Thursday, January 31, 2013

Grassley calls for changes in proposed IRS whistleblower regs

Sen. Chuck Grassley (R-IA) is disappointed with the proposed regulations for the IRS whistleblower program, he told the Treasury Department and the Internal Revenue Service in a recent letter. He believes -- as do we -- that the new regulations fail to realize the full potential for recoveries under the whistleblower program.

Grassley said the  IRS whistleblower program should be designed to encourage whistleblowers to come forward and to mobilize their own resources, much like the successful False Claims Act.

Instead the proposed IRS regulations, if adopted, are likely to discourage whistleblowers. They narrow the definition of the kinds of recoveries that are eligible for reward, exclude certain kinds of recoveries altogether and  broadly define the limitation for “planners and initiators” of the fraud. The latter, Grassley fears, could be used to “arbitrarily reduce awards to whistleblowers.” The law is intended to reward whistleblowers; limiting the scope of eligible recoveries is at odds with that goal.

The proposed regulations do little to address one of the chief sources of complaints about the program: the lack of communication between the IRS and whistleblowers. Grassley also said “the IRS should establish regulations for utilizing its contract authority” so that the IRS can use whistleblowers and their counsels and resources to assist in the recovery of funds, much like the way the Justice Department does in False Claims Act cases.

In the early years of the False Claims Act, there were similar problems. But those were overcome, and it is now the federal government’s most successful anti-fraud program The IRS whistleblower program could follow a similar path if the agencies draw on the experience and advice of people like Grassley when they draft the final regulations.