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CONGRESS CLARIFIES THAT PROCEEDS COLLECTED INCLUDES CRIMINAL FINES

02 / 25 / 2018

Under Section 7623(b), whistleblowers are entitled to a mandatory minimum award of 15% with discretion to increase the award up to 30% of "proceeds collected as a result of" IRS action taken with respect to the whistleblower's information.  At a time when the Tax Court had rejected the IRS position in Whistleblower 21276 -13W, 147 T.C. __, No. 4 (2016)(but the case is on appeal) that "proceeds" did not included criminal fines and restitution, Congress has now established that effective with the enactment of this law on February 9, 2018, moving forward, the IRS position is no longer valid.   The definition of "proceeds" now expressly includes "penalties, interest, additions to tax, and additional amounts provided under the internal revenue laws" and "any proceeds arising from laws for which the Internal Revenue Service is authorized to administer, enforce, or investigate," including specifically  (A) criminal fines and civil forfeitures, and (B) violations of reporting requirements."  In other words, proceeds include Title 18 fines and restitution  related to tax conspiracies under 18 U.S.C. Section 371 and FBAR penalties collected under 31 U.S.C. Section 5321(a)(5) as a result of a whistleblower's information."