Ms Murphy's attorneys David Colapinto and Stephen Kohn have asked the full US Court of Appeals for the District of Columbia Circuit to reconsider a July decision by a three-judge panel that held that the IRS can tax damage awards based solely on compensating victims who suffer personal injuries, claiming that Congress intended to amend the tax code “by implication” to tax personal injury damages under its authority to create an excise tax on people who use the courts to vindicate their rights. But a year earlier, the same panel in the same case held that such taxes were unconstitutional, as compensation for a documented "loss" was not "income" subject to the tax code.

Marrita Murphy had received $70,000 compensation after having filed a complaint with the Labor Department against her former employer. She paid taxes on the award but later filed an amended return asking for a refund, which the IRS rejected.

"The Court's reversal stands reality on its head," said Mr Colapinto. “This case marks the first time that a court has interpreted the gross ‘income’ statute, 26 U.S.C. § 61(a), to be amended ‘by implication’ to create a tax not expressly enacted by Congress. Additionally, this is the first time that any court has construed the tax code to imply an “excise tax” on the ‘privilege’ of utilizing the ‘legal system’ to vindicate a federal statutory right."

"When whistleblowers suffer retaliation, they do not 'sell' their mental health. If people are injured in a car accident, they do not 'sell' their arms and legs. These are real human losses, and compensation to restore that human loss was never intended to be 'income' under our Constitution or the tax code," Colapinto said.

Stephen M. Kohn, the President of the National Whistleblower Center and co-counsel for Ms. Murphy, stated: "This decision is a terrible setback for all victims of civil rights abuses. Congress did not pass a special tax demanding payment from people who use the legal system to prevent retaliation against whistleblowers. It was error for the Court to imply such a tax. This decision threatens fundamental human rights, including access to the courts."