The opinion of the court was delivered by: WEINER
On January 23, 1985, after trial, this court issued a memorandum opinion and order granting judgment to plaintiff, Shirley A. Lojeski, in the amount of sixty-seven thousand dollars ($67,000.00) against defendants Richard Boandl and George Jessup. On March 26, 1985, we granted the motion of the defendants to alter or amend the judgment on the basis of the amount awarded, and we entered a new judgment for plaintiff and against the defendants in the amount of thirty-seven thousand five hundred dollars ($37,500.00). Presently before this court is plaintiff's Application for Attorney's Fees ("Application"), pursuant to 26 U.S.C. § 7430, in the amount of thirteen thousand eight hundred ninety-two dollars and sixty-four cents ($13,892.64). For the reasons which follow, we grant plaintiff's Application; however, we reduce the amount of the fee to $4,768.00 plus expenses of $1,836.64, a total of $6,604.64.
In civil proceedings involving tax issues, Congress has expressly provided that a party may be awarded attorney's fees against the United States. Section 7430 provides in pertinent part:
(a) In general. - In the case of any civil proceeding which is -
(1) brought by or against the United States in connection with the determination, collection, or refund of any tax, interest, or penalty under this title, and
(2) brought in a court of the United States (including the Tax Court and the United States Claims Court), the prevailing party may be awarded a judgment for reasonable litigation costs incurred in civil proceeding.
Defendants argue that plaintiff is not entitled to counsel fees because she failed to name either the United States or the Internal Revenue Service as a party in the proceedings. In addition, defendants claim that the plaintiff has failed to establish that she was the prevailing party.
Plaintiff, however, argues that although her action was initiated against defendants Boandl, et al., it was "in substance an action against the Internal Revenue Service and the United States government" and thus, within the scope of § 7430, because the defendants have been given "access to the vast resources of the federal government at no personal cost" and "the Internal Revenue Service has agreed to pay the personal judgments rendered against the United States." (Plaintiff's Application, p. 2).
In this court's Memorandum Opinion and Order dated March 26, 1985, we held that defendants' sovereign immunity defense was inappropriate since suit was initiated against defendants in their individual capacities and not against the federal government. In that action involving issues of liability and damages, there existed no express statute permitting suit against the United States; however, this is not the case with the issues sub judice. Section 7430 expressly authorizes payment of attorney's fees by the United States in civil proceedings brought by or against the United States. In view of the explicit language of the statute and the intent of Congress in enacting this Section, we can only conclude that plaintiff's Application has been properly initiated pursuant to § 7430. Congress intended that the awarding of fees under 26 U.S.C. § 7430 will deter abusive actions and overreaching by the Internal Revenue Service and will enable individual taxpayers to vindicate their rights regardless of their economic circumstances. Kaufman v. Egger, 584 F. Supp. 872, 879 (D. Me. 1984) quoting H.R. Rep. No. 404, 97th Cong., 2nd Sess. 16 (1982). Therefore, we must conclude that for purposes of reviewing an application for attorney's fees under section 7430, the action sub judice is, indeed, one against the United States, in furtherance of the stated and unambiguous intentions of Congress.
Before a party may be awarded attorney's fees and expenses pursuant to § 7430, that party must have met several criteria. First, all administrative remedies made available by the Internal Revenue Service must be exhausted prior to the pursuit of civil action. 26 U.S.C. § 7430 (b)(2). Compliance with this requirement is not at issue in this case since an administrative review was conducted regarding the activities which precipitated the underlying action.
Second, the party seeking relief must have prevailed in the earlier action. If the parties are not in agreement as to which party prevailed, the court must make the determination. 26 U.S.C. § 7430(c)(2)(B). Section 7430 (c)(2)(A) facilitates this determination, providing that:
(A) in general. - the term "prevailing party" means any party to any proceeding described in subsection (a) (other than the United States or any creditor of the taxpayer involved) which -