## In the



# U n ited S ta tes Co urt o f Ap p ea ls

F o rth eS e v e n th C ir cu it
N o. 09

- 3380 R OBERT J. G ES S ERT an d T HE G ES S ERT G R OUP, P laint if fs -App el lants , v. U NI T ED S TATE SOF A MERI CA, D efend a nt-A pp ellee
.

A pp eal from the United S t ates Di strictC our t fo r the E astern Di stricto f Wisc onsin
. No . 06- C-448

—L ynnA delm an, Judge .
A RGUED D ECE MBE R 6, 2012

— D ECI DE D J AN UA RY 3, 2013

B efore E A S T E RB R OO K, Chie f Judg e, a nd F LA UM, an d R OV NER, C ircu it Judges . F LA UM, Cir cu i tJudg e . T he G essert G roup (“th e G roup ”), a pharm aceuti calco nsul ti ng g ro up , o bstinatelyr efused to pay i ts ta x es . B y 2 005, i t a ccum ula ted o ver$1 m i l l i on in un p aid li abili ties. Rev en ue Of fi c e r Lill ie J ohn son pu rsued col l ecti on eff or ts on behal f of the U ni ted Sta tes
. She l evi ed two ofthe G ro up ’ s a ccounts and al so sou gh t t o r ecov er the tax es w ithh eld from the G roup ’s2 N o. 09

- 3380

em plo yee s

— so- cal l ed tr ust fund ta xes

— from R obert G e s s e r t p er so n ally . G es se rtw as th e G ro u p ’s c re at or, sole sh ar eh o l der, a nd CEO, a nd pr esu m abl y b eh i nd the G ro u p ’s re fu sa l to p ay . Th e G r o u p an d G es se rtfiled su it aga i nst the U ni ted S ta te s s eek i ng r efund s a nd aba tem ents. Ital so pu rs ued dam age s under I
. R. C. § 7433, w hi ch perm i ts re cove ryf ori m prop er col l ecti on e ff or ts. The pla i nti ff s princi pal l y a l l ege t h at the Gro up di re cted J ohnson to apply a h an d ful ofvo l untarypaym ents to war ds its t r us t fund l i ab i l i ty, b utJ o hns o n a ppl i ed th e paym ents to the no n - tr ust fund por ti on. Thi s incre ase d Gesser t’ s per sonall i ab ili ty. The part i es al so al l ege that J o hn s o n v i o l a t e d a s e r i e s o fI nt e r na lR e v e nu e Co de (“C od e”) an d T reasu ry p rovisi ons a nd tha t sh e i m proper l y l evi ed the Group’s acco unts. H owever, Gesse rtl acks s tandi ng under I
. R. C. § 7433 because J ohnson so u gh t col l ecti on fro m the Group, not G es se rt . Fu rt h er , th e G ro u p failed to al leg e e c on om ic ha r m, wh i c h i s a l s o p r e r e qu i s i t e t o s t a nd i ngu nd e rI
. R. C. § 7433
. W ith resp ect to the refun d claim , th e d istri ct cou rt prop er l y c oncl ud ed the Group fi l ed i ts adm i ni str ati ve cl ai m t o o l at e. F i na l l y, Ge ss er t’ s r efund- an d- ab at ement c laim fails be c au se th e G ro u p d id n otp ro vid e s p ec i fic w ri tte n dir ecti on t o the I RS e ffectuat in g a d i re cted paym en t. W e th er efo r e affi r m the di st r i ctc o ur t’ s dec i si o n.
I . B a c kg r o und A. S t a t ut o ryB a c kg r o und The Int erna lRe ve nue Co de r equi r es empl o y er s to wi th

ho l d e m pl o y ee s’ i nc o m e ta x a nd S o ci alS ec ur i tyc o nt ribu-N o. 09

- 3380 3 tion from each em p loyee’s payc he ck. I
. R
. C
. §§ 3402(a), 3102 ( a)
. Em plo yer s hol d these taxes i n tr ust forthe federa l gov er nm ent, I
. R. C. § 75 0 1 ( a ) , and theyar e co m m onl y c al l ed “t r us t fund t ax es . ” I ndi vi dual s r es po ns ibl e f o rc o l l ec ting tr ust fund ta xes that wil l fully fai lto co l l ect, pay ove r, o r ac co untf o rt r us t fund t ax es c anb e as se ss ed a “t r us t fund recove ry pen alty” e qu al to th e t ax ev ad ed
. I
. R
. C
. § 6672(a). The t r us t fund r ec o ve r y pe na l tyl iab i l i tyi s se par at e an d dist in ct fro m the fi rm ’ s l i abi l i ty

— i.e., th e re sp on sib le perso n cannot r ecoverfro m the fi rm and the I RS ca n re c ov er fro m th e pe rs on in d i v id u ally
. K uz nitsky v . U nited Sta tes , 17 F. 3d 1029, 1032 (7th C ir. 1994) (ci ting cas es).

B . F a c t ua l B a c kg r o und Rober t Gess er t cr eat ed the Group i n 198 9 a n d ser ved as i ts s o l e s ha r e ho l de r, p r e s i de nt, a nd CE O u nt i li tc eas ed o p e r a t i o n s i n 2 0 0 4
. V y t a u t u s J o n y n a s s e r v e d a s C F O. F r o m th e th i r d qu a r t e ro f2 0 0 0 th r o u g h 2 0 0 4 , th e c o mpany did notm ake ti m ely em plo ym ent t ax deposi ts and paym ents, faili ng to pay near l y a l lo fi ts $1. 4 m i l l i on tax l i abi l i ty. I t a l so f ail ed to fi l e i ts em plo ym ent t ax re turns between J anuary2002 a nd A pri l20 04 ( al though th e return s w ere even tu all y fi led in 2004 and 2005). The I RS as si gned Revenue Offi cerJohnson to co l l ect th e Gr o up’ s ta xe s. J o hns o n ini ti al l y tri ed to s at i sfy the Group’s l i abi l i ti es thro ugh vo l untarypaym ents and an i ns ta l l m en t ag r ee m en t, bu t th i s pr o ve d fut i l e when th e Gr o up de f au l te d o n the i ns ta l l m en t ag r ee m en t. The Gr o up did m ake som e vol untary paym ents. I t m ade fou r electr oni c paym ents tot al i ng $6 6, 000 f ol l owed bytwo check s4 N o. 09

- 3380 tot al i ng $1 00, 000. These p aym ents w er e no t a ccom panie d by w ri tte n i nstr ucti ons dir ecting the I RS t o apply these paym ents to a speci fi c o bl i gat i on. Thus, the I RS appl i ed th em to the Gr o up’ s no n- trus t fund obl i g at i o ns c o ns i st en t w ith IRS p ro c ed u re s. T h es e p ay m en ts fell co n sid er ab ly shor t o fm eet i ng the Group’ s l i abi l i ty. Th e Gr o up a l s o a l l e g e s tha ti tv ol untar i l y i s s ue d a $75, 000 chec ka few da y s afte rthe I RS l ev i ed i ts b an k a c c o un ta nd c o l l e c t e d $ 1 1 4 , 0 0 0
. T he I RS ’ s r e c o r ds i nd i cate the check w as re cei ved thr ee m on th s a fter the l e v y . W he n the I RS s ub mi t t e d the c he c k, i t was di shonor ed. The Gro up al l ege s that i t rec eiv ed a $1, 500 ov er d ra ft fe e a s a res u lt. I n additi on t o the b ank a ccount, t h e IR S al so i ssued levies to D eP uy Orth op ed ics, Inc . ( “D eP uy ”) and Pfizer, I nc . , both of w hich ow ed the G r o u p p a ym en ts for servi ces. The t wo c o mpa ni es re specti vel y r em i tte d $121 , 292. 50 and $ 96, 744 to the I RS. Because these p aym en ts w er e i nv o l unt ary, the I RS appl i ed the m to the no ntr ust fund p or ti on o fthe Group’s l i abi l i ti es. W i th paym ents sti l lo utsta nd i ng, the IR S ass ess ed tr ust fund r ec o v e ry p en alt ies ag ain st G es se rtp er so n ally . Th es e p en alti es tot al ed $69 6,8 32. 57

— th e unpa i d po r ti o n o fthe Group’s tr ust fu n d l i abi l i ti es. A t the co m m encem ent o f th i s su i t, Ge ss er t st i l lo wed $ 35 0, 00 0 pl us pe nal ti es a nd add i ti ons, wh i l e the Gro up o w ed ove r $1 m i l l i on o n i ts em plo ym ent t axes.N o. 09

- 3380 5 C. P r o c e dur a l B a c kg r o und In 2 005, Gesse rtand the Group fi l ed adm i ni str ati ve cl ai m s fo r d am age s. A fterthe I RS di d not r espond, bo th Ge s s e r ta n d th e G r o u p fi l e d s e p a r a t e c l a i ms u n d e rt wo separ ate st atute s.
1. M ot i on t o Dismiss

— S e c t i o n 7 4 3 3 C l a i ms Fi rs t, Gesse rt and the Group soughtdam age s under I
. R. C. § 743 3 f o rpur po r te dl y i m pr o perc o l l ec ti o n a ct i o ns tak en bythe gov er nm ent. Both par ti es all ege d that J ohn son re fused to f ol l ow Jo nynas’ s v erbali nstr ucti on an d m i sa ppl i ed vo l unt ary pa y m en ts t o the no n- trus t fund p ortion of th e G roup ’s li abili ty. A s a resu lt, Ge ssert’s perso nall i abi l i ty und erthe tr ust fund r eco ver y penal ty re m ai ned the s am e a fterthe paym ents. They a l so al l ege d th atthe I RS wro ngful l y l ev i ed funds fr o m De Puya nd Pf i z e r . T h e y a r g u e d th a tth e mo n e y o we d b y D e P u y a nd Pfiz er t o the Gro up was not du e, m eaning the I RS l acke d au tho r i t y t o l e v y the a c c o un t s . F i na l l y, the p a r ti es al l ege d gener al“m i sco nd uct” s urr ounding the co l l ecti on pr o ce ss a nd v ar i o us v i o l at i o ns o fCo de pr o vi si ons a nd a Tr ea su r y Re g ul at i o n. The dist ri ct courtdi sm i sse d al lo fGesse rt ’ s cl ai m s under th is s ec tio n . I t h eld th at th e s ta tu t e o n ly a u th or ize s s u it by the t axpayerwh o i s s ub j ect to the i m properco l l ecti on acti vi ti es. Be c ause the t axpayerwas the cor pora ti on i nstea d ofGesse rt, he l acke d standi ng. The I RS had ne ver taken an y coll ection activities agains t G e s sert per so na l l y, e ve n tho ugh h e o wed a s ubs ta nt i als um und erthe tr ust fund r eco ver y penal ty.6 N o. 09

- 3380 The dis tr i ct c ourtal so d ism i sse d the Gro up ’ s dam age s clai m s r eg ar di ngi ts a l l eg at i o n tha t th e Gov ernm en t appl i ed th e Gr o up’ s vo l unt ar y pay m en ts t o the wro ng oblig a t ion
. Th e G roup cou ld n ot m eet sec tion 7433 ’s r e qu i r e men ttha tthe wr o ng fula c t i v i t y r e s ul ti n actual ec o no m i c damag es b ec au se the a ppl i ca ti o n l o wer ed th e Group’s tax l i ability b y the sa m e a m ount e i therway. The Gr o up mov ed f o rr ec o ns ide r at i o n, a r g ui ngtha t th e $ 1 , 5 0 0 i n s u ffi c i e ntfu n d s c h a r g e w a s p e c u n i a r y h a r m. The di st r i ctc o ur t di smi ss ed th i s m o ti o n be ca us e th e fee occur re d beyo nd the tw o- yea r sta tute ofl i m i tat i o ns p e r i o d.

2 . Summa ryJ udg me nt

— R em ai ning Sect ion 74 33 Clai m s and R ef un d Clai m s Aft erthe mot i o n t o di smi ss , the o nl y r emai ni ng c laim s were that the Gove rnm ent l acke d author i zati on to l evy the DePu y and Pfi zer acco unts and that Jo hnson h ad vi ol ate d the Code and Regul ati on. The di str i ct cou rt ente red sum m ary j ud gm en t i n th e G overn m en t’s fav or o n thes e cl ai m s. I t found the Gro up co uld not ch a l l e ng e the l e v i e s u nd e rs e c t i o n 74 3 3
. Ins t e a d, s ecti on 74 26 w as th e m ec h an ism C on gr es s est ab lish ed to c h all en g e i m pro perl ev i es a nd tha t se ct i o n l i m i ts s ta ndi ng to the s ubj ec t o fthe l ev y, no t the t ax pay er . Not wi th

sta nd ing, i t hel d that the l evi es w er e pr operbec ause no reas ona ble f actf in d e r w ou ld con clud e tha t the y w ere advances i ns t e a d o fp a y men tdu e t o the Gr o up . I ta l so co nc l ude d the a r g um en ts th at J o hns o n v i o l at ed th e var i ous Code provi si ons w er e “bas el ess . ” The d istr i ctN o. 09

- 3380 7

c o ur tf o un d the r e fun d c l ai m s t i me b a r r e d u nd e rI
. R. C. §§ 6511 , 7422
. I t th en en tered j ud gm en t agains t G e s s e rt f or$4 45, 041. 87 and the Gro up f or$1 , 343, 621. 67.

I I . Discussi on W e r evi ew bo th m oti ons to dism i ss and entr i es of s u mma r y j u d g me n td e n o v o . F o rmot i o n s t o d i s mi s s we ac c ep t a l l w ell-p led fac ts as tru e a n d co n st ru e a ll in f e r en c es in fa vo r of th e p lain tiff. Tam ayo v. Blag ojevi ch , 52 6 F
. 3d 1074, 10 81 ( 7th Ci r . 2 00 8)
. In r ev i ewi ngthe m oti ons f orsum m ar y j ud gm ent, we gr ant the m oti on i f, ta ki ng the ev i dence i n the l i ght m ostf avo rabl e t o Ges se r t, the r e i s no i ss ue o fmate r i alf act and th e Un i t e d S t a t e s i s e n t i t l e d t o j u d g me n ta s a ma t t ero fl a w. F e d
. R . C iv. P . 56; A ult v . Speic her, 6 3 4 F
. 3 d 9 4 2 , 9 4 5 ( 7 th C ir. 2011).

A. S e c t i o n 7 4 3 3 C l a i ms 1 . G e s s e rt ’ s C l a i ms As so ve r ei g n, the Gov ernm en t m aynotbe s ue d wi th o ut its co n se n t. F. D .I .C
. v. M eyer, 510 U
. S. 471, 475 (1994 ); U ni t e d S t at e s v. Sh e rwood, 312 U
. S. 584, 586 (1941). W aivers ar e no t i m pl i ed an d a r e co ns true d narrow l y a g ains t th e p lain t i f f
. So ria no v. U nited Sta tes , 35 2 U.S
. 27 0, 27 6 ( 1957 ) ( “[ L] i m i ta ti o ns a nd c o ndi ti o ns upo n whi chthe Go ve r nm ent c onse nts t o be s ued m ust be st ri ctl y obser ved and e xc e pt i o ns the r e t o a r e n o tt o b e i mpl i e d. ” )
. S e c ti on 74 33 of th e In te rn al R ev en u e C od e i s s u c h a w aiv er . I t8 N o. 09

- 3380 provi des “[ i ] f, i n conne c ti on with any col l ecti on o f Feder alta x w i th r espectto a taxpayer, any [ em plo yee ] o f the Inter nalReve nue Se rv i ce . . . di sr ega rds [ the Code] o r an y [IR S] re gu lat ion
. . . , su c h ta x p ay e r m ay br in g a civ il a c t i o n f or d a mag e s a g a i ns tthe Uni t e d S t a t e s . ” I
. R. C. § 7433. In o therwords, pl ai nti ff s m ay sue I RS e m plo yee s th a ts u bj e c t e d th e m t o i mpr o p e rc o l l e c t i o n e ff o r t s . Ho wever, the p lai n l an gu age l im its reli ef to “su ch taxp ayer[s]” tha twe r e s ubj e c t e d t o the wr o ngful a c t i v i t y ; the Co de does not perm it r eco ver y b y thi rd part i es harm ed by th e a c tiv ity
. See A llied /R o ya l P a rki ng L.P . v. U nited Sta tes , 166 F.3d 1000, 1003 (9th C ir. 1999) (tw o l im ited p artn ers coul d n o ts ue f o ra l l e g e d wr o ng fula c t s du r i ngc o l l e c ti on from pa rtne rship ). Gesser t o nl y a l l ege s that t h e IRS and Jo hnson eng age d i n wr o ng ful ac ti vi tyi n i ts c o l l ec ti o n e ff o r ts t o war ds th e Group. The r eco rd does n ot re fl ect that the I RS had ev er i ni ti ate d col l ecti on e ff or ts towards Gess ert per sonal l y. A s s uch, G ess er t i s no t “ such [ a] ta xpayer” under sect i on 7433, and the Gover nm ent has n ot co nsented t o sui t byhi m . There f or e, the dist ri c t c ourtpro perl y di sm iss ed all of h is c laim s u n d er se c tio n 74 33
. Ge s s e r t a r g u e s th a t b e c a u s e h e wa s a s s e s s e d t r u s t fund re c ov er y p en alt ies d u rin g t h e t im e Jo h n so n en ga ge d in th e all eged ly im p rop er coll ection s, h e w as a “tax p ayer” un d erthe sta tute. H e furtherpoi nts o ut that“bo th [ he] an d the G rou p w ere d irectly im p acte d by John son ’s f ai l ure to honorthe desi gnati on o fpaym ent. ” Even t h o u gh G es se rtw as a ta x p ay er u n d er th e C od e, see I
. R
. C. § 7 7 0 1 ( a ) ( 1 4 ) ( “ T h e t e r m ‘ t a x p a y e r ’ me a n s a n y p e r s o nsN o. 09

- 3380 9 subj ect to any inter nalr eve n u e tax.” ) , he was not “s ucht ax pay er ” unde rs ec ti o n 743 3. “ S uch ” l i m its the broad er term “ tax p ayer” to includ e only thos e tax p ayers subj ecte d to the i m properco l lecti on a cti vi ti es. Because the I RS neve r soughtto co l l ect Gesser t’ s r eco ver y penal ty, h e is n ot“s u c h [a] ta x p ay er .” G es se rt ’s re ad in g w ou ld tr an sfo r m the s ta tu te fr o m “ su chta xp ayer ” to “ an y t ax pay era ffect ed bythe a l l eg edly i m pr o perc o nduc t. ” The sta tute does not re ad as bro adlyas Gesse rtsuggests. T hu s, w e affirm the d istri ct cou rt’s dism issal of Gess ert’s sect i on 7433 cl ai m s.

2. Th e Group’s Clai m Regar ding M i sappli cat i on of the V olun tary P aym en ts The Group appeal s the di str i ct c ourt ’ s di sm i ssa lo fi ts sect ion 7433 claim that J ohn son ap p li ed th e volun tary paym ents to the wrong obl i gat i on. S ecti on 7433 perm i ts ci vi ldam age s forcer tain unauthoriz ed co l l ecti on a cti ons, but l i m i ts dam age s t o th e “ sum o f

— actual, di re ct ec on om ic d am ag es su st ain ed b y th e pla in tiff a s a p ro x im at e r es ulto fthe r ec k l es s o ri nt en ti o na lo rne g l i g en t ac ti o ns o fthe o ffi ce ro re m pl o y ee , a nd th e c ost s o fthe acti on. ” I .R .C
. § 7433 ( b) ( 1)

- ( 2)
. The di str i ct c ourtdi sm i ss ed th is c l ai m b ec au se the g r o up di d no t su ffera ny econ om ic harm

— i t o wed b o thno n- trus t fund a nd tr us tfun d t a xe s , s o the a pp l i c a t i o n t o e i the rl i abi l i ty l owered i ts ove ra l ll i abi l i ty by the s am e a m ount. W e agree w ith th e d istri ct cou rt

— the Gro up m ust al l ege actual eco nom i c dam age to st ate a c laim under se c tio n 7 43 3. O th er w ise , m on ey ed p lain tiffs co u ld10 N o. 09

- 3380 fr u s t r a t e c o l l e c t i o n e ff o r t s b y fi l i n gs u i t s f o rc l a i ms wher e th eys uffer ed no ha r m . Thi s r es ul t woul d b e i nc o nsis te n t w ith C o n gr es s’s lim ite d rem ed y a n d th e p rin c ip le re quir i ng us to str i ctl y c onst rue w ai ver s o fso ver ei gn im m un ity against th e plaintiff
. Se eSo r i ano , 35 2 U
. S. at 276. Fur ther, the sta tute does not perm i t no m i nal d am ag es , see I
. R
. C
. § 74 3 3(b)(1) -( 2), and the d eclaratory j ud gm ent a ct ex p ressl y pr ohibi ts decl ar ato ryj ud gm ents i n tax c ase s. 28 U
. S. C. § 2 201. T he Gr o up r el i es e xc l us i ve l y o n In reKapl an to ove rco m e thi s s tatutor y inter preta ti on . 104 F. 3d 589 ( 3d C ir. 1 9 9 7 ) . H ow ev er , Kapl an co ncer ned the power o f bankr up tcy cour ts to c om pel the I RS t o al l oca te tax paym en ts of a c or p or at ion n otbe for e t h e b an kr u p tc y p et itio n . Id. Kapl an had nothi ng to do w i th sect i on 7433 , under whi chthe Gr o up c ur r en tly pr o ce eds
. The r ea so ni ngo fthe Thir d C i rcui t there f or e d oes n ot re quir e a co ntra ryfi nd i ng. W e affirm the d istri ct cou r t ’s dism issal of the G roup ’s sect ion 7433 claim th at John son ap p li ed the volu nt ary pa y men t s t o the wr o ngfun d.

3. Th e Group’s Clai m s Regar ding t he Levi es The Gr o up ne xtc l ai m s th at th e l ev i es a g ains t Pfi ze ra nd DuPuyw er e i m pr o per . The I RS may l ev y a de l i nque nt ta x p ay er ’s p ro p er ty . I .R .C . § 63 31 . B u t t h e IR S m ay on ly l ev y “ pr o per typo ss es se d” bythe t ax pay ero re xi st i ng obl i gat i ons, wh i ch exi st “w hen t h e l i abi l i ty ofthe obl i gor i s fi xed and d ete rm i nabl e a l though the r i ght t o re cei ve pa y men tthe r e o fm a y be de fe r r e d u nt i la l a t e rda t e . ” I
. R. C. § 63 31 ( b) ; Tr ea s. Re g . § 3 01
. 63 31

- 1( a) ( 1)
. The Gr o upN o. 09

- 3380 11 argu es th at th ese obligati ons w ere a d van ces, an d therefore th at th e G ro u p ’s rig h t t o th em w as n ot “fix ed an d d et er m inabl e. ” See Trea s. Reg. § 301. 6331

- 1( a) ( 1)
. A ccor dingl y, the Gro up cl ai m s that the ac counts c ou ld n ot be l evi ed by th e I R S. H o we v e r, the s e a r g ume nt s a r e u na v a i l i ngb e c a use th ey too d o not allege any econ om ic harm a nd therefore th e g r o up l ac k s st an di ng . Underthe Gr o up’ s th eo r y, the DePu y a nd Pfi zeracc ounts w ere no t y et owed to i t. A cc o rd in gly , D epu y a nd P fiz er

— no t th e Gr o up

— w ould h av e s u ffer ed ec on om ic h ar m as a re s u l t o f th e a lleg ed ly i mpr o pe rl e v y . In f a c t, a s s umi ng a r g ue nd o tha t the l e v i e dupo n funds s ti l lb el o ng ed to DePuy a nd Pfi ze r, the Gr o up wou l d ha ve r ea l i ze d a wi ndf al li n havingDe puy an d P fize r’s p ro p er ty ap p lied to its ow n liab ilitie s. See Allied /Royal Parki ng, 166 F.3d at10 04 -05 ; M ai s ano v. Welch er, 94 0 F
. 2d 499, 501 ( 9th Ci r. 19 91) ( “I fthe [ proper ty] be l o ng s to th e [ th i r d par ty ] , th e [ ta xpa y er s] ha ve no stan d ing to sue and their case m us t be d ism issed
. ”). I n a ddi ti o n, Co ng r es s pr o vi des a r emedyf o rthi rd par ti es t o c o l l ec t wro ng ful l y levi ed pr o per tyb ut ex p re ss ly forb id s t h e t ax p ay er ag ain s t w h o m th e IR S is see ki ng to co l l ect the t axes fr om doi ng so . I
. R. C. § 7426( a) perm i ts “a ny per son ( othe r than the per son aga i nst w hom i s a sse sse d the t ax out ofwh i ch such l evy ar o se ) ” w hos e pr o per tyha s be enl ev i ed o rs o l d pur su an t to a lev y, to su e t o re c ov er t h e p ro p er ty . Th e G ro u p is “the perso n [ that w as] as sesse d the tax o ut o fwh i ch such l evyar ose . ” Thus, the gov er nm ent di d not wai ve sov er ei gn i m m unity t o chal l enge the l evi es.12 N o. 09

- 3380 4 . T h e Gr o u p ’ s r e ma i n i n gS e c t i o n 7 43 3 c l a i ms concerning J ohnson ’ s behavi or N ex t, the Gr o up a r g ue s th atJ o hns o n v i o l at ed va r i o us pr ovisi o ns o fthe Co de an d a r egul at i o n, pe r m i tt i ng r ec o ve r y unde rs ec ti o n 743 3. Aga i n, the Gr o up offer s no e c o no mi c d am age s, s o i th a s n o s t a nd i ngt o s ue . R e g a r dl ess , the cl ai m s l ack m er i t.
i . S e c t i o n 6 3 0 4 ( b) S e c t i o n 6 3 0 4 ( b ) s t a t e s a n o ffi c e rmay no t“ ha r a s s , o ppress , o r abuse any per son i n connect i on with the c olle cti on o fany unp ai d tax” incl ud in g “t h e use o fo bsce ne o r prof ane l anguage . ” I
. R. C. § 6 304(b) , (b) ( 2)
. The Gro up ci tes a num bero fm i n or i nci dents wh i ch i t a rgues v i ol ate the s tatute. Fo r exam ple , it ar gues that J ohnson did not expla i n to J onynas w hat a l evy w as, that sh e “ thre ate ned to ta k e a c t i o n” wh e n J o ny na s t r i e d t o i nt e r fe r e wi th I RS’ s l evyag ai nst the Pfi zerfunds, and beca m e upset w hen J onynas di sco ver ed he co uld design ate paym en ts
. M o sto fth e a l l eg at i o ns t ak e th e f o r m o fthe Gr o up lab e lin g Joh n so n ’s b eh av ior a s “ ab ru p t,” “t h re at en in g,” “e r r at i c, ” an d “a g g r es si ve . ” The se co nc l us o r y al l eg at i o ns d evoid of factu al sup p ort do n ot p r e c lu d e sum m ary j u d gm en t. Se eO zl owsk iv. He nde rs on , 23 7 F
. 3d 837, 84 0 ( 7th Ci r. 20 01)
. Ind eed, i n l i ght o fthe Group’s re fusalto payover $ 1 m i l l i o n i t o wed the g o ve r nm en t, i nc l udi ng ove r $300, 000 i t withhel d fr om i ts em plo yee s but did not turn o verto the gov er nm ent, i t i s unre m ar kabl e that J o hns o n pe r si st en tly t r i ed to a ss es s a trus t fund r ec o ve r y pe na l tya g ains t J o ny na s f o rhi s r o l e i n theN o. 09

- 3380 13 deb ac l e. F ur th er, t o the ex tent th atJ o hns o n was wro ng i n doi ng so, the I RS A pp eal s Offi ce ult i m ate l y re m ove d the penal ty aga i nst J onynas . T h us, J onynas ’ s r i ghts we r e v i nd i c a t e d. Fi nal ly, t he Gro up ar gues J ohnson “r epeate dly ” ca l l ed DePu y about the l evi ed fund s. H owever, i ts re cor d ci tati ons ci te j ust a handfulo f u nrem ar kabl e ca l l s t o both Pfi ze ra nd De Puyi nqui r i ngabo utthe levies
. Inde ed, the te st i m o ny o fDe Puya nd Pfi ze re m pl o y ee s di r ect l y c o nfl i cted with th es e al l ega ti ons, descr ibi ng J ohnson as p ro fes sio n al. T h is c laim d oe s n otj u st ify re ve rs al.

i i . Sect i on 720 6( 4) N ex t, th e G roup argu es John son viol ated section 720 6(4), w hi ch m ake s i t a fel ony f orany i nd i vi du althat“[ r] em ove s, depo si ts , o rc o nc ea l s . . . wi thi nt en t to e va de o rde fea t th e as se ss m en t o r c olle c tio n of an y t ax .” T h is p ro vis ion is d ire c te d atta x p ay er s t h at try to d efe at ta x cla im s. See, e . g. , U nite d States v. M cClain , 93 4 F
. 2d 82 2, 82 4 ( 7th C ir. 19 91 ); U ni t e d S t at e s v. Hook, 78 1 F .2d 1 16 6, 11 70 ( 6th Ci r . 1 98 6)
. I t i s no t a r ul e g o ve r ni ng the c o nduc t o fI RS em plo yee s a nd ther ef or e ca nnot for m the basi s o f re cove ryunder s ecti on 7433. M or eov er, any re m ed y for damag es ( e. g . , the $ 1, 50 0 fee a ss es se d f o ri ns uffi ci en t fund s) was bar re d by the st atute o fl i m i tat i ons.
i i i . Sect i on 721 4 Section 7214 p en ali zes offi cers or em p loyees t h a t are “g u ilty of ex to rt ion or w illfu l op p re ss ion ” o r “k n ow in gly14 N o. 09

- 3380 d em an d [] .
. . gre at er su m s t h an ar e au th or ize d by law .” I
. R. C. § 7 214( a) ( 1)

- ( 2)
. The Gro up pri nci pal l y argues that J ohnson tr ied to “s tr ong ar m ” a sum gr eat erthan whats he c o ul d l eg al l y l ev y fr om D eP uy . In s uppo r t, the Gr o up c i te s Depuye m pl o y ee M o nt e M o o r e’ s te sti m o ny that “a fte r[ J o hns o n] r ec ei ve d the $ 12 1, 00 0 ch ec k[ f o rthe l evy ] , she cal l ed [ M oo re ] , acknow ledged having r ecei ved the check, and then as ked ab out som ethi ng al ong the l i nes o f, ‘ N o w, whenw il l Ig etthe r es t o fthe mone y . ’ ” The Group had a $3 00, 000 c on tr act w i th DePuy ofwh i ch appr o xi m at ely $ 12 1, 00 0 was due
. As no te d abo ve , the I RS can o nly l e v y mo ne y du e . Mo o r e t e s t i fi e d tha twhen Joh n so n ca lled aft er r ec eiv in g th e firs t $ 12 1,0 00 , he “t old he rtha t [ he ] was n’ t su r e ex ac tl y w ha t she was r efer r i ng to ” an d ex pl aine d th at th e “$ 20 0, 00 0 was n’ t du e a nd payabl e” und erthe ter m s o fthe l ev y. T h e G ro up does not a s s e r ttha tJ o hn s o n pu r s ue d thi s $ 2 0 0 , 0 0 0 a fter l earni ng i t was notdue. Thus, thi s co nd uct does not m ee t se ct i o n 72 14’ s r equi r ementtha t th e r ev enue offi cer“know i ngl y” dem and orexto rtthe proper ty. The Group m ake s a few m or e a ccusati ons. I t a rgues J ohnson vi ol ate d the s ecti on bythr eat eni ng to se i ze Gesser t’ s ho use. H owever, Gesse rto w es the I RS o ver $400 , 000 that h e re fuses to pay. The Code perm i ts J o hns o n t o s ei ze the ho us e. I
. R. C. § § 63 31, 740 3. The Group next as ser ts J ohn son “thr eat ened” J onynas wh en h e f a x e d a Pfi z e re mpl o y e e du r i n gt h e l e v y pr o c e s s . Ho weve r, J onynas does notexpl ai n how J ohnson thre ate ned h im , w h at w as sa id , or w h et h er Joh n so n c ou ld lega lly tak e the thr eat ened act i on. These accusat i ons do not m er it re ve rs al.N o. 09

- 3380 15 iv. T rea s . R eg . § 80 1.3 Fi nal l y, the Group asse rt s that J ohnson vi ol ate d T r e a s u r y R e g ul a t i o n § 8 0 1
. 3 e n t i t l e d “ [ M] e a s u r i n ge mpl o y ee pe r f o r m an ce . ” S ec ti o n 8 01
. 3(b) i ns truct s ev aluato rs to consi der “w hetherthey p ro vi ded fai r and equit ab l e t r e at m en t t o t ax p ay er s.” T h e d ist ric t c ou rtp ro p er ly concl ud ed that J ohn son coul d not v i ol ate thi s r egul ati on because i t o nl y pr ovi ded a m etho d fo r eva lu at ing her p er for m an c e. Acco r di ng l y, we affi r m th e en try o fs um m ary j udg m en t f orthe Group’s re m ai ni ng se cti on 7433 cl ai m s.
B . R e f u n d a n d Ab a t e me n tC l a i ms 1 . T h e Gr o u p ’ s C l a i ms T he district cou rt prop erly d ism iss ed the G roup ’s re fund cl ai m s. The Gro up app ar entl y doe s no t ch alle nge th i s co nc l us i o n o n a ppea l
. Be fo r e a pl aint i ffc anb r i ng sui t in dis tr i ct c ourt, i t m ust fi l e “ a cl ai m f orr efund o r c r e d i t
. . . w i th th e [ I R S ]
. ” I
. R
. C
. § 74 2 2 ( a )
. T h e r e a r e t i me l i m i ts o n fi l i nga n a d m in i st r at i ve c l ai m , ho wev er . Any “[c ]l ai m f or cre dit or re fund of an ove rpaym ent
. . . sh all b e fi l e d b y t h e t a x p a y e rw i th i n 3 y e a r s fr o m th e t i me the r etur n w as fi l ed or2 yea rs fro m the ti m e the ta x wa s p a i d, wh i che v e ro fs uc h pe r i o ds e xp i r e s l a t e r . ” I
. R. C. § 6 511( a)
. In additi on t o th e a dm i ni str ati ve re m edi es re quir em ent, a re fund sui t i s l i m i ted to o ver paym en t, I.R.C . § 6402 ( a) , w hi ch i s paym ent i n excess of w hat i s d u e. Jone s v. Li b e r ty Gl as s Co. , 332 U
. S. 524, 531 (1947 ).16 N o. 09

- 3380 The Gr o up’ s r efund c l ai m s ar e ti m e-ba r r ed. The G roup m ade v o l unt ary pa y m en ts i n F eb r ua r y, M ay, a nd J une 200 2, wh ich were appli ed to o utsta nd i ng ta xes for 2000 , 20 01, and 200 2. The Gro up fi l ed i ts adm i ni str ati ve re fund cl ai m o n J uly1, 20 05

— o ve rthr ee y ea r s after th e retu rns an d tw o years a ft e r p aym en t. T hu s, th e G roup ’s cl ai m s do not m eetthe re quir em ents ofthe sta tute. M or eo ve r, r efund c l ai m s ar e l i m i te d t o o ve r pay m en t, a nd th e G roup doe s no t al l eg e i t pai d m o r e th ani t o wed. The Group’s situati on i s a nal ogo us to Sc ho n v . U nited Sta tes , wher e we he l d tha t a co m pan y ’ s as se r ti o n tha t th e I RS shoul d have ap p lied i ts paym ents to anothe r l i abi l i ty d oe s n otc on st itu te ov er p ay m en t w h en it ad m its th at it stil l ow es tax es to the I R S. 759 F .2 d 6 1 4 , 617 (7th C ir. 1985 ). Furth er, the G r o u p a p p ears to seek a d eclaratory j ud gm en ttha tthe I RSs ho ul d h a v e a l l o c a t e d the t a xe s to the trustfun d portion
. H ow ever, the D eclaratory Ju d gm en t A c t b a r s r elie f “w ith res p ec t t o fe d er al t ax es .” 28 U .S.C . 2 20 1; Sc hon , 759 F.2d at 617 -18. W e affirm the di str i ct c ourt ’ s di sm i ssa lo fthes e cl ai m s.

2 . G e s s e rt ’ s C l a i ms Fi na l l y, Ge s s e r ta r g ue s h i s t r us tfun d r e c o v e r y p e nal ty sh o ul d b e l o we red u nd erI
. R. C. § 742 2. To thi s en d, he cl ai m s that the Gro up and J ohnson or al l y a gr eed that volun tary p aym en ts w ou ld be allocated to the G roup ’s trus t fund l i abi l i ti es . The g o ve r nm en t co unt er s th atthe I RS hono rs o nl y wri t t e n di r e c t i o ns t o a pp l y fund s t o a speci fi c l i abi l i ty. A ccor dingl y, the I RS conte nd s it w as fr ee t o a p p ly th e funds i n i ts o wn be sti nt er es t. The I RSN o. 09

- 3380 17 gener al l y pr efer s a pp l yin g pay m ents to the no n-t rust fund l i ab i l i ty be ca us e i t ca n r ec o ve r th e trus t fun d port i on fro m a n ot h erper son. A nd , “[ o] nce the co rpor ati on i s o ut o fbusi ness, the U ni ted S tat es can k i ss goo dbye an y no n-t rustfund ta xes o w ed [ to] i t but not pai d.” See U nited Sta tes v. Sch rod er, 900 F.2d 11 44 , 114 6 n .1 (7th C ir. 1990). A s previ ousl y m enti oned, 28 U
. S. C. § 1346 au th or i zes “[ a] ny ci vi lact i on a gainst the U ni ted S tat es for the r ecove ryo fany i nter nal

- re venue t ax al l ege d to have b ee n err on eo u sly ori l l ega l l y a sse sse d orco l l ecte d , or an y pena l t y c l a i med t o h a v e b e e n c o l l e c t e d wi tho uta utho ri ty o ra ny s um a l l eg ed to ha ve b ee n e xc es si ve o ri n a ny m an n er w ro n gfu lly c olle c te d u n d er the i nter na lreven ue law s.” G essert argues th at his tax fun d re cove ry p en alt y is e rro n eo u s l y h igh be c au se th e IR S sh ou ld h ave cre dit ed the Group’s vol untarypaym ents to i ts tr ust fund l i abi l i ty th ereby l oweri ng Gesse rt ’ s penal ty l i abi l i ty. U nl i ke the Group’s cl ai m s, the parti es agree th at Gesser t’ s cl ai m i s t i m el y, al though the di str i ct c ourtr ule d othe rwis e. Genera l l y, a part y m u st pay hi s e nti re ta x liab ility b e f o r e b rin gin g a via b le s u it. Flo ra v . U nited Sta tes , 357U .S. 63 (19 58 ). Th u s, inth e G ro u p ’s c as e, it m us t payits en tir e ta x l i ab i l i tyb efo r e i t se ek s a r efund f oro ver paym ent. H owever, di vi sibl e t axes ar e t re ate d differ entl y. Exam ple s o fd ivi sibl e t axes i ncl ud e e xci se taxes , wh er e the ta x i s a sse sse d “per tr ansact i on” or“per h e a d
. ” T r us t fun d p e n a l t y t a x e s a r e t r e a t e d a s “ p e re mplo yee ”

— i.e., ea c h em p loy ee ’ s t a x w ith h eld bu t n otp aid18 N o. 09

- 3380

ov er co n st itu te s a se p ar at e t ra n sa c tio n, m ak in g it d ivis ib le. A ta x p ay er sa tis fies th e a d m in ist ra tiv e p r e re q u is it e s for d ivi sible tax es by p aying the tax for a sin gle tra n sa c tio n in e ac h ap p lica b le p er iod . M ICHAEL S AL T Z MAN, I RS P RACTICE AND P ROCEDURE § 11. 06 ( 2 d e d. re v. 20 02)
. Taxpayer s c an chall enge tr ust fund penal ty l i abi l i ti es by payi ng the ta x f or o n e e m plo yee f orea ch ap p lica b le p er iod an d filing an ad m in ist ra tiv e c laim wi th i n two y ea r s o fpa y m en t o rthr ee o fthe r etur n. Gesser t s ati sfi ed these r equi re m ents b y payi ng $1 00 f or each per i od he was as ses sed trust fund penal ty l i abi l i ty. “IR S p olic y p er m its ta x p ay er s w h o ‘v o lu n ta rily’ s u b m it paym ents to the I RS t o desi gnate t h e tax l i abi l i ty to whi c h the p a y men twi l la ppl y. ” U ni t e d S t at e s v. Ene rgy R eso u r c e s C o ., Inc ., 49 5 U.S
. 54 5, 54 8 ( 1990 ) ( ci tat i on o m i tte d ). O ve r tim e, th e IR S h as m od ified t h e s c op e o f th is ri ght. A t one ti m e, the I RS r equi re d onl y “ dir ecti ons” fro m ta x p ay er s in or d er to effe c tu at e a d ire c te d p ay m en t. See Rev. Rul. 73

- 305, 19 73- 2 C. B. 43. H owever, t h e IR S subseque nt l y c ur t a i l e d the s c o pe o f the r i g ht tha ti t had i ni t i a l l y a utho ri z e d, r e qu i r i ngtha tt a xp a y e r s p r o v i de

“ s pe ci f i c wri t t e n d i r e ct i on a s to the a ppl i ca ti o ns o fthe p aym e n t .” R ev. Proc. 2002 -26 § 3. 01 (em p ha sis add ed ). Abse ntwri tt endi r ec ti o ns , the “ S er vi ce wi l la ppl y the pay m entt o pe r i o ds i n the o r dero fpr i o r i tytha t th e Se rv ice d et er m in es w ill s er ve [t h e Se rv ice ’s] b es t in te re st .” Id. at§ 3. 02. T h us, to the extent that at one ti m e the I RS per m i tte d or aldi re ctio ns to effectuat e a di re cted paym ent, under re venue pro cedure 2002

- 26 ( app li cabl e her e) , a taxpayerN o. 09

- 3380 19

m u st sp ec ify in w rit in g t h e p ay m en t’s d es ign at ion
. See M a rtin v. C o m m ission er, 38 F. A pp ’ x 980 , 98 4 ( 4th Ci r. 20 02) ( “[ U ] nl ess a taxp aye r provi des speci fi c wri tte n i nstr ucti o ns f o rthe a ppl i ca ti o n o fa v o l unta r y pa y m en t, the I RS m ay apply the pay m ent a s i t wis hes. ”)
. H er e, no spe c ific wri tt endi rection was pr o vi ded to the I RS r eg ar di ng the designati on o fthe Group’s vol untarypaym ents. J o hn s o n wa s the r e f o r e e nt i t l e d t o a pp l y the p aym ents i n the b es t i nt er es t o fthe I RS
. Hera ppl i ca ti o n o fthe vol untarypaym ents to the no n-t rustfund l i abi l i ty w as n otin e rro r an d d oe s n otm er it re ve rs al.

I I I . Concl usio n Forthe f or ego i ng r eas ons, we A F F I R M the deci si on o f the di str i ct c ourt
.

1- 3- 13