§7433 — Title 26 Internal Revenue Code | U.S. Code

Summary

If an IRS officer or employee intentionally, recklessly, or negligently breaks tax-collection rules, the taxpayer can sue the United States in federal district court for money damages. That court case is the main way to get money back, except as another law (section 7432) says. If the court finds the IRS liable, the government must pay up to the smaller of $1,000,000 ($100,000 for negligence) or the total of the taxpayer’s actual direct financial losses plus the costs of the lawsuit. These payments come from federal funds under section 1304 of title 31. The taxpayer must first use the IRS’s administrative remedies before getting a judgment. Any award must be reduced by what the taxpayer could have reasonably avoided. The lawsuit can be filed regardless of the amount in controversy but must be brought within 2 years after the right to sue begins. If the IRS willfully violates bankruptcy stay or discharge rules (title 11, sections 362 or 524), the taxpayer may seek damages in bankruptcy court. That is usually the exclusive remedy, but for actions under 11 U.S.C. 362(h) (stay violations) the exclusivity rule does not apply; in such cases costs and fees can only be awarded under section 7430, and administrative costs only if they were incurred on or after the bankruptcy filing date.

Title 26, §7433

Internal Revenue Code — Source: USLM XML via OLRC

(a)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, or by reason of negligence, 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.

(b)In any action brought under subsection (a) or petition filed under subsection (e), upon a finding of liability on the part of the defendant, the defendant shall be liable to the plaintiff in an amount equal to the lesser of $1,000,000 ($100,000, in the case of negligence) or the sum of—

(1)actual, direct economic damages sustained by the plaintiff as a proximate result of the reckless or intentional or negligent actions of the officer or employee, and

(2)the costs of the action.

(c)Claims pursuant to this section shall be payable out of funds appropriated under section 1304 of title 31, United States Code.

(d)(1)A judgment for damages shall not be awarded under subsection (b) unless the court determines that the plaintiff has exhausted the administrative remedies available to such plaintiff within the Internal Revenue Service.

(2)The amount of damages awarded under subsection (b)(1) shall be reduced by the amount of such damages which could have reasonably been mitigated by the plaintiff.

(3)Notwithstanding any other provision of law, an action to enforce liability created under this section may be brought without regard to the amount in controversy and may be brought only within 2 years after the date the right of action accrues.

(e)(1)If, in connection with any collection of Federal tax with respect to a taxpayer, any officer or employee of the Internal Revenue Service willfully violates any provision of section 362 (relating to automatic stay) or 524 (relating to effect of discharge) of title 11, United States Code (or any successor provision), or any regulation promulgated under such provision, such taxpayer may petition the bankruptcy court to recover damages against the United States.

(2)(A)Except as provided in subparagraph (B), notwithstanding section 105 of such title 11, such petition shall be the exclusive remedy for recovering damages resulting from such actions.

(B)Subparagraph (A) shall not apply to an action under section 362(h) of such title 11 for a violation of a stay provided by section 362 of such title; except that—

(i)administrative and litigation costs in connection with such an action may only be awarded under section 7430; and

(ii)administrative costs may be awarded only if incurred on or after the date that the bankruptcy petition is filed.

Notes & Related Subsidiaries

Editorial Notes

Prior Provisions

A prior section 7433 was renumbered 7437 of this title.

Amendments

1998—Subsec. (a). Pub. L. 105–206, § 3102(a)(1)(A), inserted “, or by reason of negligence,” after “recklessly or intentionally”. Subsec. (b). Pub. L. 105–206, § 3102(a)(1)(B)(i), (c)(2), in introductory provisions, inserted “or petition filed under subsection (e)” after “subsection (a)” and inserted “($100,000, in the case of negligence)” after “$1,000,000”. Subsec. (b)(1). Pub. L. 105–206, § 3102(a)(1)(B)(ii), inserted “or negligent” after “reckless or intentional”. Subsec. (d)(1). Pub. L. 105–206, § 3102(a)(2), substituted “Requirement that administrative remedies be exhausted” for “Award for damages may be reduced if administrative remedies not exhausted” in heading and amended text of par. (1) generally. Prior to amendment, text read as follows: “The amount of damages awarded under subsection (b) may be reduced if the court determines that the plaintiff has not exhausted the administrative remedies available to such plaintiff within the Internal Revenue Service.” Subsec. (e). Pub. L. 105–206, § 3102(c)(1), added subsec. (e). 1996—Subsec. (b). Pub. L. 104–168, § 801(a), substituted “$1,000,000” for “$100,000”. Subsec. (d)(1). Pub. L. 104–168, § 802(a), amended par. (1) generally. Prior to amendment, par. (1) read as follows: “(1) Requirement that administrative remedies be exhausted.—A judgment for damages shall not be awarded under subsection (b) unless the court determines that the plaintiff has exhausted the administrative remedies available to such plaintiff within the Internal Revenue Service.”

Statutory Notes and Related Subsidiaries

Effective Date

of 1998 AmendmentAmendment by Pub. L. 105–206 applicable to actions of officers or employees of Internal Revenue Service after July 22, 1998, see section 3102(d) of Pub. L. 105–206, set out as a note under section 7426 of this title.

Effective Date

of 1996 Amendment Pub. L. 104–168, title VIII, § 801(b),

July 30, 1996, 110 Stat. 1465, provided that: “The amendment made by subsection (a) [amending this section] shall apply to actions by officers or employees of the Internal Revenue Service after the date of the enactment of this Act [

July 30, 1996].” Pub. L. 104–168, title VIII, § 802(b),

July 30, 1996, 110 Stat. 1465, provided that: “The amendment made by this section [amending this section] shall apply in the case of proceedings commenced after the date of the enactment of this Act [

July 30, 1996].”

§7433 Civil Damages for Certain Unauthorized Collection Actions

Summary

Title 26, §7433

Notes & Related Subsidiaries

Editorial Notes

Prior Provisions

Amendments

Statutory Notes and Related Subsidiaries

Effective Date

Effective Date

Citations & Metadata