The Government today petitioned for rehearing en banc in Murphy v. United States, No. 03cv02414 (D.C. Cir. 8/22/06), which held that § 104(a)(2) is unconstitutional under the 16th Amendment as applied to a recovery for a non-physical personal injury unrelated to lost wages or earnings.  The Government minces no words:

The panel’s decision represents the first time in over 85 years that an exercise of Congressional income-taxing power has been declared unconstitutional, and the panel’s narrow interpretation of the term "income" conflicts with over 60 years of Supreme Court precedents regarding the definition of income. The question presented in this case is thus one of exceptional importance to the administration of the nation’s tax laws. Moreover, the panel’s focus on the Sixteenth Amendment caused it to ignore that the relevant tax is justified by Congress’s basic Article I taxing power.

For prior TaxProf Blog commentary on Murphy, see:

• D.C. Circuit Holds § 104(a)(2) Unconstitutional Under 16th Amendment; Not All Receipts Constitute "Income" Under Glenshaw Glass (8/22/06)
• Blogosphere Commentary on Murphy (8/23/06)

• Tax Prof Commentary on Murphy (8/23/06)
• Shlaes on Murphy (8/30/06)