An Internal Revenue Service investigator has filed a lawsuit against the agency, alleging that officials improperly leaked his confidential personnel records to federal prosecutors in retaliation for his whistle-blowing on the agency’s tax enforcement practices.
Brian J. Visalli, an IRS veteran with 24 years of experience investigating complex offshore tax shelters, claims the agency disclosed sensitive employee and tax information to the Justice Department’s Tax Division in an effort to undermine his credibility and justify his dismissal. The lawsuit was submitted this month in the U.S. District Court for the Northern District of Illinois.
Mr. Visalli has been a vocal critic of the IRS’s approach to tackling tax avoidance by multinational corporations. He publicly challenged the agency’s reluctance to aggressively pursue sophisticated tax schemes, highlighting its failure to enforce a 2010 law requiring that tax-avoidance transactions exhibit “economic substance.” He described the agency’s stance as a “fundamental abdication” of its responsibility to protect government revenues and characterized its enforcement posture as starting “from a position of weakness.”
His investigations included a probe into Malta pension plans, a tax avoidance strategy used by affluent Americans, which faced pushback from lobbyists including Ken Kies, who was appointed head of the Treasury Department’s tax division under the Trump administration.
Mr. Visalli has contributed to reports by the Treasury Inspector General for Tax Administration regarding conflicts of interest within the IRS and the agency’s unwillingness to investigate promoters of aggressive tax strategies. He has also published critical articles in Tax Notes, a trade publication, drawing attention to what he terms “institutional cowardice” at the IRS.
The lawsuit centers on an alleged failure by Mr. Visalli to timely pay his 2021 tax liability, which the IRS found to be an oversight rather than intentional. Initially, the agency proposed a one-day suspension, later reduced to a counseling letter typically used for minor infractions. However, Mr. Visalli alleges that his supervisors escalated the matter to pressure him out of his position.
In response, Mr. Visalli filed a whistleblower retaliation complaint with the U.S. Office of Special Counsel in late summer 2024. His suit further claims that Justice Department officials were informed that his credibility was compromised, citing the Supreme Court’s Giglio v. United States ruling, which mandates disclosure of any evidence that could affect a law enforcement officer’s trustworthiness in criminal cases. Mr. Visalli contends these damaging characterizations were the result of unauthorized IRS disclosures of information about his prior financial reporting.
Despite a Treasury Inspector General investigation in March confirming the tax underpayment was inadvertent, the IRS moved in April to remove him from his position. He remains employed by the agency.
Mr. Visalli is seeking damages, including a withheld annual performance award, medical expenses related to stress-induced health issues, and costs for antidepressant medication. The IRS has not responded to requests for comment. Critics familiar with his work have praised his commitment to tackling complex tax avoidance, while some advocacy groups opposing the IRS have questioned the appropriateness of his actions.