Culpepper-Smith v. United States

In 1991, the Internal Revenue Service (IRS) assessed taxes against Lena Culpepper-Smith (plaintiff) for 1980. The IRS subsequently applied Culpepper-Smith’s 1993 and 1995 refunds to her 1980 taxes. Culpepper-Smith sued the United States (defendant), seeking (1) an injunction barring the IRS from collecting the 1980 taxes; (2) payment of her 1993 and 1995 refunds; and (3) damages, attorney’s fees, and other costs. In June 1998, the United States conceded that the IRS did not send Culpepper-Smith the required deficiency notice, represented that it would abate the 1980 assessment, and asked Culpepper-Smith to stipulate to dismissal. Culpepper-Smith declined to stipulate to dismissal, presumably because the IRS could have issued a new 1980 assessment and because she would have had to forgo fees and costs. In July, the United States moved to dismiss, and Culpepper-Smith cross-moved (1) for summary judgment regarding a permanent injunction, attorney’s fees and other costs, and damages; (2) to amend her complaint to specifically request payment of the refunds; and (3) to enforce the IRS’s concession and to prohibit the IRS from collecting on the 1980 assessment. In August, the court dismissed Culpepper-Smith’s injunction claim and denied Culpepper-Smith’s motion to enforce the IRS’s concession, both subject to the IRS’s abatement of the 1980 assessment and removal of all liens and levies against Culpepper-Smith. The district court also denied Culpepper-Smith’s other motions. In March 1999, the parties stipulated to the dismissal of Culpepper-Smith’s remaining damages claim. Contending that she was the prevailing party, Culpepper-Smith then moved for attorney’s fees and other costs pursuant to Internal Revenue Code (code) § 7430. The United States effectively conceded that Culpepper-Smith was the prevailing party regarding the 1980 assessment, but the United States contended that Culpepper-Smith did not prevail on the other issues that were litigated after the United States’ June 1998 concession.