In the United States v. Dalm case of 1989, the Supreme Court ruled that a taxpayer does not have standing to sue for a tax refund under section 1346(a)(1) unless they paid the taxes directly or it was wrongfully collected from them. The case involved Irene Dalm who had received gifts from her employer and did not report them as income on her federal tax return. After an audit, she was found liable for unpaid gift taxes and interest which were subsequently paid by her employer's estate after his death. Later, Dalm filed suit seeking a refund claiming that she should not be held responsible since these were gifts and not income. However, because neither she nor her employer’s estate (who actually paid the taxes) could prove wrongful collection or direct payment of those taxes by themselves respectively, their claim was denied based on lack of legal standing.

In the dissenting opinion for United States v. Dalm, Justice Blackmun argued that the majority's interpretation of Section 1346(a)(1) was too narrow and inconsistent with Congress' intent to provide a broad remedy for taxpayers who overpay their taxes. He contended that the language of this section does not limit tax refund suits to those situations where an internal revenue law imposes tax liability directly on the taxpayer seeking a refund. Instead, he believed it allows any person who paid a tax under color of federal authority to sue for a refund if they can show they were not liable for such payment in any respect. Furthermore, he pointed out that there is no explicit requirement in Section 1346(a)(1) or elsewhere in Internal Revenue Code requiring direct assessment against taxpayer as prerequisite to suit by him/her for recovery of alleged overpayment. Therefore, according to Justice Blackmun’s view, Ms.Dalm should have been allowed her claim because she bore actual economic burden of gift tax deficiency assessed against estate from which she received property.