FY19 Sequestration Rate for Whistleblower Awards

Pursuant to the requirements of the Balanced Budget and Emergency Deficit Control Act of 1985, as amended, whistleblower award payments issued under Internal Revenue Code section 7623 are subject to sequestration. This means that every award payment made to a whistleblower under Section 7623 on or after October 1, 2018, and on or before September 30, 2019, will be reduced by the fiscal year 2019 sequestration rate of 6.2 percent. The sequestration reduction rate will be applied unless and until a law is enacted that cancels or otherwise impacts the sequester, at which time the sequestration reduction rate is subject to change.

The sequestration reduction will be applied after the Whistleblower Office determines the amount of proceeds and the applicable award percentage to be paid under section 7623. Whistleblowers will be advised of the sequestration reduction in correspondence from the Whistleblower Office concerning a proposed award amount and an award determination.

2016 Tax Sequestration Rate Reduces Whistleblower Awards

Today, November 3, 2015, the IRS Whistleblower Office announced that it will continue to reduce Whistleblower Awards by 6.8%.  The IRS claims that the Balanced Budget and Emergency Deficit Control Act of 1985, as amended, allows it to reduce whistleblower award payments because of sequestration.

Therefore, award payments made to whistleblowers under Section 7623 on or after October 1, 2015, and on or before September 30, 2016, will be reduced by the fiscal year 2016 sequestration rate of 6.8 percent. The fiscal year 2015 sequestration rate was 7.3 percent.

The sequestration reduction rate will be applied unless and until a law is enacted that cancels or otherwise impacts the sequester, at which time the sequestration reduction rate is subject to change.

The sequestration reduction will be applied after the Whistleblower Office determines the amount of collected proceeds and the applicable award percentage to be paid under section 7623.

Currently, the Tax Whistleblower Law Firm has several court cases on appeal that are currently pending before the United States Tax Court challenging the authority of the IRS to unilaterally reduce these awards for sequestration.  In addition, the whistleblower statute, I.R.C. § 7623, provides “Any amount payable under …. shall be paid from the proceeds of amounts collected by reason of the information provided, and any amount so collected shall be available for such payments.”  This alone would lead one to believe that the payment of the award, once it is determined, is not discretionary.