Tax Court cannot reopen whistleblower award claim.

• Author: Beavers, James A.

In a case of first impression, the Tax Court held that it could not reopen a whistleblower claim where the IRS decided not to pursue the case and never instituted an action or collected any proceeds.

Background

Raymond Cohen, a CPA, filed a whistleblower claim with the IRS regarding alleged tax law violations when his wife served as an executrix for an estate. The estate held uncashed stock dividend checks issued by a public corporation. Cohen's wife requested the corporation honor those checks and pay all unpaid dividends. The corporation would not release dividends without Cohen's wife presenting an original check issued within the last 10 years.

Cohen suspected that the corporation customarily retained possession of unclaimed proceeds resulting from uncashed dividend checks and unredeemed bonds (unclaimed assets). In 2009, he requested information from the New York state comptroller under New York's Freedom of Information Law. The comptroller provided Cohen the amount of uncashed dividends that the corporation had reported for certain stocks. The corporation had not reported any uncashed dividends for those stocks from 2005 to 2008.

Cohen also reviewed allegations in pleadings from a civil proceeding against the corporation (see generally Frankel v. Cole, No. 06-cv-439 (E.D.N.Y. 9/7/07)). Cohen asserted that the allegations in that civil case corroborate his allegation that the corporation possesses unclaimed assets worth more than $700 million. According to Cohen, the corporation was obligated by law to turn over the unclaimed assets to the state and, in addition, the unclaimed assets the corporation retained constituted unreported income for federal tax purposes.

Based on this information, Cohen filed a whistleblower claim with the IRS. The IRS notified him that the matter had been assigned to its Whistleblower Office in Ogden, Utah. The Whistleblower Office evaluated the claim to determine whether an investigation was warranted and an award was appropriate. A few weeks later, the Whistleblower Office informed Cohen that he was not eligible for an award because no proceeds were collected. He requested the Whistleblower Office to reconsider the claim, but the Whistleblower Office refused, noting that he based his claim on publicly available information.

Cohen filed a petition and an amended petition in Tax Court, requesting that the court order the IRS to reopen the claim. Cohen contended that the IRS abused its discretion by not acting...