Opinion ID: 814753
Heading Depth: 3
Heading Rank: 2

Heading: The Group’s Claim Regarding Misapplication

Text: of the Voluntary Payments The Group appeals the district court’s dismissal of its section 7433 claim that Johnson applied the voluntary payments to the wrong obligation. Section 7433 permits civil damages for certain unauthorized collection actions, but limits damages to the “sum of—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 the costs of the action.” I.R.C. § 7433(b)(1)-(2). The district court dismissed this claim because the group did not suffer any economic harm—it owed both non-trust fund and trust fund taxes, so the application to either liability lowered its overall liability by the same amount. We agree with the district court—the Group must allege actual economic damage to state a claim under section 7433. Otherwise, moneyed plaintiffs could 10 No. 09-3380 frustrate collection efforts by filing suits for claims where they suffered no harm. This result would be inconsistent with Congress’s limited remedy and the principle requiring us to strictly construe waivers of sovereign immunity against the plaintiff. See Soriano, 352 U.S. at 276. Further, the statute does not permit nominal damages, see I.R.C. § 7433(b)(1)-(2), and the declaratory judgment act expressly prohibits declaratory judgments in tax cases. 28 U.S.C. § 2201. The Group relies exclusively on In re Kaplan to overcome this statutory interpretation. 104 F.3d 589 (3d Cir. 1997). However, Kaplan concerned the power of bankruptcy courts to compel the IRS to allocate tax payments of a corporation not before the bankruptcy petition. Id. Kaplan had nothing to do with section 7433, under which the Group currently proceeds. The reasoning of the Third Circuit therefore does not require a contrary finding. We affirm the district court’s dismissal of the Group’s section 7433 claim that Johnson applied the voluntary payments to the wrong fund.