25.3.3. Suits Against the United States and Claims for Damages under IRC 7433, IRC 7345, IRC 7426(h)

(1) There are a number of judicial actions that may be brought by taxpayers against the United States. See IRM 5.17.5, Suits Against the United States, for a review of the principal types of actions that may be brought against the United States.

(2) Generally, when the United States is named as a defendant in a suit arising from the collection of tax liability, Area Counsel sends a defense letter to the DOJ, Tax Division. In some situations, however, the case will be directly referred to the local U.S. Attorney's Office.

(3) Meeting time limits in judicial actions is critical, so promptly respond to all requests from Area Counsel; the Department of Justice, Tax Division; or the U.S. Attorney's Office. Strictly observe time frames identified in the requests.

(4) CEASO advisors are responsible for internal control of and actions pertaining to most litigation against the United States. Exceptions include:

1. Bankruptcy actions, which are controlled by Insolvency.

2. Tax Court litigation, which is controlled by Appeals or in some cases Area Counsel.

3. Refund litigation not involving trust fund recovery penalties, which is controlled by campus refund litigation units. See IRM 3.17.243.5.2, Refund Litigation Campus Contacts, for the appropriate campuses and contacts.

(1) This IRM provides instructional procedures relating to suits against the government. See also IRM 25.3.1.4, Authorization for Filing Suits, Counterclaims or Third Party Complaints, for a discussion of the authority under IRC 7401:

• Specific policies related to collection work are located in IRM 1.2.1, Servicewide Policy Statements, and starting at IRM 1.2.1.6, Policy Statements for the Collecting Process.

• Specific delegations of authority related to collection work are located in IRM 1.2.2, Servicewide Delegations of Authority, and starting at IRM 1.2.2.6, Delegations of Authority for the Collecting Process, IRM 1.2.2.15, Delegations of Authority for Special Topics Activities, and in IRM 1.2.65, Small Business/Self-Employed Division Delegations of Authority, and starting at IRM 1.2.65.3, SB/SE Functional Delegation Orders - Collection.

• Specific delegation of authority and procedures related to testifying in: IRM 1.2.2.12.2, Delegation Order 11-2 (Rev. 4), Authority to Permit Disclosure of Tax Information and to Permit Testimony or the Production of Documents, IRM 11.3.35-2, Testimony Considerations, and 26 CFR 301.9000-1, Definitions when used in Sections 301.9000-1 through 301.9000-6.

• Specific delegation of authority related to approval for payment of administrative claims under IRC 7432 and IRC 7433 is located in IRM 1.2.2.6.4(20), Delegation Order 5-4 (Rev. 3), Federal Tax Lien Certificates.

(2) See the following lists containing the legal authorities discussed in this IRM.Authorities in Title 26 (Internal Revenue Code)

(1) IRM 5.17.1, Legal Reference Guide for Revenue Officers, General Information, provides a list of the parties with an explanation of their role with suits.

(1) Program Reports: Suits are individual to the case and are of a wide variety and scope. When it is appropriate the Collection employee, generally a CEASO advisor, will provide a Civil Suit Narrative Report (Form 4477-B) for Area Counsel and DOJ identifying all pertinent facts so that appropriate legal action may be taken. Narrative Reports are discussed in IRM 5.17.12.20, Legal Reference Guide for Revenue Officers, Investigation and Reports, the Narrative Report, and IRM 25.3.2.4.4.4, Form 4477-B, Civil Suit Narrative Report, Instructions and Exhibits. Sources for the litigation include the DOJ attorney assigned, the Area Counsel attorney assigned, and PACER.

(2) Program Effectiveness: Whenever litigation involving collection matters is pending or under consideration, revenue officers are investigators of facts. They will be required to prepare reports concerning any facts ascertained. The lawyers charged with the responsibility of handling the cases must rely on those facts and reports when making case decisions.

(1) The CEASO advisor maintains a copy of any suit documentation until the suit is closed. After case closure see Document 12990, Records and Information Management Records Control Schedules, under section, Internal Revenue Service Records Control Schedule (RCS) 28, Tax Administration Collection, in:

• PART III - Administrative Records - All Collection Functions, item number 38, Litigation Files, and in

• PART IV - Delinquent Accounts, Delinquent Returns, And Office Services Records, item 45, Suits to Foreclose Federal Tax Liens, item 53, Civil Suit Recommendation, Form 4477, and in item 54 (a), Special Procedures Function Case Files.

(2) Preserving electronically stored information is covered in:

• IRM 25.3.1.7, Preserving Electronically Stored Information In Litigation Cases,

• IRM 25.3.1.7.21, References, and

• Chief Counsel Notice, CC 2016-05, Discovery Obligations to Preserve Evidence, Including Electronically Stored Information.

(1) The following table lists commonly used acronyms and their definitions:

(1) For information regarding some of the general characteristics of suits and claims for damages brought against the United States, see:

1. IRM 5.17.5, Legal Reference Guide for Revenue Officers, Suits against the United States.

2. IRM 25.3.1, Litigation and Judgments, General Guidelines.

3. IRM 5.17.12, Legal Reference Guide for Revenue Officers, Investigation and Reports.

4. 31 USC 1304, Judgments, awards, and compromise settlements.

(2) For information regarding some of the general characteristics and procedures followed in instituting and carrying out a lawsuit for effecting or assisting in the collection of taxes, and some of the most common types of lawsuits commenced by the United States, see IRM 5.17.4, Suits by the United States.

(3) The Taxpayer Bill of Rights (TBOR) lists rights that already existed in the tax code, putting them in simple language and grouping them into 10 fundamental rights. Employees are responsible for being familiar with and acting in accord with taxpayer rights. See IRC 7803(a)(3), Execution of Duties in Accord with Taxpayer Rights. For additional information about the TBOR, see https://www.irs.gov/taxpayer-bill-of-rights, Taxpayer Bill of Rights (TBOR).

(1) When service of a summons and complaint is received or litigation against the United States is otherwise discovered, the following actions must be taken:

1. Notify CEASO immediately.

2. Forward all original documents and other pertinent information to CEASO. Information regarding date, time and method of service should be included.

3. Thoroughly document the case history.

4. Retain copies of the documents and information in the case file.

5. Seek guidance from CEASO regarding what, if any, impact the litigation will have on open case actions.

(2) Refer any questions to CEASO for resolution.

(1) Review available case information and internal records to determine urgency (pending CSEDs, etc.) and proper course of action.

(2) Review any summons, complaint, or subpoena received to determine response or appearance date set by the court.

(3) Forward documents immediately to Area Counsel and/or the U.S. Attorney's Office depending upon established local practice for the type of suit. Retain copies as needed. If the response date or appearance date is imminent, call Area Counsel and/or the U.S. Attorney's Office to advise, and hand deliver the documents to them. If hand delivery is not feasible, send the documents by overnight mail.

(4) Open a case on the Integrated Collection System (ICS) no later than 10 calendar days after receiving notice that a suit has been filed against the IRS.

(5) Advise and provide applicable guidance to field or ACS personnel to whom affected accounts are assigned. Seek Area Counsel guidance as needed and appropriate.

(6) Take applicable initial actions as described in IRM 25.3.6, Open Litigation Control, Monitoring and Closing Actions.

(1) Secure all relevant TFRP administrative files, refund claim files, and other related files and forward them to Area Counsel.

(2) Prepare and forward a memorandum to Area Counsel containing details and status of related assessments and a recommendation to initiate a counterclaim against the taxpayer who brought the refund suit, and a third party complaint to bring all parties into the action. See IRM 25.3.1.4, Authorization for Filing Suits, Counterclaims or Third Party Complaints.

(3) Secure and forward necessary certified transcripts and other needed documents on the plaintiff's assessments, all related assessments, and certified transcripts and original returns for all underlying BMF liabilities.

(4) If a tax module is in BAL DUE status, determine whether or not collection should be withheld and contact the unit/person to which the module is assigned with instructions.

(5) References for guidance regarding the input, monitoring, and resolution of Transaction Code (TC) 520 with associated closing codes and CSED suspension closing codes, can be found in:

• IRM 25.3.6, Open Litigation Control, Monitoring, and Closing Actions,

• IRM 25.3.7, Reconciling Non-Insolvency LAMS Reports, and

• IRM 25.3.8, TC 520 - W Freeze Servicewide Guide.

(6) If applicable, ensure that all NFTLs are timely filed or refiled as needed.

(1) The following types of actions may be brought in state or federal court under 28 USC 2410:

• quiet title.

• foreclosure.

• partition.

• condemnation.

• interpleader.

(2) The CEASO advisor is responsible for all section 2410 suits. Notices of section 2410 suits received by other functions should be forwarded immediately to the CEASO advisor.

(3) Refer to IRM 5.12.4, Judicial/Nonjudicial Foreclosures, for instructions and procedures pertaining to foreclosure actions to which the United States is made a party pursuant to 28 USC 2410.

(4) See IRM 5.17.5.18.1, 28 USC 2410 Actions— Background, and the provisions that follow, for a discussion of the types of actions that may be brought under 28 USC 2410. These actions are generally brought in state court.

1. Coordination of these actions is generally handled directly though the appropriate U.S. Attorney's Office without Area Counsel involvement. The necessary response is generally limited to the preparation of a letter to the U.S. Attorney forwarding Automated Lien System (ALS) prints of applicable liens and information regarding unrecorded liens of relevance (statutory liens, estate tax liens, etc.)

2. Area Counsel needs to be involved only if non-routine issues are presented. If Area Counsel is involved, they generally require a copy of the summons, complaint, docket sheet, and other relevant documents.

   Note: Area Counsel will generally be involved if a state court action is removed to federal district court.

3. Control the case on ICS. The control can generally be closed after issuance of the letter to the U.S. Attorney's Office, except in cases requiring further action or monitoring.

(1) The following actions are the responsibility of the Disclosure Office:

• Releasing documents in actions involving the IRS in suits arising under the Freedom of Information Act,

• Releasing documents in actions involving the IRS in suits arising under the Privacy Act, and

• Subpoenas for testimony or documents.

(2) Disclosure is responsible for providing any necessary information to Area Counsel and for securing testimony authorizations and providing guidance to subpoenaed employees. See IRM 25.3.3.6, Subpoenas and Requests for IRS Personnel to Testify or Produce Records, above.

(3) Prior to releasing any documents in actions involving the IRS, the Disclosure Office must coordinate such disclosures with Area Counsel.

(1) The CEASO advisor is responsible for answering Area Counsel and U.S. Attorney requests for assistance on other suits against the United States, including, but not limited to, the following types of United States district court cases:

1. Injunctions to restrain collection (third-party) - IRC 7426(b)(1).

2. Wrongful levy suits (third-party) - IRC 7426(b)(2).

3. Recover surplus proceeds, substituted sale proceeds, and substitution of value (third-party) - IRC 7426(b)(3-5).

4. Damages for unauthorized collection action (third-party) - IRC 7426(h).

5. Damages from failure to release a lien (taxpayer) - IRC 7432.

6. Damages from unauthorized collection action (taxpayer) - IRC 7433.

7. Determine whether certification of being a seriously delinquent taxpayer is erroneous or that IRS failed to reverse certification (taxpayer) - IRC 7345.

(2) References: for additional guidance -

• Pub 5390, Instructions for Preparing Administrative Claims for Damages Under Sections 7426(h), 7432, and 7433(a-d), and Request for Costs under Section 7430 Related to these Sections.

• IRM 25.3.6, Open Litigation Control, Monitoring, and Closing Actions.

(1) Taxpayers have the right to bring a civil action under IRC 7345(e), Revocation or denial of passport in case of certain tax delinquencies, against the United States in United States district court or against the IRS in the Tax Court to determine whether the Internal Revenue Service’s certification as a seriously delinquent taxpayer made to the State Department was erroneous or whether the Commissioner has failed to reverse the certification when appropriate. If the court determines that such certification was erroneous or should have been reversed, then the court may order the Secretary of State be notified that the certification is reversed. For more information see:

• IRM 5.17.5.21, IRC 7345 Right to Determine Whether Certification as a Seriously Delinquent Taxpayer is Erroneous., or

• For the overall certification process under IRC 7345 see IRM 5.19.25, Passport Program.

(2) CEASO Advisor’s Role: The CEASO advisor may receive information that a taxpayer is pursuing a civil action under IRC 7345(e) in various ways. If the taxpayer files their action in a United States district court, then receipt of the summons and complaint may follow the format described in IRM 25.3.3.2, Receipt of Service of Summons and Complaint. If the taxpayer pursues their action in Tax Court, the CEASO advisor will not be notified and will not support the litigation.

1. ROLE is a support role monitoring this type of litigation when the action is in a United States district court.

2. OPEN an NF OI 132, Suits Against the United States on ICS.

3. DOCUMENT in the case history whether the action is in a United States district court as well as documenting any other actions taken on the case. The CEASO advisor will not be notified of an action in Tax Court.

4. REQUEST after the NF OI 132 has been opened, that the Group Manager or group secretary go into the NF OI 132:

Note: Follow the descriptions below to find the selection.

Item	Description
1	Select Entity Detail
2	Select Maintain Program Names
3	Select from the drop down menu Passport District Court

(3) The CEASO advisor may be asked to provide account transcripts or other information identified in IRM 25.3.3.5, Information for Defense of Suits, when the action is in a United States district court.

(4) Certified Transcript Requests:

1. District Court: When requesting certified transcripts, see IRM 3.17.243.6, Certified Documents, and any associated IRM Procedural Updates (IPUs). These can be accessed from either SERP IRM or IRM OnLine through the IPU tab at the top of the IRM screen.

2. Tax Court: Area Counsel will secure transcripts for Tax Court cases.

(5) In addition to the monitoring required under IRM 25.3.6, Open Litigation Control, Monitoring and Closing Actions, for all IRC 7345(e) United States district court cases with an open NF OI 132, the CEASO advisor will check IDRS at least every 6 months and upon request by Area Counsel or the Assistant United States Attorney handling the case to determine if the certification as a taxpayer with a seriously delinquent tax debt has been reversed.

(6) CASE CLOSURE: Once the litigation is resolved, the NF OI 132 may be closed at the direction of Area Counsel or receipt of a judicial decision. Judicial decisions can be found in the Public Access to Court Electronic Records (PACER).

(1) Treasury Regulations: 26 CFR 301.7433-1 and 26 CFR 7426-2 contain administrative claim procedures for IRC 7433(a-d), and IRC 7426(h).

1. Cause of Action: A cause of action accrues under these provision when the claimant has had a reasonable opportunity to discover all essential elements - of a possible civil action for damages in federal district court - under IRC 7433 or IRC 7426(h)

2. Claim Submission To: The administrative claim is addressed to the Area Director, Attention Collection Advisory Group Manager (for the state where the claimant currently resides or, when dealing with a corporate entity, the area which includes the corporate headquarters.

   Reminder: Claimants use Publication 4235, Collection Advisory Group Addresses, to identify the Collection Advisory office for submission of the documents.

3. Claim Submission Style: Submission is in writing and sent by registered or certified mail, or delivered by personal service.

(2) Minimum Administrative Claim Requirements: There is no requirement to use Form 15237, Administrative Damage Claim Under Sections 7426(h), 7432, 7433(a-d), in preparing a claim. However to ensure administrative claims contain the required information and documentation, direct claimants or their representatives to Pub 5390, Instructions for Preparing Administrative Claims for Damages Under Sections 7426(h), 7432, and 7433(a-d), and Request for Costs under Section 7430 Related to these Sections. It provides the instructions and contains Form 15237, Administrative Damage Claim Under Sections 7426(h), 7432, 7433(a-d). The publication and form guide the claimant through the process. It encourages that claims be timely and complete for evaluation. Required information, whether included on Form 15237 or not, includes:

1. The name, current address, current home and work telephone numbers and any convenient times to be contacted, and the taxpayer identification number of the taxpayer making the claim.

2. The grounds, in reasonable detail, for the claim, including a complete description of the unauthorized collection action and copies of available substantiating documentation or correspondence with the Internal Revenue Service.

3. A description of the injuries incurred by the taxpayer filing the claim, including copies of any available substantiating documentation or evidence.

4. The dollar amount of the claim, including any damages that have not yet been incurred but which are reasonably foreseeable (including copies of any available substantiating documentation or evidence).

5. The signature of the taxpayer or the taxpayer’s duly authorized representative.

(3) Claim Evaluation Time Frames: Evaluation and determination of a processable administrative claim should be completed as soon as possible but must be completed within 6 months of receiving the processable administrative claim. The claimant may bring suit either when:

• Final determination provided for the administrative claim - or - 6 months after submission of a processable administrative claim where no determination provided. - OR -

• If the claimant submits an administrative claim within the last 6 months of the 2 year period of limitations for filing suit, the claimant may file suit any time after submission of the administrative claim and before the expiration of the period of limitations.

(4) Claimant Notifications: These are the letters used to notify the claimant of the administrative claim determination:

• Letter 2730, Non-processable Claim for Damages Letter, notifies claimant of the deficiencies in the claim,

• Letter 2731, Transfer of Claim for Damages. This informs claimant their administrative claim was sent to the wrong office and is being forwarded to the correct office.

• Letter 2732, Notification of Full or Partial Denial of Claim for Civil Damages, and

• Letter 2733, Notification of Full or Partial Allowance of Claim for Civil Damages. Include also Treasury’s Form 197, Judgment Fund Voucher for Payment requesting claimant’s signature. Form 197 can be downloaded from https://www.fiscal.treasury.gov/judgment-fund/forms.html. The form is available at the bottom of the web page and must be signed by the claimant on page 2.

(1) Advisor’s Initial Action:

1. Open an NF OI 185 on ICS indicating the code section of claim submission.

2. Review each claim to ensure the submission is in writing, by the appropriate delivery method, to the correct party and includes at a minimum items (a - e) in (2) above. See elements of the review in IRM 25.3.3.9.2.

3. Claim Not Processable - Respond in writing: Within 14 days of receipt of a claim, if it does not include the information requested in (2) above. Include a list of the claim’s deficiencies and advise that the claim is not processable. See (6) below for letter notifying claimant how to cure the deficiencies in their claim.

   Caution: This is not considered a rejection of the claim because a claim meeting the requirements of 26 CFR 301.7433-1 or 26 CFR 301.7426-2 has not yet been submitted.

(2) Date stamp the claim upon receipt. The advisor should complete the initial review of the claim within 30 days of receipt.

(3) Open an NF OI on ICS under 185 - Claim Other. The type of claim should be noted in the comments section of the NF OI. Review the closed files for any prior claims.

(4) Review for Processability: The statutory elements contained in IRC 7433 (a-d) or IRC 7426(h) must be applied to each claim received to determine processability.

(5) If Processable - Review for Determination: In determining whether a claim is administratively allowable the reviewer must follow the steps below to make a determination.Steps Determining If Claim Allowable

(6) Claim Rejection: If the claim cannot be fully or partially substantiated, or is untimely, the claim will be submitted to Counsel for partial or full rejection. Follow the steps in the table below.

(7) Claim Acceptance: If the claim can be fully or partially substantiated and is timely, the claim will be submitted to Counsel for partial or full acceptance concurrence (See Step 6 in table below). Follow the steps in the table, IRM 25.3.3.9.2, Claim Acceptance Steps, below.

1. Claim Decision Deadline: The deadline for making this determination is 6 months after submission of a processable administrative claim.

2. No Decision Made: Where no determination provided 6 months after submission of a processable administrative claim the claimant may initiate a suit in federal district court.

3. Claim Received 6 Months Before Filing Deadline: If a claimant submits an administrative claim within the last 6 months of the 2 year period of limitations for filing suit, the claimant may file suit any time after submission of the administrative claim and before the expiration of the period of limitations.

(1) Advisory must process and respond to all claims that appear to be brought under IRC 7433, whether or not they appear to be frivolous. Follow the procedures set forth in IRM 25.3.3.9.1, Administrative Claim Procedures, above, for any correspondence received from a taxpayer that indicates in some fashion that the taxpayer is attempting to file a claim for damages for unauthorized collection action.

(2) If a claim for unauthorized collection action appears to contain frivolous arguments, send the following documents/information to the Ogden Frivolous Return Program (also known as the Frivolous Filer Unit) after the claim is processed and a response is sent to the taxpayer:

• copies of the first two or three pages of the claim (or a sufficient number of pages to show that the claim is frivolous);

• the date of receipt of the claim (this should be shown by a date stamp on the claim);

• the claimant’s name, address, and any taxpayer identification information that may be provided in the claim; and

• a copy of the response sent to the claimant.

(3) Prepare and include Form 3210, Document Transmittal, and follow the instructions in IRM 5.19.11.10.5(7), Frivolous Communications.

(4) Direct any questions as to whether a claim is being asserted under IRC 7433 or IRC 7426(h) and should be processed under these procedures to Area Counsel.

(1) Reimbursement for both damages and costs is obtained only through Treasury’s Judgment Fund Internet Claims System or JFICS. The approving official for Advisory JFICS requests is the Director, CEASO and access to JFICS for Advisory is through the CEASO Director’s staff.

• For Damage reimbursement see IRM 25.3.3.9.4.1.

• For Cost reimbursement see IRM 25.3.3.9.4.2.

(1) Advisors, with the approval of the Advisory Group Manager, should inform the manager of the employee named in the damage claim that a claim of unauthorized collection action has been received. Follow up contact will be made to advise the manager of the final results of the investigation of the claim.

(2) Provide copies of supporting documentation obtained during the investigation of the claim to the employee's manager.

(3) Discussions regarding the findings will be held by the employee’s immediate supervisor and the employee.

(4) The employee's manager will determine if NTEU representation is necessary.

(1) Any claim for damage under IRC 7426(h) must relate to the types of actions described in IRC 7426(a).

(2) Third parties may separately adjudicate the actions described above pursuant to IRC 6343(b) or IRC 7426(b) without first submitting an administrative claim. See the following references:

• IRM 5.17.5.17, IRC 7426 Suits against United States - General, et seq.

• IRM 5.11.2.3.2.1(6), Wrongful Levy, and Pub 4528, Making an Administrative Wrongful Levy Claim Under Internal Revenue Code (IRC) Section 6343(b).

  Note: A taxpayer would pursue an administrative return of property levied claim pursuant to IRC 6343(d) utilizing the instructions in Pub 5149, Making an Administrative Return of Property Claim Under Internal Revenue Code (IRC) Section 6343(d).

• IRM 5.12.10.3.4, Substitution of Proceeds of Sale.

• IRM 5.12.10.3.5, Right of Substitution of Value, IRC 6325(b)(4), et seq.