After a tremendous amount of political brinksmanship, President Trump signed the Bipartisan Budget Act of 2018 into law on February 9, 2018. As an expert in whistleblower law, people have asked me whether the budget had the positive effect on whistleblowers that many hoped for. In one word—ye
The 2018 Budget makes new amendments to the tax code that greatly increase the reward that many whistleblowers can attain for providing evidence of illegal activity to the government.
Taxation of Attorneys’ Fees
Whether you are a whistleblower or any other kind of plaintiff—personal injury, worker’s compensation, medical malpractice—historically, the money you paid to your attorney either out of pocket as the case progressed or as a percentage of any award was considered taxable income. Because some cases are extremely complex and required extensive attorneys fees, the tax consequences of having those fees considered income resulted in awards being eaten up by taxes.
While compensation awarded to relators under the False Claims Act could be deducted from annual gross income (similar to other claims such ones based on discrimination) other whistleblower laws did not have the same sort of allowable deduction. An interest in promoting whistleblower suits that benefited the public interest drove this deduction’s existence in the False Claims Act but was never applied to similar laws such as the IRS, Medicaid, and SEC whistleblower laws.
The Bipartisan Budget Act of 2018 amends the Internal Revenue Code to allow participants in other whistleblower programs to deduct attorneys’ fees so long as the amount of the fees is not greater than the amount of the compensation recovered in the whistleblower suit. Congress made these non-SEC whistleblowers equal to those participating in the SEC whistleblower program, which is an overall movement towards fairness. Perhaps more importantly, Congress further incentivized citizens’ interests in going forward with fraud claims, which is good for all citizens.
Expanded IRS Whistleblower Program
In addition to leveling the tax deduction landscape for whistleblowers, the Bipartisan Budget Act of 2018 also made an important change for participants in the IRS whistleblower program. Historically, IRS whistleblowers were allowed to recover an award if they provided new information that led to an IRS enforcement action which recovered at least $2 million in “penalties, interest, additions to tax, and additional amounts.” However, sometimes the IRS recovered a tremendous amount of money through an enforcement action that did not fall into one of those categories. The 2018 Budget widens that narrow scope of situations under which a whistleblower can recover. Now whistleblowers can recover anytime the IRS collects “proceeds” of a fraud prosecution as a result of a whistleblower’s information. This is a significant change, as in the past whistleblowers failed to receive their due compensation because the IRS recovered funds through a manner not included in the prior definition.
What Should You Do if You are Considering a Whistleblower Claim
Are you considering filing an IRS whistleblower case? As you have read, the Bipartisan Budget Act of 2018 has made the landscape more generous and more level for whistleblowers, regardless if you are participating in the IRS, SEC, or any other program. But to attain your compensation, you will require the help of an experienced whistleblower attorney to decide whether the conduct you have observed constitutes fraud. Evidence gathering, dealing with the federal government’s attorneys, important deadlines, and filing requirements make your representation both complex and time-sensitive.
Call Barrett Law now at (800) 707-9577 if you think you may be a whistleblower.
Having expert legal advice by your side can mean the difference between receiving your share of a whistleblower judgment and losing your career and livelihood. Call us today.
