Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caDC-08-05093/USCOURTS-caDC-08-05093-0/pdf.json

Nature of Suit Code: 440
Nature of Suit: Other Civil Rights
Cause of Action: 

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United States Court of Appeals 

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued May 1, 2009 Decided August 7, 2009 

No. 08-5088 

NEILAND COHEN, 

APPELLANT

v. 

UNITED STATES OF AMERICA, 

APPELLEE

Consolidated with 08-5093, 08-5174 

Appeals from the United States District Court 

for the District of Columbia 

(No. 1:07-cv-00051) 

Michael A. Bowen and Robert J. Cynkar argued the cause 

for appellants. With them on the briefs were Jonathan W. 

Cuneo, Marc B. Dorfman, Henry D. Levine, Charles Tiefer,

Mark C. Rifkin, Mark D. Griffin, and Randy J. Hart. 

Ellen Page DelSole, Attorney, U.S. Department of Justice, 

argued the cause for appellee. With her on the brief were 

Gilbert S. Rothenberg, Acting Deputy Assistant Attorney 

USCA Case #08-5093 Document #1200186 Filed: 08/07/2009 Page 1 of 38
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General, Jeffrey A. Taylor, U.S. Attorney, and Teresa E. 

McLaughlin, Attorney. R. Craig Lawrence, Assistant U.S. 

Attorney, entered an appearance. 

Before: GARLAND, BROWN, and KAVANAUGH, Circuit 

Judges. 

 Opinion for the Court filed by Circuit Judge BROWN. 

 Dissenting opinion filed by Circuit Judge KAVANAUGH. 

BROWN, Circuit Judge: Comic-strip writer Bob Thaves 

famously quipped, “A fool and his money are soon parted. It 

takes creative tax laws for the rest.” In this case it took the 

Internal Revenue Service’s (“IRS” or “the Service”) aggressive 

interpretation of the tax code to part millions of Americans with 

billions of dollars in excise tax collections. Even this 

remarkable feat did not end the IRS’s creativity. When it finally 

conceded defeat on the legal front, the IRS got really inventive 

and developed a refund scheme under which almost half the 

funds remained unclaimed. Now the IRS seeks to avoid judicial 

review by insisting the notice it issued, acknowledging its error 

and announcing the refund process, is not a binding rule but 

only a general policy statement. 

We conclude the notice bound the Service, tax collectors, 

and taxpayers. Accordingly, we reverse the district court’s 

dismissal of Appellants’ claims made under the Administrative 

Procedures Act (“APA”). We further determine Appellant 

Neiland Cohen filed his refund claim prematurely and, thus, 

affirm the district court’s dismissal of his refund claim. 

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I 

The Internal Revenue Code imposes a three percent excise 

tax on phone calls. 26 U.S.C. § 4251. Telephone service 

providers collect the tax and pay it over to the IRS. See id. 

§ 4291. The Code taxes only communications charges that vary 

with distance and transmission time. Id. § 4252(b). Decades 

ago, these requirements posed no problem as phone companies 

based their billing on multiple factors, including the key 

components of distance and time. Nat’l R.R. Passenger Corp. v. 

United States, 431 F.3d 374, 375 (D.C. Cir. 2005). The 

telecommunications revolution has changed all that: many 

consumers now pay strictly based on transmission time—

frequently, rates no longer vary based on the distance of a call. 

Id. Despite recognizing this shift, the IRS continued to collect 

taxes on all long-distance communications. See IRS Not. 2005-

79 (Oct. 20, 2005) (“Notice 2005-79”); see also IRS Rev. Rul. 

79-404, 1979-2 C.B. 382 (determining communication between 

ships at sea or other offshore facilities and telephone subscribers 

in the United States were subject to the excise tax though the 

charges varied only based on transmission time). 

Multiple corporate taxpayers brought suit seeking refunds 

and several circuits, including this one, concluded time-only rate 

structures render calls nontaxable under the Code. Nat’l R.R. 

Passenger, 431 F.3d at 375–76. While these lawsuits 

proceeded, the IRS remained adamant regarding the continuing 

applicability of the excise tax. After it lost an appeal in the 

Eleventh Circuit, see Am. Bankers Ins. Group v. United States, 

408 F.3d 1328 (11th Cir. 2005), the Service issued Notice 2005-

79, which declared it would continue to litigate the applicability 

of the tax and directed phone service providers to continue 

collecting the tax, even from individuals in the Eleventh 

Circuit’s jurisdiction. Notice 2005-79. It ordered taxpayers to 

continue paying the tax but permitted place-holder refund claims 

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“for overpayments.” Id. Taxpayers were advised, however, the 

Service would not process these claims while related cases 

pended in federal courts of appeals. Id. 

The IRS lost in every circuit that considered its application 

of § 4251. Five circuits held the tax inapplicable to longdistance calls charged without reference to the distance variable. 

Nat’l R.R. Passenger, 431 F.3d 374; Reese Bros., Inc. v. United 

States, 447 F.3d 229 (3d Cir. 2006); Fortis, Inc. v. United States, 

447 F.3d 190, 191 (2d Cir. 2006); OfficeMax, Inc. v. United 

States, 428 F.3d 583 (6th Cir. 2005); Am. Bankers Ins. Group, 

408 F.3d at 1338. In response, on May 26, 2006, the IRS issued 

Notice 2006-50. See IRS Not. 2006-50 (May 26, 2006) 

(“Notice 2006-50”). The notice announced the discontinuation 

of the excise tax for phone charges based solely on transmission 

time and the refund process for taxes erroneously collected 

between February 28, 2003 and August 1, 2006. Id. 

Under Notice 2006-50, individual taxpayers had to request 

their refund or credit on their 2006 federal income tax returns. 

Id. This requirement extended to individuals who otherwise did 

not need to file income tax returns. Id. Taxpayers could either 

request a “safe harbor” amount, which required no 

documentation, or the actual amount of tax they paid, for which 

the IRS could demand documentation. Id. § 5(c). 

Various lawsuits arose challenging the refund process. See 

In re Long-Distance Telephone Service Federal Excise Tax 

Refund Litigation, Docket No. 1798 (J.P.M.L. Dec. 28, 2006) 

(Transfer Order). The Multidistrict Litigation (“MDL”) Panel 

centralized and transferred three district court cases into an 

MDL proceeding before the United States District Court for the 

District of Columbia. Id., slip op. at 2. The district court 

dismissed the cases after concluding Appellants failed to 

exhaust their administrative remedies for their refund claims and 

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failed to state valid claims under federal law, including the 

APA, 5 U.S.C. § 702. The district court also ruled their claims 

for injunctive and declaratory relief were mooted by the IRS’s 

decision to discontinue the tax on time-based phone charges. In 

re Long-Distance Tel. Serv. Federal Excise Tax Refund 

Litigation, 539 F. Supp. 2d 281, 287 (D.D.C. 2008). Appellants 

appeal the district court’s dismissal of their APA claims. 

Appellant Cohen appeals the district court’s conclusion that he 

failed to meet jurisdictional exhaustion requirements. 

II 

We review de novo the district court’s dismissal of 

Appellants’ APA claims for failure to state a claim upon which 

relief can be granted, Kassem v. Wash. Hosp. Ctr., 513 F.3d 

251, 253 (D.C. Cir. 2008), as well as the dismissal of Appellant 

Cohen’s refund claim for lack of subject-matter jurisdiction, 

Nat’l Taxpayers Union, Inc. v. United States, 68 F.3d 1428, 

1432 (D.C. Cir. 1995). Applying this standard, we reverse the 

dismissal of Appellants’ APA claims, but affirm the dismissal of 

Cohen’s refund claim. 

A 

Before delving into the propriety of the district court’s 

dismissal, we pause to consider jurisdiction. The IRS raises two 

challenges to our jurisdiction: (1) the Anti-Injunction Act 

(“AIA”), which provides “no suit for the purpose of restraining 

the assessment or collection of any tax shall be maintained in 

any court by any person, whether or not such person is the 

person against whom such tax was assessed,” 26 U.S.C. 

§ 7421(a), and (2) the Declaratory Judgment Act (“DJA”), 

which allows for declaratory relief but specifically excludes 

federal taxes from its reach, 28 U.S.C. § 2201(a). As these acts 

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are coterminous, Investment Annuity v. Blumenthal, 609 F.2d 1, 

4 (D.C. Cir. 1979), we address them jointly. They do not apply. 

At the district court, Appellants made various claims for 

injunctive and declaratory relief as well as claims under the 

APA. In re Long-Distance Tel. Serv., 539 F. Supp. 2d at 287–

99. On appeal, however, Appellants only press the APA claims 

asking us to strike down the IRS’s refund regime as unlawful or, 

alternatively, to remand the issue to the district court. 

Appellants do not seek to restrain the assessment or collection 

of taxes and the requested relief, if granted, could not result in 

impermissible restraints. As such, on the unusual facts of this 

case, neither the AIA nor the DJA apply.1

We also step back to contemplate the basis of our 

jurisdiction. After all, this is not your typical tax case. In a runof-the-mill case, taxpayers litigate who has the right to disputed 

funds, along with incidental quarrels over the IRS’s procedures, 

in the context of a suit for refund. This pattern exists for good 

reason: usually the taxpayer’s goal is to get his money back and 

the only way to do this is to bring a refund claim. Enochs v. 

Williams Packing & Navigation Co., 370 U.S. 1, 7 (1962) (the 

tax code “require[s] that the legal right to the disputed sums be 

determined in a suit for refund”). To accomplish this, taxpayers 

must strictly comply with the refund procedures set forth in the 

tax code, including the obligation under § 7422 to file an 

administrative claim with the IRS before filing suit. United 

States v. Clintwood Elkhorn Mining Co., 128 S. Ct. 1511, 1515 

(2008). 

But this case is different: the fight is over process, not 

disputed funds. The IRS has conceded it did not have the right 

 

1 We need not decide whether the relief sought constitutes a 

declaratory judgment as, regardless, the DJA does not apply. 

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to collect the excise tax for phone charges based solely on 

transmission time in the first place and, with the exception of 

Appellant Cohen’s separate claim addressed infra, Appellants 

no longer seek a refund in this suit. See Appellants’ Reply Br. 

5. They seek to challenge the procedural obstacles the IRS 

inserted between individual taxpayers and their right to file suit 

to recover unlawfully collected taxes. They, therefore, request 

that we review and overturn Notice 2006-50. This presents us 

with a wrinkle. The tax code waives sovereign immunity and 

grants district courts original jurisdiction only for civil actions 

for the recovery of taxes. 28 U.S.C. § 1346(a)(1). So, under 

what authority do we review Appellants’ APA claims and is that 

review permissible in light of the tax code’s vigorous limits on 

judicial intervention? 

Federal jurisdiction to hear this administrative challenge 

lies not in the tax code, but in our federal question jurisdiction. 

See Road Sprinkler Fitters Local Union 669 v. Herman, 234 

F.3d 1316, 1319 (D.C. Cir. 2000) (quoting 28 U.S.C. § 1331) 

(Federal courts have jurisdiction over “‘all civil actions arising 

under the . . . laws . . . of the United States,’ including those 

brought under the APA.”); 28 U.S.C. § 1291. The APA waives 

the government’s sovereign immunity, and thus permits the 

exercise of jurisdiction, in actions seeking non-monetary relief 

with respect to agency action. 5 U.S.C. § 702. This waiver 

applies as long as another statute does not limit judicial review 

or forbid the type of relief sought. Id. 

The tax code deprives federal courts of jurisdiction over 

suits “for the recovery of any internal revenue tax alleged to 

have been erroneously or illegally assessed or collected, . . . or 

of any sum alleged to have been excessive or in any manner 

wrongfully collected, until a claim for refund or credit has been 

duly filed.” 26 U.S.C. § 7422(a) (emphasis added). As a result, 

no suit for refund can be brought under the APA—taxpayers 

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looking to recoup funds must proceed under the refund scheme 

set forth in the tax code. Rather, only in the anomalous case 

where the wrongful assessment is not disputed and litigants do 

not seek a refund is a standalone claim under the APA viable. 

This is that case. 

Of course, Appellants hope to parlay a victory in this suit 

into a successful suit for recovery. But these aspirations are too 

remote to transform these APA claims into a suit for refund. 

Even if Notice 2006-50 were struck down as unlawful, 

Appellants still may achieve only a pyrrhic victory. Moreover, 

Appellants’ desire to pursue refunds later, depending on the 

outcome of this litigation, is perfectly acceptable and has no 

bearing on the nature of their claims or the remedy to which 

they now may be entitled. Most taxpayers seek “proper tax 

treatment” in addition to invalidation of a flawed regulation. 

Kristin E. Hickman, A Problem of Remedy: Responding to 

Treasury’s (Lack of) Compliance with Administrative Procedure 

Act Rulemaking Requirements, 76 GEO. WASH. L. REV. 1153, 

1185 (2008). The possibility that this suit may help create a 

later opportunity for Appellants to pursue a refund in 

compliance with the dictates of the tax code does not affect our 

jurisdiction. 

With our jurisdiction established, we consider Appellants’ 

APA claims. The APA affords causes of action to parties 

adversely affected by agency action. 5 U.S.C. §§ 702, 704; 

Trudeau v. FTC, 456 F.3d 178, 185 (D.C. Cir. 2006). Section 

704, however, limits judicial review to “[a]gency action made 

reviewable by statute and final agency action for which there is 

no other adequate remedy in a court.” 5 U.S.C. § 704. A 

substantive rule constitutes a binding final agency action and is 

reviewable. Id. § 704. Courts review substantive rules to 

ensure, inter alia, the agency acted in a reasonable manner 

within its statutory authority and promulgated the rules in 

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accordance with the notice-and-comment requirements of the 

APA. Id. § 706. A general statement of policy, on the other 

hand, is exempt from notice-and-comment rulemaking 

requirements and is not a “final agency action,” rendering it 

unreviewable. Id. §§ 553, 704. 

Appellants assert Notice 2006-50 constitutes final agency 

action that “arbitrarily, unreasonably, and unlawfully limits 

restitution of the funds unlawfully exacted.” In re LongDistance Tel. Serv. Fed. Excise Tax Refund Litig., 501 F. Supp. 

2d 34, 38–39 (D.D.C. 2007). To determine whether Notice 

2006-50 is a binding standard, and thus a final and reviewable 

agency action, we consider whether it (1) marked the 

“consummation” of the IRS’s decisionmaking process and 

(2) either affects legal “rights or obligations” or results in “legal 

consequences.” Bennett v. Spear, 520 U.S. 154, 177–78 (1997). 

 We conclude Notice 2006-50 operates as a substantive rule that 

binds the IRS, excise tax collectors, and taxpayers. 

Notice 2006-50 marked the culmination of the IRS’s 

deliberations on the refund process for individual taxpayers. 

Once the IRS conceded it owed taxpayers approximately 

$8 billion, it had to administer the refunds. That is where the 

agency ran into trouble. Congress had provided a refund 

method—but only via the service providers who collected the 

taxes. 26 U.S.C. § 6415(a). Congress had not anticipated 

taxpayers might wish to seek their refunds directly, rather than 

relying on the industriousness or responsiveness of the 

intermediary tax collectors. The IRS overcame this glitch by 

issuing Notice 2006-50, agreeing to refund the amounts paid for 

nontaxable long-distance service to individual taxpayers who 

claimed their refunds on their 2006 federal income tax returns. 

Notice 2006-50, § 5(a). The notice is not equivocal, nor is it “of 

a merely tentative or interlocutory nature,” Bennett, 520 U.S. at 

178. It clearly concluded the IRS’s decisionmaking process. 

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We turn, then, to consider whether the notice produced 

legal consequences. First, we inquire whether the language and 

the content of the notice bound the IRS or “genuinely [left] the 

agency and its decisionmakers free to exercise discretion.” Ctr. 

for Auto Safety v. NHTSA, 452 F.3d 798, 806 (D.C. Cir. 2006) 

(alteration in original). After that, we consider whether the 

notice alters the legal rights or obligations of tax collectors or 

taxpayers. 

 “The primary distinction between a substantive rule—

really any rule—and a general statement of policy . . . turns on 

whether an agency intends to bind itself to a particular legal 

position.” Syncor Int’l Corp. v. Shalala, 127 F.3d 90, 94 (D.C. 

Cir. 1997). To that end, the language an agency uses when it 

characterizes its action can be telling. Ctr. for Auto Safety, 452 

F.3d at 806–07; see also Nat'l Ass'n of Home Builders v. Norton, 

415 F.3d 8, 14 (D.C. Cir. 2005) (finding Department of Interior 

survey protocols were policy statements in part because agency 

documents repeatedly characterized them as “recommended 

rather than mandatory” and because of “the voluntary nature of 

the language” used in the protocols). We have given decisive 

weight to agencies’ use of mandatory words like “will” instead 

of permissive words like “may.” Compare Am. Bus Ass’n v. 

United States, 627 F.2d 525, 532 (D.C. Cir. 1980) (finding the 

use of “will” indicates a statement is a binding norm) with

Guardian Fed. Savings & Loan Ass’n v. FSLIC, 589 F.2d 658, 

667 (D.C. Cir. 1978) (finding the use of “may” indicates a 

statement is a general statement of policy). Notice 2006-50 is 

laden with mandatory language. See, e.g., Notice 2006-50, 

§ 1(a) (stating that the IRS “will follow the holdings” of five 

circuits that deemed service time-only rate structures 

nontaxable); id. (“[T]he government will no longer litigate this 

issue.”). Additionally, it does not include the classic “weasel 

words” through which agencies try—with variable success—to 

reserve discretion for themselves. See, e.g., Wilderness Soc’y v. 

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Norton, 434 F.3d 584, 595–96 (D.C. Cir. 2006); Appalachian 

Power Co. v. EPA, 208 F.3d 1015, 1022–23 (D.C. Cir. 2000). 

Moreover, the IRS made several commitments that curb the 

agency’s discretion. For instance, the notice declares the 

agency’s decision to follow the holdings of the five circuits that 

concluded time-only rate structures make calls nontaxable under 

the Code. Notice 2006-50 § 1(a). Having finally admitted 

“amounts paid for time-only service are not subject to the tax 

imposed by § 4251,” id., the IRS can hardly go back now and 

try to collect taxes on these calls. The notice also created an 

obligation for the IRS to process and pay properly requested 

refunds. Under the tax code the IRS usually has discretion as to 

whether it will process refund requests. See, e.g., 26 U.S.C. 

§ 6532(a)(1) (providing a six-month window in which the IRS 

may render a decision on refund claims prior to litigation, but 

creating no obligation for it to do so); see also Milbank v. 

Duggan, 131 F.2d 898, 900 (2d Cir. 1942) (stating the purpose 

of 26 U.S.C. § 3772(a)(2), predecessor to 26 U.S.C. § 6532, was 

“to give the Commissioner six months after he becomes aware 

that the taxpayer has called upon him to act”). The IRS would 

retain the same discretion here, had it not pledged “to credit or 

refund the amounts paid for nontaxable service if the taxpayer 

requests the credit or refund in the manner prescribed in this 

Notice.” Notice 2006-50 § 5(a). As counsel for the IRS 

conceded during oral argument, through the notice the IRS 

obligated itself to process and pay refund claims if the requests 

conform to the notice’s requirements. Tr. of Oral Arg. at 35–37. 

The IRS argues the statutory scheme leaves the decision of 

whether or not to process refund requests entirely up to the 

Service’s discretion and the IRS’s method for exercising its 

discretion is unreviewable under the APA, 5 U.S.C. § 701(a)(2). 

 Indeed, the Supreme Court has concluded the tax code was 

designed “‘to advise the appropriate officials of the demands or 

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claims intended to be asserted, so as to insure an orderly 

administration of the revenue,’ to provide that refund claims are 

made promptly, and to allow the IRS to avoid unnecessary 

litigation by correcting conceded errors.” Clintwood Elkhorn 

Mining Co., 128 S. Ct. at 1519 (quoting United States v. Felt & 

Tarrant Mfg. Co., 283 U.S. 269, 272 (1931)). The IRS urges 

Notice 2006-50 amounts to no more than a policy statement 

explaining how the Service will exercise its statutory discretion 

with respect to refunds of nontaxable communications excise 

taxes. 

Due to the inverted posture of this refund case, the IRS’s 

policy-based arguments fail. We agree the tax code favors IRS 

flexibility in the administration of refunds. The IRS’s 

“exceedingly strong interest in financial stability,” id., is at its 

peak when the Service’s right to retain the funds is in dispute, 

but this interest ebbs considerably when, as here, the IRS has 

conceded it had no right to collect the funds in the first place. 

When the IRS made that concession, via Notice 2006-50, it did 

not merely forecast how it intended to exercise its statutory 

discretion to address a refund claim. Rather, it promulgated a 

reviewable, substantive rule dictating the future administration 

of this type of claim. In doing so, the Service forfeited the 

discretion it retained prior to issuing the notice. Its asymmetry 

notwithstanding, Notice 2006-50 binds the IRS. 

Notice 2006-50 also alters the legal obligations of service 

providers charged with collecting excise taxes under § 4291. 

Until the notice issued, the IRS required service providers to 

collect taxes on purely time-based service charges. See Notice 

2005-79. Notice 2006-50 directs collectors “to cease collecting 

and paying over tax under § 4251 on [this] nontaxable service,” 

thereby altering their legal obligations. Notice 2006-50, § 4(c). 

It is, of course, arguable that the five federal circuit court 

decisions that declared the services nontaxable actually altered 

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the service providers’ collection obligations, and the IRS merely 

communicated this fact to them via the notice. Id. § 4 (entitled 

“Effect of ABIG, OfficeMax, Amtrak, Fortis, and Reese Bros.”). 

 But, as these excise tax cases demonstrate, the IRS apparently 

believes it has discretion about whether or when to follow 

Article III decisions. See Notice 2005-79 (directing phone 

service providers to continue collecting the tax, even from 

individuals in the Eleventh Circuit’s jurisdiction, after the 

Eleventh Circuit held its application of the statute unlawful and 

the IRS declined to seek Supreme Court review). In Notice 

2006-50, the Service deigned to comply with the courts’ 

holdings and required its collectors to do the same, thus altering 

the operative legal regime. 

Finally, Notice 2006-50 changes taxpayers’ rights and 

obligations. The notice gives taxpayers the right not to pay 

excise taxes on phone calls for which the charges vary based 

only on transmission time, and not with distance. Notice 2006-

50, § 4(a) (“[T]axpayers are no longer required to pay tax under 

§ 4251 for nontaxable service.”); id. § 4(c) (“[Collectors] are not 

required to report to the IRS any refusal by their customers to 

pay any tax on nontaxable services that is billed after May 25, 

2006.”). The notice also creates a right to reimbursement. 

When “the language of the document is such that private parties 

can rely on it as a norm or safe harbor by which to shape their 

actions, it can be binding as a practical matter.” See Gen. Elec. 

Co. v. EPA, 290 F.3d 377, 383 (D.C. Cir. 2002). Just as Notice 

2006-50 created an obligation on the part of the IRS to pay 

properly requested refunds, it also gave taxpayers the 

concomitant right to receive a refund if they conformed to the 

notice’s instructions. Notice 2006-50, § 5(a) (“The 

Commissioner agrees to credit or refund the amounts paid for 

nontaxable service if the taxpayer requests the credit or refund 

in the manner prescribed in this Notice.”). 

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The notice also creates taxpayer obligations. On its face, 

Notice 2006-50 presents a hurdle taxpayers must surmount 

before they can file suit to recover the funds the IRS illegally 

took from them. Under § 7422, taxpayers cannot file suit to 

recover unlawfully exacted taxes “until a claim for refund or 

credit has been duly filed with the Secretary, according to the 

provisions of law in that regard, and the regulations of the 

Secretary established in pursuance thereof.” 26 U.S.C. 

§ 7422(a). The notice states “[r]equest[s] must follow this 

notice” and “a request for this credit or refund on any other form 

(such as a Form 720, 843, or 8849) will not be processed by the 

Service.” Notice 2006-50, § 5(a). It makes clear that taxpayers 

cannot seek administrative refunds in any other manner. 

The IRS insists taxpayers do not need to follow the notice 

in order to exercise their right to file suit under § 7422. It 

claims, “Nothing in [the notice] prohibits taxpayers from 

submitting otherwise valid claims for refund under the usual 

statutory procedures for claiming a refund of tax, nor does it in 

any way sanction taxpayers who elect to use the statutory 

procedure.” Appellee’s Br. 58. That’s just mean. To go the 

“statutory” route, as the IRS suggests, places taxpayers in a 

virtual house of mirrors. Section 7422 requires taxpayers to file 

a refund claim “with the Secretary, according to the provisions 

of law in that regard, and the regulations of the Secretary 

established in pursuance thereof.” 26 U.S.C. § 7422. 

Regulation, 26 CFR § 301.6402-2, enunciates the process for 

filing a refund claim. Of primary importance here, it dictates 

the appropriate form for the taxpayer to use. Id. § 302.6402-

2(c). It states, in relevant part, that “all claims by taxpayers for 

the refunding of taxes, interest, penalties, and additions to tax 

shall be made on Form 843.” Id.2

 Form 843, however, does not 

 

2

 The district court incorrectly states this regulation “directs taxpayers 

seeking non-income tax refunds to use the appropriate form in this 

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permit this type of refund claim. At the top of the form, it reads, 

“Do not use Form 843 if your claim is for . . . [a]n overpayment 

of excise taxes reported on Form(s) 11-c, 720, 730, or 2290.” 

Form 720 is the Quarterly Federal Excise Tax Return on which 

communications excise taxes, including the excise tax at issue 

here, are reported by the service providers (who collect and 

remit the taxes). Therefore, taxpayers cannot use Form 843 to 

file their refund claim. The instructions for Form 843, however, 

suggest that taxpayers fill out Form 8849 “to claim a refund of 

excise taxes other than those resulting from adjustments to 

[their] reported liabilities” and refers them to IRS Publication 

510, Excise Taxes, “for the appropriate forms to use to claim 

excise tax refunds.” IRS Publication 510 states, “Do not use 

Form 8849, Form 720, or Form 843 to make claims for 

nontaxable service; the IRS will not process these claims.” 

Even if the taxpayer ignored the reference to the IRS 

publication, Form 8849 itself cautions “Do not use Form 8849 . 

. . to claim any amounts that were or will be claimed on 

Schedule C (Form 720), Claims . . . .” While this language 

sounds slightly more flexible, taxpayers have no way of 

knowing whether their service provider has or will claim the 

nontaxable funds at issue. 

 

case, Notice 2006-50.” In re Long-Distance Tel. Serv., 539 F. Supp. 

2d at 294. But the regulation does not say “use the appropriate form.” 

 Rather, it specifically instructs taxpayers to use Form 843 and to refer 

to “other provisions . . . relating to the particular tax.” Id. § 302.6402-

2(c). No other provisions relating to the refund of these excise taxes 

apply to individual taxpayers. See generally, Code of Federal 

Regulations, Title 26, Subchapter D, Part 40, Excise Tax Procedural 

Regulations, 26 C.F.R. §§ 40.0-1–40.7701-1; id. § 40.0-1(a) 

(describing that the regulations in part 40 set forth the administrative 

provisions relating to excise taxes imposed under chapter 33, which 

includes the long-distance excise tax); see also Part 49, Subpart C, 

Communications, 26 C.F.R. §§ 49.4251-1–49.4254-2 (no provisions 

related to refunds). 

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Counsel for the IRS took the enigmatic position at oral 

argument that if the taxpayers had used either Form 843 or Form 

8849 to file their refund claims, then IRS’s acceptance would 

have been mandatory and the claims would have sufficed to 

meet § 7422’s jurisdictional exhaustion requirements. Tr. of 

Oral Arg. at 29–31. But these assertions directly conflict with 

the cautionary instructions printed in bold typeface on the front 

of both forms and the explicit directions given in IRS 

Publication 510. Furthermore, the IRS provided absolutely no 

authority supporting its position. In reality, unless taxpayers 

follow the dictates of Notice 2006-50, they run into nothing but 

dead ends. The “usual statutory procedures for claiming a 

refund of tax,” Appellee’s Br. 58, provide no avenue by which 

individual taxpayers can fulfill their obligations in order to seek 

judicial review. 

The district court implied taxpayers may be able to satisfy 

the administrative exhaustion requirements of § 7422 by filing 

an informal claim. In re Long-Distance Tel. Serv., 539 F. Supp. 

2d at 309–10 (claiming the notice’s refusal to process 

noncompliant claims “does not mean that a deviant form could 

not substantially comply with the duly promulgated regulations 

governing the form of refund claims” and referencing the 

prerequisites for informal claims to be recognized by the courts 

for the purpose of administrative exhaustion). Counsel for the 

IRS defended the position at oral argument. Tr. of Oral Arg. at 

29–30 (claiming many courts have upheld the use of informal 

refund claims). But an informal claim will not solve the 2006-

50 conundrum. 

Informal refund claims have one limited purpose: to “put[] 

the IRS on notice that a claim is being made [which] tolls the 

statute of limitations until the deficiencies are corrected in a 

subsequent refund claim.” Kaffenberger v. United States, 314 

F.3d 944, 954 (8th Cir. 2003) (emphasis added). “The informal 

USCA Case #08-5093 Document #1200186 Filed: 08/07/2009 Page 16 of 38
17 

claim doctrine is predicated on the expectation that any formal 

deficiency will at some point be corrected. To hold otherwise 

would eliminate, as a practical matter, the formal claim 

requirement.” Greene-Thapedi v. United States, 549 F.3d 530, 

533 (7th Cir. 2008) (citing Pala Emples. Profit Sharing Plan v. 

United States, 234 F.3d 873, 879 (5th Cir. 2000)). Thus, a 

taxpayer may use an informal claim, perfected by a subsequent 

formal claim, to meet the jurisdictional requirements of § 7422. 

Id.; United States v. Forma, 42 F.3d 759, 767 (2d Cir. 1994) 

(citing United States v. Kales, 314 U.S. 186, 194 (1941) (an 

informal notice “will nevertheless be treated as a claim, where 

formal defects and lack of specificity have been remedied by 

amendment filed after the lapse of the statutory period.”)). 

If, however, the taxpayer fails to perfect the administrative 

claim with a valid, formal claim, the informal claim will be 

dismissed for lack of subject-matter jurisdiction. GreeneThapedi, 549 F.3d at 533; Kaffenberger, 314 F.3d at 954 

(“Although the regulation states that a claim that fails to comply 

with the requirements will not be considered as a claim for 

refund, the Supreme Court has endorsed informal claims . . . that 

have technical deficiencies, as long as a valid refund claim is 

subsequently made after the period has run.”) (citing 

§ 301.6402-2(b)(1)). Thus, while taxpayers could initially use 

informal claims to meet the jurisdictional requirements of 

§ 7422, those claims would need to be perfected by filing formal 

claims complying with both the statute and regulations. As 

discussed above, attempts to follow the “usual” procedures only 

return taxpayers to the heart of the maze. 

Despite the obvious infirmities of these options, the IRS 

still has the chutzpah to chide taxpayers for failing to intuit that 

neither the agency’s express instructions nor the warning on its 

forms should be taken seriously. According to the IRS, 

taxpayers should have realized all the options the Service said 

USCA Case #08-5093 Document #1200186 Filed: 08/07/2009 Page 17 of 38
18 

were closed to them—using forms that proclaim their 

inapplicability in bold letter or filing informal claims that could 

not be perfected—were nonetheless sufficient to fulfill their 

administrative refund obligations and to serve as a prerequisite 

to judicial review. Not hardly. Taxpayers bear a heavy burden 

when pursuing refund claims, but we have yet to demand 

clairvoyance. 

The IRS next contends the Appellants are not “aggrieved” 

as required under the APA, 5 U.S.C. § 702, because Notice 

2006-50 did not abrogate their rights to bring civil suit before 

the district court. As discussed supra, the notice provided the 

only process by which individual taxpayers could seek refunds 

for the unlawfully exacted excise tax and, according to 

Appellants, that process was unreasonable. Moreover, the 

notice gave taxpayers the only discernable method for fulfilling 

the jurisdictional requirements under § 7422 in order to pursue 

judicial review for their refund claims. 

Section 702 provides standing to a “person suffering [a] 

legal wrong because of [an] agency action, or [one] adversely 

affected or aggrieved by agency action within the meaning of a 

relevant statute.” 5 U.S.C. § 702. Analysis under § 702 is akin 

to the prudential zone of interest test. Clarke v. Securities 

Indus. Ass’n, 479 U.S. 388, 395–97, 399, 400 n.16 (1987). 

Therefore, Appellants must establish that their injury falls 

within the “zone of interests” sought to be protected by § 7422. 

Lujan v. Nat’l Wildlife Fed’n, 497 U.S. 871, 883 (1990). The 

IRS correctly points out that the main interest the provision 

protects is the IRS’s interest in taking the first crack at refund 

claims before they are litigated. But Appellants only need to 

show their “interest is ‘arguably’ one regulated or protected by 

‘the statutory provision at issue.’” Safe Extensions, Inc. v. FAA, 

509 F.3d 593, 600–01 (D.C. Cir. 2007) (quoting PDK Labs., 

Inc. v. DEA, 362 F.3d 786, 791 (D.C. Cir. 2004)). Under 

USCA Case #08-5093 Document #1200186 Filed: 08/07/2009 Page 18 of 38
19 

§ 7422, taxpayers must scrupulously follow both the statutory 

and regulatory rules for filing a refund claim. 26 U.S.C. § 7422. 

 Thus, taxpayers have an interest in having a reasonable refund 

process available to recover funds unlawfully exacted and to 

gain access to the courts when they are dissatisfied with the 

IRS’s response. This is at least arguably within the zone of 

interests protected by § 7422, and that is enough. 

In sum, the IRS unlawfully expropriated billions of dollars 

from taxpayers, conceded the illegitimacy of its actions, and 

developed a mandatory process as the sole avenue by which the 

agency would consider refunding its ill-gotten gains. It cannot 

avoid judicial review of that process by simply designating it a 

policy statement. Notice 2006-50 constituted a final agency 

action that aggrieved taxpayers by hindering their access to 

court. Accordingly, we reverse the district court and remand 

Appellants’ APA claims for further consideration. 

*** 

The dissent argues we do not have jurisdiction to hear 

Appellants’ APA claims. In the dissent’s view, the tax 

exception in the DJA bars Appellants’ claims. Our colleague 

insists the text of the DJA prohibits our review. But binding 

circuit precedent interpreting the text of the DJA tells us the tax 

exception is coextensive with the limits described in the more 

narrowly worded AIA. Nat’l Taxpayers, 68 F.3d at 1435 

(stating, in 1995, “Because the AIA and DJA operate 

coterminously, the following analysis of the impact of the AIA 

upon [the plaintiff’s] complaint also determines the effect of the 

DJA.”); Investment Annuity, 609 F.2d at 4; E. Ky. Welfare 

Rights Org. v. Simon, 506 F.2d 1278, 1285 n.11 (D.C. Cir. 

1974), rev’d on other grounds, 426 U.S. 26 (1976) (explaining 

the DJA did not originally contain the phrase ‘except with 

respect to Federal taxes,’ which Congress added later in order to 

prevent taxpayers from accomplishing by declaratory judgment 

USCA Case #08-5093 Document #1200186 Filed: 08/07/2009 Page 19 of 38
20 

that which was forbidden under the AIA)3; Am. United v. 

Walters, 477 F.2d 1169, 1175–76 (D.C. Cir. 1973), rev’d on 

other grounds, 416 U.S. 752 (1974) (“The breadth of the tax 

exception of § 2201 is co-extensive with the effect of § 7421(a), 

and so the applicability of the latter to our situation is 

determinative of jurisdiction.”); see also Ecclesiastical Order of 

ISM of AM, Inc. v. IRS, 725 F.2d 398, 404–05 (6th Cir. 1984). 

So, despite its broad language, the DJA bars only 

declaratory relief sought “for the purpose of restraining the 

assessment or collection of any tax.” The dissent prefers the 

 

3 The dissent complains the precedential status of this case is dubious 

because it was vacated. The fact that two cases have since reembraced the rationale as enunciated in Eastern Kentucky renders that 

concern irrelevant. See Nat’l Taxpayers Union, 68 F.3d at 1435; 

Investment Annuity, 609 F.2d at 4 (citing E. Ky. Welfare Rights Org., 

506 F.2d at 1283–85; Am. United, 477 F.2d at 1175–76). To 

overcome this obstacle to his novel interpretation, the dissent claims 

neither National Taxpayers nor Investment Annuity passed on whether 

the broader language of the DJA or the narrower language of the AIA 

governs the inquiry. Actually, both cases confirmed that the AIA’s 

applicability controls and conducted the analysis accordingly. Nat’l 

Taxpayers, 68 F.3d at 1435 (“[A]nalysis of the impact of the AIA 

upon [the plaintiff’s] complaint also determines the effect of the 

DJA.”); Investment Annuity, 609 F.2d at 4 (recognizing the DJA “is, if 

anything, more restrictive,” but expressly deciding to follow the 

holdings of Eastern Kentucky and Americans United and focus the 

analysis on the AIA). Moreover, for the dissent to ask “coterminous 

in what direction” and pretend precedent leaves open the question of 

which statute’s language controls is revisionist history. This circuit 

concluded the provisions are coextensive because Congress only 

added the tax exception to the DJA to stop taxpayers from using the 

DJA to circumvent the AIA. E. Ky. Welfare Rights Org., 506 F.2d at 

1285 n.11; Am. United, 477 F.2d at 1175–76. Thus, we construe the 

provisions as coterminous for the precise purpose of limiting the scope 

of the DJA tax exception to the effect of the AIA. Id. 

USCA Case #08-5093 Document #1200186 Filed: 08/07/2009 Page 20 of 38
21 

broader language of the DJA, and thus wants to interpret the 

statutes as precluding injunctive and declaratory relief “with 

respect to Federal taxes.” To support this interpretation, the 

dissent relies on one half of a sentence from Murphy v. IRS, 493 

F.3d 170, 174 (D.C. Cir. 2007) (addressing whether the IRS 

could be sued eo nomine), which states, “ . . . 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.” But this admittedly loose language does 

not support the dissent’s preferred standard. Murphy does not 

purport to analyze the interplay between the AIA and the DJA 

or even suggest the DJA’s broader language controls. Id. Nor 

could it. Just as stare decisis compels this panel to follow 

precedent, so too those same principles confined the Murphy 

court. Maxwell v. Snow, 409 F.3d 354, 358 (D.C. Cir. 2005) 

(“[T]his Court is bound to follow circuit precedent until it is 

overruled either by an en banc court or the Supreme Court.”). 

The only other support the dissent offers is a law review article. 

 With all due respect to the Academy, we take the law as we 

find it in the opinions of this circuit. Because the AIA does not 

apply, the DJA’s tax exception likewise does not apply. 

The dissent also contends the ripeness doctrine forbids 

Appellants’ “pre-enforcement” APA challenges to Notice 2006-

50 and emphasizes that “the majority opinion can cite no case 

that has permitted a pre-enforcement APA challenge to a tax 

regulation of this kind.” Of course, the dissent similarly cannot 

point to any case that has disallowed a pre-enforcement APA 

challenge in a context like this one. It appears the Federal 

Reporters’ silence is deafening on both sides. But that is of no 

moment, as this is a post-enforcement case. To be ripe, typically 

courts require “some concrete action applying the regulation to 

the claimant’s situation in a fashion that harms or threatens to 

harm him.” Nat’l Park Hospitality Ass’n v. DOI, 538 U.S. 803, 

USCA Case #08-5093 Document #1200186 Filed: 08/07/2009 Page 21 of 38
22 

808 (2003). Here, Appellants have been barred from pursuing 

their refunds in court by virtue of the fact that they did not 

exhaust their administrative remedies under the only available 

avenue—Notice 2006-50.4 This post-enforcement case is ripe 

for review. 

We agree that the thrust of legislation and jurisprudence in 

this area aims at protecting the IRS from draining litigation. 

That much is evident from the AIA, the DJA, and Congress’s 

decision to relieve the IRS from some, but not all, of the 

requirements in the APA, see 26 U.S.C. § 7852(e). Once the 

limits of the protections Congress provided have been 

surpassed, however, the IRS is subject to the same legal 

requirements as other administrative agencies. And rightfully 

so. No agency operates beyond the reach of the law. In this odd 

case, neither the AIA, the DJA, the tax code’s statutory 

exhaustion provision, nor the ripeness doctrine apply to protect 

the IRS from scrutiny. 

B 

Under 26 U.S.C. § 6532, taxpayers cannot file suit to 

recover taxes until six months after filing a valid refund claim 

with the IRS “unless the Secretary renders a decision thereon 

within that time.” 26 U.S.C. § 6532. Cohen contends the 

district erred by dismissing his refund claim for lack of subjectmatter jurisdiction on the grounds that he filed suit prematurely. 

 We disagree. 

 

4 The district court alludes to other methods for pursuing refund. As 

discussed supra, however, those alternatives are illusory at best. 

Consequently, while Appellants generally failed to make any attempt 

reasonably calculated to exhaust their administrative remedies, the 

only remedy available to exhaust was the process provided by Notice 

2006-50. 

USCA Case #08-5093 Document #1200186 Filed: 08/07/2009 Page 22 of 38
23 

In November 2005, the same month the IRS issued Notice 

2005-79, Appellant Cohen filed a refund claim for excise taxes 

he paid in 2004 and 2005. In re Long-Distance Tel. Serv. Fed. 

Excise Tax Refund Litig., 539 F. Supp. 2d at 295. He received a 

letter from the IRS, dated December 20, 2005, stating they had 

received his claim but had not resolved it as they had not 

“completed all the research necessary for a complete response.” 

Id. The letter continued, “We will contact you again within 45 

days to let you know what action we are taking. You don’t need 

to do anything further now on this matter.” Id. Cohen received 

a second letter from the IRS, dated January 4, 2006, which 

(consistent with Notice 2005-79) stated: “We are unable to 

process your claim . . . . The tax is currently a subject in 

litigation and additional information will be provided to you as 

it is received.” Id. at 296. Cohen understood this letter as 

denying his refund claims. Id. Thus, he added a refund claim to 

his ongoing civil suit on February 6, 2006. Id. 

Cohen asserts the second letter he received from the IRS, 

dated January 4, 2006, communicated the IRS’s “decision” not 

to voluntarily return Cohen’s money and thus triggered his right 

to sue under the statute. But the letter communicated no such 

thing. It stated, “We are unable to process your claim . . . . The 

tax is currently a subject in litigation and additional information 

will be provided to you as it is received.” Taken at face value, 

the letter merely communicated the IRS would take no action 

because the tax was “currently” the subject of litigation—an 

interpretation completely consistent with Notice 2005-79, which 

similarly notified all taxpayers that the Service would not 

process refund claims while the excise tax cases were pending in 

federal appellate courts. Like the general notice, Cohen’s letter 

does not suggest any permanent resolution. In fact, the message 

specifically contemplates future interaction by promising to 

provide further information at a later date. Commonsense 

USCA Case #08-5093 Document #1200186 Filed: 08/07/2009 Page 23 of 38
24 

dictates a letter pledging to supply “additional information . . . 

as it is received” does not resolve a matter. 

Cohen compares his situation to Gervasio v. United States, 

627 F. Supp. 428 (N.D. Ill. 1986), where an IRS officer told the 

plaintiff he could not accept her claim and mailed it back to her. 

 This case, however, is distinguishable. The IRS did not refuse 

to accept Cohen’s claim; it told him why it had not yet been 

processed and invited him to contact the IRS with any questions. 

 Cohen next accuses the IRS of trying to prevent judicial review 

by disguising its decision as inaction. This is meritless. 

Regardless of the IRS’s inaction, under the statute Cohen could 

have brought suit after six months. 26 U.S.C. § 6532. Finally, 

Cohen urges the IRS made a “decision” when it chose to halt 

consideration of his claim pending the outcome of litigation, 

which, for purposes of the statute, triggered his right to file suit. 

 Cohen ignores that it is the IRS’s prerogative when or even 

whether to process his claim. The statute allows the IRS a sixmonth window in which it may act before a claim can be 

litigated. Id. During that time, the IRS can process the claim, 

ignore the claim, or twiddle its thumbs if it wants to. It can 

certainly make processing the claim contingent on a condition 

precedent, such as the completion of pending legal action, even 

if the realization of that condition could easily occur outside the 

six-month period. If the IRS’s stalling tactic (which it had every 

right to employ) extended beyond six months, the taxpayer 

could file suit. If the contingency occurred within the six 

months, presumably the IRS would issue a decision as it did 

here. Regardless, the Service’s choice to precondition 

processing on a future event does not give the taxpayer the 

immediate right to file suit. 

After receiving the IRS’s letter, Cohen had two safe 

options: to wait four-and-a-half months until the six-month 

period expired or to contact the IRS to clarify its intent. As it 

USCA Case #08-5093 Document #1200186 Filed: 08/07/2009 Page 24 of 38
25 

stands, he chose not to err on the side of caution, but rather to 

rely on his own interpretation of a somewhat ambiguously 

worded missive. He rolled the dice and lost. Accordingly, 

Cohen’s refund claim was premature and the district court 

rightly concluded it lacked subject-matter jurisdiction. 

III 

Appellants invite us to resolve the merits of their claims 

that IRS’s refund procedure was “inadequate and unlawful” 

under the APA. As the district court did not reach the merits of 

the claims and because the factual record is not sufficiently 

developed, we decline. See, e.g., National Fed’n of Fed. 

Employees v. Weinberger, 818 F.2d 935, 937 (D.C. Cir. 1987) 

(declining to decide the merits of the case where the district 

court based its decision on a purely jurisdictional issue). 

Instead, we remand for further proceedings before the district 

court. 

So ordered. 

USCA Case #08-5093 Document #1200186 Filed: 08/07/2009 Page 25 of 38
KAVANAUGH, Circuit Judge, dissenting in part:1

Plaintiffs filed suit in federal district court to challenge 

IRS Notice 2006-50 and to obtain tax refunds larger than 

those permitted by the Notice. But plaintiffs did not first file 

refund claims with the IRS. They therefore failed to comply 

with the statutory exhaustion requirement of 26 U.S.C. 

§ 7422(a), which bars taxpayers from bringing suits for 

“recovery” of taxes paid “until a claim for refund or credit has 

been duly filed with the Secretary.” 

On appeal, plaintiffs creatively seek to end-run the 

exhaustion requirement by arguing that they are no longer 

seeking money – at least in this case – but instead are 

pursuing only a pure Administrative Procedure Act challenge 

to Notice 2006-50. But as I see it, plaintiffs still face two 

insurmountable hurdles that preclude the federal courts from 

entertaining their suit at this time. First, plaintiffs’ APA 

claims seek a judicial declaration that Notice 2006-50 does 

not provide them sufficient tax refunds and that the Notice is 

procedurally invalid. But § 2201(a) of title 28 bars courts 

from entertaining a claim for declaratory relief “with respect 

to Federal taxes.” Second, and in the alternative, the ripeness 

doctrine precludes pre-enforcement APA challenges to IRS 

rules of this kind. 

As a result of either § 2201(a) or the ripeness doctrine, 

plaintiffs must raise their arguments about Notice 2006-50 in 

a refund suit, as authorized by § 7422(a) and 28 U.S.C. 

§ 1346. And they may file such a refund case only after 

 1

 This case involves three consolidated suits. I agree with the 

majority’s decision to dismiss the Cohen plaintiffs’ suit for the 

reasons well explained in its opinion. I respectfully disagree with 

the majority’s decision to allow the suit by the Sloan and Gurrola

plaintiffs to go forward. References to “plaintiffs” in this 

dissenting opinion are to the Sloan and Gurrola plaintiffs. 

USCA Case #08-5093 Document #1200186 Filed: 08/07/2009 Page 26 of 38
2 

complying with the exhaustion requirements of § 7422(a), 

which they have not done. 

It is long established that a refund suit – after exhaustion 

of administrative remedies – is the proper forum to raise 

claims about tax laws and regulations. It therefore comes as 

no surprise that the majority opinion can cite no case that has 

permitted a pre-enforcement APA challenge to a tax 

regulation of this kind. Because we should not entertain this 

suit at this time, I respectfully dissent. 

A 

In Notice 2006-50, the IRS announced that it would 

refund excise taxes paid by millions of Americans for longdistance telephone calls billed between February 28, 2003, 

and August 1, 2006. The Notice informed taxpayers that they 

could claim refunds on their tax returns for 2006. Those who 

wanted to claim a standard amount – ranging from $30 to $60 

depending on the number of exemptions claimed on Form 

1040 – could simply check a box on their returns. Those who 

wished to claim a greater amount could file a Form 8913 with 

their returns. And those who would not otherwise file a tax 

return for 2006 could file a newly created Form 1040EZ-T for 

the standard amount or claim a greater amount by also 

completing a Form 8913. 

Approximately 90 million Americans followed those 

simple instructions and promptly received their refunds. 

But the plaintiffs involved in this case did not properly 

seek refunds from the IRS pursuant to those authorized 

procedures. Instead, they filed suit in federal court and 

attempted to style the case as a class action on behalf of tens 

of millions of Americans who paid the improper telephone 

USCA Case #08-5093 Document #1200186 Filed: 08/07/2009 Page 27 of 38
3 

excise taxes. Plaintiffs’ complaint primarily argued that the 

refunds authorized by Notice 2006-50 would not fully 

compensate taxpayers for the telephone excise taxes that had 

been improperly collected. The complaint alleged, in 

particular, that taxpayers are entitled to refunds for service 

taxed before February 28, 2003 – not just from February 28, 

2003, to August 1, 2006. The complaint also contended that 

Notice 2006-50 requires excessive documentation in order to 

claim an amount above the standard amount – another way of 

saying that Notice 2006-50 undercompensates many 

taxpayers for the actual excise taxes paid. The complaint 

further claimed that Notice 2006-50 was procedurally flawed 

because the IRS promulgated it without notice and comment. 

The complaint expressly asked the district court to order 

additional tax refunds to tens of millions of Americans. 

It would have been easy enough for the individual named 

plaintiffs to first seek refunds from the IRS. And then, if they 

were denied refunds or did not receive a response within the 

statutory six-month period under 26 U.S.C. § 6532(a), they 

could have brought suits challenging the amounts they 

received or the procedures by which the IRS determined those 

amounts. For whatever reason, presumably strategic 

considerations related to their efforts to obtain class 

certification and significant classwide monetary relief, 

plaintiffs did not do so. 

B 

Plaintiffs’ failure to exhaust their available remedies with 

the IRS precludes them from proceeding in federal court at 

this time. 

In the district court, to the extent plaintiffs were seeking 

money refunds, they ran smack into the exhaustion 

USCA Case #08-5093 Document #1200186 Filed: 08/07/2009 Page 28 of 38
4 

requirement of § 7422(a). That statute bars federal courts 

from entertaining suits for recovery of federal taxes unless 

and until the taxpayers first seek refunds from the IRS. 

On appeal, no doubt recognizing the § 7422(a) 

exhaustion problem with their refund claims, plaintiffs have 

simply dropped those arguments and now pursue only a freestanding Administrative Procedure Act challenge to Notice 

2006-50. The majority opinion allows those APA claims to 

proceed.2

 Although I respect the majority opinion’s analysis, 

I disagree with allowing this case to go forward at this time, 

for two alternative reasons. 

First, plaintiffs’ suit – even as stripped down on appeal – 

still runs headlong into the phalanx of statutory provisions 

mandating that challenges to tax laws, regulations, decisions, 

or actions ordinarily be brought in refund suits after plaintiffs 

have sought a refund from, and exhausted their administrative 

remedies with, the IRS. See 26 U.S.C. § 7422(a) (exhaustion 

requirement); id. § 7421(a) (Anti-Injunction Act); 28 U.S.C. 

§ 2201(a) (tax exception to courts’ power to grant declaratory 

relief); see also 5 U.S.C. § 702 (preserving other limitations 

on judicial review in APA cases). Those statutory provisions 

help ensure the efficient administration of the tax system by 

funneling challenges to the tax laws into one refund procedure 

and by precluding premature judicial review of disputes 

involving taxes owed or paid. See Bob Jones Univ. v. Simon, 

416 U.S. 725, 746-47 (1974). 

 2

 On remand, to the extent plaintiffs ultimately prevail on their 

argument that Notice 2006-50 was improperly promulgated without 

notice and comment, the IRS can simply re-promulgate it after 

notice and comment and, under 26 U.S.C. § 7805(b)(4), make it 

retroactive to the date of the original Notice. 

USCA Case #08-5093 Document #1200186 Filed: 08/07/2009 Page 29 of 38
5 

Of particular relevance here is § 2201(a) of title 28. With 

their APA claims, plaintiffs seek a judicial declaration that 

Notice 2006-50 is arbitrary and capricious because it 

undercompensates them and was adopted in a procedurally 

improper manner. See J.A. 340-42 (Sloan complaint) (asking 

for “declaratory relief” and “a declaratory judgment” and that 

the court “declare” rights); J.A. 348 (Gurrola complaint) 

(seeking “declaratory relief”).3

But by enacting § 2201(a) back in 1935, Congress 

generally barred suits for declaratory relief in cases “with 

respect to Federal taxes.” The text of § 2201(a) squarely 

precludes this APA suit at this time. It means that plaintiffs 

must raise their arguments about Notice 2006-50 in a refund 

suit, as authorized by § 7422, after first seeking refunds from 

the IRS.4

The majority opinion concludes that § 2201(a) does not 

apply here because this Court has said that § 2201(a) and the 

 3

 Because the APA preserves the limitations on judicial review 

in other statutes such as § 2201(a), plaintiffs may not use the APA 

to avoid the limitations of § 2201(a). See, e.g., Taylor v. United 

States, 292 Fed. App’x. 383, 388-89 (5th Cir. 2008) (per curiam) 

(“as both the Anti-Injunction Act and the Declaratory Judgment Act 

bar the equitable relief sought by the Taylors, they cannot avail 

themselves of the APA’s waiver of sovereign immunity to seek that 

relief in the district court”); Fostvedt v. United States, 978 F.2d 

1201, 1203-04 (10th Cir. 1992) (“§ 702 of the APA does not 

override the limitations of the Anti-Injunction Act and the 

Declaratory Judgment Act”). 

4

 Section 2201(a) would not bar plaintiffs’ suit if they had no 

other legal avenue available to obtain relief. See South Carolina v. 

Regan, 465 U.S. 367, 378-79 (1984). But here, of course, those 

who wanted to challenge Notice 2006-50 could have brought a 

refund suit and raised their concerns there.

USCA Case #08-5093 Document #1200186 Filed: 08/07/2009 Page 30 of 38
6 

Anti-Injunction Act are “coterminous.” Maj. Op. at 6 (citing 

Inv. Annuity, Inc. v. Blumenthal, 609 F.2d 1, 4 (D.C. Cir. 

1979)). By their terms, of course, the statutes are not 

coterminous: § 2201(a) bars declaratory relief “with respect 

to Federal taxes,” and the Anti-Injunction Act precludes 

injunctive relief “restraining the assessment or collection of 

any tax.” Despite the statutes’ different language, the 

majority opinion is correct that our cases have said the two 

statutes are “coterminous.” 

But coterminous in what direction: (i) coterminously 

narrow such that the statutes bar declaratory and injunctive 

relief restraining the assessment or collection of taxes or 

(ii) coterminously broad such that the statutes bar declaratory 

and injunctive relief with respect to federal taxes? 

In one recent decision, we indicated that the AntiInjunction Act and § 2201(a) should be read to be 

coterminous and broad, barring all declaratory and injunctive 

relief with respect to Federal taxes. See Murphy v. IRS, 493 

F.3d 170, 174 (D.C. Cir. 2007). In Murphy, citing both 

§ 2201(a) and the Anti-Injunction Act, we said that “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 Internal Revenue Code. 

Id. (emphasis added). 

The Murphy statement is consistent, moreover, with the 

oft-articulated general principle that “the tax field is marked 

by the general preclusion of advance declaratory or injunctive 

relief. . . . For most tax issues and most taxpayers, a 

subsequent action for refund adequately safeguards all 

appropriate concerns.” Inv. Annuity, Inc. v. Blumenthal, 609 

F.2d 1, 9 (D.C. Cir. 1979). The Murphy statement also 

USCA Case #08-5093 Document #1200186 Filed: 08/07/2009 Page 31 of 38
7 

corresponds to the case law elsewhere: “Given the breadth of 

[§ 2201(a)], conclusions by many lower courts that I.R.C. 

§ 7421 and [§ 2201(a)] should be interpreted in pari materia

seem to derive at least partly from the courts’ broad 

interpretation of I.R.C. § 7421.” Kristin E. Hickman, A 

Problem of Remedy: Responding to Treasury’s (Lack of) 

Compliance with the Administrative Procedure Act 

Rulemaking Requirements, 76 GEO. WASH. L. REV. 1153, 

1212 (2008). 

In short, reading the two statutes to coterminously bar 

declaratory and injunctive relief with respect to federal taxes 

is consistent with precedent, adheres to the plain text of the 

later-enacted 26 U.S.C. § 2201(a), and corresponds to the 

well-established principle that challenges to tax regulations 

should be brought in refund suits. Therefore, to the extent we 

must read the two statutes coterminously (and as a panel we 

must, see infra n.6), I would read them to bar free-standing 

suits seeking declaratory and injunctive relief with respect to 

federal taxes. 

The majority opinion disagrees and cites four of our cases 

in concluding that the Anti-Injunction Act and § 2201(a) must 

be interpreted conterminously but narrowly – thereby 

allowing the federal courts to entertain plaintiffs’ freestanding challenge to Notice 2006-50 before they have 

exhausted their administrative remedies with the IRS. Upon 

examination, however, none of the cited cases actually 

supports that result. 

Our decision in E. Ky. Welfare Rights Org. v. Simon, 506 

F.2d 1278, 1285 n.11 (D.C. Cir. 1974), is not binding 

precedent because it was vacated by the Supreme Court on 

standing grounds, meaning the federal courts had no 

jurisdiction to hear the case. See Simon v. E. Ky. Welfare 

USCA Case #08-5093 Document #1200186 Filed: 08/07/2009 Page 32 of 38
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Rights Org., 426 U.S. 26, 37, 46 (1976). As the Supreme 

Court has explained, a decision “vacating the judgment of the 

Court of Appeals deprives that court’s opinion of precedential 

effect.” County of Los Angeles v. Davis, 440 U.S. 625, 634 

n.6 (1979) (internal quotation marks omitted). 

So, too, our pre-Eastern Kentucky decision in 

“Americans United” Inc. v. Walters, 477 F.2d 1169, 1175-76 

(D.C. Cir. 1973), was reversed by the Supreme Court on other 

grounds – namely, that the Anti-Injunction Act by its own 

terms jurisdictionally barred the suit. See Alexander v. 

“Americans United” Inc., 416 U.S. 752, 758-59 & n.10 

(1974). A judicial opinion lacks precedential force if it is not 

connected to a judgment. Therefore, prior panel decisions 

that were reversed by the Supreme Court – like those that 

were vacated – are not binding precedent. See Charles A. 

Sullivan, On Vacation, 43 HOUS. L. REV. 1143, 1149 (2006) 

(“it is not clear why any opinion survives the extinction of the 

judgment it supports (whether that extinction is by vacatur or 

reversal), but, if some opinions do survive, it seems strange 

that the distinction is drawn between judgments which are 

vacated and those that are reversed”); Jon O. Newman, 

Decretal Language: Last Words of an Appellate Opinion, 70 

BROOK. L. REV. 727, 728 (2005) (noting “difference of 

opinion among judges as to the circumstances in which 

‘vacated’ or ‘reversed’ should be used in decretal language”).5

 5

 To be sure, after a reversal or vacatur by the Supreme Court, 

a panel may then have to decide the case on remand by addressing 

issues that were not considered by the Supreme Court. And the 

panel’s post-remand decision and accompanying ratio decidendi 

may of course become binding precedent. But a prior panel 

decision that was vacated or reversed by the Supreme Court has no 

more weight than dicta. It can be analyzed and cited for its 

persuasive value, but it is not binding. 

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Finally, the majority opinion cites two later cases that 

purportedly “re-embraced” the rationale of Americans United

and Eastern Kentucky. Maj. Op. at 20 n.3 (citing Nat’l 

Taxpayers Union, Inc. v. United States, 68 F.3d 1428, 1436-

37 (D.C. Cir. 1995) and Inv. Annuity, 609 F.2d at 4, 10). But 

National Taxpayers Union and Investment Annuity merely 

reiterated that the statutes were coterminous in the course of 

concluding that the suits in question were barred by the 

narrow terms of the Anti-Injunction Act. Neither case 

therefore had occasion to pass on the key question here: 

whether the statutes are (i) coterminously narrow and bar 

declaratory and injunctive relief restraining the assessment or 

collection of taxes or (ii) coterminously broad and bar 

declaratory and injunctive relief with respect to federal taxes.6

In sum, I respectfully disagree with the majority 

opinion’s decision to aggressively interpret National 

Taxpayers Union and Investment Annuity and thereby allow 

this case to go forward at this time. In my judgment, none of 

 6

 This whole effort in assessing the “coterminous in what 

direction” question is admittedly a rather odd exercise. I say that 

because, contrary to what our 1970s-era cases said, the texts of the 

Anti-Injunction Act and § 2201(a) are of course not coterminous. 

And courts today likely would not find them coterminous because 

courts today tend to pay greater attention to statutory text. So at 

some point, the en banc Court should clear this up and ensure that 

our case law aligns with the text of the two statutes, as Professor 

Bittker advocated years ago. See Boris I. Bittker & Kenneth M. 

Kaufman, Taxes and Civil Rights: “Constitutionalizing” the 

Internal Revenue Code, 82 YALE L.J. 51, 58 (1972) (“reducing the 

Declaratory Judgment Act to a mere echo of § 7421(a) . . . deprives 

it of any independent significance . . . and the fact that Congress 

amended the Declaratory Judgment Act in 1935 to exclude 

controversies ‘with respect to Federal taxes’ argues for giving the 

amendment some independent significance”); cf. Bob Jones Univ., 

416 U.S. at 732 n.7. 

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our precedents compels or permits us to disregard the very 

plain statutory text of § 2201(a). And pursuant to that text, 

courts may not entertain this kind of free-standing suit for 

declaratory relief “with respect to Federal taxes.” 26 U.S.C. 

§ 2201(a). A refund suit – after exhaustion – is the proper 

vehicle for plaintiffs to challenge Notice 2006-50. On that 

basis alone, we should dismiss plaintiffs’ suit. 

Second, even if § 2201(a) does not bar the APA claims, 

the ripeness doctrine does so. The Supreme Court’s decision 

in Abbott Laboratories v. Gardner permits many preenforcement challenges to agency rules – and those disputes 

are, of course, a staple of this Court’s diet. 387 U.S. 136 

(1967). But Abbott Laboratories by no means opens the door 

to every pre-enforcement challenge to an agency rule. Rather, 

the ripeness inquiry examines the fitness of the issues for 

judicial decision and the hardship to the parties of 

withholding court consideration. See id. at 148-49. Under the 

hardship prong of that test, a plaintiff ordinarily may not bring 

a pre-enforcement challenge to a rule that does not “as a 

practical matter require[] the plaintiff to adjust his conduct 

immediately.” Nat’l Park Hospitality Ass’n v. Dep’t of the 

Interior, 538 U.S. 803, 808 (2003) (internal quotation marks 

omitted); see also Ohio Forestry Ass’n v. Sierra Club, 523 

U.S. 726, 733-35 (1998); Lujan v. Nat’l Wildlife Fed’n, 497 

U.S. 871, 891 (1990). Therefore, pre-enforcement review 

typically is more appropriate for regulations imposing 

burdens than for those (like Notice 2006-50) offering benefits 

or establishing criteria for benefits. See Reno v. Catholic Soc. 

Servs., Inc., 509 U.S. 43, 57-59 (1993); 2 RICHARD J. PIERCE,

JR. ADMINISTRATIVE LAW TREATISE § 15.14, at 1078-79 (4th 

ed. 2002). In other words, plaintiffs in such cases must 

ordinarily apply for benefits (here, for additional tax refunds) 

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11 

before launching a lawsuit against the agency regulation that 

sets forth the criteria for the benefits.7

Under the governing precedents, plaintiffs’ APA 

challenge to IRS Notice 2006-50 is not ripe. Plaintiffs must 

file a refund request and first give the IRS a chance to assess 

the merits of their arguments for additional refunds. After 

that step, plaintiffs may file a refund suit and complain in 

court about the Notice. See Stephenson v. Brady, No. 90-

3042, 1991 WL 22835, at *3-4 (4th Cir. 1991). 

The majority opinion says the ripeness doctrine does not 

apply because this is a post-enforcement suit. That 

explanation is mystifying. Until plaintiffs seek a larger refund 

from the IRS and are denied, Notice 2006-50 will not have 

been enforced against them by the IRS. So this lawsuit is a 

pre-enforcement suit targeting Notice 2006-50. And the 

ripeness doctrine, in my judgment, precludes hearing this preenforcement case at this time. 

C 

Both § 2201(a)’s bar on declaratory relief “with respect 

to Federal taxes” and the ripeness doctrine exemplify the 

broad theme that runs throughout administrative law in the tax 

area. As noted above, we have stated, for example, that “the 

tax field is marked by the general preclusion of advance 

declaratory or injunctive relief. . . . For most tax issues and 

most taxpayers, a subsequent action for refund adequately 

 7

 Courts have also been more reluctant to find a specific preenforcement challenge ripe where (as here) a statute (26 U.S.C. 

§§ 1346, 7422) creates a separate process for review. See, e.g., 

Thunder Basin Coal Co. v. Reich, 510 U.S. 200, 207-209 (1994). 

That body of case law also counsels against premature adjudication 

of plaintiffs’ claims. 

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12 

safeguards all appropriate concerns.” Inv. Annuity, Inc. v. 

Blumenthal, 609 F.2d 1, 9 (D.C. Cir. 1979). We also have 

flatly stated that “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 Internal 

Revenue Code. Murphy v. IRS, 493 F.3d 170, 174 (D.C. Cir. 

2007). 

So, too, the leading academic on this issue has explained 

that the precedents applying § 7421(a), § 7422(a), § 2201(a), 

and the ripeness doctrine stand “almost unyieldingly against 

pre-enforcement challenges to Treasury’s regulations 

promulgated in violation of APA procedural requirements.” 

Kristin E. Hickman, A Problem of Remedy: Responding to 

Treasury’s (Lack of) Compliance with the Administrative 

Procedure Act Rulemaking Requirements, 76 GEO. WASH. L.

REV. 1153, 1200 (2008). It is true that Professor Hickman 

argues for changing the state of the law, but she 

acknowledges frankly that it “is perhaps quixotic to suggest 

that the courts rethink doctrine firmly rooted in forty years of 

jurisprudence.” Id. at 1201. 

In charting a new course in this case, the majority opinion 

refers to the IRS’s position in the events surrounding this case 

as “adamant,” “aggressive,” “creative,” “inventive,” 

“remarkable,” “mean,” and exhibiting “chutzpah” – and the 

majority opinion then proclaims that “[n]o agency operates 

beyond the reach of the law.” Maj. Op. at 23. I of course 

agree wholeheartedly with the sentiment that the IRS must 

comply with the law. But that sentiment, as I see it, is a red 

herring in this case. The question here concerns only the 

timing of judicial review, not the availability of judicial 

review. 

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13 

With respect to the actual issue presented – namely, the 

timing of judicial review – it is telling that the majority 

opinion and plaintiffs cite no decision that has entertained an 

APA challenge to an IRS rule relating to taxes outside the 

context of a refund suit. The lack of support in the Federal 

Reporters for entertaining a free-standing, pre-enforcement 

APA challenge to a tax regulation counsels judicial caution 

and restraint – and helps demonstrate, in my judgment, the 

novelty and error of the majority opinion’s approach. 

The majority opinion claims that the lack of case law 

permitting challenges to tax regulations except in refund suits 

actually is of no moment because, it says, there are not many 

opinions expressly rejecting this precise kind of free-standing 

APA challenge. But we could line Constitution Avenue from 

this Courthouse to the IRS Building with judicial decisions 

that apply § 2201(a), the Anti-Injunction Act, the statutory 

exhaustion principle, and the ripeness doctrine and hold that 

challenges to tax laws and regulations must occur in refund 

suits. Those many decisions, in my judgment, establish a 

principle of judicial restraint that plainly covers this suit. 

* * * 

In sum, plaintiffs’ APA claims are barred from review at 

this time by 28 U.S.C. § 2201(a), or in the alternative, by the 

ripeness doctrine. I respectfully dissent from the majority 

opinion’s contrary conclusion. 

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