Cindy Damiani v. Commissioner

2020 T.C. Memo. 132

• Court: United States Tax Court
• Decided: September 17, 2020
• Docket: 14914-19W
• Status: Unpublished

Opinion

T.C. Memo. 2020-132

UNITED STATES TAX COURT

CINDY DAMIANI, Petitioner v. COMMISSIONER OF INTERNAL REVENUE, Respondent

Docket No. 14914-19W. Filed September 17, 2020.

Cindy Damiani, pro se.

Elizabeth C. Mourges, Bartholomew Cirenza, and Nancy M. Gilmore, for

respondent.

MEMORANDUM OPINION

LAUBER, Judge: This whistleblower award case is before the Court on a

motion for summary judgment filed by the Internal Revenue Service (IRS or re-

spondent). Respondent contends that the IRS Whistleblower Office (Office) did

not abuse its discretion in rejecting petitioner’s claim on the ground that she did -2-

[*2] not provide information regarding any Federal tax violation. We agree and

accordingly will grant the motion.1

Background

The following facts are derived from the parties’ pleadings and motion pa-

pers, including a declaration and the attached exhibits. Petitioner, a foreign

national residing in Germany, filed a Form 211, Application for Award for Origi-

nal Information, that the Office received on May 20, 2019. In her claim she iden-

tified two targets: (1) a German insurance company and (2) the insurance com-

pany’s managing director. She alleged that the targets had committed fiduciary

fraud, bond fraud, securities fraud, and identity theft, asserting that they had

forged her name on insurance contracts and repeatedly demanded payments for

insurance premiums that allegedly “disappear[ed].” She made allegations of

money laundering and tax fraud, asking whether “IRS Form 1099-OID * * * was

required and has Form 1040 already been submitted?”

Petitioner supplied little information to support her claims. She provided:

(1) a letter reiterating her allegations, (2) a Form 3949-A, Information Referral,

and a Form 14039, Identity Theft Affidavit, and (3) several documents, written

1 All statutory references are to the Internal Revenue Code in effect at all relevant times, and all Rule references are to the Tax Court Rules of Practice and Procedure. -3-

[*3] entirely in German, that appear to be invoices. She made no discernible

allegations regarding the U.S. tax liability of any person.

The Office assigned petitioner two claim numbers, one for each target. The

Office referred the claims to Matthew Wiggins, a classifier in the IRS Small Busi-

ness/Self-Employed Operating Division (SB/SE). A classifier is an employee of

an operating division whose role is “to determine if the information on the Form

211 warrants further review.” Internal Revenue Manual pt. 25.2.1.3.1(2) (May 28,

2020).

Mr. Wiggins investigated petitioner’s allegations by researching the targets

on various databases. Mr. Wiggins ascertained that “neither party is a USA per-

son/entity.” He concluded that, because the allegations pertained to “events be-

tween and among non-USA persons/entities,” petitioner did not identify a Federal

tax issue. He accordingly recommended that the Office reject petitioner’s claims.

The Office agreed with Mr. Wiggins’ recommendation and on June 14,

2019, issued a final determination letter rejecting petitioner’s claims. The letter

stated in pertinent part that “[t]he claim has been rejected because the information

submitted did not identify an issue regarding tax underpayments or violations of

internal revenue laws.” The letter informed petitioner: “If you disagree with this -4-

[*4] determination, you have 30 days from the date of this letter to file a petition

with the Tax Court.”2

Petitioner petitioned this Court for review of the Office’s determination.

Her petition was mailed from Germany, postmarked by Deutsche Post on July 31,

2019, and was received and filed by the Court on August 12, 2019. On June 10,

2020, respondent filed a motion for summary judgment under Rule 121. We or-

dered petitioner to respond to that motion by July 24, 2020. We advised her that if

she “disagree[d] with the facts set out in the motion, * * * [she] should point out

the specific facts in dispute and explain why these factual disputes are important.”

Petitioner did not respond to our order and has not otherwise responded to the

motion for summary judgment.

Discussion

A. Jurisdiction

Section 7623(b)(4) provides that “[a]ny determination regarding an award

* * * may, within 30 days of such determination, be appealed to the Tax Court

(and the Tax Court shall have jurisdiction with respect to such matter).” The

2 Petitioner submitted additional (and substantially similar) Forms 211 that the Office appears to have processed on July 31 and August 3, 2019. As of the date of the petition the IRS does not appear to have issued a determination letter with respect to those claims. -5-

[*5] Office issued its determination letter to petitioner on June 14, 2019. She

mailed her petition on July 31, 2019, and the petition was filed by the Court on

August 12, 2019. Both dates are more than 30 days from the date on which the

Office issued the determination letter.

In numerous cases this Court had ruled that the 30-day filing period speci-

fied in section 7623(b)(4) is jurisdictional. See, e.g., Comparini v. Commissioner,

143 T.C. 274, 277 (2014) (“[T]his Court has jurisdiction under section 7623(b)(4)

when * * * a petition * * * is timely filed.”); Kasper v. Commissioner, 137 T.C.

37, 41 (2011) (“The jurisdiction of the Court is dependent upon a * * * finding

that the appeal from the determination is timely.”). However, we were reversed on

that point by the U.S. Court of Appeals for the D.C. Circuit in Myers v. Commis-

sioner, 928 F.3d 1025, 1036 (D.C. Cir. 2019), rev’g and remanding 148 T.C. 438

(2017). In Myers the D.C. Circuit held that section 7623(b)(4) sets forth a “non-

jurisdictional claim-processing rule[],” the violation of which does not deprive a

court of authority to hear the case. Id. at 1034 (quoting Gonzalez v. Thaler, 565

U.S. 134, 141 (2012)). The appellate court further held that the statute’s 30-day

filing period “is subject to equitable tolling.” Id. at 1037. It accordingly reversed

our order of dismissal and remanded to this Court “to consider in the first instance

whether equitable tolling is appropriate.” Ibid. -6-

[*6] The D.C. Circuit is the appellate venue for this case, as for whistleblower

cases generally. See sec. 7482(b)(1) (penultimate sentence). We thus follow its

precedent. See Golsen v. Commissioner, 54 T.C. 742, 757 (1970), aff’d, 445 F.2d

985 (10th Cir. 1971). Consistently with Myers, we hold that we have jurisdiction

to consider this case. And since neither party has questioned the filing of the peti-

tion after the 30-day period or addressed the subject of equitable tolling, we will

proceed to consider respondent’s motion for summary judgment.

B. Summary Judgment Standard

The purpose of summary judgment is to expedite litigation and avoid costly,

time-consuming, and unnecessary trials. Fla. Peach Corp. v. Commissioner, 90

T.C. 678, 681 (1988). Under Rule 121(b) we may grant summary judgment when

there is no genuine dispute as to any material fact and a decision may be rendered

as a matter of law. Sundstrand Corp. v. Commissioner, 98 T.C. 518, 520 (1992),

aff’d, 17 F.3d 965 (7th Cir. 1994). However, this summary judgment standard “is

not generally apt” when reviewing whistleblower award determinations because

we “confine ourselves to the administrative record to decide whether there has

been an abuse of discretion.” Van Bemmelen v. Commissioner, 155 T.C. __, __

(slip op. at 25) (Aug. 27, 2020). In a “record rule” whistleblower case “summary

judgment serves as a mechanism for deciding, as a matter of law, whether the * * * -7-

[*7] [Office’s] action is supported by the administrative record and is not arbitrary,

capricious, an abuse of discretion, or otherwise not in accordance with law.” Id.

at __ (slip op. at 26).

Because petitioner did not respond to the motion for summary judgment, we

could enter decision against her for that reason alone. See Rule 121(d). We will

nevertheless consider the motion on its merits.

C. Analysis

We review the Secretary’s determination as to whether a whistleblower is

entitled to an award under section 7623(b)(1) by applying an abuse-of-discretion

standard. Kasper v. Commissioner, 150 T.C. 8, 22 (2018). Abuse of discretion

exists when a determination is arbitrary, capricious, or without sound basis in fact

or law. Murphy v. Commissioner, 125 T.C. 301, 320 (2005), aff’d, 469 F.3d 27

(1st Cir. 2006).

In Lacey v. Commissioner, 153 T.C. 146, 166-169 (2019), we held that we

have jurisdiction to review, for abuse of discretion, a determination by the Office

to reject a whistleblower claim for failure to meet certain basic criteria. See sec.

301.7623-1(c), Proced. & Admin. Regs. (providing that claims may be rejected if

they supply “speculative information or * * * do not provide specific and credible

information regarding tax underpayments or violations of internal revenue laws”). -8-

[*8] When the Office rejects a claim, “the written notice [to the claimant] will state

the basis for the rejection.” Sec. 301.7623-3(b)(3), Proced. & Admin. Regs. In

ascertaining whether the Secretary abused his discretion, we confine our review to

the administrative record. Kasper, 150 T.C. at 20.

Section 7623(b)(1) provides for nondiscretionary (i.e., mandatory) awards

of at least 15% and not more than 30% of the collected proceeds if all stated re-

quirements are met. Before any award can be paid, section 7623(b)(1) requires

that the IRS first proceed with an “administrative or judicial action” and then col-

lect proceeds from the target taxpayer. See Cohen v. Commissioner, 139 T.C. 299,

302 (2012), aff’d, 550 F. App’x 10 (D.C. Cir. 2014); Whistleblower 14106-10W v.

Commissioner, 137 T.C. 183, 189 (2011). While we have jurisdiction to review

the IRS’ award determination, section 7623 gives us no authority to direct the IRS

to commence an administrative or judicial action. Cooper v. Commissioner, 136

T.C. 597, 600-601 (2011). If the IRS proceeds with no administrative or judicial

action, there can be no whistleblower award. Id. at 601.

The administrative record shows that the Office properly rejected petition-

er’s claims because she did not provide any credible information regarding a Fed-

eral tax violation. The Office based its decision on a recommendation from Mr.

Wiggins, a classifier in SB/SE. He investigated petitioner’s claims and ascer- -9-

[*9] tained that all of the alleged participants were German persons or entities.

The chief violations petitioner alleged--fiduciary fraud, bond fraud, securities

fraud, and identity theft by a German insurance company and its managing

director--had no nexus to the United States or to Federal tax law.

Petitioner’s Form 211 mentioned “tax fraud” only in connection with her

query whether the targets were required to file certain IRS forms. But she sup-

plied no support for the notion that the German insurance company was required

to file with the IRS Form 1099-OID, Original Issue Discount, or that the com-

pany’s managing director, a German national, was required to file Form 1040, U.S.

Individual Income Tax Return. See sec. 1.6049-5(b)(6), Income Tax Regs. (pro-

viding that amounts “paid and received outside the United States” are not reported

on Form 1099-OID); sec. 1.6012-1(b)(1)(i), Income Tax Regs. (providing that a

“nonresident alien individual” need not file Form 1040 unless he is “engaged in a

trade or business in the United States”).

On the basis of this record, we have no difficulty concluding that the Office

did not abuse its discretion in rejecting petitioner’s claims for failure to allege any

Federal tax issue. We will therefore grant summary judgment to respondent. - 10 -

[*10] To reflect the foregoing,

An appropriate order and decision

will be entered for respondent.