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Two new Tax Court orders continue to provide uncertainty for whistleblowers seeking anonymity

Though anonymity was ultimately granted in these cases, the details of two recent Tax Court orders only adds to the confusion of when a tax whistleblower's identity will remain protected. (Photo via Flickr)

Two recent decisions from the Tax Court underscore the uncertainty that whistleblowers filing claims with the Internal Revenue Service face when it comes to preserving their anonymity.

Although both cases ultimately granted the tax whistleblowers’ requests for anonymity, the decisions provided mixed signals about the circumstances under which the court will protect anonymity for future whistleblowers.

While whistleblowers can file submissions anonymously with the IRS, whistleblowers must ask permission of the court to proceed anonymously when their claims are appealed in Tax Court, which the court can either grant or deny.

The first decision, Whistleblower 12568-16W v. Commissioner of Internal Revenue, involved a case where more than $3 billion in estimated avoided taxes are at stake. The whistleblower in that case is seeking to remain anonymous for fear of retaliation and economic and physical harm.

By balancing the public interest in knowing a whistleblower’s identity and transparency of the judicial system against the whistleblower’s interest in protection against retaliation, professional and personal stigma, and physical harm, the court found that the public interest was “relatively weak” in comparison to the whistleblower’s interests.

The court granted the whistleblower’s motion, but only “until and unless” the court changes its mind. The court stated that as the case moved forward, it was possible that due to the size of the award or “other developments,” the balance may shift and the public interest may ultimately outweigh the whistleblower’s interest, which could lead the court to revoke anonymity.

By reserving the right to change its mind in the future, the court leaves whistleblowers uncertain about whether their identities will be protected. The court’s suggestion that the public interest in knowing a whistleblower’s identity increases as the size of the award grows larger is especially concerning, as it may deter whistleblowers from bringing what may be the biggest, most pervasive frauds to light.

In the second decision, Whistleblower 6121-16W v. Commissioner of Internal Revenue, the court extended a temporary seal over the case. When something is under “seal,” it cannot be entered into the public record in any way. The court had previously granted the whistleblower’s request to proceed anonymously, but had not agreed to permanently seal the case.

The whistleblower felt that anything short of sealing the proceedings entirely would not offer sufficient protection, and moved to dismiss the case and seal the proceedings. The Tax Court agreed to dismissal, but noted that because nothing had changed since its previous ruling that sealing the entire case was “too strong a medicine.”

Nevertheless, the court concluded that it would seal all documents except for its seal decision, which did not reveal the whistleblower’s identity. The court based its decision on the circumstances of the case, including that because nothing of note had happened in the case yet, the public interest in disclosure was weak. But had the circumstances of the case been slightly different, it could have just as easily decided against sealing the case.

While both cases ultimately protected the whistleblower’s anonymity, the opinions demonstrate that significant uncertainty remains about how courts will treat requests to remain anonymous.

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