This is the seventh in a series of ten client alerts summarizing the key provisions of the Taxpayer Assistance and Service Act (the “TAS Act”), a bipartisan legislative package introduced on February 26, 2026, by Senators Crapo and Wyden to improve service and administration at the Internal Revenue Service (“IRS”). This alert addresses Title VII of the proposed legislation, which focuses on Whistleblowers. For a general overview of the legislation, please refer to the Introduction of this series and summaries of Titles I, II, III, IV, V, and VI.
Title VII of the TAS Act is designed to strengthen the IRS whistleblower program by enhancing judicial review of award determinations, protecting whistleblower awards from budgetary reductions, bolstering privacy protections, increasing transparency, ensuring timely payment of awards, and correcting a limitation on deductions for attorney’s fees
Section 701: Standard and Scope of Review of Award Determinations
Section 701 amends Section 7623(b)(4) of the Internal Revenue Code to change the standard and scope of Tax Court review of whistleblower award determinations. Under current law, whistleblower award determinations may be “appealed to” the Tax Court, but the statute does not specify the standard of review. Section 701 replaces the term “appealed to” with “reviewed by” and expressly provides that Tax Court review is de novo and based on the administrative record established at the time of the original determination and any additional newly discovered or previously unavailable evidence. This provision is intended to ensure that whistleblowers receive a meaningful and substantive review of IRS award decisions, rather than a more deferential review limited to the existing administrative record. This provision would apply to whistleblower petitions that are pending on, or filed on or after, the date of enactment.
Section 702: Exemption from Sequestration
Section 702 amends Section 255 of the Balanced Budget and Emergency Deficit Control Act of 1985 to provide that any award is exempt from reduction under any sequestration order. This provision addresses a longstanding concern that automatic budget cuts imposed through the sequestration process have reduced amounts paid to whistleblowers, even after those awards have been determined and approved. By exempting whistleblower awards from sequestration, the TAS Act seeks to ensure that whistleblowers receive the full amount they are owed under the statute. This exemption would apply to any sequestration order issued after the date of enactment.
Section 703: Privacy Protections
Section 703 adds a new subparagraph to Section 7623(b)(6) establishing privacy protections for whistleblowers in Tax Court proceedings. Specifically, the provision requires that a whistleblower proceed anonymously unless the Tax Court makes a finding that a societal interest exists for disclosing the whistleblower’s identity which exceeds the potential harm disclosure could cause to the whistleblower. This provision creates a presumption of anonymity, placing the burden on those seeking disclosure to demonstrate that the public interest in identifying the whistleblower outweighs the potential harm to that individual. This provision would apply to Tax Court petitions that are pending on, or filed on or after, the date of enactment.
Section 704: Modification of Whistleblower Report
Section 704 amends Section 406(c) of division A of the Tax Relief and Health Care Act of 2006 to expand the content of the IRS’s annual whistleblower report. Under this proposed provision, the report is required to include a list and descriptions of the top tax avoidance schemes disclosed by whistleblowers during the applicable year. This modification is designed to enhance transparency and to provide Congress and the public with greater insight into the types of tax avoidance that whistleblowers are identifying, without compromising the identities of the whistleblowers themselves. This amendment would apply to annual reports for fiscal years ending after the date of enactment.
Section 705: Interest on Awards
Section 705 adds a new paragraph (7) to Section 7623(b) to provide for the accrual of interest on whistleblower awards when the IRS fails to act in a timely manner. Under the provision, if the IRS has not provided notice to the whistleblower of a preliminary award recommendation before the “applicable date,” the award will accrue interest from that date at the overpayment rate under Section 6621(a). Interest ceases to accrue once the Secretary provides notice of the preliminary award recommendation.
The “applicable date” is defined as the date that is 12 months after the first date on which (i) all of the proceeds resulting from actions subject to the award recommendation have been collected, and (ii) either the statutory period for filing a claim or suit for refund has expired, or the taxpayers subject to the actions and the IRS have agreed with finality to the tax or other liabilities for the periods at issue and either the taxpayers have waived the right to file a claim or suit for refund or any claim or suit for refund has been resolved. This provision addresses the often lengthy delays between the collection of proceeds and the payment of whistleblower awards by incentivizing timely IRS action. These amendments would take effect 180 days after the date of enactment.
Section 706: Deductions of Attorney’s Fees
Section 706 amends Section 62(a)(21)(A)(i) by striking “7623(b)” and inserting “7623,” thereby expanding the above-the-line deduction for attorney’s fees to cover awards under both subsections of Section 7623. Under current law, the deduction for attorney’s fees and court costs is available only in connection with awards under Section 7623(b), which applies to cases involving tax liabilities exceeding $2 million. Section 706 corrects this limitation by extending the deduction to fees incurred in connection with awards under Section 7623(a) as well, which covers smaller claims. This ensures that whistleblowers who receive awards under either subsection are not required to pay tax on amounts used to compensate their attorneys. This provision would apply to taxable years ending after the date of enactment.
Conclusion
Taken together, the provisions in Title VII reflect a legislative effort to make the IRS whistleblower program more effective, fair, and accessible. By establishing de novo review of award determinations, protecting awards from sequestration, creating a presumption of anonymity in Tax Court proceedings, enhancing reporting on tax avoidance schemes identified by whistleblowers, requiring the payment of interest on delayed awards, and correcting the scope of the attorney’s fees deduction, the TAS Act seeks to encourage whistleblowers to come forward with information about tax noncompliance and to ensure that they are treated fairly when they do so.
The next post in this series will review Title VIII, which focuses on the tax obligations of individuals who are held hostage.