Murphy v. IRS.
In August 2006, the US Court of Appeals for the District of Columbia ruled the IRS is not part of the United States. “Insofar Congress has waived sovereign immunity with respect to suits for tax refunds under 28 USC 11346(a)(1), that provision specifically contemplates only actions against the ‘United States’, therefore we hold the IRS, unlike the United States, may not be sued in nomine in this case.”
An exception to the federal sovereign immunity is in the US Tax Court, where a tax payer may sue the Commissioner of Internal Revenue. So, in December 2006, the original 3-panel agreed to hear the case.
On July 3, 2007 the US Court of Appeals for the District of Columbia wrote, “Although the Congress cannot make a thing income which is not so in fact … it can label a thing income and tax it, so long as it acts within its Constitutional authority, which includes not only the Sixteenth Ammendment, but also Article 1, Sections 8 and 9.”
Aril 21, 2008 the US Supreme Court declined to review the Court of Appeals decision.