The IRS Whistleblower Program’s annual report for FY 2015 calls on Congress to provide legal protections to whistleblowers from retaliation, similar to the protections accorded under other whistleblower award programs.
The report offers the following justification for enacting a federal law protecting whistleblowers who report tax fraud or tax underpayment:
Whistleblowers may be putting their careers at risk by coming forward with information, which is not an easy step to take. Providing whistleblowers with protection from retaliation by their employer would help make the IRS Whistleblower Program more effective and help bring to light additional violations of tax laws that may otherwise go undetected. . . When the whistleblower is an employee of the taxpayer, retaliation can take the form of a job-related action. In other cases, whistleblowers may face threats of physical harm or damage to economic interests.
This is a sound recommendation and hopefully such legislation will expressly protect internal disclosures and incorporate the best practices in recently enacted whistleblower protection laws, including contributing factor causation and the right to a jury trial.
In the interim, corporate whistleblowers that suffer retaliation for disclosing tax fraud or tax underpayment can seek protection under the whistleblower protection provisions of the Sarbanes-Oxley Act, or under the Dodd-Frank Act. For example in Vannoy v. Celanese Corp., a DOL ALJ held that disclosures about improper deductions stemming from personal, non-business cash advances and purchases were protected under SOX.
Section 922 of the Dodd-Frank Act can protect disclosures about tax fraud in that it encompasses disclosures protected under 18 U.S.C. Sec. 1513(e),which prohibits retaliation for a disclosure about the “commission or possible commission of any Federal offense.” As certain forms of tax evasion are criminal offenses, disclosures about tax avoidance schemes can be protected under the Dodd-Frank Act.