WASHINGTON, D.C./October 8, 2026 – A whistleblower disclosure to the U.S. Office of Special Counsel (OSC) has prompted the Internal Revenue Service (IRS) to restore its coordination function, provide training, and update its procedures for tax filings tied to foreign ownership of U.S. real estate.
The disclosure concerned tax filings related to the Foreign Investment in Real Property Tax Act of 1980 (FIRPTA). When a foreign person sells a U.S. real property interest, the buyer generally must withhold tax—ordinarily 15 percent of the amount realized—unless a reduced rate or an exception applies or the IRS issues a withholding certificate reducing or eliminating withholding. The IRS’s Ogden, Utah, team processes applications for FIRPTA withholding certificates as well as a cluster of related filings. IRS employees refer to this group of related submissions as “Weird FIRPTA.”
The whistleblower alleged that, after a specialized international-tax unit in Cincinnati was dissolved about 16 years ago, the IRS assigned this work to tax examiners in Ogden without sufficient training or a functioning FIRPTA coordinator, contrary to the Internal Revenue Manual. The whistleblower also reported that, as of February 26, 2026, the team had 7,435 related filings awaiting processing and that its principal written guidance was a three-page job aid issued in 2014.
OSC referred the disclosure to the Secretary of the Treasury. The Treasury Inspector General for Tax Administration (TIGTA) concluded that the work was appropriately within the Ogden team’s authority but confirmed the operational gaps. The previous FIRPTA coordinator retired in March 2025. The employee who subsequently assumed the role had not received training and was not widely known to examiners as a technical resource. The IRS had no formal training program for several types of FIRPTA-related work, and examiners relied on informal instruction and the 2014 job aid. TIGTA confirmed the backlog of unprocessed FIRPTA-related submissions and found that the IRS lacked an official system for tracking the inventory. Because some submissions had not been processed for more than a year, TIGTA could not determine whether required withholdings, penalties, or interest went uncollected.
In June 2026, after TIGTA identified the coordination gap, the IRS designated a FIRPTA coordinator and a backup and began providing training and resource materials. The IRS updated Internal Revenue Manual section 21.8.5. It also stated that it would incorporate the updated guidance into examiner training by October 31, 2026, revise related taxpayer correspondence, and address the outstanding inventory. TIGTA’s Office of Audit plans to review applications to reduce FIRPTA withholdings and related submissions in fiscal year 2027.
“OSC thanks the whistleblower for bringing a detailed disclosure that identified longstanding gaps in FIRPTA coordination and training,” said Special Counsel Charles Baldis. “We also appreciate that Treasury appears to be taking this issue seriously and that the IRS has taken steps to restore the coordination function, update its manual, and schedule the needed training. This is the kind of outcome that the whistleblower disclosure process is intended to produce.”