INSINGA v. COMMISSIONER

OPINION

GUSTAFSON, Judge:

This case is before the Court on a motion, filed pursuant to Rule 63(a),1 to substitute the Estate of Joseph A. Insinga ("the estate") as petitioner in this case and to change the case caption. Respondent, the Commissioner of Internal Revenue, does not oppose the motion. We will grant it.

Background

Pursuant to section 7623(b)(4), petitioner Joseph A. Insinga filed on April 25, 2013, a timely petition in the Tax Court for review of an adverse determination of the IRS Whistleblower Office ("WBO") regarding his claims for an award. His claims and petition sought awards in connection with eight target taxpayers and 94 additional transactions. After substantial development of the case by cross-motions for partial summary judgment and motions to compel discovery (described in our orders of July 27, 2016, and January 27, 2017), petitioner reported that he intended to pursue only his claims regarding two entities, and the parties have so stipulated.

Petitioner then filed an amended petition in September 2017, asserting only the two remaining claims. Since then the parties have filed and briefed cross-motions for summary judgment and have filed supplemental briefs on the impact on this case of Kasper v. Commissioner, 150 T.C. 8 (2018), and Van Bemmelen v. Commissioner, 155 T.C. 64 (2020).

Petitioner died on March 22, 2021. This case and the most recent cross-motions for summary judgment are still pending. The motion for substitution was filed on June 4, 2021, asserting that the probate court of the State of South Carolina, County of Beaufort, has issued to Amanda Gilmore a Certificate of Appointment to serve as personal representative for the estate, and asserting that as the decedent's successor, the estate should be substituted for petitioner (and that the case caption be accordingly changed to reflect the substitution) so that the estate may proceed in place of Mr. Insinga.

Discussion

I. Jurisdiction

Congress granted to the Tax Court jurisdiction over whistleblower award determinations in section 7623(b)(4), which provides that "[a]ny determination regarding an award under paragraph (1), (2), or (3) 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)." This statute thus confers jurisdiction "with respect to `[a]ny determination regarding an award'". Lacey v. Commissioner, 153 T.C. 146, 163 (2019) (citing Cooper v. Commissioner, 135 T.C. 70 (2010)). However, as the Commissioner acknowledges in his filings, "[s]ection 7623 and its legislative history are silent with respect to survivability of whistleblower claims."

Whether an appeal of a whistleblower's award determination to the Tax Court pursuant to section 7623(b)(4) survives the death of the petitioner-whistleblower is a question of first impression in this Court.2 Rule 63(a) provides that "[i]f a petitioner dies, the Court, on motion of a party or the decedent's successor or representative or on its own initiative, may order substitution of the proper parties." But before ordering such a substitution, we must first ask whether we continue to have jurisdiction over an appeal filed pursuant to section 7623(b) after the petitioner-whistleblower who filed it has died.

In deficiency cases, which constitute most of the cases before this Court, "it is well settled that a petitioner's death does not divest this Court of jurisdiction over his income tax liability for years already in issue". Beatty v. Commissioner, T.C. Memo. 1980-168, 1980 Tax Ct. Memo LEXIS 414, at *7 (citing Nordstrom v. Commissioner, 50 T.C. 30 (1968), and Yeoman v. Commissioner, 25 T.C. 589 (1955)).3 Our deficiency jurisdiction is based on a timely filed petition, see sec. 6213(a); and (as held by our predecessor, the Board of Tax Appeals) "that jurisdiction * * * continues unimpaired" after the petitioner's death,4 because "the action is one which survives against * * * [the petitioner's] estate", Duggan v. Commissioner, 18 B.T.A. 608, 625 (1930);5 see also Nordstrom v. Commissioner, 50 T.C. at 31-32 (citing Duggan v. Commissioner, 18 B.T.A. at 625, and Yeoman v. Commissioner, 25 T.C. 589, 593 (1955), in support of its holding that the Court's jurisdiction over a case continues unimpaired by the death of a taxpayer and even though there is no personal representative appointed to act in the place and stead of the decedent).

The prerequisites to the Tax Court's acquiring jurisdiction in a section 7623(b) whistleblower case are the WBO's issuance to the whistleblower of a final determination and the whistleblower's filing of a petition.6 See McCrory v. Commissioner, 156 T.C. 90, 94 (2021) (holding that a preliminary award determination letter does not entitle a whistleblower to invoke our jurisdiction and citing Kasper v. Commissioner, 137 T.C. 37, 41 (2011), for the proposition that "[t]he jurisdiction of this Court is nevertheless dependent upon a finding that a `determination' has been made"). We find (and the parties do not dispute) that these prerequisites were met in this case. Evaluating the prerequisites to our jurisdiction under section 7623(b) and our precedent for the other sorts of cases in our jurisdiction, we conclude that we continue to have jurisdiction over the petition upon the death of the petitioner-whistleblower. We consequently hold that the death of a petitioner-whistleblower who has filed a petition in the Tax Court that is pending at the time of his death does not extinguish our jurisdiction over the petition.

II. Survival of the claim

A. Survival of Federal statutory claims generally

When a Federal statute does not specifically address survival rights, Federal common law provides the general rule that rights of action under Federal statutes survive a plaintiff's death if the statute is remedial, not penal. See Ex parte Schreiber, 110 U.S. 76, 80 (1884); see also United States ex rel. Hood v. Satory Global, Inc., 946 F.Supp.2d 69, 81 (D.D.C. 2013) (holding that a claim arising under the False Claims Act survives the death of the relator-plaintiff). The Court of Appeals for the Federal Circuit has expressed this rule by holding that, in the absence of a statutory provision to the contrary, common law supplies a presumption in favor of the survival of a remedial right of action arising under a Federal statute. See Figueroa v. Sec'y of Health & Human Servs., 715 F.3d 1314, 1319 (Fed. Cir. 2013).

Various Courts of Appeals have applied a three-factor test to ascertain whether a statute is remedial or penal, examining: "(1) whether the purpose of the statute was to redress individual wrongs or more general wrongs to the public; (2) whether recovery under the statute runs to the harmed individual or to the public; and (3) whether the recovery authorized by the statute is wholly disproportionate to the harm suffered." United States v. NEC Corp., 11 F.3d 136, 137 (11th Cir. 1993) (quoting First Nat'l Bank & Tr. Co. in Macon v. Flatau (In re Wood), 643 F.2d 188, 191 (5th Cir. 1980)).

B. Remedial vs. penal purpose

No court has yet decided whether section 7623(b) has a remedial or a penal purpose. However, opinions addressing the treatment of claims arising under the False Claims Act ("FCA"), 31 U.S.C. secs. 3729-3733, are illuminating because such qui tam7 actions involve the roughly analogous8 circumstance of a "relator" who (like a whistleblower) brings information regarding illegal activity to the attention of the Government and, upon successful prosecution of the claim, shares in the recovery.

In NEC Corp., 11 F.3d at 139, the court held that a decedent-plaintiff's claim under the FCA was remedial and therefore survived his death. In so holding, the court determined that each of the three relevant factors weighed in favor of finding the statute remedial, as follows: (1) The purpose of the qui tam remedy under the FCA was to redress individual wrongs of the relator who (the court held) may suffer "substantial harm" by bringing the qui tam action.9 (2) "[Q]ui tam provisions are intended to remedy, at least in material part, the harm suffered by the individual relator * * * rather than the public at large".10 And (3) the fact that a relator's recovery depends upon and is proportional to "the extent to which the person substantially contributed to the prosecution of the action", see 31 U.S.C. sec. 3730, likewise weighs in favor of discerning a remedial purpose, NEC Corp., 11 F.3d at 137-139. With respect to the FCA, the Federal courts have widely arrived at the same conclusion—i.e., that a claim brought by an FCA relator which is pending at his death survives and may therefore be pursued by his estate. See Satory Global, Inc., 946 F. Supp. 2d at 81 (observing that at the time of its opinion, all but one Federal District Court deciding this question had determined that an FCA claim survives the relator's death, and observing that since the time of the sole adverse opinion, United States ex rel. Harrington v. Sisters of Providence in Or., 209 F.Supp.2d 1085 (D. Ore. 2002), the Supreme Court had clarified that the FCA "serves dual punitive and remedial purposes" (citing Cook Cty., Ill. v. United States ex rel. Chandler, 538 U.S. 119, 129-134 (2003)).

C. The purpose of section 7623(b)

The 2006 amendments to section 7623(b)11 evince an intent to encourage whistleblowers to provide information (by limiting the IRS's discretion to deny certain awards). See Smith v. Commissioner, 148 T.C. 449, 458 (2017). The 2006 amendments also had the practical effect of increasing the amount of proceeds from which a so-called "mandatory" award under section 7623(b)(1) could be paid, by setting the "floor" for a mandatory award at the 15% threshold that the IRS previously imposed administratively and by increasing the ceiling for such awards to 30%. See Staff of J. Comm. on Taxation, Technical Explanation of H.R. 6408, the "Tax Relief and Healthcare Act of 2006," as introduced in the House on December 7, 2006, at 88-89 (J. Comm. Print 2006).

Applying the three-factor test set forth in NEC Corp., 11 F.3d at 137-139, we conclude: (1) Like the purpose of the FCA's qui tam remedy, the purpose of the award provisions of section 7623(b) is to redress individual wrongs of the whistleblower in bringing his claim (such as retaliation by his employer or professional ostracism) by compensating him for the harm he may incur by doing so.12 (2) Section 7623(b) is intended to provide a remedy to the whistleblower for bringing his claim by providing mandatory compensation for claims where the collected proceeds meet certain statutory thresholds. And (3) the recovery due to the whistleblower under section 7623(b)(1), which "shall depend upon the extent to which the individual substantially contributed to such action", shows that the whistleblower's recovery is proportional to the harm he incurs in bringing his claim. Consequently, these three factors weigh in favor of holding (and we therefore do hold) that section 7623(b) has a remedial purpose, and therefore the petitioner-whistleblower's Tax Court petition survives his death. This conclusion is bolstered by the holding of the Court of Appeals for the Federal Circuit in Figueroa, 715 F.3d at 1319, that the starting point at Federal common law is a presumption that a remedial Federal cause of action survives where the statute does not contain an explicit statement to the contrary.

D. Regulatory guidance

Our holding is also consistent with the IRS's regulatory guidance with respect to claims pending before the WBO at the time of the whistleblower's death. See 26 C.F.R. sec. 301.7623-4(d)(4), Proced. & Admin. Regs. ("If a whistleblower dies before or during the whistleblower administrative proceeding, the Whistleblower Office may substitute an executor, administrator, or other legal representative on behalf of the deceased whistleblower for purposes of conducting the whistleblower administrative proceeding"). As the Commissioner points out, though this regulation became effective13 after the date of petitioner's Tax Court petition,14 if further proceedings were to occur before the WBO (in the event of a remand), the WBO would be bound by the regulation. And though the regulation is neither binding on us nor directly applicable to the issue we decide today, it lends some persuasive support to our conclusion.

III. Standing

Tax Court Rule 63(a) provides: "If a petitioner dies, the Court, on motion of a party or the decedent's successor or representative or on its own initiative, may order substitution of the proper parties." No party disputes that the estate is the "proper part[y]" to substitute for petitioner. Consistent with our analysis above regarding survival of the petitioner-whistleblower's claim, we hold that the estate has standing to pursue that section 7623(b) claim. Accord Figueroa, 715 F.3d at 1320.

Conclusion

For the foregoing reasons, we hold that the death of a whistleblower who has filed a petition in the Tax Court pursuant to section 7623(b) that is pending at the time of his death does not extinguish our jurisdiction over the petition. We further hold that petitioner's petition under section 7623(b), which was pending before us at the time of his death, survives his death, and that his estate has standing to pursue the claim. Finding that the estate is a proper party to substitute for petitioner pursuant to Rule 63(a), we will grant the motion to substitute the estate for petitioner and to accordingly change the caption in this case.

To reflect the foregoing,

An appropriate order will be issued.