[Code of Federal Regulations]
[Title 26, Volume 18]
[Revised as of April 1, 2004]
From the U.S. Government Printing Office via GPO Access
[CITE: 26CFR301.7426-2]

[Page 508-510]
 
                       TITLE 26--INTERNAL REVENUE
 
    CHAPTER I--INTERNAL REVENUE SERVICE, DEPARTMENT OF THE TREASURY 
                               (CONTINUED)
 
PART 301_PROCEDURE AND ADMINISTRATION--Table of Contents
 
                          Judicial Proceedings
 
Sec. 301.7426-2  Recovery of damages in certain cases.

    (a) In general. In addition to remedies related to wrongful levy set 
forth in Sec. 301.7426-1(b), if a district court of the United States 
finds in any action brought under section 7426 that any officer or 
employee of the Internal Revenue Service recklessly or intentionally, or 
by reason of negligence, disregarded any provision of this title, the 
United States shall be liable to the

[[Page 509]]

plaintiff for damages. The plaintiff has a duty to mitigate damages. The 
total amount of damages recoverable under this section is the lesser of 
$1,000,000 ($100,000 in the case of negligence), or the sum of--
    (1) Actual, direct economic damages as defined in Sec. 301.7433-
1(b) sustained as a proximate result of the reckless, intentional, or 
negligent actions of the officer or employee, reduced by the amount of 
any damages awarded under Sec. 301.7426-1(b); and
    (2) Costs of the action as defined in Sec. 301.7433-1(c).
    (b) Administrative remedies must be exhausted. The court may not 
award a judgment for damages under paragraph (a) of this section unless 
the court determines that the plaintiff has filed an administrative 
claim pursuant to paragraph (d) of this section, and has satisfied the 
requirements of paragraph (c) of this section.
    (c) No request for damages in a district court of the United States 
prior to filing an administrative claim. (1) Except as provided in 
paragraph (c)(2) of this section, no request for damages under paragraph 
(a) of this section shall be maintained in any district court of the 
United States before the earlier of the following dates--
    (i) The date the decision is rendered on a claim filed in accordance 
with paragraph (d) of this section; or
    (ii) The date that is six months after the date an administrative 
claim is filed in accordance with paragraph (d) of this section.
    (2) If an administrative claim is filed in accordance with paragraph 
(d) of this section during the last six months of the period of 
limitations described in paragraph (f) of this section, the claimant may 
file an action in a district court of the United States any time after 
the administrative claim is filed and before the expiration of the 
period of limitations.
    (d) Procedures for an administrative claim--(1) Manner. An 
administrative claim for the lesser of $1,000,000 ($100,000 in the case 
of negligence) or actual, direct economic damages as defined in Sec. 
301.7433-1(b) shall be sent in writing to the Area Director, Attn: 
Compliance Technical Support Manager of the area in which the taxpayer 
currently resides.
    (2) Form. The administrative claim shall include--
    (i) The name, taxpayer identification number, current address and 
current home and work telephone numbers (indicating any convenient times 
to be contacted) of the person making the claim;
    (ii) The grounds, in reasonable detail, for the claim (include 
copies of any available substantiating documentation or correspondence 
with the Internal Revenue Service);
    (iii) A description of the damages incurred by the claimant filing 
the claim (include copies of any available substantiating documentation 
or evidence);
    (iv) The dollar amount of the claim, including any damages that have 
not yet been incurred but which are reasonably foreseeable (include 
copies of any available substantiating documentation or evidence); and
    (v) The signature of the claimant or duly authorized representative.
    (3) Duly authorized representative. For purposes of this paragraph 
(d), a duly authorized representative is any attorney, certified public 
accountant, enrolled actuary, or any other person permitted to represent 
the claimant before the Internal Revenue Service who is not disbarred or 
suspended from practice before the Internal Revenue Service and who has 
a written power of attorney executed to the claimant.
    (e) No liability for damages for any sum in excess of the dollar 
amount sought in the administrative claim. See Sec. 301.7433-1(f).
    (f) Period of limitations--(1) Time for filing. A civil action under 
paragraph (a) of this section must be brought in a district court of the 
United States within two years after the date the cause of action 
accrues.
    (2) Right of action accrues. A cause of action under paragraph (a) 
of this section accrues when the plaintiff has had a reasonable 
opportunity to discover all essential elements of a possible cause of 
action.
    (g) Recovery of costs under section 7430. See Sec. 301.7433-1(h).

[[Page 510]]

    (h) Effective date. This section is applicable March 25, 2003.

[T.D. 9050, 68 FR 14319, Mar. 25, 2003]