Gonsalves v. IRS

• Court: Court of Appeals for the First Circuit
• Decided: September 15, 1992
• Docket: 92-1204
• Status: Published

Opinion

USCA1 Opinion

September 15, 1992

___________________

No. 92-1204

GILBERT T. GONSALVES,

                                Plaintiff, Appellant,

                                          v.

                              INTERNAL REVENUE SERVICE,

                                 Defendant, Appellee.

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                     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.
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               James A. Bruton, Acting  Assistant Attorney General, Gary R.
               _______________                                      _______
          Allen,  Kenneth L.  Greene  and  Curtis  C.  Pett  on  brief  for
          _____   __________________       ________________
          appellee. 

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                                  __________________

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.   

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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

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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,
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            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,

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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).
            ______________________

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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,
                                                _______    _____________

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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

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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

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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

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            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.  
                                                  ___

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an  Internal  Revenue  Service  employee   or  officer  after

            November 10, 1988."

                 Affirmed.
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