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Parties Involved:
Paul Keohane
Appellant
United States of America
Appellee

Document Text:

United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued November 16, 2011 Decided February 21, 2012

No. 11-5127

PAUL KEOHANE,

APPELLANT

v.

UNITED STATES OF AMERICA,

APPELLEE

Appeal from the United States District Court

for the District of Columbia

(No. 1:08-cv-02081)

David W. Foster argued the cause for appellant. With 

him on the briefs were Armando Gomez and Alan J.J. Swirski.

Janet A. Bradley, Attorney, U.S. Department of Justice, 

argued the cause for appellee. With her on the brief were 

Tamara W. Ashford, Deputy Assistant Attorney General,

Ronald C. Machen, U.S. Attorney, and Michael J. Haungs, 

Attorney.

Before: BROWN, GRIFFITH, and KAVANAUGH, Circuit 

Judges.

Opinion for the Court filed by Circuit Judge

KAVANAUGH.

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KAVANAUGH, Circuit Judge: For the 1994 tax year, Paul 

Keohane owed about $10,000 in federal income taxes for

income he earned while working in Indonesia. He did not pay 

those taxes. To recover the unpaid taxes, the IRS eventually

issued what is known as a single paper levy on Keohane’s 

Social Security benefits. That paper levy automatically took

nearly 40% of Keohane’s monthly Social Security checks for 

about two years. Keohane now claims that the amount levied 

each month exceeded a statutory cap on monthly levies.

Of course, now that the full amount owed by Keohane to 

the IRS has been paid – and would have been paid in full by 

now even under Keohane’s view of the maximum monthly 

levy amount – Keohane is suffering no further harm from the 

IRS’s alleged error. But Keohane has sued to recover the 

expenses he incurred along the way from the allegedly 

unlawful levy schedule. Those expenses total $373.

To recover the $373 in expenses, Keohane sued under 26 

U.S.C. § 7433. That statute allows taxpayers to sue the 

United States to recover damages caused by illegal IRS 

actions. The threshold question before us is whether 

Keohane’s suit was timely. The District Court concluded that 

it was not timely because Keohane did not bring suit within 

two years of when he had a “reasonable opportunity to 

discover all essential elements of a possible cause of action.” 

26 C.F.R. § 301.7433-1(g)(2). We agree and affirm.

I

Paul Keohane, a U.S. citizen, worked in Indonesia in 

1994. He did not file a timely federal income tax return for 

that tax year. The IRS assessed a net deficiency of 

approximately $10,000 for that year. In 2000, the IRS sent 

Keohane two notices of intent to levy. In 2002, it sent two 

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more notices. Because he was moving from place to place, 

Keohane received none of those notices.

In May 2005, the Social Security Administration sent 

Keohane a notice of an IRS levy on his Social Security 

benefits. Keohane received the notice in May or June. The 

levying began in June 2005, with the IRS taking $451.90 out 

of Keohane’s $1135 monthly Social Security payment (which, 

by 2007, rose to $1220). The amount taken out each month 

constituted between 35% and 40% of each Social Security 

check. To execute its levy on Keohane’s Social Security 

benefits, the IRS issued what is known as a single paper levy 

to the Social Security Administration. After issuance of the 

single paper levy, the monthly removal of $451.90 from 

Keohane’s Social Security check occurred automatically 

without any additional action by the IRS. In other words, the 

IRS did not have to execute any additional paper levies. That

monthly removal continued for about two years.

In 2007, Keohane filed a late tax return for 1994 and 

squared up his debt with the IRS. The IRS then released the 

levy on Keohane’s Social Security benefits.

Although Keohane could have ended his dealings with 

the IRS at that point, he became upset when he learned that 

the IRS, as it recouped the debt, had allegedly violated a 

statute setting limits on how much the IRS could take from 

his Social Security check each month. Although that issue 

was of no continuing concern to Keohane with respect to his 

tax liability (which had been paid in full by then), Keohane 

brought a claim to recover expenses he had incurred as a 

result of the allegedly unlawful schedule by which he paid the

taxes due. After an unsuccessful administrative claim, 

Keohane sued the United States in December 2008 under 26 

U.S.C. § 7433. That statute permits recovery of “actual, 

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direct economic damages sustained by the plaintiff” plus “the 

costs of the action” if, in connection with IRS tax collection, 

“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.” 26 U.S.C. § 7433(a)-(b).

Keohane argued that 26 U.S.C. § 6331(h)(1) forbids the 

IRS from employing a single paper levy to continuously take 

more than 15% of each monthly Social Security benefit 

payment. In Keohane’s case, a 15% monthly cap would have 

meant a maximum of between $170 and $180 per month. The 

IRS took $451.90 per month, between 35% and 40% of 

Keohane’s monthly Social Security benefits. Under 

Keohane’s theory, the IRS should have recovered the back 

taxes by taking less each month for a longer period of time.

Or the IRS, according to Keohane, should have employed the 

separate legal mechanism by which it could re-issue a new 

paper levy each month and take more than 15% per month.

The parties stipulate that Keohane incurred $373 in costs 

as a result of the IRS’s levying more than 15% of Keohane’s 

monthly Social Security benefits.

Without reaching the merits of Keohane’s statutory 

argument, the District Court concluded that Keohane’s suit 

was barred by the two-year statute of limitations in Section 

7433(d)(3), and it granted summary judgment to the 

Government. See Keohane v. United States, 775 F. Supp. 2d 

87, 91 (D.D.C. 2011).

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II

A

Section 7433 of Title 26 provides a cause of action 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.” 26 U.S.C. § 7433(a). A 

taxpayer who sues under Section 7433 may collect the “costs 

of the action” and the “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.” 

26 U.S.C. § 7433(b).

But Section 7433 contains a two-year statute of 

limitations: “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.” 26 U.S.C. § 7433(d)(3).

The IRS’s regulations implementing Section 7433(d)(3) 

provide that the right of action “accrues when the taxpayer 

has had a reasonable opportunity to discover all essential 

elements of a possible cause of action.” 26 C.F.R. 

§ 301.7433-1(g)(2). The parties agree that the regulation 

applies here. The parties disagree only about when Keohane 

had such a “reasonable opportunity.”

B

By June 2005, Keohane received a letter informing him 

of the IRS levy. That same month, the IRS took its first 

$451.90 from Keohane’s Social Security check – a sum 

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Keohane knew to be more than 15% of his benefits. By June 

2005, therefore, Keohane knew that an IRS levy had been 

placed on his Social Security benefits and that the levy was 

taking more than 15% of those benefits each month. He 

nonetheless did not file suit challenging the legality of the 

allegedly excessive monthly amount until more than three

years later, in December 2008.

Keohane offers two arguments to get around the two-year 

statute of limitations.

First, Keohane contends that he had no way to know in 

2005 that the IRS was relying on a single paper levy instead 

of filing a new levy each month. The parties agree that under 

a separate section of the Tax Code, the IRS could have legally 

taken more than 15% of Keohane’s Social Security benefits 

each month simply by filing a new paper levy each month. 

Keohane claims, however, that a single paper levy of the kind 

at issue here is limited to 15% of monthly Social Security 

benefits. Keohane argues that he did not know the IRS was 

relying on a single paper levy at the time it began levying his 

Social Security benefit payments.

The problem for Keohane is that the statute (as 

implemented by the regulation) requires only “a reasonable 

opportunity to discover” every element of the cause of action. 

26 C.F.R. § 301.7433-1(g)(2); see also Kovacs v. United 

States, 614 F.3d 666, 674 (7th Cir. 2010). The language in 

the regulation – a “reasonable opportunity” – sets a relatively 

low bar. In other contexts, we have said that the “reasonable 

opportunity to discover” language in a statute of limitations 

“bars a suit if the plaintiff had such notice as would lead a 

reasonable person either to sue or to launch an investigation 

that would likely uncover the requisite facts.” Sparshott v. 

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Feld Entertainment, Inc., 311 F.3d 425, 428-29 (D.C. Cir. 

2002) (interpreting 18 U.S.C. § 2520(e)).

Here, Keohane knew that a levy existed. As soon as he 

knew of that levy, he had a “reasonable opportunity” to learn 

that the IRS was relying on a single paper levy rather than 

issuing a new paper levy each month. Keohane points to 

nothing that prevented him from uncovering this fact by 

inquiring; indeed, his eventual inquiry revealed the alleged

flaw. Because Keohane had a reasonable opportunity to 

discover the IRS’s alleged statutory violation after he received 

notice of the levy – by June 2005 – the statute of limitations 

on his Section 7433 cause of action began to run at that time.1 

By the time he filed suit in December 2008, the two-year

statute of limitations had therefore run.

2

Second, Keohane points to the continuing violation

doctrine and claims that the statute of limitations didn’t expire

until two years after the IRS’s last wrongful collection from 

his Social Security benefits – that is, until July 2009. The 

continuing violation doctrine is intricate and somewhat 

confusing, but we need not explore it in depth here. We have 

said that a continuing violation “is one that could not 

reasonably have been expected to be made the subject of a 

lawsuit when it first occurred because its character as a 

violation did not become clear until it was repeated during the 

limitations period, typically because it is only its cumulative 

 1 To be clear, we are not here suggesting that Keohane is 

correct that the IRS’s use of a single paper levy was unlawful. The 

IRS vigorously contests Keohane’s interpretation of the statute, and 

we leave that question for another day.

2 It is quite possible that Keohane at that time did not know

that the law supposedly established a 15% monthly cap with respect 

to a single paper levy on Social Security benefits. But in any event, 

unawareness of the law does not toll this statute of limitations.

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impact (as in the case of a hostile work environment) that 

reveals its illegality.” Taylor v. FDIC, 132 F.3d 753, 765 

(D.C. Cir. 1997) (citations and internal quotation marks 

omitted); see also National Railroad Passenger Corp. v. 

Morgan, 536 U.S. 101, 115 (2002) (a hostile work 

environment claim “involves repeated conduct” so that the 

“cumulative effect” creates a claim even when “a single act of 

harassment may not be actionable on its own”); Dziura v. 

United States, 168 F.3d 581, 583 (1st Cir. 1999) (continuing 

violation doctrine “is generally thought to be inapposite when 

an injury is definite, readily discoverable, and accessible in 

the sense that nothing impedes the injured party from seeking 

to redress it”). Under the continuing violation doctrine, the 

statute of limitations begins to run only after the date of the 

last injury. See Heard v. Sheahan, 253 F.3d 316, 319 (7th 

Cir. 2001).

But the continuing violation doctrine does not help

Keohane here. Under Keohane’s theory, the IRS violated 

Section 6331(h)(1) when it issued a single paper levy with the 

effect of automatically taking more than 15% of his Social 

Security benefits each month. Its “character” as an alleged 

violation would have been clear had Keohane inquired; no 

“cumulative effect” was necessary to reveal its supposed 

illegality. As other courts have noted in somewhat analogous 

cases on tax liens, once Keohane knew of the levy, “nothing 

prevented him from recognizing the potential injury at that 

time, nor would later events provide any greater insight into 

his possible cause of action.” Macklin v. United States, 300 

F.3d 814, 824 (7th Cir. 2002). The continuing violation 

doctrine does not apply here.

In sum, the two-year statute of limitations on Keohane’s 

cause of action began to run no later than June 2005, after he 

received notice of the levy on his Social Security benefits. 

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Because Keohane did not sue until December 2008, more than 

three years after he received notice of the levy, his claim is 

barred.

* * *

One final piece of housekeeping. The District Court 

interpreted the statute of limitations in Section 7433(d)(3) as a 

jurisdictional bar. See Keohane v. United States, 775 F. Supp. 

2d 87, 90 (D.D.C. 2011). We don’t think Section 7433(d)(3)

qualifies as jurisdictional under the Supreme Court’s current 

tests. See, e.g., Henderson ex rel. Henderson v. Shinseki, 131 

S. Ct. 1197, 1202 (2011) (“a rule should not be referred to as 

jurisdictional unless it governs a court’s adjudicatory 

capacity, that is, its subject-matter or personal jurisdiction”); 

Reed Elsevier, Inc. v. Muchnick, 130 S. Ct. 1237, 1243-44

(2010); Arbaugh v. Y & H Corp., 546 U.S. 500, 515-16

(2006); see also Menominee Indian Tribe of Wis. v. United 

States, 614 F.3d 519, 525 (D.C. Cir. 2010). Other courts have

likewise said that the similar exhaustion requirement in

Section 7433(d)(1) is not jurisdictional. See, e.g., 

Hoogerheide v. IRS, 637 F.3d 634, 636 (6th Cir. 2011); see 

also Kim v. United States, 632 F.3d 713, 717-19 (D.C. Cir. 

2011) (holding Section 7433(d)(1) is an “affirmative 

defense”). But because the Government raised the Section 

7433(d)(3) argument and because we are affirming dismissal 

on that basis, nothing in this case turns on the mistaken 

labeling. See, e.g., Sierra Club v. Jackson, 648 F.3d 848, 854 

(D.C. Cir. 2011); Fernandez v. Centerplate/NBSE, 441 F.3d 

1006, 1009 (D.C. Cir. 2006).

We affirm the judgment of the District Court dismissing 

the case.

So ordered.

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