In a case decided today by the Tax Court, a taxpayer pursuing a whistleblower claim against his former employer was permitted to remain anonymous, despite the court’s long history of open trials and public access to court records.
Section 7623 provides that if the IRS proceeds with any “administrative or judicial action” on the basis of information provided by a whistleblower, then, subject to various conditions, the whistleblower is entitled to an award of 15 to 30 percent of the collected proceeds.
In the immediate case, a highly ranking employee of a corporation (for ease of reference, lets call him “Benedict Arnold”) attempted to cash in on Section 7623 by implicating the employer for a substantial tax underpayment.
The IRS denied the claim, however, as 1) the information provided by Arnold did not result in the opening of a judicial or administrative proceeding against the employer, and 2) despite the language of Section 7623, nobody likes a tattletale.
In response, Arnold filed a petition with the Tax Court, seeking to recover the whistleblower award. While his claim was again denied by the court, the more noteworthy aspect of the case was Arnold’s request for continued anonymity; an issue of first impression that forced the Tax Court to weigh its century-long policy of full disclosure with the need to protect whistleblowers from retribution.
In his petition, Arnold requested to have the court documents sealed, or failing that, to continue on an anonymous basis, citing potentially adverse consequences should his name be released:
At some point after filing the whistleblower claim, petitioner obtained new employment in a company other than X. According to the affidavit petitioner fears “economic and professional ostracism, harm, and job-related harassment if my identity is revealed because my new employer and other potential employers will not want to hire or employ a known tax whistleblower.” Petitioner also asserts that X may suffer financially if the details of petitioner’s claim are made public.
In reaching its decision to permit Arnold to remain anonymous, the Tax Court respected the severity of the potential backlash:
In sum, petitioner has demonstrated a risk of harm that far exceeds in severity mere embarrassment or annoyance. The retaliation, professional ostracism, and economic duress which petitioner reasonably fears are, we believe, no less severe than the harm posed to attorneys and doctors suing to enjoin disciplinary proceedings and unsuccessful job applicants suing to protect their reputation…all cases in which plaintiffs have been allowed to proceed anonymously.
But not before weighing these concerns against considerations of social interest:
The social interests at stake are mixed. On the one hand, for reasons previously discussed, there is strong social interest in protecting petitioner’s identity as a confidential informant. On the other hand, the people generally have a right to know “who is using their courts”. Because we have held that the IRS is entitled to summary judgment on a threshold legal issue which does not depend to any appreciable extent on petitioner’s identity, we believe that the public’s interest in knowing petitioner’s identity is relatively weak.