Robert Gessert v. United States
703 F.3d 1028
7th Cir.2013Background
- Gessert Group failed to pay over $1 million in employment taxes; trust fund taxes were at issue.
- IRS Revenue Officer Johnson pursued collection, levied accounts, and sought the trust fund recovery penalty against Gessert personally.
- Gessert and the Group sued for refunds, abatements, and damages under §7433, alleging misapplication of voluntary payments and improper levies.
- IRS applied voluntary payments to non-trust fund obligations due to lack of written designation from the Group.
- Levy actions were also issued to third parties DePuy and Pfizer; the Group claimed these levies were improper.
- District court dismissed for lack of standing under §7433, time-barred refund claims, and such, with judgment entered against Gessert and the Group.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Standing under §7433 to sue | Gessert and Group claim damages for IRS actions. | Only the taxpayer actually subjected to improper collection may sue. | Gessert has no standing; §7433 limits relief to the subject taxpayer. |
| Economic damage requirement for §7433 damages | Group suffered harm from misapplied payments. | No economic harm, so no §7433 damages. | Group lacked actual economic damages; claim properly dismissed. |
| Authority to levy third-party funds (DePuy and Pfizer) under §7433 | Levy on third-party funds was improper. | Levy by IRS authorized; Group lacks standing to challenge third-party levies. | No standing to challenge levies on third parties; §7426 provides only limited recourse. |
| Merit of remaining §7433 claims (various statutory/regulatory violations) | Johnson violated several provisions warranting §7433 damages. | Claims lack economic damages or are otherwise unwarranted. | All remaining §7433 claims affirmed as to lack of standing or merit. |
| Refund and abatement claims timeliness | Refund/abatement claims were timely and properly pleaded. | Administrative claims untimely; declaratory relief barred; no overpayment. | Refund claims time-barred; declaratory relief generally unavailable; claims affirmed. |
Key Cases Cited
- Kuznitsky v. United States, 17 F.3d 1029 (7th Cir. 1994) (trust fund recovery penalties are individual liability)
- Allied/Royal Parking L.P. v. United States, 166 F.3d 1000 (9th Cir. 1999) (standing limits under §7433; third parties barred)
- Soriano v. United States, 352 U.S. 270 (1957) (strictly construed waivers; government consent narrowed)
- Schon v. United States, 759 F.2d 617 (7th Cir. 1985) (overpayment requirement; declaratory relief barred)
- United States v. Schroder, 900 F.2d 1144 (7th Cir. 1990) (divisible taxes; trust fund penalties per employee)
- Martin v. Commissioner, 38 F. App’x 980 (4th Cir. 2002) (directed payments require written designation)
- Flora v. United States, 357 U.S. 63 (1958) (administrative prerequisites for refund)
- In re Kaplan, 104 F.3d 589 (3d Cir. 1997) (Kaplan distinguished; not controlling for §7433)