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April 24, 1992


The opinion of the court was delivered by: BRIAN BARNETT DUFF


 Timothy and Nanette Crossin, husband and wife, *fn1" filed suit against the United States alleging that their Claim for a Refund for the overpayment of income taxes for the 1989 tax year was erroneously denied. The Crossins paid $ 66,433 as a tax assessed against the award resulting from the settlement of a civil rights case. They claim that the award was excludable from the computation of income under § 104(a)(2) of the Internal Revenue Code. The government denies that § 104(a)(2) excludes the award. The parties have filed cross-motions for summary judgement. The government's motion is granted.


 The Crossins filed a joint tax return for 1989, the tax year in which the settlement payment was received. They then filed a Claim for Refund on July 5, 1990 to obtain approximately $ 66,000 in income taxes withheld. The claim was disallowed by the District Director of Internal Revenue, Chicago, District, on February 4, 1991. The Crossins then filed this action seeking a refund of the taxes paid.


 The parties are now before this court on cross motions for summary judgment. The sole issue presented is whether or not backpay awarded pursuant to a settlement of a Title VII sex discrimination action is excludable from income under § 104(a)(2) of the Internal Revenue Code. § 104(a)(2) excludes "the amount of any damages received (whether by suit or agreement and whether as lump sums or as periodic payments) on account of personal injuries or sickness" from the calculation of a taxpayer's gross income. The parties disagree on the proper application of this section. The interpretation of § 104(a)(2) has been litigated in several circuits with varying results. *fn2" The Seventh Circuit has not yet addressed this issue directly, but as will be seem below, has provided significant guidance.

 § 61 of the Code determines what is included in a taxpayer's calculation of his or her "gross income". § 61(a) defines "gross income" as all income from whatever source derived." This provision is to be broadly construed as the purpose of the statute is to tax all income comprehensively. C.I.R. v. Jacobson, 336 U.S. 28, 93 L. Ed. 477, 69 S. Ct. 358 (1949) (discussing § 22(a) of the 1939 Internal Revenue Code, the predecessor of § 61 of the current Code). Under that broad analysis any "accession to wealth" received by a taxpayer represents gross, taxable income. Commissioner v. Glenshaw Glass Co., 348 U.S. 426, 99 L. Ed. 483, 75 S. Ct. 473 (1955). Congress has, however, provided certain specific exceptions to the inclusive nature of § 61. § 104(a)(2), the section involved in this controversy, is one such exception.

 Exceptions under the tax code must be narrowly construed. United States v. Centennial Savings Bank, 113 L. Ed. 2d 608, 111 S. Ct. 1512 (1991). Strict construction of what is to be excluded from gross income furthers the intent of the legislature to tax income comprehensively. Wolder v. C.I.R., 493 F.2d 608 (2nd. Cir. 1974) cert. denied 419 U.S. 828, 42 L. Ed. 2d 53, 95 S. Ct. 49 (1974). In order to be subject to the exception created in § 104(a)(2) the plaintiffs must meet all of the criteria established in that exception. Thus, the plaintiffs have the burden of proving two elements: (1) that the plaintiffs received an award of "damages" and (2) that award was received on account of "personal injuries or sickness".

 Addressing the second element first, the plaintiffs argue that the discrimination Mrs. Crossin suffered was a "personal injury". They analogize an action under Title VII to a tort claim, asserting that like a tort a violation of Title VII is "a violation of some duty owing to a plaintiff . . . generally . . . [arising] by operation of a law and not mere agreement of the parties." Downey v. Commissioner, 97 T.C. 150 (1990) quoting Black's Law Dictionary 1489 (6th ed. 1990) (definition of tort). According to the Crossins the harms that Title VII are intended to prevent are fundamental human rights. See Davis v. Passman 442 U.S. 228, 60 L. Ed. 2d 846, 99 S. Ct. 2264 (1979). They note the distinction between a tort claim and a contractual obligation and contend that a Title VII violation is more like a tort claim.

 The government does not address the issue of whether or not a violation of Title VII is a "personal injury" but instead argues that the plaintiffs failed to meet the first element of § 104(a)(2), i.e., that the backpay received by Nanette Crossin did not amount to "damages" under the statute. The government claims that Mrs. Crossin's backpay award substitutes for compensation for services and is therefore not subject to an exclusion under § 104(a)(2).

 The remedies available under Title VII are statutorily limited to equitable relief. *fn3" A clear distinction exists between the equitable relief allowed under Title VII and awards of compensatory or punitive damages. Espinueva v. Garrett, 895 F.2d 1164 (7th Cir. 1990). Assessments of the remedies available to victims of sex discrimination have concluded that "no damages are available under Title VII." Bohen v. City of East Chicago, Ind., 799 F.2d 1180 (7th Cir. 1986).

 The money received by Mrs. Crossin was paid in reference to the amount of money she would have earned had she been hired by the F.B.I. "The demand for backpay is not in the nature of a claim for damages, but rather an integral part of the statutory equitable remedy . . ." Johnson v. Georgia Highway Express, Inc., 417 F.2d 1122 (5th Cir. 1969) quoting Smith v. Hampton Training School for Nurses, 360 F.2d 577 (4th Cir. 1966).

 The government contends that the rationale behind § 104(a)(2) is that no gain is realized by a person that is compensated for the loss of personal capital lost through a personal injury, and that therefore there is no income available to tax. Commissioner v. Glenshaw Glass Co., 348 U.S. 426, 432, 99 L. Ed. 483, 75 S. Ct. 473 n. 8 (1955). The government takes the position that a settlement or award under Title VII does not represent lost personal capital but ...

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