Mandy Mobley Li v. Commissioner of Internal Revenue

United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued November 5, 2021 Decided January 11, 2022
No. 20-1245
M ANDY M OBLEY LI,
APPELLANT
v.
C OMMISSIONER OF INTERNAL R EVENUE,
APPELLEE
On Appeal from a Decision and Order
of the United States Tax Court
Mandy Mobley Li, pro se, argued the cause and filed the
briefs for appellant.
Matthew S. Johnshoy, Attorney, U.S. Department of
Justice, argued the cause for appellee. With him on the briefs
was Bruce R. Ellisen, Attorney.
Robert Manhas, appointed by the court, argued the cause
as amicus curiae to assist the court by addressing this court’s
jurisdiction. With him on the brief was Robert M. Loeb,
appointed by the court.

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Before: HENDERSON and M ILLETT, Circuit Judges, and
S ENTELLE, Senior Circuit Judge.
Opinion for the Court filed by Senior Circuit Judge
S ENTELLE.
S ENTELLE, Senior Circuit Judge: Appellant Mandy
Mobley Li appeals the United States Tax Court’s final decision
awarding summary judgment to the IRS Commissioner in her
whistleblower case. Specifically, the Tax Court held that the
IRS Whistleblower Office (“WBO”) did not abuse its
discretion in rejecting Li’s request for a whistleblower award,
since Li provided only vague and speculative information as to
purported tax violations. For the reasons explained below, we
dismiss this appeal for lack of subject matter jurisdiction and
remand to the Tax Court with instructions to do the same.1
I. Background
On December 12, 2018, Li filed a Form 211 with the
WBO alleging four tax violations by a third party (the “target
taxpayer”). A Form 211 is an application to receive a monetary
whistleblower award for supplying the IRS with actionable tax
violation information, pursuant to 26 U.S.C. § 7623(b). A
WBO classifier reviewed Li’s Form 211, as well as the target
taxpayer’s 2016 and 2017 tax returns, and concluded that Li’s
allegations were “speculative and/or did not provide specific or
credible information regarding tax underpayments or
violations of internal revenue laws,” making Li ineligible for
an award. Therefore, the WBO did not forward Li’s form to an
1 The Court appointed Mr. Robert Manhas to assist in addressing the
Court’s jurisdiction to hear this appeal. The Court extends its
appreciation to Mr. Manhas for his excellent amicus brief on the
topic.

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IRS examiner for any potential action against the target
taxpayer. The WBO communicated its decision by letter to Li
on February 8, 2019 and informed her that she could appeal to
the United States Tax Court if she thought the WBO had erred.
Li did so by petition on March 13, 2019. Neither party
identified a jurisdictional issue with the Tax Court’s review of
the case. The Commissioner subsequently filed a motion for
summary judgment, which the Tax Court granted. The Tax
Court found that the WBO adequately performed its evaluative
function in reviewing Li’s application and did not abuse its
discretion by rejecting it for an award. Li then filed a motion
for reconsideration. After the Tax Court denied the motion, Li
appealed to this Court.
II. Analysis
Statutory law gives exclusive jurisdiction over Tax
Court decisions to the United States Courts of Appeals, which
are required to review Tax Court decisions in the same manner
as any district court decision. 26 U.S.C. § 7482(a)(1).
However, this Court’s jurisdiction is predicated upon the Tax
Court having had jurisdiction over the case. Bender v.
Williamsport Area Sch. Dist., 475 U.S. 534, 541 (1986). If the
Tax Court lacks jurisdiction, this Court has “jurisdiction on
appeal, not of the merits but merely for the purpose of
correcting the error of the lower court in entertaining the suit.”
Id. (quoting United States v. Corrick, 298 U.S. 435, 440
(1936)). For the reasons set forth below, such is the case
presently. The Tax Court lacked jurisdiction to hear Li’s
appeal from the WBO, leaving this Court with jurisdiction only
to cure the defect. Even though the parties did not raise the
issue, “federal courts have an independent obligation to ensure
that they do not exceed the scope of their jurisdiction, and
therefore they must raise and decide jurisdictional questions
that the parties either overlook or elect not to press.”

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Henderson ex rel. Henderson v. Shinseki, 562 U.S. 428, 434
(2011).
a. The Whistleblower Statute
There are three relevant provisions of the whistleblower
statute, 26 U.S.C. § 7623. The first, subsection (a), authorizes
the IRS to grant monetary awards to persons helping to
“detect[] underpayments of tax, or . . . detect[] and bring[] to
trial and punishment persons guilty of violating the internal
revenue laws or conniving at the same . . . .” § 7623(a). The
second, subsection (b)(1), requires the IRS to give awards to
whistleblowers “[i]f the Secretary proceeds with any
administrative or judicial action described in subsection (a)
based on information brought to the Secretary’s attention by an
individual . . . .” § 7623(b)(1). This provision only applies if
certain monetary conditions are met ((b)(5)). The remainder of
that portion of the statute provides the parameters for such
awards, including a floor and ceiling award amount ((b)(1)), a
reduction in award amount for information based on public
data ((b)(2)), and a reduction or denial of award amount in
which the whistleblower participated in the tax violations
((b)(3)).
The third relevant segment, subsection (b)(4), gives the
Tax Court exclusive jurisdiction over an appeal of “[a]ny
determination regarding an award under paragraph (1), (2), or
(3) . . . .”
When a whistleblower makes a Form 211 filing, the
WBO follows several steps. First, it reviews the Form, and any
related information, to determine whether the provided
information may lead to the discovery of a tax violation. If the
information is too vague or speculative, the WBO issues a
rejection. Rogers v. Comm’r, No. 17985-19W, 2021 WL

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3284613, at *5 (T.C. Aug. 2, 2021). “[A] rejection is
appropriate when a whistleblower’s claim fails to comply with
the threshold requirements as to who may submit a claim or
what information the claim must include.” Id.; see also 26
C.F.R. § 301.7623-3(c)(7) (defining “rejection”). If the
whistleblower’s information signals a potential tax violation,
the IRS may initiate a proceeding against the target taxpayer.
If the proceeding then yields payments to the IRS, the
whistleblower receives an award, subject to 26 U.S.C.
§ 7623(b)(1)-(3). Any appeal of an award determination under
subsections (b)(1)-(3) is then directed to the Tax Court.
§ 7623(b)(4).
As we noted earlier, we have the continuing duty to
examine our jurisdiction, regardless of whether the parties raise
the issue. The jurisdictional issue in this case asks whether
§ 7623(b)(4) gives the Tax Court jurisdiction over the
threshold first step, the initial rejection of a whistleblower
award before the WBO makes an award determination under
subsections (b)(1)-(3). This issue is not one of first impression
for the court below. In Cooper v. Comm’r, the Tax Court held
that an initial rejection of a whistleblower award is in fact an
award determination under subsection (b)(4), rejecting the
argument that “there can be a determination for jurisdictional
purposes only if the Whistleblower Office undertakes an
administrative or judicial action and thereafter ‘determines’ to
make an award.” 135 T.C. 70, 75 (2010). Instead, the Tax
Court held that it had jurisdiction even over threshold
rejections of whistleblower awards, interpreting the statute to
“expressly permit[] an individual to seek judicial review in this
Court of the amount or denial of an award determination.” Id.
(emphasis added).
This position was echoed in the Tax Court’s decision in
Lacey v. Comm’r, 153 T.C. 146 (2019), where the Tax Court

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found jurisdiction on the grounds that “a denial or rejection is
a (negative) ‘determination regarding an award’, so the Tax
Court has jurisdiction where, pursuant to the WBO’s
determination, the individual does not receive an award.”
Lacey, 153 T.C. at 163 n.19 (emphasis in original) (citing in
accompanying text Cooper, 135 T.C. 70); see also id. at 150
n.5 (citing Cooper, 135 T.C. at 75–76).
In the case at bar, the Tax Court relied on its precedent
in Cooper and Lacey to find jurisdiction over Li’s WBO
appeal. Neither party identified a problem with the Tax Court’s
jurisdiction. However, as we noted above, we have the
continuing duty to examine our own jurisdiction.
b. Lack of Jurisdiction under 26 U.S.C.
§ 7623(b)(4)
After review, we conclude that Cooper and Lacey were
wrongly decided. The Tax Court lacks jurisdiction to hear
appeals from threshold rejections of whistleblower award
requests.
Subsection (b)(4) of § 7623 gives the Tax Court
exclusive jurisdiction over only a “determination regarding an
award” under subsections (b)(1)-(3). The Cooper and Lacey
Courts held that a threshold rejection of a whistleblower award
request constituted such an award determination because the
rejection of an award was a so-called “negative” award
determination. Lacey, 153 T.C. 163 n.19 (citing in
accompanying text Cooper, 135 T.C. 70); see also id. at 150
n.5 (“[A] ‘rejection’ is also a ‘determination’ . . . .”). We
disagree. A threshold rejection of a whistleblower’s Form 211
for vague and speculative information is not a negative award
determination, as there is no determination as to an award
under subsections (b)(1)-(3) whatsoever. Per subsection (b)(1),

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an award determination by the IRS arises only when the IRS
“proceeds with any administrative or judicial action described
in subsection (a) based on information brought to the
Secretary’s attention by [the whistleblower] . . . .” 26 U.S.C.
§ 7623(b)(1) (emphasis added). A threshold rejection of a
Form 211 by nature means the IRS is not proceeding with an
action against the target taxpayer. See Cline v. Comm’r, 119
T.C.M. (CCH) 1199, 2020 WL 1249454, at *5 (T.C. 2020).
Therefore, there is no award determination, negative or
otherwise, and no jurisdiction for the Tax Court.2
In this case, the WBO rejected Li’s Form 211 for
providing vague and speculative information it could not
corroborate, even after examining supplemental material Li
herself did not provide. The WBO did not forward Li’s Form
211 to an IRS examiner for further action, and the IRS did not
take any action against the target taxpayer. There was no
proceeding and thus no “award determination” by the IRS for
Li’s whistleblower information. Therefore, the Tax Court had
no jurisdiction to review the WBO’s threshold rejection of Li’s
Form 211.
This Court regrets that Li was informed otherwise by
letter to her from the WBO. However, “no action of the parties
can confer subject-matter jurisdiction upon a federal court.”
Insurance Corp. of Ireland v. Compagnie des Bauxites de
Guinee, 456 U.S. 694, 702 (1982).
2 Li does not argue on appeal that the IRS, in fact, did proceed against
the target taxpayer based on information in her Form 211
application. So we need not and do not decide whether the Tax Court
would have jurisdiction to hear a whistleblower’s claim in a case in
which the IRS wrongly denied a Form 211 application but
nevertheless proceeded against a target taxpayer based on the
provided information.

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Finally, the parties have called our attention to our
decision in Myers v. Comm’r which contains the statement that
“‘written notice informing a claimant that the IRS has
considered information that he submitted and has decided
whether the information qualifies the claimant for an award’
suffices to constitute a ‘determination’ for the purpose of
§ 7623(b)(4).” 928 F.3d 1025, 1032 (D.C. Cir. 2019). Upon
review, we conclude that this statement is not a holding
concerning the issue in the present case. This statement was
responding to petitioner’s argument that the WBO denial letter
in his case did not contain enough information to qualify as a
“determination” under the statute. Id. We subsequently
declined to “craft requirements out of whole cloth” regarding
what information a WBO denial letter must contain. Id. at
1033. By contrast, the question in this case asks whether
§ 7623(b)(4) confers jurisdiction only when there is both an
IRS action based on whistleblower information and proceeds
collected from that action. As this issue was not squarely
before us in Myers, the above statement from Myers does not
bind our decision today.
III. Conclusion
For the reasons set forth above, we dismiss this appeal
for lack of subject matter jurisdiction under 26 U.S.C.
§ 7623(b)(4). We remand to the Tax Court with instructions to
do the same.
So ordered.

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