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.
