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The 3rd U.S. Circuit Court of Appeals has ruled that IRS agents cannot be hit with civil rights suits — so-called Bivens actions — because Congress has created an extensive scheme for providing remedies to taxpayers who want to lodge complaints about an agent’s conduct. “We believe that Congress’s efforts to govern the relationship between the taxpayer and the taxman indicate that Congress has provided what it considers to be adequate remedial mechanisms for wrongs that may occur in the course of this relationship,” U.S. Circuit Judge Marjorie O. Rendell wrote in Shreiber v. Mastrogiovanni. In the suit, Gerald Shreiber claimed that IRS agent Robert Mastrogiovanni left an offensive and anti-Semitic message on his answering machine in 1995, during the period that Mastrogiovanni was auditing Schreiber and his wife for the 1991, 1992 and 1993 tax years. Mastrogiovanni allegedly left a voice mail message at Schreiber’s office that said “Hey you Jew bastard piece of s—. This is White Trash. I am going to get you.” When the audit was completed, the IRS sent a “30-day letter” to the Shreibers proposing large increases in their tax liabilities for the three years. Shreiber filed a protest of the adjustment with the IRS and proceeded to contest it through administrative channels. He reached a tentative settlement with the IRS in June 1999, in which the IRS agreed to reduce the amount of deductions it would deny and agreed to an adjusted amount due. But Shreiber also filed a civil rights suit against Mastrogiovanni and the IRS, alleging that he was denied his constitutional right to a fair hearing “due to the religious discrimination of the IRS agent.” The suit sought damages to compensate Schreiber for his attorney fees and mental anguish as well as punitive damages. U.S. District Judge Joseph E. Irenas dismissed the suit on two grounds. First, he determined that Shreiber could not state a claim upon which relief could be granted because he had conceded that 26 U.S.C. Section 7433 was limited to redressing violations of the Internal Revenue Code and, thus, did not provide him with a cause of action. Irenas then considered whether a Bivens remedy should be inferred and concluded it should not because by enacting Section 7433, Congress had provided a complex structure permitting the challenge of tax assessments through other means. On appeal, Schreiber’s lawyer, David N. Zeehandelaar of Philadelphia’s Blank Rome Comisky & McCauley, argued that the court should infer a cause of action under Bivens precisely because Congress did not provide one when it enacted Section 7433. Without a federal damages action, he argued, Schreiber will be without a meaningful remedy in the form of compensatory and punitive damages and unconstitutional behavior will not be deterred. Rendell found that before deciding whether Schreiber was entitled to bring a Bivens action — named for the U.S. Supreme Court’s 1971 decision in Bivens v. Six Unknown Federal Narcotics Agents — it was important to understand the applicable tax statutes. In 1988, as part of the “Taxpayer Bill of Rights,” Congress enacted 26 U.S.C. Section 7433, providing for a federal cause of action against an officer or employee of the IRS for actions in violation of the Internal Revenue Code or regulations “in connection with any collection of federal tax.” Rendell found that the law is the “exclusive remedy for recovering damages resulting from such actions.” Legislative history, she said, showed that a proposed draft of the law contained broader language that would have permitted suits “in connection with any determination or collection of federal tax” and in violation of “any provisions of federal law.” Although the law was narrowed in scope during the drafting process, Rendell also found that Congress has provided other methods for taxpayers to challenge an assessment, including internal appeals with the IRS, suits for a refund in federal court and appeals of assessments to the Tax Court. In Bivens, Rendell said, the Supreme Court held that an individual complaining of a Fourth Amendment violation by federal officers acting under color of their authority may bring a suit for money damages against the officers in federal court. But she said the justices noted that the case involved “no special factors counseling hesitation in the absence of affirmative action by Congress” and found “no explicit congressional declaration that persons injured by a federal officer’s violation of the Fourth Amendment may not recover money damages from the agents, but must instead be remitted to another remedy, equally effective in the view of Congress.” Since Bivens, Rendell said the Supreme Court has considered the availability of damages remedies in a number of factual settings and has addressed the meaning of “special factors counseling hesitation.” Most relevant for Shreiber’s case, she said, was the 1988 decision in Schweiker v. Chilicky in which the justices considered whether a damages remedy should be implied for alleged due process violations in connection with the denial of Social Security benefits. The plaintiffs in Schweiker were three recipients of Social Security benefits who had been dropped from the rolls after the defendants adopted policies that the plaintiffs alleged violated their due process rights. Each plaintiff had either successfully appealed the determination or applied for reinstatement and had either received full retroactive benefits or had an application for benefits pending. They then sued for additional damages not available through the congressionally provided measures. The Supreme Court held that no Bivens remedy should be implied, holding that the absence of statutory relief for a constitutional violation does not necessarily mean that courts should create a damages remedy against the officer responsible for the violation. The justices stressed the importance of considering Congress’s activities in the area in question even if the remedies provided did not afford complete relief. “When the design of a government program suggests that Congress has provided what it considers adequate remedial mechanisms for constitutional violations that may occur in the course of its administration, we have not created additional Bivens remedies,” the Schweiker court wrote. Applying the same reasoning to Shreiber’s case, Rendell said, “We agree with the District Court that a Bivens action should not be inferred to permit suits against IRS agents accused of violating a taxpayer’s constitutional rights in the course of making a tax assessment.” The legislative history of the Taxpayer’s Bill of Rights, she said, “indicates that Congress did not inadvertently fail to codify a cause of action for assessment conduct; rather, Congress deleted ‘determinations’ — which would have included assessments — in passing the statutory provision.” Congress also withdrew a remedy for violations of “federal law,” Rendell said, and enacted instead a remedy only for violations of the IRS code and regulations. “Congress chose to provide certain remedies, and not others, as part of the complex statutory scheme which regulates the relationship between the IRS and taxpayers,” Rendell wrote. “We will not create a remedy where Congress has chosen not to.” Rendell, who was joined by U.S. Circuit Judges Richard L. Nygaard and Max Rosenn, noted that the court’s decision fell in line with decisions from the 1st, 6th, 7th 8th, 9th and 10th circuits. “Although none of these cases explicitly consider the drafting of 26 U.S.C. Section 7433 in their analysis, and some involve collection actions rather than tax determinations, many rely explicitly upon Schweiker to conclude that the Bivens action against IRS employees is foreclosed by the existence of comprehensive statutory remedies,” Rendell wrote. Justice Department tax division attorney Kenneth Rosenberg argued the case for the government. He was joined on the brief by attorney David I. Pincus.

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