Marrita Murphy (plaintiff) filed a complaint with the U.S. Department of Labor against her former employer for emotional distress resulting from her former employer’s actions. Murphy argued she also suffered physical manifestations of emotional distress. The Secretary of Labor found in favor of Murphy and remanded the complaint to an administrative law judge (ALJ) for damages. The ALJ awarded Murphy $70,000, consisting of $45,000 for emotional distress and $25,000 for harm to Murphy’s reputation. Murphy paid federal income taxes on the $70,000, but later filed an amended income tax return seeking a refund of those taxes on the ground that the award was compensation for a physical injury and thus not taxable. The Internal Revenue Service denied Murphy’s refund request. Murphy brought suit against the United States (defendant), arguing that the award was not taxable because either it was not included in the definition of gross income, or was included in the exception from gross income for personal-physical-injury damages. Murphy also argued that the tax on her award was an unconstitutional direct tax. The district court ruled in favor of the United States. Murphy appealed.