The opinion of the court was delivered by: Royce C. Lamberth, United States District Judge
This matter comes before the Court on the defendants' motion to dismiss for lack of jurisdiction over the Internal Revenue Service (IRS) as a proper party to this suit, as well as defendants' motion for summary judgment and plaintiff's cross motion for partial summary judgment. FED. R. CIV. P. 12(b)(2), FED. R. CIV. P. 56(c). The defendants move to dismiss because Congress has not explicitly authorized the IRS as an agency to be sued eo nomine. Blackmar v. Guerre, 342 U.S. 512, 515 (1952). The issue before the court regarding the summary judgment and partial summary judgment motions dispute is whether or not plaintiff's damages were received "on account of physical injuries or physical sickness" under the 1996 amended definition of Internal Revenue Code § 104(a)(2). Further, the parties dispute whether § 104(a)(2) is constitutional under the Fifth Amendment and Sixteenth Amendment. The defendants submitted a motion and memorandum in support of their position. Plaintiff submitted a memorandum in opposition to the defendants' motion and supporting a cross motion. Defendants subsequently filed a motion in opposition to plaintiff's motion for summary judgment, and plaintiff accordingly provided a reply memorandum. Upon consideration of the parties' filings, the applicable law, the Federal Rules of Civil Procedure and the facts of this case, the Court finds that the defendants' motion to dismiss will be DENIED. Defendant's motion for summary judgment will be GRANTED and plaintiff's cross motion for partial summary judgment will be DENIED.
Plaintiffs Marrita Murphy and Daniel Leveille filed complaints against the New York National Guard, alleging that their former employer discriminated against them by engaging in conduct that violated six whistle blower environmental statutes. (Leveille et al. v. New York Air National Guard, 1995 WL 848112, *3 (DOL Off, Adm. App.). Each of the whistle blower statutes provide for "compensatory damages."*fn1 The Toxic Substances Control Act, 15 U.S.C. §2622 (1994); The Safe Drinking Water Act, 42 U.S.C. §300j-9(I) (1994); The Clean Air Act, 42 U.S.C. §7622 (1994); The Solid Waste Disposal Act, 42 U.S.C. §6971 (1994); The Clean Water Act, 33 U.S.C. §1367 (1994); The Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C. §9610 (1994).
During the trial, Dr. Edwin N. Carter and Dr. Barry L. Kurzer testified that plaintiff's injuries were the result of NYANG's conduct. Dr. Carter testified that Murphy sustained "somatic" and "emotional" injuries, including a condition known as "bruxism," or teeth grinding. (Aff. Dr. Carter.) Murphy had no previous history of bruxism, but was initially treated for the condition in March 1994, when Dr. Kurzer immediately recommended a bite guard. (Aff. of Dr. Kurzer, ¶5-6.) Murphy continues to experience pain and tooth damage from the bruxism. (Id. at ¶ 13-15.) Additionally, the Administrative Law Judge noted and the Administrative Review Board confirmed that Murphy suffered from other "physical manifestations of stress" including "anxiety attacks, shortness of breath, and dizziness." (Leveille v. New York Air National Guard, Recommended Decision and Order at 6 (ALJ Feb. 9, 1998.)
The Secretary of Labor ruled in favor of Murphy on December 11, 1995, and dismissed Daniel Leveille's complaint due to untimely filing. (Id.) Shortly thereafter, in 1996, Congress amended 26 U.S.C. § 104(a)(2), the statute governing plaintiff's potential exclusion from taxation, limiting the exclusion to compensatory damages received on account of "physical injuries and physical sickness." Prior to 1996, § 104(a)(2) required only personal injury or sickness to qualify for the tax exemption. On October 25, 1999, Murphy was awarded $70,000 in damages - $45,000 for mental pain and anguish, and $25,000 for damage to her professional reputation. (1999 WL 966951, *5 (DOL Adm. Rev.Bd.)) The Department of Labor Decision and Order on Damages stated that "[b]y authorizing the award of compensatory damages, the environmental statutes have created a 'species of tort liability' in favor of persons who are the objects of unlawful discrimination." (Decision and Order on Damages, p. 4 (Oct. 25, 1999).)
Murphy then filed her 2000 tax return on April 11, 2001, reporting the $70,000 she received in compensatory damages. (Compl. ¶ 6,7.) Plaintiff later sought a refund of the compensatory damages plus interest on April 15, 2001, December 25, 2001, and October 8, 2002, asserting that such damages were exempted from taxation under 26 U.S.C. § 104(a)(2). (Compl. ¶ 8, 9, 10, 20.) The IRS denied plaintiff's claim for a refund, stating that plaintiff did not demonstrate that the compensatory damages were attributable to physical injury or physical sickness. (Id. at ¶ 14.) Plaintiff requested an appeal of this decision on January 16, 2003, and when the Appeals Office did not respond within 180 days, plaintiff filed this action on November 21, 2003. (Compl. at 1, 15-17.)
1. The IRS is a proper party to this suit under the Administrative Procedure Act. 5 U.S.C. § 702(a) (2000) states that "[a] person suffering a legal wrong because of agency action, or adversely affected or aggrieved by agency action... is entitled to judicial review," so long as the relief sought is other than monetary damages. More specifically, "[t]he district courts have original jurisdiction of "[a]ny civil action against the United States for the recovery of an internal-revenue tax alleged to have been erroneously or illegally assessed or collected, or any penalty claimed to have been collected without authority or any sum alleged to have been excessive or in any manner wrongfully collected under the internal revenue laws." 28 U.S.C. § 1346 (1997); United States v. Williams, 514 U.S. 527, 532 (1995).
Jurisdiction over the United States in federal taxation cases was extended to administrative agencies in 1973. 5 U.S.C. § 703 (1973). The revised statute states that an "action for judicial review may be brought against the United States, the agency by its official title, or the appropriate officer" and that such action "is subject to judicial review in civil...proceedings for judicial enforcement." Id. (emphasis added). 5 U.S.C. § 703 changed the state of the law under Blackmar v. Guerre, 342 U.S. 512, 515 (1952), which held that administrative agencies could not sue or be sued unless Congress authorized the particularly agency as a potential party to the suit. See Baumohl v. Columbia Jewelry Co., 127 F.Supp. 865 (D. Md. 1955); O'Connell v. IRS, 93 A.F.T.R.2d (RIA) 1841; M&M Transp. Co. v. U.S. Industries, Inc., 416 F.Supp. 865 (1976).
Current case law supports the § 703 change. In Sarit v. Drug Enforcement Admin., 759 F.Supp. 63, 69 (D.R.I. 1991) defendants' claimed that the Drug Enforcement Administration could not be sued eo nomine because was a federal agency. The court disagreed, explaining that "[t]his... is not the case when jurisdiction is viewed in light of the Administrative Procedure Act." The Sarit court also referenced the amended language of § 703, noting that "the previous law under Blackmar v. Guerre... was that suit could not be maintained against an agency. The amendment gets rid of Blackmar." Id. (citations omitted). Similarly, in Blassingame v. Secretary of Navy, 811 F.2d 65 (2d. Cir. 1987), the court clarified that "[t]he rule that a federal agency cannot itself be sued... no longer holds." See also B.K. Instrument Inc. v. United States, 715 F.2d 713, 724-25 (2d. Cir. 1983). In this case, the IRS is a proper party to the suit. Under 5 U.S.C. § 702(a), if a party suffers a legal wrong by an agency action, such a party is entitled to bring her case before this Court as long as she seeks relief other than monetary damages. Plaintiff claims violations of her rights Fifth and Sixteenth Amendment rights, and seeks injunctive and declaratory relief, thus satisfying 5 U.S.C. § 702(a). Further, this court has jurisdiction over plaintiff's action because it involves a claim of an illegally collected federal tax revenue. 28 U.S.C. § 1346 (1997). Finally, plaintiff properly named the IRS as party to under 5 U.S.C. § 703 (1973), which codified the principle that such a suit may be brought against a government agency.
2. Plaintiff exhausted all remedies prior to filing suit in District Court.
A party aggrieved by an administrative agency action must exhaust available administrative remedies before seeking judicial relief. Myers v. Bethlehem Shipbuilding Corp., 303 U.S. 41, 50-51 (1938); McKart v. United States, 395 U.S. 185, 193 (1969); Department of Transportation. v. Public Citizen, 541 U.S. 752 (2004). The rationale behind such a requirement is that "[t]he exhaustion doctrine guarantees administrative autonomy and efficiency, and ensures that administrative agencies are afforded an opportunity to ...