Whistleblower Blog

International and Offshore Tax Whistleblower Issues Among Topics for Next IRS Whistleblower Boot Camp

We have written about the first two highly successful “IRS Whistleblower Boot Camps” in 2009 and 2010, at which the IRS Whistleblower Office and whistleblower lawyers gathered to discuss the latest developments in pursuing tax whistleblower cases. It is sponsored by Taxpayers Against Fraud.

The Third Annual IRS Whistleblower Boot Camp will be held on April 12 in Washington, D.C.

Because the IRS has increasingingly focused on international and offshore tax issues, I will be moderating the panel discussion on “International and Offshore Tax Whistleblower Issues.”

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IRS Whistleblower Rules For Disclosure of Tax Return Information to Whistleblowers and Their Attorneys

The IRS announced today final regulations for sharing of tax return information with IRS whistleblowers and their lawyers, as the IRS pursues tax whistleblower claims.

Under these regulations, officers and employees of the Treasury Department may disclose tax return information to whistleblowers and, if applicable, their legal representatives, in connection with written contracts for services. (See our updated comments on why this rule and IRS practice should change dramatically, as the procedure has never been used.)

In theory, that sharing of information should
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Offshore Alert Conference: Protecting Whistleblowers from Criminal and Civil Liability

Of interest to whistleblowers reporting fraud under the False Claims Act, the IRS Whistleblower Program, or the brand new SEC Whistleblower and CFTC Whistleblower Programs is an upcoming presentation, “Avoiding the Mistakes of the UBS/Birkenfeld Case: Protecting Whistleblowers from Criminal and Civil Liability.”

This discussion is part of a fascinating gathering this April in South Beach–the OffshoreAlert Conference. As the brochure promises:

Where else could tax collectors mingle with tax minimizers, asset tracers with asset protectors, regulators with the regulated, whistleblowers with their former employers and crooks with prosecutors?

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SEC Whistleblower Office Has First Director–Sean McKessy

Just as we have followed closely the development of the IRS Whistleblower program since Congress authorized it in December 2006, we are watching the birth of the new SEC Whistleblower program. In 2010’s Dodd-Frank Financial Reform law, Congress mandated the creation of what could be the first meaningful SEC and CFTC Whistleblower programs.

Today, the SEC took a major step in announcing the first head of the nascent SEC Whistleblower Office: Sean McKessy, a former Senior Counsel in the SEC’s Division
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SEC Resolves FCPA Case With Maxwell Technologies, Inc. Alleging Millions in Bribes to Chinese Officials

As we have discussed previously, bribery of foreign government officials is the subject of many cases filed by the SEC under the Foreign Corrupt Practices Act. Those cases, which often bring significant recoveries, will increase in number as a result of rewards to whistleblowers under the new SEC Whistleblower program that we have followed.

The SEC today announced the successful conclusion of an FCPA investigation of Maxwell Technologies, Inc. The SEC announced it had filed a “settled” case through which Maxwell agreed to
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New IRS Offshore Account Disclosure Program Takes Shape

As the IRS continues its increasing focus on international tax issues, a new IRS offshore disclosure program announced in December continues to take shape. While the IRS has not made public a full description of the program, details have emerged in comments of IRS officials over the past weeks.

Using the 2009 IRS voluntary disclosure program as a template, the IRS is apparently tweaking the approach that generated approximately 15,000 disclosures in the 2009 effort.

The IRS Criminal Investigative Division (“CI”)–already quite busy
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Long-Awaited IRS Whistleblower Rule “Fix” Is Released for Comment

We have written previously about Senator Grassley’s pointed criticisms of aspects of the IRS whistleblower rules proposed in June 2010. The IRS’s delay in finalizing those rules is a principal reason why the IRS has not yet paid whistleblowers who have come forward since the December 2006 creation of the new IRS Whistleblower Program.

Today, the IRS took a large step to correct one major flaw that Grassley urged be corrected: re-writing a bizarre rule that would deny rewards to valuable whistleblowers who prevent improper refunds, or reduce a credit balance by a taxpayer. From what we can tell, that nonsensical rule was not the creation of the IRS Whistleblower Office, but of others within the IRS.

The IRS today announced a new IRS whistleblower rule to correct that anomaly, to be published for comment in the Federal Register.

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Activities of IRS Large Business and International Division Earn Its Commissioner Recognition As “Tax Person of the Year”

Citing many developments in the IRS Large Business and International Division in 2010, Tax Analysts this week named IRS LB&I Commissioner Heather Maloy as its “Tax Person of the Year.”

Among those developments that we have followed previously are the international focus of the restructured LB&I division (formerly known as the Large and Mid-Size Business Division (LMSB)), and the creation of the new Global High Wealth Industry Group within LB&I. That group within LB&I is already is working some very significant IRS Whistleblower cases.

Also mentioned by Tax Notes was one of my favorite IRS professionals who assisted the new IRS Whistleblower Program in its infancy, Stuart Mann:
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New SEC Whistleblower Program to Benefit from SEC’s Appointment of New Enforcement Official?

The SEC has just announced that current senior advisor to SEC Chairman Mary Schapiro, Stephen L. Cohen, has been named an Associate Director of the Division of Enforcement.

We hope this is good news for the nascent SEC Whistleblower Program. The SEC recently announced that its delaying creation of an SEC Whistleblower Office for budget reasons.

Steve Cohen has advised Chairman Schapiro on a number of issues including the SEC Whistleblower program, which I have discussed with him briefly earlier this year.

Coincidentally, the announcement came on yesterday’s deadline for comments on the SEC’s proposed rules for SEC whistleblowers, which must be substantially revamped so as not to defeat Congress’ purpose by discouraging meaningful whistleblowers from coming forward. We have submitted our own comments to the SEC on its proposed whistleblower rules, and will discuss later others’ comments here. See our comments

The SEC’s press release is reprinted below:
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IRS Whistleblower Claims Reporting Tax Evasion and “Overlooked” Returns

Tax whistleblowers using the new IRS Whistleblower Program have reported many instances of tax evasion involving domestic and foreign corporations, partnerships, and trusts, in addition to abusive offshore transactions about which we have written previously. These tax whistleblowers will allow the IRS to reduce the more than $300 billion “tax gap”–the difference between what tax cheats owe, but refuse to pay.

Tax evasion generally entails taxpayers understating taxes in the returns they file. In many cases evasion also entails taxpayers failing to file returns, especially information returns (as opposed to tax returns).

For example, partnership returns (Form 1065) are information returns and as such do not report tax payable. Cases of partnership tax evasion sometimes arise where filing Form 1065 is “overlooked.” In many of these cases, the partners continue to file their own income tax returns, which typically understate taxable income and tax payable, as there are no K-1’s to report.

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