GAO report on improved IRS whistleblower office
Sen. Chuck Grassley of Iowa wrote the 2006 law improving the IRS whistleblower office to encourage people with information about big-dollar tax fraud to come forward and lead to the substantial recovery of tax dollars for the U.S. Treasury. He modeled the whistleblower improvements after the successful 1986 whistleblower amendments to the federal False Claims Act. Grassley was the Senate author of the False Claims Act whistleblower amendments, which since 1986 have brought back more than $27 billion to the federal treasury and deterred even more fraudulent activity. The False Claims Act whistleblower provisions have been very effective against defense and health care fraud, but there was no strong incentive to expose big-dollar tax fraud until Grassley’s work in 2006. Grassley has been monitoring the progress of the new, improved whistleblower office. In April, an in-house accountant who raised a red flag about a tax lapse that his employer then ignored, leading him to tip off the IRS, received $4.5 million in the first whistleblower award under the new, improved IRS whistleblower office, with a recovery for the taxpayers of a net $20 million in taxes and interest from the financial services firm. Grassley made the following comment on a report released today from the Government Accountability Office, GAO-11-683, “Tax Whistleblowers: Incomplete Data Hinders IRS's Ability to Manage Claim Processing Time and Enhance External Communication.”
“The report makes clear that the whistleblower program has been a success in providing good information to the IRS about big-dollar tax cheating. The statistics show the IRS views a significant number of the whistleblower claims as having merit. The IRS has received tips on more than 9,500 taxpayers from 1,400 whistleblowers in just five years. The IRS has acted or is acting on almost 8,300 of these claims, so only about 1,300 tips have been rejected so far.
“Now the challenge is for the IRS and Treasury to make the changes needed to provide assurance to existing and future whistleblowers so they’re not discouraged by the time needed to process their claims. With the nation facing massive deficits, Treasury and IRS officials need to do all they can to ensure the success of what’s clearly one of the best tools available to go after tax fraud. The vast majority of taxpayers are honest. They’re the ones who benefit from a successful whistleblower program. More tax compliance means more fairness for hardworking families who pay what they owe.
“The report has good recommendations that the IRS needs to implement tomorrow. The IRS needs to do a better job of communicating with whistleblowers. Silence between the IRS and the whistleblowers only helps the tax cheats. I’m concerned that the IRS management still might have too many opportunities to say ‘no’ to a whistleblower, even when the whistleblower office believes a claim has merit. The IRS commissioner has to make it clear that he expects the director of the IRS whistleblower office to speak up if it thinks an IRS office is foot-dragging on a good whistleblower claim. The law I wrote gives the IRS whistleblower office the power to investigate claims on its own. The IRS commissioner should make that clear to all of his managers and provide the necessary resources so that valid whistleblower claims aren’t forgotten. We can’t let the next Madoff get a free pass just because someone doesn’t want to be bothered. Going through whistleblower claims is work but it’s worth it.
“The GAO report says the IRS is short on resources but also is doing nothing to take advantage of the resources of the whistleblower and his attorneys. This has to stop. A key provision of the whistleblower law, and a big part of the success of the False Claims Act provisions that I co-wrote, is to allow the government to leverage the whistleblower’s resources. It’s worrisome that the IRS hasn’t taken advantage of this provision even once. The tax cheats shouldn’t be the only ones who can take advantage of outside legal talent. The IRS can’t ask for more resources while ignoring the free resources available.
“The GAO has done a good service by providing a road map for how to improve the IRS whistleblower program and go after big-dollar tax cheating. For the benefit of honest taxpayers, I intend to ensure that the IRS follows that map.”
Senator Chuck Grassley tonight released the following statement after the President’s speech before a Joint Session of Congress.
An audio comment can be accessed on Grassley’s website by clicking here.
“What the President’s saying is more of the same, especially with what was in the stimulus bill. That massive government spending bill passed two years ago, right after the President took office, and was touted by the administration as a way to keep unemployment below eight percent, which it hasn’t by a long shot. When we’ve tested something like that, and it failed, we need to try something new. That something new would be to remove the tremendous anxiety that Congress, the President and Washington lately are creating for employers throughout America, in businesses small and big. Employers don’t know what’s coming next in the way of regulations and higher taxes. As a result, they’re understandably reluctant to spend the trillion dollars that’s now sitting in corporate treasuries. The cash flow of small businesses needs to be protected, or they can’t hire anybody new. We’ve got to free up that corporate money and the entrepreneurial spirit to create economic activity and jobs.
“The best way for Congress and the President to lessen that anxiety is to make a serious effort to get rid of duplicative, outdated regulations and really consider the economic impact of forthcoming regulations before reflexively moving them forward, as in the Environmental Protection Agency’s proposed dust regulation, which doesn’t reflect an understanding of farming and the economic impact on rural communities; to make sure the biggest tax increase in the history of the country, which everyone knows is coming on December 31, 2012, doesn’t happen; and to get under control the excessive government spending that’s tripled the national debt over the last two years. I’m willing to work with the President to make things happen, but that doesn’t mean more of the same. In the end, the President inherited a very bad economic situation, but by any measure of the economy, including inflation or unemployment or deficit spending, his policies and programs have made it worse. We want the President to see that what he’s tried hasn’t worked and for him to work with Congress to get the economy turned around.”
BAUCUS, GRASSLEY APPLAUD PASSAGE OF BILL TO INCREASE TAX FAIRNESS, DETER TAX SHELTERS BY ELIMINATING PATENTS ON TAX STRATEGIES
Finance Senators Say All Taxpayers Have a Right to Legal Methods to Reduce Tax Bills
Washington, DC – Senate Finance Committee Chairman Max Baucus (D-Mont.) and senior Committee member Chuck Grassley (R-Iowa) today applauded the Senate’s passage of their bill to protect taxpayers and fight tax evasion, which was included in the larger patent reform bill. The Baucus-Grassley legislation prevents any individual or firm from patenting tax strategies, which could otherwise subject taxpayers to royalty fees for using the patented strategy when filing their taxes. The bill also stops tax patents from providing windfalls to lawyers and patent holders by preventing them from holding exclusive rights to use loopholes, which could provide some businesses with unfair advantages over their competitors. Now that both the House and Senate have passed the patent reform bill, it goes to the President for his signature.
“Unfair patents can give a small number of people a stranglehold on tax strategies that should be open to anyone,” Baucus said. “This bill will bring fairness to the system, and it will deter the use of tax shelters to evade the responsibility we all share. Our ongoing tax reform effort will continue cleaning up the code, and it can create jobs and be a major boost to our economy.”
“Tax strategy patents are on the rise. More and more legal tax strategies are unavailable or more expensive for more and more taxpayers,” Grassley said. “It’s important to protect intellectual property rights for true tax preparation and financial management software. At the same time, we have to protect the right of taxpayers to have equal access to legal tax strategies. That’s necessary for fairness and tax compliance. We need more tax compliance, not less.”
In order to obtain a patent, an inventor must show, among other things, that the claimed invention is novel and non-obvious and has a practical application. In 1998, the courts determined that a method of doing business may be patentable, and soon thereafter, the U.S. Patent and Trademark Office began granting patents for various tax-related inventions.
Tax practitioners have long decried the issuance of these tax-strategy patents because they are unlikely to be novel, given the public nature of the tax code, and undermine the fairness of the Federal tax system by removing from the public domain particular ways of satisfying a taxpayer’s legal obligations. The bill expressly provides that a strategy for reducing, avoiding or deferring tax liability cannot be considered a new or non-obvious idea, and therefore, a patent on a tax strategy cannot be obtained.
Baucus and Grassley have long been leaders in congressional efforts to protect taxpayers and prevent the patenting of tax strategies that result in extra costs for taxpayers.
Grassley, Johanns Work to Stop Long Reach of the EPA in Regulating Dust
WASHINGTON – Senator Chuck Grassley today introduced legislation to prevent the Environmental Protection Agency (EPA) from regulating dust in rural America while maintaining the protections of the Clean Air Act to the public’s health and welfare. Grassley introduced the bill with Senator Mike Johanns of Nebraska.
Grassley first began asking questions about the EPA’s proposed dust rules in 2006. He has hounded the EPA as the rule has progressed through the regulating process to ensure that the unique aspects of agriculture and rural America are accounted for. Grassley has invited the last two EPA administrators to Iowa to see for themselves the important role that farmers play in their communities. Administrator Stephen Johnson came to Iowa in 2006 and heard directly from several farmers and agriculture specialists. Current Administrator Lisa Jackson sent two staff members to Iowa in 2009 to spend the day with Grassley touring a family farm, the Iowa State University research facility and a biodiesel plant.
“In each of my most recent town hall meetings the excessive amount of regulations coming out of Washington, D.C. and the impact on small businesses and rural communities was a top issue,” Grassley said. “The dust rule is a perfect example. It makes no sense to regulate the dust coming out of a combine harvesting soybeans or the dust off a gravel road of a pick-up truck traveling into town. If the administration were to decide to revise the standard, farmers and livestock producers will likely be unable to attain the standard levels and the rural economy would be devastated.”
The bill takes a two prong approach to keep the EPA from regulating farm dust. First, it prevents the EPA from revising the current dust standard for one year from date of enactment.
The bill also provides flexibility for states, localities, and tribes to regulate “nuisance dust.” Nuisance dust is defined in the bill to exclude the type of dust typical of rural areas (unpaved roads and dust resulting from agricultural activities) from the National Ambient Air Quality Standards (NAAQS) regulation targeted at harmful air pollutants. If the state, tribal, or local government chooses to regulate nuisance dust, these regulations would supersede any regulations put forth by the federal government under the Clean Air Act. If there are no local regulations in place and the EPA wants to regulate this type of dust, the EPA must find that the specific type of dust or particulate matter causes adverse health effects and that the benefits of applying EPA’s standard to that area outweigh the costs to the local and regional communities, including economic and employment impacts. The Clean Air Act does not currently differentiate between urban and rural dust, so this provides the EPA with a distinction between the two for implementation of air quality standards.
A companion bill was introduced in the House of Representatives by Representative Kristi Noem of South Dakota.