In this case, we consider the extent to which the WBO is constrained by the regulations when it communicates adverse decisions to whistleblowers. Specifically, petitioner, Bobby Lee Rogers, has appealed, pursuant to section 7623(b)(4), a determination of the WBO that declines to grant him an award. Respondent, the Commissioner of Internal Revenue (the "Commissioner"), has filed a motion for summary judgment under Rule 121, arguing that the WBO "rejected" Mr. Rogers' claim and that this determination was consistent with the regulatory scheme and supported by the administrative record. But the letter that the WBO sent to Mr. Rogers purported to reject his claim based on a rationale that the regulations specifically associate with an alternative adverse determination, a denial.
The facts described below are drawn from the parties' pleadings and motion papers, including the exhibits attached thereto and the administrative record as certified by the Commissioner.
A. Mr. Rogers' Award Applications
In 2019, Mr. Rogers submitted nine Forms 211, Application for Award for Original Information, to the WBO, along with certain attachments. Mr. Rogers' Forms 211 identified nine target taxpayers—all individuals and extended family members or personal acquaintances of Mr. Rogers—and alleged that they had conspired to commit "grand theft through conversion" of the assets of Mr. Rogers' mother. The forms further alleged that the target taxpayers knowingly engaged in a "planned offense," through which property owned in part by Mr. Rogers' mother was fraudulently shifted through a variety of business entities, with the result that she was "[divested] of her financial assets and property without her direct knowledge or control."
Mr. Rogers attached a number of supporting documents to his Forms 211, including various trust instruments, affidavits, corporate filings, and news articles. The documents were part of an "investigation report" that Mr. Rogers had prepared and submitted to law enforcement agencies at the Federal, State, and local levels in an attempt to regain ownership of his mother's assets.
B. WBO Review
Mr. Rogers' Forms 211 and attachments (collectively, his claim) were received and date-stamped by the WBO Initial Claims Evaluation ("ICE") Team in August 2019. The ICE Team assigned nine separate claim numbers—including one master claim number—to Mr. Rogers' claim and mailed him a letter acknowledging that the WBO had received the materials. The ICE Team then routed Mr. Rogers' claim to a classifier in the IRS Small Business Self-Employed ("SBSE") operating division.
A few days after the SBSE classifier completed his review, a Tax Examining Technician for the WBO drafted an Award Recommendation Memorandum (the "ARM"). The ARM was addressed to Keith Dehart, a supervisory Tax Examining Technician overseeing the WBO's ICE team. The ARM included a notation recommending that the WBO "reject" Mr. Rogers' claim. The ARM further explained that the claim had been "[r]ecommended for rejection by classification." In addition to this "Summary Recommendation," the ARM recited the same bases for the recommendation that appeared in each of the SBSE classifier's classification sheets.
After the ARM's preparation, the WBO did not forward Mr. Rogers' claim to an IRS examiner for possible action with respect to the target taxpayers. Instead, the ICE Team immediately issued Mr. Rogers a letter (the "WBO Letter" or "Letter"), dated September 10, 2019, declining to grant him an award. The Letter, which was styled "Final Decision Under Section 7623(a)," was signed by "Layne Carver for Joseph Hebb, Program Manager Whistleblower Office, SPPA," and stated in relevant part:
The WBO E-Trak report for each claim number associated with Mr. Rogers' claim lists the date the Letter was issued as the date of "Closure Action." According to the E-Trak reports, the action taken for each claim number was "Claim Rejected: Allegations are not specific, credible, or are speculative."
C. Tax Court Proceedings
Mr. Rogers timely appealed to this Court seeking review of the WBO's award determination under section 7623(b)(4). The petition repeated the allegations from Mr. Rogers' Forms 211 and asserted that the cash and property converted by the target taxpayers were not "taxed appropriately" at the Federal or the State level. Mr. Rogers also requested that the Commissioner produce certain records to facilitate Mr. Rogers' investigation of the target taxpayers, including more than 50 years of tax returns and "Tax and Earnings Statements" for his mother.
The Commissioner filed an answer that did not address certain monetary thresholds under I.R.C. section 7623(b)(5) discussed in greater detail below. The Commissioner subsequently filed a motion for summary judgment under Rule 121, along with a supporting declaration and attachments.
I. Summary Judgment
The purpose of summary judgment is to expedite litigation and avoid unnecessary trials. Fla. Peach Corp. v. Commissioner, 90 T.C. 678, 681 (1988). Generally speaking, the Court 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. Rule 121(b); Sundstrand Corp. v. Commissioner, 98 T.C. 518, 520 (1992), aff'd, 17 F.3d 965 (7th Cir. 1994).
The usual summary judgment standard is less apt in a case like this one, where we must confine ourselves to the
II. Whistleblower Framework
A. Section 7623(a) and (b)
As we have said, section 7623 provides for awards to whistleblowers who submit information about third parties who have underpaid their taxes or otherwise violated the internal revenue laws. Section 7623(a) authorizes discretionary payments in certain circumstances, while section 7623(b) provides for nondiscretionary (i.e., mandatory) awards. Before an award may be paid, the IRS generally must proceed with an "administrative or judicial action" and collect proceeds from the target taxpayer. See sec. 7623(b)(1); Cohen v. Commissioner, 139 T.C. 299, 302 (2012), aff'd, 550 F. App'x 10 (D.C. Cir. 2014); see also sec. 7623(a).
Under section 7623(b), the WBO first determines whether a whistleblower is entitled to a mandatory award. If an award is due, then the WBO also determines the amount of the award. See sec. 7623(b)(1), (2), and (3). This Court has jurisdiction to review the WBO's determinations under section 7623(b), including determinations that no award is due. See sec. 7623(b)(4); Lacey v. Commissioner, 153 T.C. 146, 169 (2019); see also Cooper v. Commissioner, 135 T.C. 70, 75-76 (2010). We do not, however, have authority to order the IRS to commence an administrative or judicial action or to review its determination of the alleged tax liability to which a whistleblower's claim pertains. See Lacey v. Commissioner, 153 T.C. at 166; see also Cohen v. Commissioner, 139 T.C. at 302 (citing Cooper v. Commissioner, 136 T.C. 597, 600 (2011)).
B. Rejections and Denials
The statutory provisions governing whistleblower awards are succinct, and the Department of the Treasury and the IRS have adopted regulations supplementing the statutory scheme. As relevant to our decision, the regulations provide for two distinct types of determinations that result in no award: rejections and denials. We describe each type of determination in greater detail below.
The regulations establish certain minimum criteria that apply to all whistleblower claims. In particular, section 301.7623-1(b), Proced. & Admin. Regs., describes which individuals are eligible to file a claim (i.e., it addresses the "Who may file?" question), while section 301.7623-1(c), Proced. & Admin. Regs., describes the information each claim should include (i.e., it addresses the "What information must be submitted?" question). Among other things, a claim generally must (1) include specific, credible, and nonspeculative information that the whistleblower believes will lead to collected proceeds, (2) report a failure to comply with the internal revenue laws and identify the person(s) believed to have failed to comply with the internal revenue laws, and (3) provide substantive information in support of the whistleblower's allegations, including all available documentation. See sec. 301.7623-1(c)(1), (4), Proced. & Admin. Regs.; see also Lacey v. Commissioner, 153 T.C. at 160. For these purposes, a claim is considered purely speculative if it lacks any basis or support for its allegations. See Lacey v. Commissioner, 153 T.C. at 161.
Under the regulations, "[a] rejection is a determination that relates solely to the whistleblower and the information on the face of the claim that pertains to the whistleblower." Sec. 301.7623-3(c)(7), Proced. & Admin. Regs.; see also Internal Revenue Manual ("IRM") pt. 22.214.171.124.3(7) (Apr. 29, 2019) ("A rejection is a determination that relates to the whistleblower's eligibility to file a claim for award, or the submission of information and claims for award (i.e., the claim did not contain a tax issue, the information on the Form 211 was not specific/credible information, the claim was purely speculative in nature, or the Service was unable to identify the taxpayer based on the information provided by the whistleblower).").
Congress has entrusted to the WBO the initial evaluation of whistleblower claims to determine whether they satisfy the minimum standards for an award.
If a claim fails to meet the threshold criteria, depending on the circumstances, the WBO may choose to notify the whistleblower of any deficiencies and give him an opportunity to perfect the claim before the WBO takes further action.
A "denial" is fundamentally different from a "rejection." Under the regulations, "[a] denial is a determination that relates to or implicates taxpayer information." Sec. 301.7623-3(c)(8), Proced. & Admin. Regs.; see also IRM pt. 126.96.36.199.3(3) ("A denial is a determination that is made for reasons beyond the information contained on the Form 211. [sic] (e.g., the Service did not proceed based on the information provided by the whistleblower, the case was surveyed or no changed by the operating division, the issue(s) alleged by the whistleblower were no change issues, the issues alleged by the whistleblower were below threshold, the statute has expired on the issues raised by the whistleblower, there are no collected proceeds).").
III. Standard and Scope of Review
Section 7623(b)(4) provides that "[a]ny determination regarding an award" under section 7623(b) may be "appealed to the Tax Court (and the Tax Court shall have jurisdiction with respect to such matter)." We review the WBO's determinations regarding an award for abuse of discretion. See Kasper v. Commissioner, 150 T.C. at 22-23. Abuse of discretion exists when a determination is arbitrary, capricious, or
In ascertaining whether the WBO abused its discretion, we generally confine our review to the administrative record. See Kasper v. Commissioner, 150 T.C. at 20. In the whistleblower context, the administrative record consists of "all information contained in the administrative claim file that is relevant to the award determination and not protected by * * * privileges." Sec. 301.7623-3(e)(1), Proced. & Admin. Regs.
The Supreme Court has held that "a reviewing court, in dealing with a determination or judgment which an administrative agency alone is authorized to make, must judge the propriety of such action solely by the grounds invoked by the agency." Chenery II, 332 U.S. at 196 (summarizing the holding of Chenery I, 318 U.S. 80). Consequently, we held in Kasper v. Commissioner, 150 T.C. at 23-24:
Thus, our Court reviews a WBO determination by reference to the grounds that it states, not by reference to post hoc rationalizations. Lacey v. Commissioner, 153 T.C. at 165. In performing this analysis, we may consider any "contemporaneous explanation of the agency decision" contained in the record. Tourus Records, Inc. v. DEA, 259 F.3d 731, 738-740 (D.C. Cir. 2001) (quoting Camp v. Pitts, 411 U.S. 138, 143 (1973)) (deciding not to remand a case involving a letter with an insufficient explanation of an agency's action because the record contained contemporaneous explanations of the agency's decision-making rationale). We will "uphold a decision of less than ideal clarity if the agency's path may reasonably be discerned." Bowman Transp., Inc. v. Ark.-Best Freight Sys., Inc., 419 U.S. 281, 286 (1974).
If the Court decides that the WBO abused its discretion in rejecting or denying a whistleblower's claim, then we can remand the case for further consideration. See Lacey v. Commissioner, 153 T.C. at 165, 172-173; Whistleblower 769-16W v. Commissioner, 152 T.C. 172, 181-182 (2019) (holding that the Tax Court may in appropriate circumstances remand a whistleblower case to the WBO for further consideration); see also Fla. Power & Light Co. v. Lorion, 470 U.S. 729, 744 (1985) ("If the record before the agency does not support the agency action, if the agency has not considered all relevant factors, or if the reviewing court simply cannot evaluate the challenged agency action on the basis of the record before it, the proper course, except in rare circumstances, is to remand to the agency for additional investigation or explanation.").
IV. Applying the Standards to the Commissioner's Motion
A. Section 7623(b)(5)
As we have discussed, section 7623(b) authorizes our review of WBO determinations when two monetary thresholds set out in section 7623(b)(5) are satisfied. We therefore begin with a procedural question: Are we precluded from reviewing Mr. Rogers' petition because the record does not establish that the action here satisfies the monetary thresholds? We conclude that the answer is no.
B. Abuse of Discretion
1. The WBO Letter
Under Chenery I, 318 U.S. at 89, we judge agency action "by the standards which the * * * [agency] itself invoked." See also Chenery II, 332 U.S. at 196. Accordingly, in reviewing the WBO's action in this case, we turn first to its determination: the Letter mailed to Mr. Rogers. The WBO Letter was titled "Final Decision Under Section 7623(a)" and stated in relevant part:
On its face, the Letter states that the WBO is rejecting Mr. Rogers' claim. But the WBO Letter fails to include any rationale that would support a rejection under the regulations. See sec. 301.7623-1(b)(2), (c)(4), Proced. & Admin. Regs. (stating that a whistleblower claim may be rejected for violating specified minimum criteria); see also IRM pt. 188.8.131.52.3(7) (stating that a rejection is appropriate if a claim does not raise a tax issue or is purely speculative, the information on the Form 211 is not specific or credible, or the IRS is unable to identify the taxpayer based on the claim). The Letter identifies no deficiencies with respect to the "who" or "what" questions addressed in the regulations. See sec. 301.7623-1(b)(2), (c), Proced. & Admin. Regs. Put another way, the WBO Letter does not say that Mr. Rogers is an impermissible whistleblower. See id. para. (b)(2) (setting out the "who" requirements). Nor does the Letter say that the materials he submitted fell short of providing the information the regulations required. See id. para. (c) (setting out the "what" requirements). The WBO Letter does not address any
Rather than focusing on the whistleblower and explaining what he failed to do, as required by the rejection rules under the regulations, the WBO Letter switches its focus to the agency itself and what the agency chose to do. Thus, the Letter tells Mr. Rogers that "the IRS decided not to pursue the information you provided." While this may be a plausible explanation for a denial, it does not explain the basis of a rejection.
In short, the regulatory framework gave the WBO two distinct paths for action—rejection or denial. Having come to that "fork in the road," the WBO Letter followed Yogi Berra's advice and "took it." The Yankee great's suggestion was sound in context, as both prongs of the fork led to his home. But with respect to a whistleblower award, the two prongs of the regulations lead to very different places. By including the "decided not to pursue" rationale as the reason for its purported rejection, the WBO Letter in effect said to Mr. Rogers: "We reject your claim because we are denying the
We assume that WBO personnel are familiar with the rejection and denial categories set out in the regulations and thus are puzzled by the Letter's apparent disregard of them.
2. The Administrative Record
This conclusion does not end our inquiry. Consistent with Chenery I, a determination letter that is silent or muddled with respect to a supportable rationale may still be sustained if other materials in the record clarify the agency's reasoning. See Tourus Records, 259 F.3d at 738-740 (agency decision was adequately supported because the record included contemporaneous explanations of the agency's decision-making rationale); Kasper v. Commissioner, 150 T.C. at 24-25 (evidence from an operating division classifier adequately explained claim's rejection).
For example, in Tourus, 259 F.3d at 733, the Drug Enforcement Agency ("DEA") announced in a letter that it was denying a petition for waiver of a bond requirement because the petitioner's "Affidavit of Indigency" was "not adequately supported." Noting that the letter on its own was insufficient to sustain the DEA's determination because it failed to explain the DEA's reasoning, id. at 737 (citing Roelofs v. Sec'y of the Airforce, 628 F.2d 594, 599 (D.C. Cir. 1980)), the U.S. Court of Appeals for the District of Columbia Circuit went on to consider agency memoranda that in that court's view filled the gap left by the DEA's letter, id. at 738-739. We note two key distinctions between Tourus and this case. First, the regulation the court considered in Tourus required the DEA to waive the bond requirement "[u]pon satisfactory proof of financial inability to post the bond," but did not elaborate on the permissible reasons for such a determination or otherwise constrain the DEA's decision making. See id. at 735-736 (quoting 19 C.F.R. sec. 162.47(e) (2000)). By contrast, the regulations under section 7623 describe in detail the two types of determination available to the WBO when it declines to issue an award (rejection and denial), as well as the circumstances that justify each type of determination. Second, while the D.C. Circuit viewed the letter in Tourus essentially as silent as to the rationale for the agency's decision, the letter here does provide a rationale. But that rationale, as discussed above, does not support the determination (a rejection) reflected in the WBO's Letter. Thus, the facts here are materially different from those that were before the D.C. Circuit in Tourus.
Nevertheless, based on Tourus and the other authorities we have cited, we will evaluate the WBO's determination by looking beyond the four corners of the Letter to consider the record more broadly. The purpose of this inquiry is to determine whether any aspects of the record provide a basis for changing our initial evaluation of the WBO's decision. As we describe below, we find no such basis here.
The sheets elaborated that Mr. Rogers failed to provide documentation and "did not provide a breakdown of the years and how much money was benefitted to TP per year." See sec. 301.7623-1(c)(1), Proced. & Admin. Regs. (stating that whistleblower claims "should provide substantive information, including all available documentation, that supports the whistleblower's allegations"). The SBSE classifier, therefore, could have hardly been clearer in recommending a rejection for the reasons stated in subparagraphs (1) and (4) of section 301.7623-1(c), Proced. & Admin. Regs.
Instead, in a situation where only two paths were available to the WBO (reject or deny), the WBO Letter purported to adopt the former using a justification for the latter. At best, this mixup betrays confusion in the mind of the ultimate decision maker, whether with respect to the requirements of the regulations, the recommendations made by the SBSE classifier and the WBO technician, or both.
The supporting declaration from Mr. Dehart, the WBO supervisor, perpetuates the confusion. Mr. Dehart, to whom the ARM was addressed, states that both the SBSE classifier and the WBO technician recommended rejecting Mr. Rogers'
The self-contradiction reflected in the WBO Letter leaves us unable to "reasonably * * * discern" the WBO's path. Bowman Transp., Inc., 419 U.S. at 286. What we can discern is that, at every step before the WBO's ultimate decision, IRS employees recommended the rejection of Mr. Rogers' claim because it failed to satisfy the minimum threshold criteria established by the regulations. Given the rationale stated in the WBO Letter, however, the ultimate decision maker appears to have opted to base his decision on an alternative ground. Thus, this is not a case in which the determination letter is silent or muddled, but the administrative record clears up the confusion. See, e.g., Tourus Records, 259 F.3d 731. Rather, the WBO's selection of its particular rationale, expressly tied to a denial by the regulations, conflicts with the recommendations that it received.
The Commissioner's explanation of the WBO's rationale does more harm than good to his case. The Commissioner maintains that the WBO intentionally selected the "decided not to pursue" formulation (rather than relying on regulatory criteria invoked by the SBSE classifier and WBO technician) because the WBO wanted to avoid suggesting that Mr. Rogers could perfect his claim by submitting additional information. As already discussed, when a claim is rejected (and not denied), the regulations state that a whistleblower "may [that is, he is permitted to] perfect and resubmit" his claim if the rejection is premised on a lack of adequate explanation
As the Supreme Court recently observed: "If men must turn square corners when they deal with the government, it cannot be too much to expect the government to turn square corners when it deals with them." Niz-Chavez v. Garland, 593 U.S. ___, ___, 141 S.Ct. 1474, 1486 (2021). We cannot countenance intentional obfuscation on the part of the WBO. And neither the WBO Letter alone nor the Letter coupled with the administrative record here provides a coherent account of the WBO's determination that is consistent with the regulations. That, in turn, represents an abuse of discretion, and accordingly we must deny the Commissioner's motion.
3. The Commissioner's Additional Arguments
In his motion and the supplement to his motion, the Commissioner attempts to rescue the WBO's determination by offering three additional arguments. We address each in turn.
a. Rejection Determination
First, the Commissioner contends that the WBO correctly rejected Mr. Rogers' claim because it based its determination on the SBSE classifier's recommendation and the contents of the claim alone. We need not tarry long on this argument as we have addressed it extensively above. See supra Part IV.B.1 and 2. But we do wish to highlight a few points.
The Commissioner cites section 301.7623-3(c)(7), Proced. & Admin. Regs., and contends that a rejection was appropriate here because both the WBO's determination and the SBSE classifier's recommendation were based on the face of Mr. Rogers' claim and not on any information beyond the claim. In the case of the SBSE classifier, the Commissioner points to the reasons enumerated in the classification sheets (e.g., that Mr. Rogers' claim was not specific or credible or was speculative and that Mr. Rogers failed to provide documentation) as supporting the proposition that the classifier based his recommendation on the face of Mr. Rogers' claim. With respect to the WBO's determination, however, the Commissioner simply states, without providing further support, that "[u]pon receiving [the] SBSE Classifier['s] * * * recommendation, the * * * [WBO] did not go beyond the face of the claim made by the petitioner in making the determination to reject the claim."
The Commissioner's argument is unpersuasive. To the extent the Commissioner contends that a rejection would have been the correct determination under the regulations based on the information available to the WBO, that argument does not establish what the WBO actually did. We agree in light of the record that the SBSE classifier and the WBO technician based their recommendations on the face of Mr. Rogers' claim. But we have no way of knowing that the determination by the WBO was similarly limited. As we have discussed, the rationale selected by the WBO to explain its determination was different from the rationale offered by the
The Commissioner also argues that the inclusion of the phrase "decided not to pursue" in the WBO Letter supports his contention that the WBO rejected Mr. Rogers' claim. The Commissioner concedes that a decision not to proceed based on a whistleblower's information would constitute a denial under section 301.7623-3(c)(8), Proced. & Admin. Regs., but contends that a decision not to pursue a claim is distinct from a decision not to proceed. We see no daylight between the two phrases.
The Commissioner is correct that the phrase "did not proceed based on" is defined in the regulations and specifically cited as an example of a denial in section 301.7623-3(c)(8), Proced. & Admin. Regs. But he should have read the regulations more closely. Section 301.7623-2(b)(1), Proced. & Admin. Regs., which defines the phrase "proceeds based on," states as follows:
Under the regulations, therefore, a decision to pursue an action is equivalent to a decision to proceed, see id., and a decision not to proceed is grounds for a denial, see sec. 301.7623-3(c)(8), Proced. & Admin. Regs.; see also IRM pt. 184.108.40.206.3(3). These rules flatly contradict the Commissioner's contention that an IRS "deci[sion] not to pursue" a claim would support a rejection instead of a denial under the regulations.
b. Not an Abuse of Discretion
The Commissioner next contends that the WBO did not abuse its discretion when it rejected Mr. Rogers' claim based on a "dec[ision] not to pursue," because the regulations allow for rejections other than those based on the minimum threshold criteria of section 301.7623-1(b) and (c), Proced. & Admin. Regs. More specifically, the Commissioner acknowledges that the regulations do not mention a decision not to pursue a claim as a potential reason for rejecting (as opposed to denying) the claim, but argues that the regulations in this area are illustrative, not exclusive, and a rejection need not reference any specific criteria. The Commissioner further contends that rejections for reasons not referenced in the regulations are exempt from the requirements of section 301.7623-1(c)(4), Proced. & Admin. Regs. (providing a whistleblower with the opportunity to perfect his claim in certain circumstances), and section 301.7623-3(c)(7), Proced. & Admin. Regs. (defining "rejection" and setting out certain procedural rules that apply to rejections under section 7623(b)).
In light of the discussion above, we need not determine whether there is any case in which the WBO could reject a claim on grounds other than the minimum criteria set out in the regulations.
c. Our Authority To Review
Finally, the Commissioner argues that, regardless of the merits of the WBO's determination, we are precluded from reviewing the determination because it reflects an "enforcement decision" by an IRS operating division—i.e., the recommendation of the SBSE classifier. In the Commissioner's view, our Opinion in Lacey v. Commissioner, 153 T.C. 146, which held that the Tax Court has authority to review the WBO's threshold rejection of a whistleblower's claim for abuse of discretion, id. at 166-167, does not affect the rule that we lack authority to review an IRS enforcement decision not to audit a taxpayer's return or otherwise pursue a whistleblower's information, see id. at 163-164; see also Cohen v. Commissioner, 139 T.C. at 302; Cooper v. Commissioner, 135 T.C. at 75-76.
Unlike in Lacey, 153 T.C. at 166-167, where the WBO acted alone, the WBO in this case involved an operating division by transmitting Mr. Rogers' claim to the SBSE classifier for classification. The Commissioner contends that, when the SBSE classifier made his recommendation to reject Mr. Rogers' claim, he made an enforcement decision on behalf of an IRS operating division. Therefore, the Commissioner argues, our Court lacks authority to review the WBO's determination. We disagree.
To begin with, and as already discussed, the Commissioner has not established that the WBO based its determination on
Yet, the Commissioner tries to have it both ways. Under his theory, the WBO's reliance on the SBSE classifier was complete enough to shield the WBO's determination from review, but not so complete as to adopt the classifier's rationale. We fail to see how the WBO could have based its decision on the SBSE classifier's recommendation while simultaneously rejecting his reasoning.
In any event, the involvement of an IRS operating division does not automatically preclude our review of a WBO determination. The Commissioner is correct that in Lacey this Court distinguished between a rejection determination made by the WBO, on the one hand, and a determination not to proceed with a claim made by an operating division, on the other.
Under the realigned system, after initial processing by the WBO, all claims not summarily rejected (e.g., for failure to include required information) are forwarded to the operating division for classification. IRM pt. 220.127.116.11 (Apr. 29, 2019). An operating division classifier (like the SBSE classifier in this case) then determines whether each claim should be rejected, denied, or forwarded for further investigation, IRM pt. 18.104.22.168.1 (May 28, 2020), including by considering whether the claim describes a specific and credible tax issue or is purely speculative, IRM pt. 22.214.171.124.2(5) (May 28, 2020).
We do not consider it improper for the IRS to reorganize itself to allocate the initial classification function to SBSE or other operating divisions and to allocate some audit decisions to the WBO. See Tax Relief and Health Care Act of 2006, sec. 406(b)(1)(B) (providing that the WBO "shall analyze information received from any individual * * * and either investigate the matter itself or assign it to the appropriate Internal Revenue Service office"). But, accepting that such an allocation of duties is permissible, the issue becomes not which IRS office made the determination but rather what the nature of that determination was.
The determination whether a claim satisfies the minimum requirements of the regulations (i.e., the decision whether or
As we held in Lacey, when the WBO rejects a claim on its face for failure to conform to the minimum threshold requirements set out in the regulations, an explanation is required and that explanation is reviewable for abuse of discretion. See Lacey v. Commissioner, 153 T.C. at 168 (noting that an abuse of discretion standard applies and that the WBO's exercise of its discretion must conform with the pertinent regulatory criteria). This is so whether or not an operating division agreed with or participated in the decision.
As we describe above, neither the WBO Letter alone nor the Letter coupled with the administrative record here provides a coherent account of the WBO's determination that is consistent with the regulations. Therefore, the WBO's determination constitutes an abuse of discretion. It may well be that Mr. Rogers' claim is nothing more than a personal dispute that the IRS will decide not to pursue even if Mr. Rogers provides additional information. Nevertheless, the WBO must comply with the regulations, and Mr. Rogers is entitled to transparency and candor as to the reasons for its ultimate determination. We cannot countenance intentional obfuscation by the WBO, nor will we bless attempts to improperly shield cases from judicial review. Accordingly, we will deny the Commissioner's motion as supplemented and remand the case to the WBO for further consideration.
To reflect the foregoing,
An appropriate order will be issued.