Murphy v. Internal Revenue Service

United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued April 23, 2007 Decided July 3, 2007

No. 05-5139

MARRITA MURPHY AND
DANIEL J. LEVEILLE,
APPELLANTS

v.

INTERNAL REVENUE SERVICE AND
UNITED STATES OF AMERICA,
APPELLEES

Appeal from the United States District Court
for the District of Columbia
(No. 03cv02414)

On Rehearing

David K. Colapinto argued the cause for appellants. With
him on the briefs were Stephen M. Kohn and Michael D. Kohn.

Richard R. Renner was on the brief for amici curiae No
FEAR Coalition, et al. in support of appellants.

Gilbert S. Rothenberg, Attorney, U.S. Department of
Justice, argued the cause for appellees. With him on the brief
were Jeffrey A. Taylor, U.S. Attorney, Richard T. Morrison,
 2

Deputy Assistant Attorney General, and Kenneth L. Greene and
Francesca U. Tamami, Attorneys. Bridget M. Rowan, Attorney,
entered an appearance.

Before: GINSBURG, Chief Judge, and ROGERS and BROWN,
Circuit Judges.

Opinion for the Court filed by Chief Judge GINSBURG.

GINSBURG, Chief Judge: Marrita Murphy brought this suit
to recover income taxes she paid on the compensatory damages
for emotional distress and loss of reputation she was awarded in
an administrative action she brought against her former
employer. Murphy contends that under § 104(a)(2) of the
Internal Revenue Code (IRC), 26 U.S.C. § 104(a)(2), her award
should have been excluded from her gross income because it
was compensation received “on account of personal physical
injuries or physical sickness.” She also maintains that, in any
event, her award is not part of her gross income as defined by
§ 61 of the IRC, 26 U.S.C. § 61. Finally, she argues that taxing
her award subjects her to an unapportioned direct tax in
violation of Article I, Section 9 of the Constitution of the United
States.

We reject Murphy’s argument in all aspects. We hold, first,
that Murphy’s compensation was not “received ... on account of
personal physical injuries” excludable from gross income under
§ 104(a)(2). Second, we conclude gross income as defined by
§ 61 includes compensatory damages for non-physical injuries.
Third, we hold that a tax upon such damages is within the
Congress’s power to tax.

I. Background

In 1994 Marrita Leveille (now Murphy) filed a complaint
 3

with the Department of Labor alleging that her former employer,
the New York Air National Guard (NYANG), in violation of
various whistle-blower statutes, had “blacklisted” her and
provided unfavorable references to potential employers after she
had complained to state authorities of environmental hazards on
a NYANG airbase. The Secretary of Labor determined the
NYANG had unlawfully discriminated and retaliated against
Murphy, ordered that any adverse references to the taxpayer in
the files of the Office of Personnel Management be withdrawn,
and remanded her case to an Administrative Law Judge “for
findings on compensatory damages.”

On remand Murphy submitted evidence that she had
suffered both mental and physical injuries as a result of the
NYANG's blacklisting her. A psychologist testified that
Murphy had sustained both “somatic” and “emotional” injuries,
basing his conclusion in part upon medical and dental records
showing Murphy had “bruxism,” or teeth grinding often
associated with stress, which may cause permanent tooth
damage. Noting that Murphy also suffered from other “physical
manifestations of stress” including “anxiety attacks, shortness of
breath, and dizziness,” and that Murphy testified she “could not
concentrate, stopped talking to friends, and no longer enjoyed
‘anything in life,’” the ALJ recommended compensatory
damages totaling $70,000, of which $45,000 was for “past and
future emotional distress,” and $25,000 was for “injury to
[Murphy’s] vocational reputation” from having been blacklisted.
None of the award was for lost wages or diminished earning
capacity.

In 1999 the Department of Labor Administrative Review
Board affirmed the ALJ’s findings and recommendations. See
Leveille v. N.Y. Air Nat’l Guard, 1999 WL 966951, at *2-*4
(Oct. 25, 1999). On her tax return for 2000, Murphy included
the $70,000 award in her “gross income” pursuant to § 61 of the
 4

IRC. See 26 U.S.C. § 61(a) (“[G]ross income means all income
from whatever source derived”). As a result, she paid $20,665
in taxes on the award.

Murphy later filed an amended return in which she sought
a refund of the $20,665 based upon § 104(a)(2) of the IRC,
which provides that “gross income does not include ... damages
... received ... on account of personal physical injuries or
physical sickness.” In support of her amended return, Murphy
submitted copies of her dental and medical records. Upon
deciding Murphy had failed to demonstrate the compensatory
damages were attributable to “physical injury” or “physical
sickness,” the Internal Revenue Service denied her request for
a refund. Murphy thereafter sued the IRS and the United States
in the district court.

In her complaint Murphy sought a refund of the $20,665,
plus applicable interest, pursuant to the Sixteenth Amendment
to the Constitution of the United States, along with declaratory
and injunctive relief against the IRS pursuant to the
Adminstrative Procedure Act and the Due Process Clause of the
Fifth Amendment. She argued her compensatory award was in
fact for “physical personal injuries” and therefore excluded from
gross income under § 104(a)(2). In the alternative Murphy
asserted taxing her award was unconstitutional because the
award was not “income” within the meaning of the Sixteenth
Amendment. The Government moved to dismiss Murphy’s suit
as to the IRS, contending the Service was not a proper
defendant, and for summary judgment on all claims.

The district court denied the Government’s motion to
dismiss, holding that Murphy had the right to bring an “action[]
for declaratory judgments or ... [a] mandatory injunction”
against an “agency by its official title,” pursuant to § 703 of the
APA, 5 U.S.C. § 703. Murphy v. IRS, 362 F. Supp. 2d 206,
 5

211-12, 218 (2005). The court then rejected all of Murphy’s
claims on the merits and granted summary judgment for the
Government and the IRS. Id.

Murphy appealed the judgment of the district court with
respect to her claims under § 104(a)(2) and the Sixteenth
Amendment. In Murphy v. IRS, 460 F.3d 79 (2006), we
concluded Murphy’s award was not exempt from taxation
pursuant to § 104(a)(2), id. at 84, but also was not “income”
within the meaning of the Sixteenth Amendment, id. at 92, and
therefore reversed the decision of the district court. The
Government petitioned for rehearing en banc, arguing for the
first time that, even if Murphy’s award is not income, there is no
constitutional impediment to taxing it because a tax on the
award is not a direct tax and is imposed uniformly. In view of
the importance of the issue thus belatedly raised, the panel sua
sponte vacated its judgment and reheard the case. See
Consumers Union of U.S., Inc. v. Fed. Power Comm’n, 510 F.2d
656, 662 (D.C. Cir. 1975) (“[R]egarding the contents of briefs
on appeal, we may also consider points not raised in the briefs
or in oral argument. Our willingness to do so rests on a
balancing of considerations of judicial orderliness and efficiency
against the need for the greatest possible accuracy in judicial
decisionmaking. The latter factor is of particular weight when
the decision affects the broad public interest.”) (footnotes
omitted); see also Eli Lilly & Co. v. Home Ins. Co., 794 F.2d
710, 717 (D.C. Cir. 1986) (“The rule in this circuit is that
litigants must raise their claims on their initial appeal and not in
subsequent hearings following a remand. This is a specific
application of the general waiver rule, which bends only in
‘exceptional circumstances, where injustice might otherwise
result.’”) (quoting Dist. of Columbia v. Air Florida, Inc., 750
F.2d 1077, 1085 (D.C. Cir. 1984)) (citation omitted). In the
present opinion, we affirm the judgment of the district court
based upon the newly argued ground that Murphy’s award, even
 6

if it is not income within the meaning of the Sixteenth
Amendment, is within the reach of the congressional power to
tax under Article I, Section 8 of the Constitution.

II. Analysis

We review the district court’s grant of summary judgment
de novo, Flynn v. R.C. Tile, 353 F.3d 953, 957 (D.C. Cir. 2004),
bearing in mind that summary judgment is appropriate only “if
there is no genuine issue as to any material fact and if the
moving party is entitled to judgment as a matter of law,”
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250 (1986).
Before addressing Murphy’s claims on their merits, however, we
must determine whether the district court erred in holding the
IRS was a proper defendant.

A. The IRS as a Defendant

The Government contends the courts lack jurisdiction over
Murphy’s claims against the IRS because the Congress has not
waived that agency’s immunity from declaratory and injunctive
actions pursuant to 28 U.S.C. § 2201(a) (courts may grant
declaratory relief “except with respect to Federal taxes”) and 26
U.S.C. § 7421(a) (“no suit for the purpose of restraining the
assessment or collection of any tax shall be maintained in any
court by any person”); and insofar as the Congress in 28 U.S.C.
§ 1346(a)(1) has waived immunity from civil actions seeking tax
refunds, that provision on its face applies to “civil action[s]
against the United States,” not against the IRS. In reply Murphy
argues only that the Government forfeited the issue of sovereign
immunity because it did not cross-appeal the district court’s
denial of its motion to dismiss. See FED. R. APP. P. 4(a)(3).
Notwithstanding the Government's failure to cross-appeal,
however, the court must address a question concerning its
jurisdiction. See Occidental Petroleum Corp. v. SEC, 873 F.2d
 7

325, 328 (D.C. Cir. 1989) (“As a preliminary matter ... we must
address the question of our jurisdiction to hear this appeal”).

Murphy and the district court are correct that § 703 of the
APA does create a right of action for equitable relief against a
federal agency but, as the Government correctly points out, the
Congress has preserved the immunity of the United States from
declaratory and injunctive relief with respect to all tax
controversies except those pertaining to the classification of
organizations under § 501(c) of the IRC. See 28 U.S.C.
§ 2201(a); 26 U.S.C. § 7421(a). As an agency of the
Government, of course, the IRS shares that immunity. See
Settles v. U.S. Parole Comm’n, 429 F.3d 1098, 1106 (D.C. Cir.
2005) (agency “retains the immunity it is due as an arm of the
federal sovereign”). Insofar as the Congress in 28 U.S.C.
§ 1346(a)(1) has waived sovereign immunity with respect to
suits for tax refunds, that provision specifically contemplates
only actions against the “United States.” Therefore, we hold the
IRS, unlike the United States, may not be sued eo nomine in this
case.

B. Section 104(a)(2) of the IRC

Section 104(a) (“Compensation for injuries or sickness”)
provides that “gross income [under § 61 of the IRC] does not
include the amount of any damages (other than punitive
damages) received ... on account of personal physical injuries or
physical sickness.” 26 U.S.C. § 104(a)(2). Since 1996 it has
further provided that, for purposes of this exclusion, “emotional
distress shall not be treated as a physical injury or physical
sickness.” Id. § 104(a). The version of § 104(a)(2) in effect
prior to 1996 had excluded from gross income monies received
in compensation for “personal injuries or sickness,” which
included both physical and nonphysical injuries such as
emotional distress. Id. § 104(a)(2) (1995); see United States v.
 8

Burke, 504 U.S. 229, 235 n.6 (1992) (“[section] 104(a)(2) in fact
encompasses a broad range of physical and nonphysical injuries
to personal interests”). In Commissioner v. Schleier, 515 U.S.
323 (1995), the Supreme Court held that before a taxpayer may
exclude compensatory damages from gross income pursuant to
§ 104(a)(2), he must first demonstrate that “the underlying cause
of action giving rise to the recovery [was] ‘based upon tort or
tort type rights.’” Id. at 337. The taxpayer has the same burden
under the statute as amended. See, e.g., Chamberlain v. United
States, 401 F.3d 335, 341 (5th Cir. 2005).

Murphy contends § 104(a)(2), even as amended, excludes
her particular award from gross income. First, she asserts her
award was “based upon ... tort type rights” in the whistle-blower
statutes the NYANG violated — a position the Government does
not challenge. Second, she claims she was compensated for
“physical” injuries, which claim the Government does dispute.

Murphy points both to her psychologist’s testimony that she
had experienced “somatic” and “body” injuries “as a result of
NYANG's blacklisting [her],” and to the American Heritage
Dictionary, which defines “somatic” as “relating to, or affecting
the body, especially as distinguished from a body part, the mind,
or the environment.” Murphy further argues the dental records
she submitted to the IRS proved she has suffered permanent
damage to her teeth. Citing Walters v. Mintec/International, 758
F.2d 73, 78 (3d Cir. 1985), and Payne v. Gen. Motors Corp., 731
F. Supp. 1465, 1474-75 (D. Kan. 1990), Murphy contends that
“substantial physical problems caused by emotional distress are
considered physical injuries or physical sickness.”

Murphy further contends that neither § 104 of the IRC nor
the regulation issued thereunder “limits the physical disability
exclusion to a physical stimulus.” In fact, as Murphy points out,
the applicable regulation, which provides that § 104(a)(2)
 9

“excludes from gross income the amount of any damages
received (whether by suit or agreement) on account of personal
injuries or sickness,” 26 C.F.R. § 1.104-1(c), does not
distinguish between physical injuries stemming from physical
stimuli and those arising from emotional trauma; rather, it tracks
the pre-1996 text of § 104(a)(2), which the IRS agrees excluded
from gross income compensation both for physical and for
nonphysical injuries.

For its part, the Government argues Murphy’s focus upon
the word “physical” in § 104(a)(2) is misplaced; more important
is the phrase “on account of.” In O’Gilvie v. United States, 519
U.S. 79 (1996), the Supreme Court read that phrase to require a
“strong[] causal connection,” thereby making § 104(a)(2)
“applicable only to those personal injury lawsuit damages that
were awarded by reason of, or because of, the personal injuries.”
Id. at 83. The Court specifically rejected a “but-for” formulation
in favor of a “stronger causal connection.” Id. at 82-83. The
Government therefore concludes Murphy must demonstrate she
was awarded damages “because of” her physical injuries, which
the Government claims she has failed to do.

Indeed, as the Government points out, the ALJ expressly
recommended, and the Board expressly awarded, compensatory
damages “because of” Murphy’s nonphysical injuries. The
Board analyzed the ALJ’s recommendation under the headings
“Compensatory damage for emotional distress or mental
anguish” and “Compensatory damage award for injury to
professional reputation,” and noted such damages compensate
“not only for direct pecuniary loss, but also for such harms as
impairment of reputation, personal humiliation, and mental
anguish and suffering.” Leveille, 1999 WL 966951 at *2. In
describing the ALJ’s proposed award as “reasonable,” the Board
stated Murphy was to receive “$45,000 for mental pain and
anguish” and “$25,000 for injury to professional reputation.”
 10

Although Murphy may have suffered from bruxism or other
physical symptoms of stress, the Board focused upon Murphy’s
testimony that she experienced “severe anxiety attacks, inability
to concentrate, a feeling that she no longer enjoyed ‘anything in
life,’ and marital conflict” and upon her psychologist’s
testimony about the “substantial effect the negative references
had on [Murphy].” Id. at *3. The Board made no reference to
her bruxism, and acknowledged that “[a]ny attempt to set a
monetary value on intangible damages such as mental pain and
anguish involves a subjective judgment,” id. at *4, before
concluding the ALJ’s recommendation was reasonable. The
Government therefore argues “there was no direct causal link
between the damages award at issue and [Murphy’s] bruxism.”

Murphy responds that it is undisputed she suffered both
“somatic” and “emotional” injuries, and the ALJ and Board
expressly cited to the portion of her psychologist’s testimony
establishing that fact. She contends the Board therefore relied
upon her physical injuries in determining her damages, making
those injuries a direct cause of her award in spite of the Board’s
labeling the award as one for emotional distress.

Although the pre-1996 version of § 104(a)(2) was at issue
in O’Gilvie, the Court’s analysis of the phrase “on account of,”
which phrase was unchanged by the 1996 Amendments, remains
controlling here. Murphy no doubt suffered from certain
physical manifestations of emotional distress, but the record
clearly indicates the Board awarded her compensation only “for
mental pain and anguish” and “for injury to professional
reputation.” Id. at *5. Although the Board cited her
psychologist, who had mentioned her physical aliments, in
support of Murphy’s “description of her mental anguish,” we
cannot say the Board, notwithstanding its clear statements to the
contrary, actually awarded damages because of Murphy’s
bruxism and other physical manifestations of stress. Id. at *3.
 11

At best — and this is doubtful — at best the Board and the ALJ
may have considered her physical injuries indicative of the
severity of the emotional distress for which the damages were
awarded, but her physical injuries themselves were not the
reason for the award. The Board thus having left no room for
doubt about the grounds for her award, we conclude Murphy’s
damages were not “awarded by reason of, or because of, ...
[physical] personal injuries,” O’Gilvie, 519 U.S. at 83.
Therefore, § 104(a)(2) does not permit Murphy to exclude her
award from gross income.*

C. Section 61 of the IRC

Murphy and the Government agree that for Murphy’s award
to be taxable, it must be part of her “gross income” as defined by
§ 61(a) of the IRC, which states in relevant part: “gross income
means all income from whatever source derived.” The Supreme
Court has interpreted the section broadly to extend to “all
economic gains not otherwise exempted.” Comm’r v. Banks,
543 U.S. 426, 433 (2005); see also, e.g., James v. United States,
366 U.S. 213, 219 (1961) (Section 61 encompasses “all
accessions to wealth”) (internal quotation mark omitted);
Comm’r v. Glenshaw Glass Co., 348 U.S. 426, 430 (“the Court
has given a liberal construction to [“gross income”] in
recognition of the intention of Congress to tax all gains except
those specifically exempted”). “Gross income” in § 61(a) is at
least as broad as the meaning of “incomes” in the Sixteenth

*
Insofar as compensation for nonphysical personal injuries
appears to be excludable from gross income under 26 C.F.R.
§ 1.104-1, the regulation conflicts with the plain text of § 104(a)(2);
in these circumstances the statute clearly controls. See Brown v.
Gardner, 513 U.S. 115, 122 (1994) (finding “no antidote to [a
regulation’s] clear inconsistency with a statute”).
 12

Amendment.* See Glenshaw Glass, 348 U.S. at 429, 432 n.11
(quoting H.R. Rep. No. 83-1337, at A18 (1954), reprinted in
1954 U.S.C.C.A.N. 4017, 4155); Helvering v. Bruun, 309 U.S.
461, 468 (1940).

Murphy argues her award is not a gain or an accession to
wealth and therefore not part of gross income. Noting the
Supreme Court has long recognized “the principle that a
restoration of capital [i]s not income; hence it [falls] outside the
definition of ‘income’ upon which the law impose[s] a tax,”
O’Gilvie, 519 U.S. at 84; see, e.g., Doyle v. Mitchell Bros. Co.,
247 U.S. 179, 187-88 (1918); S. Pac. Co. v. Lowe, 247 U.S. 330,
335 (1918), Murphy contends a damage award for personal
injuries — including nonphysical injuries — should be viewed
as a return of a particular form of capital — “human capital,” as
it were. See Gary S. Becker, HUMAN CAPITAL (1st ed. 1964);
Gary S. Becker, The Economic Way of Looking at Life, Nobel
Lecture (Dec. 9, 1992), in NOBEL LECTURES IN ECONOMIC
SCIENCES 1991-1995, at 43-45 (Torsten Persson ed., 1997). In
her view, the Supreme Court in Glenshaw Glass acknowledged
the relevance of the human capital concept for tax purposes.
There, in holding that punitive damages for personal injury were
“gross income” under the predecessor to § 61, the Court stated:

The long history of ... holding personal injury
recoveries nontaxable on the theory that they roughly
correspond to a return of capital cannot support
exemption of punitive damages following injury to
property .... Damages for personal injury are by
definition compensatory only. Punitive damages, on

*
The Sixteenth Amendment provides: “The Congress shall
have power to lay and collect taxes on incomes, from whatever source
derived, without apportionment among the several States, and without
regard to any census or enumeration.”
 13

the other hand, cannot be considered a restoration of
capital for taxation purposes.

348 U.S. at 432 n.8. By implication, Murphy argues, damages
for personal injury are a “restoration of capital.”

As further support, Murphy cites various administrative
rulings issued shortly after passage of the Sixteenth Amendment
that concluded recoveries from personal injuries were not
income, such as this 1918 Opinion of the Attorney General:

Without affirming that the human body is in a technical
sense the “capital” invested in an accident policy, in a
broad, natural sense the proceeds of the policy do but
substitute, so far as they go, capital which is the source
of future periodical income. They merely take the
place of capital in human ability which was destroyed
by the accident. They are therefore “capital” as
distinguished from “income” receipts.

31 Op. Att’y Gen. 304, 308; see T.D. 2747, 20 Treas. Dec. Int.
Rev. 457 (1918); Sol. Op. 132, I-1 C.B. 92, 93-94 (1922)
(“[M]oney received ... on account of ... defamation of personal
character ... does not constitute income within the meaning of
the sixteenth amendment and the statutes enacted thereunder”).
She also cites a House Report on the bill that became the
Revenue Act of 1918. H.R. Rep. No. 65-767, at 9-10 (1918)
(“Under the present law it is doubtful whether amounts received
... as compensation for personal injury ... are required to be
included in gross income”); see also Dotson v. United States, 87
F.3d 682, 685 (5th Cir. 1996) (concluding on basis of House
Report that the “Congress first enacted the personal injury
compensation exclusion ... when such payments were considered
the return of human capital, and thus not constitutionally taxable
‘income’ under the 16th amendment”).
 14

Finally, Murphy argues her interpretation of § 61 is
reflected in the common law of tort and the provisions in various
environmental statutes and Title VII of the Civil Rights Act of
1964, all of which provide for “make whole” relief. See, e.g., 42
U.S.C. § 1981a; 15 U.S.C. § 2622. If a recovery of damages
designed to “make whole” the plaintiff is taxable, she reasons,
then one who receives the award has not been made whole after
tax. Section 61 should not be read to create a conflict between
the tax code and the “make whole” purpose of the various
statutes.

The Government disputes Murphy’s interpretation on all
fronts. First, noting “the definition [of gross income in the IRC]
extends broadly to all economic gains,” Banks, 543 U.S. at 433,
the Government asserts Murphy “undeniably had economic gain
because she was better off financially after receiving the
damages award than she was prior to receiving it.” Second, the
Government argues that the case law Murphy cites does not
support the proposition that the Congress lacks the power to tax
as income recoveries for personal injuries. In its view, to the
extent the Supreme Court has addressed at all the taxability of
compensatory damages, see, e.g., O’Gilvie, 519 U.S. at 86;
Glenshaw Glass, 348 U.S. at 432 n.8, it was merely articulating
the Congress’s rationale at the time for not taxing such damages,
not the Court’s own view whether such damages could
constitutionally be taxed.

Third, the Government challenges the relevance of the
administrative rulings Murphy cites from around the time the
Sixteenth Amendment was ratified; Treasury decisions dating
from even closer to the time of ratification treated damages
received on account of personal injury as income. See T.D.
2135, 17 Treas. Dec. Int. Rev. 39, 42 (1915); T.D. 2690, Reg.
No. 33 (Rev.), art. 4, 20 Treas. Dec. Int. Rev. 126, 130 (1918).
Furthermore, administrative rulings from the time suggest that,
 15

even if recoveries for physical personal injuries were not
considered part of income, recoveries for nonphysical personal
injuries were. See Sol. Mem. 957, 1 C.B. 65 (1919) (damages
for libel subject to income tax); Sol. Mem. 1384, 2 C.B. 71
(1920) (recovery of damages from alienation of wife’s affections
not regarded as return of capital, hence taxable). Although the
Treasury changed its position in 1922, see Sol. Op. 132, I-1 C.B.
at 93-94, it did so only after the Supreme Court’s decision in
Eisner v. Macomber, 252 U.S. 189 (1920), which the Court later
viewed as having established a definition of income that “served
a useful purpose [but] was not meant to provide a touchstone to
all future gross income questions.” Glenshaw Glass, 348 U.S.
at 430-31. As for Murphy’s contention that reading § 61 to
include her damages would be in tension with the common law
and various statutes providing for “make whole” relief, the
Government denies there is any tension and suggests Murphy is
trying to turn a disagreement over tax policy into a constitutional
issue.

Finally, the Government argues that even if the concept of
human capital is built into § 61, Murphy’s award is nonetheless
taxable because Murphy has no tax basis in her human capital.
Under the IRC, a taxpayer’s gain upon the disposition of
property is the difference between the “amount realized” from
the disposition and his basis in the property, 26 U.S.C. § 1001,
defined as “the cost of such property,” id. § 1012, adjusted “for
expenditures, receipts, losses, or other items, properly
chargeable to [a] capital account,” id. § 1016(a)(1). The
Government asserts, “The Code does not allow individuals to
claim a basis in their human capital”; accordingly, Murphy’s
gain is the full value of the award. See Roemer v. Comm’r, 716
F.2d 693, 696 n.2 (9th Cir. 1983) (“Since there is no tax basis in
a person’s health and other personal interests, money received
as compensation for an injury to those interests might be
considered a realized accession to wealth”) (dictum).
 16

Although Murphy and the Government focus primarily
upon whether Murphy’s award falls within the definition of
income first used in Glenshaw Glass,* coming within that
definition is not the only way in which § 61(a) could be held to
encompass her award. Principles of statutory interpretation
could show § 61(a) includes Murphy’s award in her gross
income regardless whether it was an “accession to wealth,” as
Glenshaw Glass requires. For example, if § 61(a) were
amended specifically to include in gross income “$100,000 in
addition to all other gross income,” then that additional sum
would be a part of gross income under § 61 even though no
actual gain was associated with it. In other words, although the
“Congress cannot make a thing income which is not so in fact,”
Burk-Waggoner Oil Ass’n v. Hopkins, 269 U.S. 110, 114 (1925),
it can label a thing income and tax it, so long as it acts within its
constitutional authority, which includes not only the Sixteenth
Amendment but also Article I, Sections 8 and 9. See Penn Mut.
Indem. Co. v. Comm’r, 277 F.2d 16, 20 (3d Cir. 1960)
(“Congress has the power to impose taxes generally, and if the
particular imposition does not run afoul of any constitutional
restrictions then the tax is lawful, call it what you will”)
(footnote omitted). Accordingly, rather than ask whether
Murphy’s award was an accession to her wealth, we go to the
heart of the matter, which is whether her award is properly

*
Murphy also suggests further insight into whether her award
is income can be gleaned from application of the “in lieu of” test. See
Raytheon Prod. Corp. v. Comm’r, 144 F.2d 110, 113 (1st Cir. 1944).
As she acknowledges, however, we would still be required to
determine whether her award was compensatory or an accession to
wealth, which is the same analysis Glenshaw Glass and its progeny
demand. As discussed below, it is unnecessary to determine if there
was an accession to wealth in this case; § 61 encompasses Murphy’s
award regardless.
 17

included within the definition of gross income in § 61(a), to wit,
“all income from whatever source derived.”

Looking at § 61(a) by itself, one sees no indication that it
covers Murphy’s award unless the award is “income” as defined
by Glenshaw Glass and later cases. Damages received for
emotional distress are not listed among the examples of income
in § 61 and, as Murphy points out, an ambiguity in the meaning
of a revenue-raising statute should be resolved in favor of the
taxpayer. See, e.g., Hassett v. Welch, 303 U.S. 303, 314 (1938);
Gould v. Gould, 245 U.S. 151, 153 (1917); see also United
Dominion Indus., Inc. v. United States, 532 U.S. 822, 839 (2001)
(Thomas, J., concurring); id. at 839 n.1 (Stevens, J., dissenting);
3A NORMAN J. SINGER, SUTHERLAND STATUTES & STATUTORY
CONSTRUCTION § 66:1 (6th ed. 2003). A statute is to be read as
a whole, however, see, e.g., Alaska Dep’t of Envtl. Conservation
v. EPA, 540 U.S. 461, 489 n.13 (2004), and reading § 61 in
combination with § 104(a)(2) of the Internal Revenue Code
presents a very different picture — a picture so clear that we
have no occasion to apply the canon favoring the interpretation
of ambiguous revenue-raising statutes in favor of the taxpayer.

As noted above, in 1996 the Congress amended § 104(a) to
narrow the exclusion to amounts received on account of
“personal physical injuries or physical sickness” from “personal
injuries or sickness,” and explicitly to provide that “emotional
distress shall not be treated as a physical injury or physical
sickness,” thus making clear that an award received on account
of emotional distress is not excluded from gross income under
§ 104(a)(2). Small Business Job Protection Act of 1996, Pub. L.
104-188, § 1605, 110 Stat. 1755, 1838. As this amendment,
which narrows the exclusion, would have no effect whatsoever
if such damages were not included within the ambit of § 61, and
as we must presume that “[w]hen Congress acts to amend a
statute, ... it intends its amendment to have real and substantial
 18

effect,” Stone v. INS, 514 U.S. 386, 397 (1995), the 1996
amendment of § 104(a) strongly suggests § 61 should be read to
include an award for damages from nonphysical harms.*
Although it is unclear whether § 61 covered such an award
before 1996, we need not address that question here; even if the
provision did not do so prior to 1996, the presumption indicates
the Congress implicitly amended § 61 to cover such an award
when it amended § 104(a).

We realize, of course, that amendments by implication, like
repeals by implication, are disfavored. United States v. Welden,
377 U.S. 95, 103 n.12 (1964); Cheney R.R. Co. v. R.R. Ret. Bd.,
50 F.3d 1071, 1078 (D.C. Cir. 1995). The Supreme Court has
also noted, however, that the “classic judicial task of reconciling
many laws enacted over time, and getting them to ‘make sense’
in combination, necessarily assumes that the implications of a
statute may be altered by the implications of a later statute.”
United States v. Fausto, 484 U.S. 439, 453 (1988); see also FDA
v. Brown & Williamson Tobacco Corp., 529 U.S. 120, 133
(2000) (“[T]he meaning of one statute may be affected by other
Acts, particularly where Congress has spoken subsequently and
more specifically to the topic at hand”); Almendarez-Torres v.
United States, 523 U.S. 224, 237 (1998) (suggesting later
enacted laws “depend[ing] for their effectiveness upon
clarification, or a change in the meaning of an earlier statute”
provide a “forward looking legislative mandate, guidance, or
direct suggestion about how courts should interpret the earlier

*
As evidence the presumption is well-founded in this case,
we note the House Report accompanying the 1996 amendment to
§ 104 explicitly presumes recoveries for nonphysical injuries would
be included in gross income: Part of the section explaining the effect
of the amendment is entitled “Include in income damage recoveries for
nonphysical injuries.” H.R. Rep. No. 104-586, at 143-44 (1996),
reprinted in 1996-3 C.B. 331, 481-82.
 19

provisions”); cf. Franklin v. Gwinnett County Pub. Sch., 503
U.S. 60, 72-73 (1992) (amendment of Title IX abrogating
States’ Eleventh Amendment immunity validated Court’s prior
holding that Title IX created implied right of action); id. at 78
(Scalia, J., concurring in judgment) (amendment to Title IX was
an “implicit acknowledgment that damages are available”).

This “classic judicial task” is before us now. For the 1996
amendment of § 104(a) to “make sense,” gross income in
§ 61(a) must, and we therefore hold it does, include an award for
nonphysical damages such as Murphy received, regardless
whether the award is an accession to wealth. Cf. Vermont
Agency of Natural Res. v. United States ex rel. Stevens, 529 U.S.
765, 786 & n.17 (2000) (determining meaning of “person” in
False Claims Act, which was originally enacted in 1863, based
in part upon definition of “person” in Program Fraud Civil
Remedies Act of 1986, which was “designed to operate in
tandem with the [earlier Act]”).

D. The Congress’s Power to Tax

The taxing power of the Congress is established by Article
I, Section 8 of the Constitution: “The Congress shall have power
to lay and collect taxes, duties, imposts and excises.” There are
two limitations on this power. First, as the same section goes on
to provide, “all duties, imposts and excises shall be uniform
throughout the United States.” Second, as provided in Section
9 of that same Article, “No capitation, or other direct, tax shall
be laid, unless in proportion to the census or enumeration herein
before directed to be taken.” See also U.S. CONST. art. I, § 2, cl.
3 (“direct taxes shall be apportioned among the several states
which may be included within this union, according to their
 20

respective numbers”).* We now consider whether the tax laid
upon Murphy’s award violates either of these two constraints.

1. A Direct Tax?

Over the years, courts have considered numerous claims
that one or another nonapportioned tax is a direct tax and
therefore unconstitutional. Although these cases have not
definitively marked the boundary between taxes that must be
apportioned and taxes that need not be, see Bromley v.
McCaughn, 280 U.S. 124, 136 (1929); Spreckels Sugar Ref. Co.
v. McClain, 192 U.S. 397, 413 (1904) (dividing line between
“taxes that are direct and those which are to be regarded simply
as excises” is “often very difficult to be expressed in words”),
some characteristics of each may be discerned.

Only three taxes are definitely known to be direct: (1) a
capitation, U.S. CONST. art. I, § 9, (2) a tax upon real property,
and (3) a tax upon personal property. See Fernandez v. Wiener,
326 U.S. 340, 352 (1945) (“Congress may tax real estate or
chattels if the tax is apportioned”); Pollock v. Farmers’ Loan &
Trust Co., 158 U.S. 601, 637 (1895) (Pollock II).** Such direct
taxes are laid upon one’s “general ownership of property,”
Bromley, 280 U.S. at 136; see also Flint v. Stone Tracy Co., 220
U.S. 107, 149 (1911), as contrasted with excise taxes laid “upon

*
Though it is unclear whether an income tax is a direct tax,
the Sixteenth Amendment definitively establishes that a tax upon
income is not required to be apportioned. See Stanton v. Baltic Mining
Co., 240 U.S. 103, 112-13 (1916).
**
Pollock II also held that a tax upon the income of real or
personal property is a direct tax. 158 U.S. at 637. Whether that
portion of Pollock remains good law is unclear. See Graves v. New
York ex rel. O’Keefe, 306 U.S. 466, 480 (1939).
 21

a particular use or enjoyment of property or the shifting from
one to another of any power or privilege incidental to the
ownership or enjoyment of property.” Fernandez, 326 U.S. at
352; see also Thomas v. United States, 192 U.S. 363, 370 (1904)
(excises cover “duties imposed on importation, consumption,
manufacture and sale of certain commodities, privileges,
particular business transactions, vocations, occupations and the
like”). More specifically, excise taxes include, in addition to
taxes upon consumable items, see Patton v. Brady, 184 U.S.
608, 617-18 (1902), taxes upon the sale of grain on an exchange,
Nicol v. Ames, 173 U.S. 509, 519 (1899), the sale of corporate
stock, Thomas, 192 U.S. at 371, doing business in corporate
form, Flint, 220 U.S. at 151, gross receipts from the “business
of refining sugar,” Spreckels, 192 U.S. at 411, the transfer of
property at death, Knowlton v. Moore, 178 U.S. 41, 81-82
(1900), gifts, Bromley, 280 U.S. at 138, and income from
employment, see Pollock v. Farmers’ Loan & Trust Co., 157
U.S. 429, 579 (1895) (Pollock I) (citing Springer v. United
States, 102 U.S. 586 (1881)).

Murphy and the amici supporting her argue the dividing line
between direct and indirect taxes is based upon the ultimate
incidence of the tax; if the tax cannot be shifted to someone else,
as a capitation cannot, then it is a direct tax; but if the burden
can be passed along through a higher price, as a sales tax upon
a consumable good can be, then the tax is indirect. This, she
argues, was the distinction drawn when the Constitution was
ratified. See Albert Gallatin, A Sketch of the Finances of the
United States (1796), reprinted in 3 THE WRITINGS OF ALBERT
GALLATIN 74-75 (Henry Adams ed., Philadelphia, J.P.
Lippincott & Co. 1879) (“The most generally received opinion
... is, that by direct taxes ... those are meant which are raised on
the capital or revenue of the people; by indirect, such as are
raised on their expense”); THE FEDERALIST NO. 36, at 225
(Alexander Hamilton) (Jacob E. Cooke ed., 1961) (“internal
 22

taxes[] may be subdivided into those of the direct and those of
the indirect kind ... by which must be understood duties and
excises on articles of consumption”). But see Gallatin, supra, at
74 (“[Direct tax] is used, by different writers, and even by the
same writers, in different parts of their writings, in a variety of
senses, according to that view of the subject they were taking”);
EDWIN R.A. SELIGMAN, THE INCOME TAX 540 (photo. reprint
1970) (2d ed. 1914) (“there are almost as many classifications
of direct and indirect taxes are there are authors”). Moreover,
the amici argue, this understanding of the distinction explains
the different restrictions imposed respectively upon the power
of the Congress to tax directly (apportionment) and via excise
(uniformity). Duties, imposts, and excise taxes, which were
expected to constitute the bulk of the new federal government’s
revenue, see Erik M. Jensen, The Apportionment of “Direct
Taxes”: Are Consumption Taxes Constitutional?, 97 COLUM. L.
REV. 2334, 2382 (1997), have a built-in safeguard against
oppressively high rates: Higher taxes result in higher prices and
therefore fewer sales and ultimately lower tax revenues. See
THE FEDERALIST NO. 21, supra, at 134-35 (Alexander
Hamilton). Taxes that cannot be shifted, in contrast, lack this
self-regulating feature, and were therefore constrained by the
more stringent requirement of apportionment. See id. at 135
(“In a branch of taxation where no limits to the discretion of the
government are to be found in the nature of things, the
establishment of a fixed rule ... may be attended with fewer
inconveniences than to leave that discretion altogether at large”);
see also Jensen, supra, at 2382-84.

Finally, the amici contend their understanding of a direct
tax was confirmed in Pollock II, where the Supreme Court noted
that “the words ‘duties, imposts, and excises’ are put in
antithesis to direct taxes,” 158 U.S. at 622, for which it cited
THE FEDERALIST NO. 36 (Hamilton). Pollock II, 158 U.S. at
624-25. As it is clear that Murphy cannot shift her tax burden
 23

to anyone else, per Murphy and the amici, it must be a direct tax.

The Government, unsurprisingly, backs a different
approach; by its lights, only “taxes that are capable of
apportionment in the first instance, specifically, capitation taxes
and taxes on land,” are direct taxes. The Government maintains
that this is how the term was generally understood at the time.
See Calvin H. Johnson, Fixing the Constitutional Absurdity of
the Apportionment of Direct Tax, 21 CONST. COMM. 295, 314
(2004). Moreover, it suggests, this understanding is more in line
with the underlying purpose of the tax and the apportionment
clauses, which were drafted in the intense light of experience
under the Articles of Confederation.

The Articles did not grant the Continental Congress the
power to raise revenue directly; it could only requisition funds
from the States. See ARTICLES OF CONFEDERATION art. VIII
(1781); Bruce Ackerman, Taxation and the Constitution, 99
COLUM. L. REV. 1, 6-7 (1999). This led to problems when the
States, as they often did, refused to remit funds. See Calvin H.
Johnson, The Constitutional Meaning of “Apportionment of
Direct Taxes,” 80 TAX NOTES 591, 593-94 (1998). The
Constitution redressed this problem by giving the new national
government plenary taxing power. See Ackerman, supra, at 7.
In the Government’s view, it therefore makes no sense to treat
“direct taxes” as encompassing taxes for which apportionment
is effectively impossible, because “the Framers could not have
intended to give Congress plenary taxing power, on the one
hand, and then so limit that power by requiring apportionment
for a broad category of taxes, on the other.” This view is,
according to the Government, buttressed by evidence that the
purpose of the apportionment clauses was not in fact to constrain
the power to tax, but rather to placate opponents of the
compromise over representation of the slave states in the House,
 24

as embodied in the Three-fifths Clause.* See Ackerman, supra,
at 10-11. See generally SELIGMAN, supra, at 548-55. As the
Government interprets the historical record, the apportionment
limitation was “more symbolic than anything else: it appeased
the anti-slavery sentiment of the North and offered a practical
advantage to the South as long as the scope of direct taxes was
limited.” See Ackerman, supra, at 10. But see Erik M. Jensen,
Taxation and the Constitution: How to Read the Direct Tax
Clauses, 15 J.L. & POL. 687, 704 (1999) (“One of the reasons
[the direct tax restriction] worked as a compromise was that it
had teeth — it made direct taxes difficult to impose — and it
had teeth however slaves were counted”).

The Government’s view of the clauses is further supported
by the near contemporaneous decision of the Supreme Court in
Hylton v. United States, 3 U.S. (3 Dall.) 171 (1796), holding that
a national tax upon carriages was not a direct tax, and thus not
subject to apportionment. Justices Chase and Iredell opined that
a “direct tax” was one that, unlike the carriage tax, as a practical
matter could be apportioned among the States, id. at 174 (Chase,
J.); id. at 181 (Iredell, J.), while Justice Paterson, noting the
connection between apportionment and slavery, condemned
apportionment as “radically wrong” and “not to be extended by

*
Many Northern delegates were opposed to the three-fifths
compromise on the ground that if slaves were property, then they
should not count for the purpose of representation. Apportionment
effectively meant that if the slaveholding states were to receive
representation in the House for their slaves, then because apportioned
taxes must be allocated across states based upon their representation,
the slaveholding states would pay more in taxes to the national
government than they would have if slaves were not counted at all in
determining representation. See Ackerman, supra, at 9.
Apportionment was then limited to direct taxes lest it drive the
Congress back to reliance upon requisitions from the States. See id.
at 9-10.
 25

construction,” id. at 177-78.* As for Murphy’s reliance upon
Pollock II, the Government contends that although it has never
been overruled, “every aspect of its reasoning has been eroded,”
see, e.g., Stanton v. Baltic Mining Co., 240 U.S. 103, 112-13
(1916), and notes that in Pollock II itself the Court
acknowledged that “taxation on business, privileges, or
employments has assumed the guise of an excise tax,” 158 U.S.
at 635. Pollock II, in the Government’s view, is therefore too
weak a reed to support Murphy’s broad definition of “direct tax”
and certainly does not make “a tax on the conversion of human
capital into money ... problematic.”

Murphy replies that the Government’s historical analysis
does not respond to the contemporaneous sources she and the
amici identified showing that taxes imposed upon individuals
are direct taxes. As for Hylton, Murphy argues nothing in that
decision precludes her position; the Justices viewed the carriage
tax there at issue as a tax upon an expense, see 3 U.S. (3 Dall.)
at 175 (Chase, J.); see also id. at 180-81 (Paterson, J.), which
she agrees is not a direct tax. See Pollock II, 158 U.S. at 626-27.
To the extent Hylton is inconsistent with her position, however,
Murphy contends her references to the Federalist are more
authoritative evidence of the Framers’ understanding of the
term.

Murphy makes no attempt to reconcile her definition with
the long line of cases identifying various taxes as excise taxes,
although several of them seem to refute her position directly. In
particular, we do not see how a known excise, such as the estate
tax, see, e.g., New York Trust Co. v. Eisner, 256 U.S. 345, 349
(1921); Knowlton, 178 U.S. at 81-83, or a tax upon income from

*
The other Justice to hear the case, Wilson, J., had previously
determined while sitting on the Circuit Court of Virginia, that the tax
was not direct and so he did not write a full opinion. Id. at 183-84.
 26

employment, see Pollock II, 158 U.S. at 635; Pollock I, 157 U.S.
at 579; cf. Steward Mach. Co. v. Davis, 301 U.S. 548, 580-81
(1937) (tax upon employers based upon wages paid to
employees is an excise), can be shifted to another person, absent
which they seem to be in irreconcilable conflict with her
position that a tax that cannot be shifted to someone else is a
direct tax. Though it could be argued that the incidence of an
estate tax is inevitably shifted to the beneficiaries, we see at
work none of the restraint upon excessive taxation that Murphy
claims such shifting is supposed to provide; the tax is triggered
by an event, death, that cannot be shifted or avoided. In any
event, Knowlton addressed the argument that Pollock I and II
made ability to shift the hallmark of a direct tax, and rejected it.
178 U.S. at 81-82. Regardless what the original understanding
may have been, therefore, we are bound to follow the Supreme
Court, which has strongly intimated that Murphy’s position is
not the law.

That said, neither need we adopt the Government’s position
that direct taxes are only those capable of satisfying the
constraint of apportionment. In the abstract, such a constraint is
no constraint at all; virtually any tax may be apportioned by
establishing different rates in different states. See Pollock II,
158 U.S. at 632-33. If the Government’s position is instead that
by “capable of apportionment” it means “capable of
apportionment in a manner that does not unfairly tax some
individuals more than others,” then it is difficult to see how a
land tax, which is widely understood to be a direct tax, could be
apportioned by population without similarly imposing
significantly non-uniform rates. See Hylton, 3 U.S. (3 Dall.) at
178-79 (Paterson, J.); Johnson, Constitutional Absurdity, supra,
at 328. But see, e.g., Hylton, 3 U.S. (3 Dall.) at 183 (Iredell, J.)
(contending land tax is capable of apportionment).
 27

We find it more appropriate to analyze this case based upon
the precedents and therefore to ask whether the tax laid upon
Murphy’s award is more akin, on the one hand, to a capitation
or a tax upon one’s ownership of property, or, on the other hand,
more like a tax upon a use of property, a privilege, an activity,
or a transaction, see Thomas, 192 U.S. at 370. Even if we
assume one’s human capital should be treated as personal
property, it does not appear that this tax is upon ownership;
rather, as the Government points out, Murphy is taxed only after
she receives a compensatory award, which makes the tax seem
to be laid upon a transaction. See Tyler v. United States, 281
U.S. 497, 502 (1930) (“A tax laid upon the happening of an
event, as distinguished from its tangible fruits, is an indirect tax
which Congress, in respect of some events ... undoubtedly may
impose”); Simmons v. United States, 308 F.2d 160, 166 (4th Cir.
1962) (tax upon receipt of money is not a direct tax); cf. Penn
Mut., 277 F.2d at 20. Murphy’s situation seems akin to an
involuntary conversion of assets; she was forced to surrender
some part of her mental health and reputation in return for
monetary damages. Cf. 26 U.S.C. § 1033 (property
involuntarily converted into money is taxed to extent of gain
recognized).

At oral argument Murphy resisted this formulation on the
ground that the receipt of an award in lieu of lost mental health
or reputation is not a transaction. This view is tenable, however,
only if one decouples Murphy’s injury (emotional distress and
lost reputation) from her monetary award, but that is not
beneficial to Murphy’s cause, for then Murphy has nothing to
offset the obvious accession to her wealth, which is taxable as
income. Murphy also suggested at oral argument that there was
no transaction because she did not profit. Whether she profited
is irrelevant, however, to whether a tax upon an award of
damages is a direct tax requiring apportionment; profit is
relevant only to whether, if it is a direct tax, it nevertheless need
 28

not be apportioned because the object of the tax is income
within the meaning of the Sixteenth Amendment. Cf. Spreckels,
192 U.S. at 412-13 (tax upon gross receipts associated with
business of refining sugar not a direct tax); Penn Mut., 277 F.2d
at 20 (tax upon gross receipts deemed valid indirect tax despite
taxpayer’s net loss).

So we return to the question: Is a tax upon this particular
kind of transaction equivalent to a tax upon a person or his
property? Cf. Bromley, 280 U.S. at 138 (assuming without
deciding that a tax “levied upon all the uses to which property
may be put, or upon the exercise of a single power indispensable
to the enjoyment of all others over it, would be in effect a tax
upon property”). Murphy did not receive her damages pursuant
to a business activity, cf. Flint, 220 U.S. at 151; Spreckels, 192
U.S. at 411, and we therefore do not view this tax as an excise
under that theory. See Stratton’s Independence, Ltd. v. Howbert,
231 U.S. 399, 414-15 (1913) (“The sale outright of a mining
property might be fairly described as a mere conversion of the
capital from land into money”). On the other hand, as noted
above, the Supreme Court several times has held a tax not
related to business activity is nonetheless an excise. And the tax
at issue here is similar to those.

Bromley, in which a gift tax was deemed an excise, is
particularly instructive: The Court noted it was “a tax laid only
upon the exercise of a single one of those powers incident to
ownership,” 280 U.S. at 136, which distinguished it from “a tax
which falls upon the owner merely because he is owner,
regardless of the use or disposition made of his property,” id. at
137. A gift is the functional equivalent of a below-market sale;
it therefore stands to reason that if, as Bromley holds, a gift tax,
or a tax upon a below-market sale, is a tax laid not upon
ownership but upon the exercise of a power “incident to
ownership,” then a tax upon the sale of property at fair market
 29

value is similarly laid upon an incidental power and not upon
ownership, and hence is an excise. Therefore, even if we were
to accept Murphy’s argument that the human capital concept is
reflected in the Sixteenth Amendment, a tax upon the
involuntary conversion of that capital would still be an excise
and not subject to the requirement of apportionment. But see
Nicol, 173 U.S. at 521 (indicating pre-Bromley that tax upon
“every sale made in any place ... is really and practically upon
property”).

In any event, even if a tax upon the sale of property is a
direct tax upon the property itself, we do not believe Murphy’s
situation involves a tax “upon the sale itself, considered separate
and apart from the place and the circumstances of the sale.” Id.
at 520. Instead, as in Nicol, this tax is more akin to “a duty upon
the facilities made use of and actually employed in the
transaction.” Id. at 519. To be sure, the facility used in Nicol
was a commodities exchange whereas the facility used by
Murphy was the legal system, but that hardly seems a significant
distinction. The tax may be laid upon the proceeds received
when one vindicates a statutory right, but the right is nonetheless
a “creature of law,” which Knowlton identifies as a “privilege”
taxable by excise. 178 U.S. at 55 (right to take property by
inheritance is granted by law and therefore taxable as upon a
privilege);* cf. Steward, 301 U.S. at 580-81 (“[N]atural rights, so
called, are as much subject to taxation as rights of less
importance. An excise is not limited to vocations or activities
that may be prohibited altogether. ... It extends to vocations or
activities pursued as of common right.”) (footnote omitted).

2. Uniformity

*
For the same reason, we infer from Knowlton that a tax laid
upon an amount received in settlement of a suit for a personal
nonphysical injury would also be an excise. See 178 U.S. at 55.
 30

The Congress may not implement an excise tax that is not
“uniform throughout the United States.” U.S. CONST. art. I, § 8,
cl. 1. A “tax is uniform when it operates with the same force
and effect in every place where the subject of it is found.”
United States v. Ptasynski, 462 U.S. 74, 82 (1983) (internal
quotation marks omitted); see also Knowlton, 178 U.S. at 84-86,
106. The tax laid upon an award of damages for a nonphysical
personal injury operates with “the same force and effect”
throughout the United States and therefore satisfies the
requirement of uniformity.

III. Conclusion

For the foregoing reasons, we conclude (1) Murphy’s
compensatory award was not received on account of personal
physical injuries, and therefore is not exempt from taxation
pursuant to § 104(a)(2) of the IRC; (2) the award is part of her
“gross income,” as defined by § 61 of the IRC; and (3) the tax
upon the award is an excise and not a direct tax subject to the
apportionment requirement of Article I, Section 9 of the
Constitution. The tax is uniform throughout the United States
and therefore passes constitutional muster. The judgment of the
district court is accordingly

Affirmed.