D.C. Circuit: IRS Division's Decision Not to Pursue Whistleblower Case Is Not Appealable

(Parker Tax Publishing August 2025)

The D.C. Circuit held that when the IRS Whistleblower Office (WBO) sends a whistleblower's Form 211, Application for Award for Original Information, to an IRS operating division for further examination, the operating division's decision not to take action against any taxpayer based on the whistleblower's information is not reviewable by the Tax Court. Under Code Sec. 7623(a), the Tax Court has jurisdiction under Code Sec. 7623(b) only if the IRS proceeds with an action against a taxpayer, and the D.C. Circuit concluded that the forwarding of the whistleblower's Form 211 to an operating division is not such an action. Kennedy v. Comm'r, 2025 PTC 230 (D.C. Cir. 2025).

Background

Roy Meidinger asserted that discounts offered by healthcare providers to insurance companies constitute a form of debt relief. Because this relief has gone untaxed, the industry has ostensibly received an improper windfall to the tune of nine trillion dollars. For years, Meidinger has unsuccessfully pursued a trifecta of whistleblower claims stemming from his debt-relief theory.

In 2019, Meidinger submitted a Form 211, Application for Award for Original Information, to the IRS Whistleblower Office (WBO) that was in all material respects a repetition of his previous allegations. Upon receipt of Meidinger's latest allegations, the WBO reviewed Meidinger's claim and recommended that it be forwarded to the IRS Tax Exempt and Government Entities (TEGE) Operating Division. The TEGE reviewed Meidinger's claim, surveyed the pertinent tax return and chose not to investigate further because his allegations were "not specific, credible, or [were] speculative." The WBO then prepared its own memorandum, which recommended that the IRS reject Meidinger's claims on the same grounds. Three days later, the IRS informed Meidinger by letter that the WBO had "made a final decision to reject [his] claim." Meidinger file an appeal with the Tax Court under Code Sec. 7623(b)(4). The Tax Court dismissed Meidinger's case for lack of jurisdiction. Meidinger pro se appealed to the D.C. Circuit. The court an amicus curiae in support of Meidinger.

Patrick Kennedy filed a whistleblower complaint with the WBO in 2012. In his Form 211, Kennedy alleged that three interrelated corporations owed over $150,000,000 in unpaid taxes. In brief, Kennedy claimed that Taxpayer 1 raided the assets of Taxpayers 2 and 3, tax-exempt employee beneficiary associations, for its own use. The WBO screened Kennedy's claim and referred it to the Large Business and International (LB&I) Operating Division. At this point, Kennedy's claim became mired in bureaucratic delay.

LB&I determined that Kennedy's claim fell outside its bailiwick and transferred his complaint to the TEGE. Around the same time, the IRS trifurcated Kennedy's Form 211 into three separate claims, one against each of the targeted taxpayers. The TEGE placed its review of Taxpayer 1 "in suspense" because it was outside the TEGE's domain. In effect, Kennedy's Taxpayer 1 claim fell into a jurisdictional black hole: neither evaluated by the LB&I nor subject to the TEGE's examination. The TEGE took no action regarding Kennedy's Taxpayer 2 claim because the company was a defunct entity.

As to Taxpayer 3, Kennedy's claim found greater traction. A revenue agent in the TEGE audited Taxpayer 3's 2011 tax returns. That examination languished for two years until its eventual completion in June 2015. The IRS ultimately concluded that Taxpayer 3 remained eligible for tax exempt status and closed the record. The TEGE then recommended that the IRS issue a denial letter because the agency took no action on Kennedy's first two claims and the claim-three examination resulted in no change. The WBO agreed and mailed Kennedy a preliminary denial letter. Kennedy asked the IRS to reconsider its denial to no avail. In 2017, nearly five years after Kennedy commenced his quest, the IRS issued a final decision denying all three of his claims.

Kennedy appealed to the Tax Court. The Tax Court reached the merits and concluded the WBO did not abuse its discretion in denying Kennedy's claims. Kennedy then appealed to the D.C. Circuit.

Code Sec. 7623(b)(4) authorizes the Tax Court to review any "determination regarding an award under paragraphs (1), (2), or (3)" of Code Sec. 7623(b). Paragraph (1) speaks to the determination of the amount of an award by the WBO after the IRS proceeds with any "administrative or judicial action" described in Code Sec. 7623(a). Paragraph (2) references that same determination and requires that the action described in paragraph (1) be based principally on the whistleblower's information. Paragraph (3) addresses cases in which the WBO's determination that a claim under paragraph (1) or (2) is brought by an individual who planned an initiated the actions that led to the underpayment of tax or was convicted of violating tax laws.

In Li v. Comm'r, 2022 PTC 8 (D.C. Cir. 2022), the D.C. Circuit held that the requirement in Code Sec. 7623(b)(1) that the IRS must proceed with an administrative or judicial action imposes a jurisdictional requirement on the Tax Court. The D.C. Circuit concluded, on the facts before it, that if the WBO neither forwards a whistleblower's claim to an IRS operating division nor acts against a taxpayer, there is no judicially reviewable action. In Lissack v. Comm'r, 2025 PTC 12 (D.C. Cir. 2025), the D.C. Circuit held that a second portion of Code Sec. 7623(b)(1) - that the IRS have collected proceeds as a result of the action - is non-jurisdictional. On the facts of that case, the D.C. Circuit concluded that once the WBO forwards the whistleblower's claim to an IRS operating division and that division audits the targeted taxpayer, the Tax Court has jurisdiction to review the whistleblower's award.

The D.C. Circuit consolidated Meidinger's and Kennedy's appeals. The court focused primarily on the arguments presented by the amicus as bases for the Tax Court's jurisdiction of Meidinger's appeal. First, the amicus argued that Li involved a "rejection" of a Form 211 but Meidinger's claim was "denied." Second, the WBO sent Meidinger's Form to an operating division for further examination, which constituted "administrative action." Third, the plain text of Code Sec. 7623(b)(4) uses expansive terminology that encompasses the IRS's actions regarding the claims at issue.

Analysis

The D.C. Circuit held that Li controlled and therefore, the Tax Court lacked jurisdiction. In the court's view, the movement of a whistleblower's form from one wing of the IRS to another is an exercise in paperwork shuffling, not a jurisdictionally relevant event. Accordingly, the D.C. Circuit dismissed Meidinger's petition and dismissed two Kennedy's three claims for want of jurisdiction. With respect to Meidinger's third claim, the D.C. Circuit found that the Tax Court properly rejected it on the merits because, following an audit, the IRS made no change to the taxpayer's return and collected no proceeds.

The court saw no meaningful difference between the terms "denial" and "rejection." The court found that Li turned not on the terminology used by the IRS but on what the IRS did - whether it proceeded with any administrative or judicial action. In other words, unless the IRS initiates some action, there is no judicially reviewable decision. The court noted that nothing in Code Sec. 7623(b) speaks to rejections or denials; instead, the statute ties jurisdiction to a "determination regarding an award under paragraph (1), (2), or (3)," and such a determination arises only if there has been "administrative or judicial action."

The court further found that the referral of Meidinger's Form 211 by the WBO to an operating division, which review his claim and surveyed one taxpayer before ultimately recommending that the claim be disposed of, was not an administrative action. Under Code Sec. 7623(a), "administrative actions" are limited to "actions for detecting underpayments of tax or detecting and bringing to trial persons who violate or connive to violate internal revenue laws." In Lissack, the D.C. Circuit found that under Code Sec. 7623(a), administrative actions are limited to actions on the discrete tax issues the whistleblower's information identifies. The court also noted that under Li, a threshold rejection does not constitute an administrative action in the context of Code Sec. 7623(b)(1).

Finally, the court rejected the amicus's argument that Meidinger's case fell within the plain text of Code Sec. 7623(b)(4). According to the amicus, Congress intended to allow whistleblowers to appeal award denials, and Li carved out from this broad jurisdictional grant a narrow sliver of cases that are rejected at the "threshold first step." After analyzing the statutory language and legislative history, the court concluded that there are actions other than a threshold rejection - including sending a Form 211 to an operating division - that do not constitute a Code Sec. 7623(b) determination.

For a discussion of appealing a whistleblower determination, see Parker Tax ¶262,340.

Disclaimer: This publication does not, and is not intended to, provide legal, tax or accounting advice, and readers should consult their tax advisors concerning the application of tax laws to their particular situations. This analysis is not tax advice and is not intended or written to be used, and cannot be used, for purposes of avoiding tax penalties that may be imposed on any taxpayer. The information contained herein is general in nature and based on authorities that are subject to change. Parker Tax Publishing guarantees neither the accuracy nor completeness of any information and is not responsible for any errors or omissions, or for results obtained by others as a result of reliance upon such information. Parker Tax Publishing assumes no obligation to inform the reader of any changes in tax laws or other factors that could affect information contained herein.

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