The federal government in certain circumstances waives its sovereign immunity from lawsuits. This IRM discusses those circumstances. See also IRM 5.17.5.2, Doctrine of Sovereign Immunity.

Purpose: This section provides the procedural instructions for collection staff working suits against the United States and claims for damages under IRC 7426(h), Civil Actions by Persons Other Than Taxpayers, Recovery of Damages Permitted in Certain Cases, and IRC 7433, Civil Damages for Certain Unauthorized Collection Actions.

Audience: Collection employees responding to suits against the government. Primarily Collection, Civil Enforcement Advice and Support Operation (CEASO) Advisors or Field Collection Revenue Officers use this IRM when assisting Counsel and the Department of Justice (DOJ) with defense actions related to these types of suits.

Policy Owner: Director, Collection Policy.

Program Owner: The program owner is Collection, an organization within the Small Business Self-Employed (SBSE) division.

Primary Stakeholders: The primary stakeholders are Chief Counsel and DOJ attorneys.

Program Goals: The goal of the program aligns with IRS Strategic Goal II to, Enforce the tax law fairly and efficiently to increase voluntary compliance and narrow the tax gap and Objective 1 to: Improve operations to effectively and efficiently identify and address non-compliance

Proper service of the summons and complaint is necessary to bring an action against the United States. Therefore, information relating to the manner in which the IRS received notice of the suit is important.

Service on the United States of a summons and complaint is governed by Rule 4(i) of the Federal Rules of Civil Procedure. To make proper service on the United States, a plaintiff must:

If you receive service of a summons and complaint, date-stamp it and immediately forward it to CEASO. Include information regarding the manner in which the documents were served (e.g., personal delivery, certified mail).

CEASO will immediately forward a complete set of the documents to Area Counsel and the U.S. Attorney's Office unless local procedures are established with Area Counsel and the U.S. Attorney's Office that copies of documents in certain types of suits need not be provided to that office.

Include complete information on how, when and by whom service was received.

When the United State is named as a defendant in a suit filed in state court, the United States can remove the suit to federal district court. See IRM 5.17.5.6, Removal to Federal Court.

The United States has the same right of removal if it is not named as a party defendant if it intervenes in the state court action.

Because the time period for removing an action to federal district court is short, generally within 30 days after receipt of a copy of the complaint, Area Counsel should immediately be notified whenever a complaint filed in a state court proceeding is received and there is any question as to whether the case should be removed to federal district court. Ensure CEASO is also notified so proper controls can be established.

When service of a summons and complaint is made on the IRS, prompt correct action is essential to ensure that a timely, complete response is made.

Prompt analysis and action is also important when it is discovered through other means that the United States has been made a party to litigation.

When the United States is named as a defendant in a suit, information/evidence will need to be gathered and a report prepared to assist in defending the government's position in some cases. In such cases, the CEASO advisor will ensure that any narrative report necessary to reflect the factual situation is prepared and that other data requested or required by Area Counsel is secured. Specific reporting forms are not prescribed for use in all types of defense suits.

When necessary, the CEASO advisor will issue courtesy investigations to Field Collection to gather information and prepare reports. The requested action must be taken promptly and completed within the specified time frames to ensure proper defense of the suit.

If a request from Area Counsel or the Department of Justice requires additional investigation or examination by either a revenue officer or a revenue agent, the CEASO advisor will have a copy of the request secure emailed to Collection or Examination, as applicable, and request that the investigation or examination be given preferential treatment and that the information be furnished as soon as possible.

Use Form 4481 , Civil Suit - Advisory Transmittal, with the civil suit package submissions to Counsel; and use Form 4481-A , Advisory Transmittal to United States Attorney, for submissions to the U.S. Attorney's Office, any transcript, administrative file, reports or other documents as appropriate and when required.

Upon receipt of a summons and complaint or a request for data, the CEASO advisor will determine the periods of tax liability in question and take action to secure a certified transcript, if necessary.

Form 4844 , Request for Terminal Action, will be prepared and forwarded to Case Processing to secure the administrative files if needed.

The CEASO advisor, with the assistance of Area Counsel, will review the complaint and determine what documents are needed. These documents may include:

In most cases the required data can and should be anticipated and gathered before a request is received from the U.S. Attorney or Area Counsel since the CEASO advisor will normally have received notification of the pending suit through direct sources.

The CEASO advisor will ensure that required data is secured promptly and will follow-up on all requests for administrative files, tax returns, or other documents, and requests for investigations. The data should be sent to Area Counsel and/or the U.S. Attorney's Office as soon as it is received and no later than the 45th day after the complaint or petition was filed. Area Counsel should be advised of any delay by telephone, including situations where the CEASO advisor is not made aware of the suit, or does not receive a copy of the complaint or petition, until many days after the suit is filed.

If required data or documents are located in a campus or other area office, the office receiving the request for such data or documents will expeditiously initiate action to secure it and will be responsible for providing it to the requester.

Subpoenas and requests for Service personnel to testify or to produce records in all cases not involving the administration of Internal Revenue laws should be routed as quickly as possible to the Disclosure Officer to whom the employee is assigned, or in matters involving Headquarters employees, to the Office of Privacy, Governmental Liaison, and Disclosure (PGLD). Contacts may be found on the PGLD Knowledge Base. A link to that knowledge base can be found on the PGLD website PGLD. It is important that this information be provided without delay so that necessary authorization can be obtained within the time allowed. If timing is urgent, the matter should also be reported by telephone to the Disclosure Officer or the Office of Privacy, Governmental Liaison, and Disclosure, as appropriate. For further guidelines, see IRM 11.3.35, Disclosure of Official Information Handbook, Requests and Demands for Testimony and Production of Documents.

Requests by a government attorney (Area Counsel or the Department of Justice) for Service personnel to testify or produce records on behalf of the government in referred tax cases or Tax Court cases may be complied with and do not require prior approval.

Subpoenas and requests not served on behalf of the government for Service personnel to testify or produce records in referred tax cases or Tax Court cases require authorization and must be routed as quickly as possible to Area Counsel so that necessary authorization can be obtained. Area Counsel may need to coordinate with the Office of the appropriate Associate Chief Counsel depending upon the nature of the case.

If necessary, it is the Disclosure Officer’s responsibility to arrange for Area Counsel to assist, or an attorney of the Department of Justice (including U.S. Attorneys) to represent subpoenaed/requested employees, briefing the employees and appearing with them at the proceeding.

See Delegation Order No. 11-2 (Rev 4), Authority to Permit Disclosure of Tax Information and to Permit Testimony or the Production of Documents, and found in IRM 1.2.2.12.2. It contains the managerial levels with the authority to determine whether an employee will be permitted to testify or produce Service documents subpoenaed or requested in connection with judicial and administrative proceedings. If the designated official determines that the employee may not testify or produce the records subpoenaed or requested (in whole or in part), Area Counsel or the representative of the U.S. Attorney’s Office will, as necessary, appear before the court with the employee and inform the court that the information may not be disclosed and explain the reason for the information being protected.

If the delegated official’s instructions are not received by the time set for appearance, the employee will appear before the court, with the Disclosure Officer, Area Counsel, Department of Justice trial attorney, or the representative of the U.S. Attorney’s Office, as necessary. The court should be advised that, pursuant to 26 CFR 301.9000-1 (See paragraph (i), A testimony authorization.) the employee may not testify or produce Service documents until the delegated official has considered the contents of the subpoena or request and has authorized a Service employee to comply. The employee or the Disclosure Officer, Area Counsel, Department of Justice trial attorney, or the representative of the U.S. Attorney’s Office should request additional time in which to receive instructions. If the court does not grant the delay, the employee will decline to disclose the records or information sought. However, an attempt will be made to contact the party seeking the information prior to the appearance time so that continuance might be obtained, if appropriate.

The determination of whether employees should be allowed to testify and what records or information, if any, may be disclosed must take into account applicable statutes, privileges, and constitutional requirements. Any applicable privilege or protection under law may be asserted in response to a request or demand for testimony or disclosure of IRS records or information, including, but not limited to, the following:

The testimony and production authorization should be specific as to the scope of the records or testimony that may be provided. See IRM 11.3.35-2, Testimony Considerations, for additional information regarding demands for testimony.

The procedures to follow when a suit is filed against the United States depend upon the type of suit that is brought against the United States.

This subsection lists the principal types of suits that may be filed against the United States and the office that is responsible for handling the case.

General assistance may be requested of CEASO Advisors as outlined in the table below.

In most circumstances, taxpayers and third parties file administrative claims for relief or restitution with the IRS first. In fact, a judgment for damages will not be awarded by a court unless the court determines that the claimant has exhausted the administrative remedies available within the IRS. Claimants commonly submit their administrative claim to the CEASO advisor before taking judicial action against the United States. Generally, the CEASO advisor is responsible for the review and resolution of these administrative claims.

Common administrative claims: Ones that may be made or are required include the following:.

IRC 7433 allows the filing, by the taxpayer, of a damages action against the government in federal district court when, in connection with the collection of a tax, if any officer or employee of the IRS recklessly, intentionally, or negligently disregards any provision of the Internal Revenue Code or the related Treasury Regulations.

IRC 7426(h) allows the filing of a damages action against the government in federal district court when, in connection with the collection of a tax, if any officer or employee of the IRS recklessly, intentionally, or negligently disregards any provision of the Internal Revenue Code or the related Treasury Regulations. These actions may be filed by anyone:

IRC 7432, allows the filing, by the taxpayer, of a damages action if any officer or employee of the IRS knowingly or negligently fails to release a lien under IRC 6325 on property of the taxpayer.

Employee Protection: Employees, acting in the performance of their duties, whose actions are challenged under the sections identified above, will not be held personally liable in such an action. See IRM 25.3.3.9.5, Notifying the Employee’s Manager of a Claim of Unauthorized Collection Action, and IRC 7426(d), Limitation on Rights of Action.

Litigation Filing Cutoff: A suit under IRC 7433(a-d), IRC 7426(h), or IRC 7432 must be brought within two years from the date the right of action accrued. The right of action accrues when the taxpayer or third party has had reasonable opportunity to discover all essential elements of a possible cause of action for wrongful collection.

Administrative Claim Prior to Suit: A judgment for damages under IRC 7433(a-d), IRC 7426(h), or IRC 7432 will not be awarded unless the court determines that the plaintiff has exhausted all administrative remedies within the IRS (see CFR 301.7433-1(e)).

Direct Claimants Wanting to Submit an Administrative Claim: If someone requests information on filing an administrative claim under IRC 7433(a-d), IRC 7426(h), or IRC 7432, direct them to both:

Recoverable Amount In A Court Action: If successful in a court action under either IRC 7433 (a-d) or IRC 7426(h) , a taxpayer or third party may recover

Litigation and Administrative Costs: Costs of the action are not recoverable under sections 7426(h), 7432, and 7433. To recover these costs, which may include attorney’s fees, the claimant may pursue recovery under IRC 7430 , Awarding of costs and certain fees.

Litigation Claim Payment Authority: Litigation claims arising from the sections discussed above, will be paid out of 31 USC 1304, Judgments, awards, and compromise settlements. For cases referred to the Tax Division of the Department of Justice, the request from the Judgment Fund in Treasury’s Bureau of Fiscal Service utilizes the Judgment Fund Internet Claim System (JFICS) will be prepared by these DOJ offices:

Administrative Claim Approving Official: - see IRM 25.3.3.9.4, Reimbursement of Damages and Costs, below.

Under IRC 7426)h), recovery of damages is permitted by a third party if it is determined that any officer or employee of the IRS recklessly, intentionally or by reason of negligence, disregarded the provisions of the Code. The liability for damages is in an amount equal to the lesser of $1,000,000 ($100,000 in the case of negligence) or the sum of:

Evaluate a claim for damages brought under IRC 7426(h) in the same manner as other damage claims. See