National Whistleblower Center - Murphy V. IRS

Murphy V. IRS

In Murphy v. IRS, whistleblower Marrita Murphy (represented by David K. Colapinto, general counsel for the National Whistleblower Center) challenged the constitutionality of taxing compensatory damages in civil rights/whistleblower cases. In August, 2006, a unanimous panel of the U.S. Court of Appeals for the District of Columbia Circuit ruled in favor of Ms. Murphy, and declared unconstitutional a special tax Congress had passed in 1996, which targeted civil rights victims who received compensation for emotional distress damages. However, on July 3, 2007, the U.S. Court of Appeals for the District of Columbia Circuit reversed itself on the case, holding that the IRS can tax damage awards based solely on compensating victims who suffer emotional injuries.