number of specific IRS
    tax code violations committed by * * * [the target] in connection with
    its global activities. The report memorialized our more than 2 year
    investigation which remains ongoing. The report is more than 6000
    pages in length, and was supported by 95 Exhibits setting out
    confirming proof of our findings. All of these materials and pages,
    including original contracts with foreign governments, exchanges
    between * * * [target] officials and foreign and domestic government
    officials, and reviews of each and every * * * [target] federal form
    990 have been shared with and receipt confirmed by the
    Whistleblower Office in Ogden, Utah.
    As indicated previously, we shared this report, our evidence,
    our notes of investigation, and our exhibits with the federal agents in
    * * * [city]. The FBI in * * * [city] has thanked us profusely and
    praised our report excessively. As one individual close to the
    investigation commented to me, “you and your colleagues have saved
    numerous federal agents thousands of hours of work.”
    Our report reached the joint FBI/IRS Task Force in * * *
    [State] in * * * [month and year]. * * * [Petitioners’ colleague] was
    in touch with the United States Attorney * * * [location and name] on
    * * * [date], who then referred us to FBI Special Agent * * * [name].
    For the next several months, two members of our team * * * have
    been in regular contact with Special Agent * * * [name] providing
    information on an ongoing basis given that our investigative efforts
    continue to this very day. We have shared all of the same materials
    submitted to the IRS Whistleblower Office with these offices and
    agents. We have received both confirmation and excessive
    compliments on the quantity and quality of our work and the case
    manner in which we presented it.
    To take a step back at this juncture, though, our efforts and
    ongoing work product are a result of not only thousands of hours of
    our own self-financed personal investigative pursuits but also endless
    hours of engagement with legal professionals, tax attorneys,
    accountants, and charity experts all well versed in the specific nature
    - 12 -
    [*12] of the work we have submitted. We pushed hard in challenging these
    individuals to critique our work. They pushed back hard so that our
    work product is fully vetted, refined, and exhaustive. Additionally,
    prior to and/or subsequent to making our formal IRS Whistleblower
    Submission, we engaged or communicated with both current and
    former law enforcement officials, tax professionals and others within
    a wide array of state and federal offices including the following: IRS,
    DOJ, FBI, US Postal Inspection Service, Treasury Inspector General
    Tax Administration, Counsel and Chief Counsel on the US House of
    Representatives Committee on the Judiciary, and officials within
    selected State Attorneys General, Secretaries of State, and/or
    Consumer Affairs offices.
    In a similar fashion to the expressly stated gratitude and
    amazement at our work product that we received from Special Agent
    * * * [name], we have also received praise and compliments from
    countless others as well. Not once has any single individual within
    these professional ranks or elsewhere pushed back in a manner that
    would indicate that our investigative efforts and work product were
    misdirected or misinformed. On the contrary, the transparency we
    have provided in our efforts and submission has been enlightening to
    many of these professionals. This same transparency is central to any
    robust investigative endeavor of the sort that we understand that the
    IRS/CID is engaged in as an active and full participant looking into
    the true nature of * * * [the target]. We further understand that this
    investigation is currently ongoing. Furthermore, it is also clear, that
    the claims and allegations, including supporting evidence, that our
    team has provided to you as part of our whistleblower claim is central
    to this investigation; that it helped launch it; and the evidence of the
    violations set out in our submission are being actively investigated by
    the IRS and FBI in * * * [city]. Thus, it is simply cannot be the case
    that the “IRS took no action in this matter.”
    The assertion that the IRS is not investigating our claims is also
    belied by public reporting. There have been a number of public, press
    reports confirming the IRS role in the investigation of * * * [the
    target] being pursued out of * * * [city]. For example, the photograph
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    [*13] shared by my colleague Mr. Moynihan in his communication with
    you depicts an IRS agent and an FBI agent participating in a search
    warrant in this investigation in * * * [city]. This picture is dated * * *
    [date].
    In conclusion, we are confident that your office in * * * [city]
    can confirm the above. We also are confident that upon review you
    will agree that your letter to us is fully inconsistent with the feedback
    we have received elsewhere from other former and current
    government officials and was thus issued in error. As such, please
    accept this letter in strong opposition to the notice of Preliminary
    Denial. We respectfully request that the above information be
    confirmed within your agency and that our efforts are accorded the
    full and appropriate consideration and credit that they deserve. We
    look forward to this confirmation and the withdrawal of this
    Preliminary Denial so that the rule of law upon which our nation
    stands can be upheld and so that Americans everywhere can have
    confidence that lady justice truly is blind.
    Of course, we stand ready to provide proof and confirmation of
    any of the above.
    WBO’s consultation with CI
    The WBO analyst reacted as follows to petitioners’ submission of
    November 20, 2018:
    Upon receipt of petitioners’ response to the preliminary denial
    letter, I conducted a diligent search of the IRS Integrated Data
    Retrieval System to confirm there were no open IRS examinations
    involving * * * [the target]. I also coordinated with the
    Whistleblower Office CI liaison to confirm with CI headquarters that
    there is no ongoing CI investigation of * * * [the target].
    - 14 -
    [*14] That “coordinat[ion] with the Whistleblower Office CI liaison” apparently
    consisted of a two-email exchange between Laura Meis in the WBO and David
    Denning in CI. On January 30, 2019, she stated: “We have a WB that claims he is
    working with an IRS agent jointly with the FBI regarding” the target. She
    described in some detail the nature of petitioners’ allegations, and she quoted one
    paragraph (also quoted above) of petitioners’ November 2018 letter:
    Our report reached the joint FBI/IRS Task Force in * * *
    [State] in * * * [month and year]. * * * [Petitioners’ named
    colleague] was in touch with the United States Attorney * * *
    [location and name] on * * * [date], who then referred us to FBI
    Special Agent * * * [name]. For the next several months, two
    members of our team * * * have been in regular contact with Special
    Agent * * * [name] providing information on an ongoing basis given
    that our investigative efforts continue to this very day. We have
    shared all of the same materials submitted to the IRS Whistleblower
    Office with these offices and agents. We have received both
    confirmation and excessive compliments on the quantity and quality
    of our work and the case manner in which we presented it.
    The email concluded with a single bullet-point question (emphasis added)--
    •      Can you please confirm that IRS CI is not working with these
    WBs on any investigation with these [target] entities?
    CI’s succinct emailed reply from Mr. Denning to the WBO, sent February 11,
    2019, stated in its entirety:
    Hi Laura,
    The claim was appropriately declined by criminal investigation.
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    [*15] WBO’s final determination
    The WBO analyst drafted an award recommendation memorandum that
    stated:
    I am recommending the issuance of a Final denial letter because the
    IRS took no action based on the information the WB provided. IDRS
    shows no audit activity for the prior and subsequent years. * * * The
    analyst has reviewed the WB’s response and contacted CI HQ to
    determine whether CI is still involved in an investigation. Based on
    the response from CI HQ the preliminary denial decision will not be
    revised. The decision by the operating division (CI) is final.
    On February 19, 2019, the WBO sent each petitioner a final determination letter
    denying his claim. Each letter stated:
    FINAL DETERMINATION
    The Whistleblower Office has considered your Form 211, Application
    for Award for Original Information, dated August 1, 2017. * * *
    Internal Revenue Code (IRC) section 7623 provides that an award
    may be paid only if the Secretary proceeds with an administrative or
    judicial action based on the information provided and the action
    results in the collection of tax, penalties, interest, additions to tax, or
    additional amounts based on the information provided. The
    Whistleblower Office has made a final determination to deny your
    claim for an award.
    The claim has been recommended for denial because the IRS took no
    action based on the information that you provided. * * * [Emphasis
    added.]
    This letter is a final determination for purposes of filing a petition
    with the United States Tax Court. Under IRC section 7623(b)(4), you
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    [*16] have 30 days from this determination to file a petition with the Tax
    Court.
    The final determination letters did not explicitly state lack of collected tax
    proceeds as a basis for denial of the claims.
    On March 11, 2019, petitioners filed a timely petition challenging the
    WBO’s final determination.
    The Commissioner’s motion for summary judgment
    The Commissioner filed his motion, contending: “The supporting
    documents from the administrative claim file fully support the Whistleblower
    Office’s determination that the IRS did not proceed with an administrative or
    judicial action against the [target] Entity and did not collect any proceeds based on
    petitioners’ claims.” Specifically, the Commissioner contended:
    [T]he Whistleblower Office sent petitioners’ claims to the TEGE
    SME, who reviewed petitioners’ information and did not open an
    examination of the Entity’s tax returns. The IRS CI also reviewed
    petitioners’ claims and declined to pursue a criminal investigation[5]
    due to lack of criminal potential and because the “individual notated
    5
    See also the motion at 4 (“CI declined to investigate the [target] Entity or
    any of the issues raised by petitioners’ in their Forms 211”); id. at 6 (“the
    Whistleblower Office CI liaison * * * confirmed with CI headquarters that there is
    no ongoing CI investigation of the [target] Entity”); the Commissioner’s reply at 3
    (“two IRS operating divisions considered petitioners’ claim and declined to open
    an examination”); id. at 4 (“the Whistleblower Office CI liaison who confirmed
    with the Acting Deputy Chief of Staff at CI headquarters in February of 2019 that
    there is no ongoing CI investigation of the entities”).
    - 17 -
    [*17] in the claim who had personal knowledge denied making those
    statements in an interview with federal agents.” Moreover, a search
    of the IRS Integrated Data Retrieval System by the Whistleblower
    Analyst confirmed there are no open IRS examinations involving the
    [target] Entity. The supporting documents from the administrative
    claim file fully support the Whistleblower Office’s determination that
    the IRS did not proceed with an administrative or judicial action
    against the [target] Entity and did not collect any proceeds based on
    petitioners’ claims. [Emphasis added.]
    Petitioners opposed the motion. They argue that their claims and other
    information strongly support their allegations of tax violations by the target and
    that the IRS failed to respond reasonably to the information they had provided.
    The opposition concludes:
    WHEREFORE, Petitioners pray that this Honorable Court:
    1.    Deny the Respondent’s Motion for Summary Judgment;
    and
    2.    Direct judgment on the pleadings in favor of Petitioners
    and direct the appointment of an independent investigator outside of
    the Internal Revenue Service to review this submission due to the
    clear abuse of discretion present in this matter or, alternatively, direct
    the Whistleblower Office to assign new investigators within the office
    under the review of a U.S. Tax Court appointed monitor to review the
    claim; or
    3.     Order the Respondent to initiate informal discovery as
    requested in the Petitioners’ Branerton Letter.
    We hold below that some of petitioners’ arguments lack merit, but one contention
    requires us to deny the Commissioner’s motion.
    - 18 -
    [*18]                                 Discussion
    I.      General legal principles
    A.    Whistleblower claims and the WBO’s function
    In section 7623(b), entitled “Awards to Whistleblowers”, Congress
    provided an incentive for providing to the IRS information on taxpayers’
    noncompliance with the tax laws, in return for which--if the IRS uses that
    information to collect proceeds--the whistleblower will be entitled to a percentage
    of the collected proceeds. 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 * * *
    receive as an award * * * [a percentage] of the collected proceeds
    * * * resulting from the action * * *.
    By those terms, a whistleblower will receive an award only if (1) the IRS
    “proceeds with * * * [an] action” on the basis of his information and (2) the IRS
    collects proceeds as a result of that action. The WBO will deny the claim if it
    determines that “the IRS either did not proceed based on the information provided
    by the whistleblower * * * or did not collect proceeds” as a result of proceeding
    against the taxpayer on the basis of the whistleblower’s information. 26 C.F.R.
    sec. 301.7623-3(c)(8).
    - 19 -
    [*19] B.     Standard and scope of Tax Court review of whistleblower awards
    1.    The “record rule” and the abuse-of-discretion standard
    Section 7623(b)(4) provides that a “determination regarding an award” may
    be “appealed to the Tax Court (and the Tax Court shall have jurisdiction with
    respect to such matter).” As we held in Kasper v. Commissioner, 
    150 T.C. 8
    , 21-
    23 (2018), in a whistleblower case our review is generally restricted to the
    administrative record, and under this “record rule” we review the WBO’s
    determinations not de novo but rather for abuse of discretion. An abuse of
    discretion exists when a determination is arbitrary, capricious, or without sound
    basis in fact or law. Id. at 21-22; Murphy v. Commissioner, 
    125 T.C. 301
    , 320
    (2005), aff’d, 
    469 F.3d 27
     (1st Cir. 2006). As we explained in Cline v.
    Commissioner, 
    T.C. Memo. 2020-35
    , at *15 (fn. refs. omitted):
    It is not to the Tax Court but to the Secretary of the Treasury
    that Congress has given the authority to “make the inquiries,
    determinations, and assessments of all taxes”, sec. 6201, and to
    “collect the taxes”, sec. 6301. The Tax Court has no practical means
    for evaluating the IRS’s audit priorities, its allocation of its audit
    resources, or its judgments about the likelihood of collecting
    particular liabilities. Congress has given to the Tax Court not plenary
    oversight over the IRS but rather circumscribed jurisdiction to review
    certain actions in certain circumstances. In the award context,
    Congress has given the Tax Court jurisdiction to review the
    determinations of the WBO. Consequently, “we do not review the
    IRS’s decision whether to audit a target in response to a
    whistleblower’s claim and * * * we have no authority to require the
    - 20 -
    [*20] IRS to explain a decision not to audit.” Lacey v. Commissioner,
    153 T.C. * * * [146, 164 (2019)].
    2.     Reviewing the grounds stated
    “[T]he Tax Court reviews a WBO determination by reference to the grounds
    that it states, not by reference to post hoc rationalizations.” Lacey v.
    Commissioner, 153 T.C. at 165 (citing SEC v. Chenery Corp., 
    332 U.S. 194
    , 196
    (1947)); see Kasper v. Commissioner, 150 T.C. at 23-24. We therefore look to the
    final determination letter and generally consider only the grounds stated therein,
    not other grounds advanced by the Commissioner’s counsel in the litigation but
    not by the WBO in its determination.
    C.     Summary judgment
    Generally speaking, under Rule 121(b) the Court may grant summary
    judgment when “there is no genuine dispute as to any material fact and * * * a
    decision may be rendered as a matter of law”. Sundstrand Corp. v. Commissioner,
    
    98 T.C. 518
    , 520 (1992), aff’d, 
    17 F.3d 965
     (7th Cir. 1994). The Commissioner’s
    motion cites this rule and invokes this standard.
    However, we have recently observed that--
    this summary judgment standard is not generally apt where we must
    confine ourselves to the administrative record to decide whether there
    has been an abuse of discretion. * * * [I]n a “record rule”
    whistleblower case there will not be a trial on the merits. In such a
    - 21 -
    [*21] case involving review of final agency action under the APA,
    summary judgment serves as a mechanism for deciding, as a matter of
    law, whether the agency action is supported by the administrative
    record and is not arbitrary, capricious, an abuse of discretion, or
    otherwise not in accordance with law. * * *
    Van Bemmelen v. Commissioner, 155 T.C. at __ (slip op. at 25-26). That
    distinction (the more demanding standard of denying the motion if the record
    simply shows a dispute of fact versus the less demanding standard of denying the
    motion only if the record fails to support the conclusion) does not affect the
    outcome in this case since, as we explain below, the administrative record does not
    support a critical premise of the WBO’s determination, and we therefore deny the
    motion even under the less demanding standard.
    II.   Analysis
    The Commissioner cites materials from the administrative record to make a
    showing that petitioners’ claims were referred to IRS personnel in two operating
    divisions--TEGE and CI--and that, in the words of section 7623(b)(1), neither
    division decided to “proceed[] with any administrative or judicial action * * *
    based on information brought to the Secretary’s attention by” petitioners. The
    Commissioner’s motion asserts that “[t]he supporting documents from the
    administrative claim file fully support the Whistleblower Office’s determination
    that the IRS [1] did not proceed with an administrative or judicial action against
    - 22 -
    [*22] the [target] Entity and [2] did not collect any proceeds based on petitioners’
    claims.” We address each aspect of this alleged two-fold determination.
    A.     Lack of collected proceeds
    The Commissioner’s motion errs by stating, as a supposed second aspect of
    the WBO’s determination, that the IRS “did not collect any proceeds based on
    petitioners’ claims”. A lack of collected proceeds will indeed properly result in
    the denial of an award, because the only award to which a whistleblower may
    become entitled is a percentage “of the collected proceeds * * * resulting from the
    [administrative or judicial] action” that is “based on information brought to the
    Secretary’s attention by” the whistleblower. Sec. 7623(b)(1). If there are no
    proceeds, there can be no award. However, we do not know of any evidence in the
    administrative record in this case establishing whether tax proceeds were
    collected.
    More important for present purposes, the final determination letters did not
    assert a lack of collected tax proceeds as a basis for denying the claims. As we
    noted, supra part I.B.2, citing Lacey v. Commissioner, 153 T.C. at 165, we review
    only the determination that the WBO made, not other determinations that it might
    have made but did not make.
    - 23 -
    [*23] Admittedly, it might seem that, if there had been no “administrative or
    judicial action * * * based on information brought to the Secretary’s attention by”
    the whistleblower, then it must inevitably be true that there could therefore be no
    “proceeds collected as a result of the action” that was never taken.
    Sec. 7623(b)(1) (emphasis added).
    However, proving non-collection of proceeds would be a different
    undertaking, supported by a different sort of evidence, from proving that no
    administrative or judicial action was commenced. The latter might seem to
    necessitate the former; but since we do not know what we do not know, we decline
    to grant summary judgment on an assumed fact for which the Commissioner’s
    motion did not make a showing and that the WBO did not determine. Therefore,
    we consider further only the WBO’s actual determination--i.e., that “[t]he claim
    has been recommended for denial because the IRS took no action [i.e.,
    administrative or judicial action] based on the information that you provided.”
    B.     Lack of administrative or judicial action
    The WBO concluded that, in the words of section 7623(b)(1), the IRS did
    not “proceed[] with any administrative or judicial action * * * based on
    information brought to the Secretary’s attention by” petitioners. The record shows
    that the WBO referred petitioners’ claims to two operating divisions--TEGE and
    - 24 -
    [*24] CI--and that the WBO concluded that neither division proceeded with any
    action and that therefore the claims should be denied. Against the
    Commissioner’s argument, petitioners make some contentions that lack merit and
    one that we must sustain.
    1.     Whether the IRS’s audit decisions were correct
    Much of petitioners’ argument assails the IRS’s failure to audit the target
    after petitioners had submitted a wealth of information that, they maintain, amply
    justified such an audit. Petitioners argue both (1) that their information--
    acknowledged by the WBO’s initial evaluators as “specific credible
    documentation”--demonstrated convincingly that the target was violating the
    Internal Revenue Code and (2) that the IRS’s consideration of their information
    must have been cursory, misguided, and undiscerning.6 Petitioners conclude that
    6
    For example, petitioners’ claims had included allegations from an
    individual with personal knowledge, but CI’s Form 11369, by which it declined to
    investigate the target, stated that the “[i]ndividual notated in the claims who had
    personal knowledge denied making those statements in an interview with federal
    agents.” Petitioners contend that CI or the WBO was unduly credulous of that
    denial: “[T]hat individual’s interview comprises only a small part of the evidence
    included with the submission. Further, the Petitioners specifically allege that the
    ‘individual’ is complicit in the actions of the Subject Entity [i.e., the target] and,
    on numerous occasions, knowingly signed documents under penalties of perjury
    that contained falsehoods and/or omissions.”
    - 25 -
    [*25] the IRS “does not seem to have much of an interest in actually investigating
    the submission.”
    Petitioners stoutly dispute the Commissioner’s “assertion that the statute
    does not ‘confer [on the Tax Court] the authority to direct the IRS to commence an
    administrative or judicial action.’” They ask us to review the IRS’s decision not to
    audit and, when we see how deficient its process was, to “direct the appointment
    of an independent investigator outside of the Internal Revenue Service to review
    this submission due to the clear abuse of discretion present in this matter or,
    alternatively, direct the Whistleblower Office to assign new investigators within
    the office under the review of a U.S. Tax Court appointed monitor to review the
    claim[s].”
    As we explained, see supra part I.B.1, quoting Cline v. Commissioner,
    at *15, such “monitor[ing]” or take-over of the IRS’s audit function is plainly
    outside the power we have been granted. In reply to the Commissioner’s
    contentions to this same effect, petitioners object that “[r]espondent boldly
    contends that this Court has no authority to do much of anything and, therefore,
    seems to believe that it [the IRS] can act (or fail to act) as it wishes with little to no
    recourse.” However counter-intuitive it may be, as we noted above, “we do not
    review the IRS’s decision whether to audit a target in response to a
    - 26 -
    [*26] whistleblower’s claim and * * * we have no authority to require the IRS to
    explain a decision not to audit.” Lacey v. Commissioner, 153 T.C. at 164.
    Consequently, we must reject all of petitioners’ arguments and requests for relief
    that presume otherwise.
    2.    Whether CI proceeded with any action
    We cannot as quickly dispose of petitioners’ contention that, as a matter of
    fact, CI did investigate the target and thus did “proceed[] with any administrative
    or judicial action * * * based on information brought to the Secretary’s attention
    by” petitioners, for purposes of section 7623(b)(1). If the record does not support
    the WBO’s conclusion that CI did not conduct an investigation of the target using
    petitioners’ information, then the WBO abused its discretion when it determined
    that “the IRS took no action based on the information that you provided”; and that
    error may have resulted in a premature denial of an award that may eventually
    become due, depending on the results of that investigation.
    Prompted by petitioners’ allegations--explicit and detailed, with names,
    dates, and locations--the WBO’s email put a single direct question to CI: “Can
    you please confirm that IRS CI is not working with these WBs on any
    investigation with these [target] entities?” CI’s reply was a non-answer that looks
    - 27 -
    [*27] like it may have been a deliberate evasion: “The claim was appropriately
    declined by criminal investigation.”
    But was CI “working with” petitioners or not? CI did not say. And it gives
    us no confidence in the WBO’s determination to note (as the administrative record
    shows) that in 2018 CI had to be asked three times to complete its Form 11369 for
    this case, giving “unacceptable” responses to the WBO and grousing that it’s
    “somebody else’s job”. We therefore hold that the administrative record,
    containing petitioners’ detailed allegations and CI’s non-response, fails to support
    the WBO’s conclusion that CI had not proceeded with any action based on
    petitioners’ information. Accordingly, we deny the motion on the grounds that the
    WBO abused its discretion in reaching its conclusion, because not all of its factual
    determinations underlying that conclusion are supported by that record.
    Conclusion
    We will deny the Commissioner’s motion for summary judgment because
    the WBO’s factual conclusion that there had been no “proceed[ing]” under
    section 7623(b)(1) was an abuse of its discretion, and we will order the parties to
    propose a schedule for further proceedings.
    - 28 -
    [*28] To reflect the foregoing,
    An appropriate order will be issued.