## Facts

- The Internal Revenue Service (IRS) assessed tax deficiencies against William and Linda Johnson for tax years 1981 through 1983.
- The Johnsons later claimed tax overpayments for tax years 1988 through 1990.
- The IRS applied the Johnsons’ claimed 1988–1990 overpayments to the Johnsons’ assessed liabilities for 1981 and 1982.
- In December 1993, the IRS issued deficiency notices to the Johnsons for tax years 1981 through 1983.
- The IRS also issued collection-related notices around December 1993 and January 1994, including a December 2, 1993 collection notice that the Johnsons asserted was improper.
- In February 1994, the Johnsons filed a petition in the United States Tax Court challenging the December 1993 deficiency notices and alleging, among other things, that the December 2, 1993 collection notice was improper.
- After discovery and litigation in the Tax Court, on July 12, 1994, the Tax Court entered an order (at the parties’ request) stating that the Johnsons neither owed any tax for 1981 through 1983 nor overpaid their taxes for those years.
- On July 11, 1996, the Johnsons sued the United States seeking damages under I.R.C. § 7433 for allegedly unauthorized tax-collection actions.
- The Johnsons’ § 7433 allegations focused on IRS actions connected to assessment and determination of tax the Johnsons purportedly owed, as well as certain notice-and-demand actions.
- All IRS actions the Johnsons identified as § 7433 violations (including the December 1993 and January 1994 notices) occurred before March 21, 1994.
- The United States moved for summary judgment, arguing the § 7433 action was barred by the statute’s two-year limitations period because it expired no later than March 21, 1996.
- The Johnsons argued their § 7433 claim did not accrue until the Tax Court’s July 12, 1994 order, because (in their view) the elements of their claim were not complete until the Tax Court resolved the underlying tax dispute.

## Issues

1. When does a right of action “accrue” under I.R.C. § 7433(d)(3): at the time the taxpayer knew or should have known of the allegedly unauthorized collection actions, or only after the Tax Court later entered an order resolving the underlying liability dispute?
2. Under the correct accrual date, was the Johnsons’ § 7433 damages suit filed on July 11, 1996 timely when the complained-of IRS acts occurred before March 21, 1994?

## Decision

- The court granted the United States’ motion for summary judgment.
- The court held that, for limitations purposes, a § 7433 claim accrues when the taxpayer knew or reasonably should have known of the allegedly unauthorized collection conduct.
- The court rejected the Johnsons’ argument that accrual awaited the Tax Court’s July 12, 1994 order resolving the underlying deficiency dispute.
- Because the Johnsons alleged only conduct occurring before March 21, 1994, the court treated the limitations period as expiring no later than March 21, 1996.
- The Johnsons’ complaint filed July 11, 1996 was therefore untimely and barred by § 7433’s two-year statute of limitations.

## Legal Principles

- A civil action for damages under I.R.C. § 7433 “may be brought only within 2 years after the date the right of action accrues.” I.R.C. § 7433(d)(3).
- Accrual for § 7433 is tied to the taxpayer’s knowledge (actual or constructive) of the allegedly unlawful collection actions, not to the final outcome of later proceedings about the underlying tax liability.
- A later Tax Court order determining that no tax is due does not, by itself, postpone accrual of a § 7433 claim if the taxpayer already knew of the IRS acts claimed to be unauthorized.
- When all challenged collection-related acts occurred more than two years before suit, summary judgment is appropriate on limitations grounds.

## Conclusion

The court held that the Johnsons’ § 7433 claim accrued when they knew or should have known of the IRS’s allegedly unauthorized collection notices and related conduct (all occurring before March 21, 1994), not when the Tax Court later entered an order on July 12, 1994 stating no tax was due for 1981–1983; because the Johnsons filed suit on July 11, 1996, more than two years after accrual, the action was time-barred and summary judgment was entered for the United States.


Johnson v. United States, 99-1 U.S.T.C. ¶ 50,463 (1999)