Gonsalves v. IRS
U.S. Court of Appeals for the First Circuit
Gonsalves v. IRS
Opinion
USCA1 Opinion
September 15, 1992
___________________
No. 92-1204
GILBERT T. GONSALVES,
Plaintiff, Appellant,
v.
INTERNAL REVENUE SERVICE,
Defendant, Appellee.
__________________
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MAINE
[Hon. D. Brock Hornby, U.S. District Judge]
___________________
___________________
Before
Breyer, Chief Judge,
___________
Campbell, Senior Circuit Judge,
____________________
and Cyr, Circuit Judge.
_____________
___________________
Gilbert T. Gonsalves on brief pro se.
____________________
James A. Bruton, Acting Assistant Attorney General, Gary R.
_______________ _______
Allen, Kenneth L. Greene and Curtis C. Pett on brief for
_____ __________________ ________________
appellee.
__________________
__________________
Per Curiam. The appellant, Gilbert Gonsalves, worked in
__________
Panama for the Panama Canal Commission between 1979 and 1985.
Like some of his colleagues, he took the position that the
Panama Canal Treaty -- which in 1979 returned the Canal Zone
to Panamanian sovereignty -- created an exemption from United
States income taxes for American employees of the Commission.
In 1986, the United States Supreme Court decided that the
treaty did not create such an exemption. O'Connor v. United
________ ______
States, 479 U.S. 27 (1986).
______
The Internal Revenue Service had been collecting income
taxes withheld from Mr. Gonsalves' salary even before the
Supreme Court decided O'Connor. The IRS' authority to
________
collect these taxes, and the amounts due in addition to those
withheld, continued to be a subject of contention between Mr.
Gonsalves and the IRS even after O'Connor was decided. Mr.
________
Gonsalves believed that O'Connor had only prospective effect,
________
and did not require him to pay income taxes for the period
1979-1985.
Mr. Gonsalves filed his 1981 tax return sometime in 1985
or 1986. The IRS determined that he owed additional taxes
for 1981. It made an assessment for the amount owed, 26
U.S.C. 6203, and sent Mr. Gonsalves notice of the
assessment and demand for payment pursuant to 26 U.S.C.
6303. Upon assessment, a lien arose in favor of the United
States against all of Mr. Gonsalves' property. 26 U.S.C.
-2-
6321, 6322. In March 1988, the government collected at least
some of the amount assessed by levying upon Mr. Gonsalves'
bank account at the Granite State National Bank. 26 U.S.C.
6331.
In 1991, frustrated by his inability to obtain through
administrative channels the tax refund to which he considered
himself entitled, Mr. Gonsalves filed this lawsuit in the
United States District Court for the District of Maine. He
alleged that the Internal Revenue Service had violated his
constitutional rights in four ways: (1) by denying him the
right to "appeal" his claims within the IRS "as provided for
by Internal Revenue Service procedures," (2) by refusing to
refund all taxes collected for the years 1981 through 1985,
(3) by levying upon his bank account "without prior
notification," and (4) by "using delaying and evasive tactics
to prevent the Plaintiff from concluding his tax differences
in a timely manner." He alleged that each of these four acts
also gave rise to a claim for damages under the "Taxpayer
Bill of Rights," 26 U.S.C. 7433. Mr. Gonsalves sought
damages of more than $1,000,000, but did not ask for a refund
of taxes paid for the years at issue. Gonsalves v. United
_________ ______
States, 782 F.Supp. 164, 166 n.2 (D.Me. 1992).
______
The district court gave partial summary judgment to the
government. First, the court granted judgment on all of Mr.
Gonsalves' claims insofar as he sought to recover for alleged
-3-
violations of his constitutional rights. 782 F.Supp. at 168.
The court then examined Mr. Gonsalves' claims for damages
under 26 U.S.C. 7433, and gave summary judgment to the
government on the first (appeal rights), second (refusal to
refund) and fourth (delaying tactics) claims. Id. at 170-73.
___
The court ruled, however, that a triable issue existed with
respect to the claim that the government had levied upon Mr.
Gonsalves' bank account without proper notice. Id. at 171-
___
72.
A second district judge held a bench trial on the
remaining claim in January 1992. After Mr. Gonsalves,
appearing pro se, had put in his case on the notice issue,
_______
the government moved for a judgment on partial findings. See
___
Fed. R. Civ. P. 52(c). The district court found that the IRS
had failed to give proper notice of its intention to levy in
compliance with 26 U.S.C. 6331(d). Although the IRS had
mailed a notice to Mr. Gonsalves, it had not sent the notice
to his "last known address," as the statute required. 26
U.S.C. 6331(d)(2)(C).
Nevertheless, the district court granted the
government's motion. The court ruled that Mr. Gonsalves
could not recover under Section 7433 because (1) the levy had
occurred before Section 7433 became effective, and (2) Mr.
Gonsalves had failed to prove that he sustained any "actual,
-4-
direct economic damages," 26 U.S.C. 7433(b)(1), as a result
of the ineffective notice. This appeal followed. We affirm.
I
_
The district court correctly disposed of all of Mr.
Gonsalves' claims for damages allegedly caused by
constitutional violations. The complaint named only the
Internal Revenue Service (that is, the United States) as a
defendant. It did not identify, or seek damages from, any of
the individual IRS officers who may have actually committed
the acts complained of, and who might have been held
personally liable for their behavior. See Bivens v. Six
___ ______ ___
Unknown Named Agents of Federal Bureau of Narcotics, 403 U.S.
___________________________________________________
388 (1971) (holding that government agents can be sued for
damages caused by their violations of citizens'
constitutional rights). See also Gonsalves v. Internal
_________ _________ ________
Revenue Service, 791 F.Supp. 19 (D.Me. 1992) (dismissing Mr.
_______________
Gonsalves' separate complaint against particular IRS
officials). But "the sovereign immunity of the United States
is not waived simply because agents of the government may be
personally liable for deprivation of constitutional
__________
interests." American Ass'n of Commodity Traders v.
________________________________________
Department of Treasury, 598 F.2d 1233, 1235 (1st Cir. 1979).
______________________
-5-
There is no implied right of action, analogous to that found
in Bivens, for claims against the government.
______
II
__
The district court also correctly granted judgment to
the government on Mr. Gonsalves' claims for damages under 26
U.S.C. 7433. Congress enacted this statute in 1988 as part
of a "Taxpayer Bill of Rights." Section 7433 was intended to
give taxpayers "a specific right to bring an action against
the Government for damages sustained due to unreasonable
actions taken by an IRS employee." Conf. Rep. No. 1104,
100th Cong., 2d Sess., at 228, reprinted in 1988-3 Internal
____________
Revenue Cum. Bull. 473, 718. The statute says:
If, in connection with any collection of Federal
tax with respect to a taxpayer, any officer or
employee of the Internal Revenue Service recklessly
or intentionally disregards any provision of this
title, or any regulation promulgated under this
title, such taxpayer may bring a civil action for
damages against the United States in a district
court of the United States. Except as provided in
Section 7432, such civil action shall be the
exclusive remedy for recovering damages resulting
from such actions.
26 U.S.C. 7433(a).
Section 7433's waiver of sovereign immunity, like any
other, "must be strictly observed," Soriano v. United States,
_______ _____________
-6-
352 U.S. 270, 276 (1957), and construed "in favor of the
sovereign." McMahon v. United States, 342 U.S. 25, 27
_______ ______________
(1951). Courts may not "enlarge . . . beyond what the
language [of the statute creating the waiver] requires."
Eastern Transportation Co. v. United States, 272 U.S. 675,
___________________________ _____________
686 (1927).
These limiting principles are fatal to all of Mr.
Gonsalves' claims under Section 7433. Because the statute
authorizes suits only where an IRS agent has violated the
taxing statutes or the regulations promulgated under them,
Mr. Gonsalves cannot recover from the government for the
alleged denial of his appeal rights. These "rights," as Mr.
Gonsalves acknowledges, were created not by statute or
regulation, but by internal IRS policy as reflected in
publications disseminated to taxpayers. The government has
not consented to suit for violations of rights created in
this manner. Therefore, whether or not the courts may have a
duty to enforce the rights at issue in appropriate
circumstances and by appropriate methods, see United States
___ ______________
v. Caceres, 440 U.S. 741 (1979), they have no power to do so
_______
by assessing liability for money damages against the United
States. See United States v. Testan, 424 U.S. 392, 400-401
___ ______________ ______
(1976) (existence of substantive rights does not "of
necessity create a waiver of sovereign immunity such that
money damages are available to redress their violation"). By
-7-
the same token, Mr. Gonsalves' claim that the IRS used
"delaying and evasive tactics" must fail because Mr.
Gonsalves cannot point to any specific statute or regulation
which these tactics might have violated.
Mr. Gonsalves' claim for damages resulting from the
government's refusal to give him a tax refund runs afoul of
the clause in Section 7433 which says that a taxpayer may sue
only if an IRS agent disregards a statute or regulation "in
connection with any collection of Federal tax." The essence
__________
of Mr. Gonsalves' claim is that the government violated the
tax laws by refusing to give him a refund because he was
exempt from paying taxes during the years in question. In
order to prevail on this claim, Mr. Gonsalves would have to
prove that the IRS incorrectly determined the amount of his
__________
tax liability. The legislative history of Section 7433
tells us that "an action under this provision may not be
based on alleged . . . disregard in connection with the
determination of tax." Conf. Rep. No. 1104, 100th Cong., 2d
Sess., at 229, reprinted in 1988-3 Internal Revenue Cum.
_____________
Bull. 473, 719. Taxpayers who wish to challenge the IRS'
calculation of their tax liability must file either a
petition for redetermination in the Tax Court, 26 U.S.C.
6213, 6214, or a refund action in the district court. 26
U.S.C. 7422. Section 7433 was not intended to supplement
or supersede, or to allow taxpayers to circumvent, these
-8-
procedures. Cf. McMillen v. United States Department of
___ ________ _____________________________
Treasury, 960 F.2d 187, 190 (1st Cir. 1991) (per curiam)
________
(Section 7432 does not authorize taxpayers to circumvent
refund action process by litigating merits of assessment in
suit for damages allegedly caused by IRS' refusal to release
liens on taxpayers' property).1
Finally, the trial judge properly granted judgment to
the government on Mr. Gonsalves' claim for damages caused by
the inadequate notice of the IRS' intention to levy.
Congress provided that Section 7433, which it enacted on
November 10, 1988, see 102 Stat. 3748-49, would apply only
___
"to actions by officers or employees after the date of . . .
enactment." Here, the act complained of -- the levy on Mr.
Gonsalves' bank account -- indisputably occurred on March 3,
1988, and the district court found as fact that "there is
simply no proof of any [other] reckless or intentional act by
____________________
1. In any event, we agree with the district court that
O'Connor v. United States settled the underlying issue of Mr.
________ _____________
Gonsalves' entitlement to a tax refund. Mr. Gonsalves
concedes that O'Connor decided that Commission employees are
________
not exempt from the income tax, but he insists that O'Connor,
________
decided in 1986, could have only prospective effect because
it is unconstitutional to enact a new tax that has
retroactive application for more than "short and limited
periods." United States v. Darusmont, 449 U.S. 292, 296-97
_____________ _________
(1981). But O'Connor did not in any sense "enact" a new tax,
________
or even "repeal" a previously-existing exemption: the Court
decided that the Panama Canal Treaty had never exempted
_____
Commission employees from paying the income tax. 479 U.S. at
30, n.1. O'Connor itself concerned the taxable status of
________
income earned between 1979 and 1981. Id. at 28.
___
-9-
an Internal Revenue Service employee or officer after
November 10, 1988."
Affirmed.
________
-10-
Reference
- Status
- Published