Court To Reconsider Whistleblower Tax Case

Court To Reconsider Whistleblower Tax Case, by Glen Shapiro, LawAndTax-News.com, Washington 28 August 2007

Last week attorneys for whistleblower Marrita Murphy asked a US court to reconsider its decision that her award for emotional distress should be taxable, itself a reversal of an earlier decision in her favour.

Ms Murphy's attorneys David Colapinto and Stephen Kohn have asked the full US Court of Appeals for the District of Columbia Circuit to reconsider a July decision by a three-judge panel that held that the IRS can tax damage awards based solely on compensating victims who suffer personal injuries, claiming that Congress intended to amend the tax code “by implication” to tax personal injury damages under its authority to create an excise tax on people who use the courts to vindicate their rights. But a year earlier, the same panel in the same case held that such taxes were unconstitutional, as compensation for a documented "loss" was not "income" subject to the tax code.

Marrita Murphy had received $70,000 compensation after having filed a complaint with the Labor Department against her former employer. She paid taxes on the award but later filed an amended return asking for a refund, which the IRS rejected.

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