Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caDC-08-05088/USCOURTS-caDC-08-05088-1/pdf.json

Nature of Suit Code: 320
Nature of Suit: Assault, Libel, and Slander
Cause of Action: 

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United States Court of Appeals 

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued September 29, 2010 Decided July 1, 2011 

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 

(Nos. 1:07-cv-00051, 06–cv–00483, 07–cv–00050) 

On Petition for Rehearing En Banc 

Thomas Goldstein argued the cause for appellants. With 

him on the briefs were Isaac J. Lidsky, Michael A. Bowen, 

Marc B. Dorfman, Jonathan W. Cuneo, Robert J. Cynkar, 

William H. Anderson, Nicholas E. Chimicles, Benjamin F. 

Johns, Henry D. Levine, Charles Tiefer, Mark C. Rifkin, Mark 

Griffin, and Randy J. Hart. 

USCA Case #08-5088 Document #1316088 Filed: 07/01/2011 Page 1 of 53
2 

Kristin E. Hickman was on the brief of amicus curiae in 

support of appellants. 

Gilbert S. Rothenberg, Acting Deputy Assistant Attorney 

General, U.S. Department of Justice, argued the cause for 

appellee. With him on the brief were Ronald C. Machen, Jr., 

U.S. Attorney, and Teresa E. McLaughlin and Ellen P. 

DelSole, Attorneys. Kathleen E. Lyon, Attorney, and R. Craig 

Lawrence, Assistant U.S. Attorney, entered appearances. 

Before: SENTELLE, Chief Judge, GINSBURG, HENDERSON,

ROGERS, TATEL, GARLAND, BROWN, GRIFFITH, AND 

KAVANAUGH, Circuit Judges. 

Opinion for the Court filed by Circuit Judge BROWN. 

Dissenting opinion filed by Circuit Judge KAVANAUGH, 

with whom Chief Judge SENTELLE and Circuit Judge 

HENDERSON join. 

BROWN, Circuit Judge: After illegally collecting a three 

percent excise tax, the Internal Revenue Service (“IRS” or “the 

Service”) created a refund procedure for taxpayers to recoup 

their money. That procedure, Appellants argue, is unlawful. 

We have no occasion to visit the merits of Appellants’ claims, 

as we granted rehearing en banc only to determine whether we 

have the authority to hear the case. We do. 

 

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3 

I

1

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. Individual taxpayers are not required to calculate 

their own excise tax liability or to maintain adequate 

supporting documentation to do so. See Rev. Rul. 60-58, 

1960-1 C.B. 638. The Code taxes communications charges 

that are based upon distance and transmission time. 26 U.S.C. 

§ 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 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 I.R.S. Notice 2005-79, 2005-2 C.B. 952 

(“Notice 2005-79”); see also 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 refund suits 

claiming the excise tax was illegal and several circuits, 

including this one, concluded time-only rate structures render 

calls nontaxable under the Code. Nat’l R.R. Passenger, 

 

1

 The panel decision, Cohen v. United States, 578 F.3d 1, 3–4 (D.C. 

Cir. 2009), sets out much of the relevant factual and procedural 

background of this case. We draw, often verbatim, from that 

decision in summarizing the background here. 

USCA Case #08-5088 Document #1316088 Filed: 07/01/2011 Page 3 of 53
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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 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. The IRS 

further ordered taxpayers to continue paying the tax, but 

permitted place-holder refund claims “for overpayments.” Id. 

Taxpayers were advised, however, the Service would not 

process place-holder refund claims while related cases 

remained pending in federal courts of appeals. Id. 

The IRS lost in each of the five circuits that considered its 

application of § 4251. All held the tax inapplicable to 

long-distance rates calculated without reference to distance. 

Reese Bros., Inc. v. United States, 447 F.3d 229, 231 (3d Cir. 

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

2006); Nat’l R.R. Passenger, 431 F.3d at 374; OfficeMax, Inc. 

v. United States, 428 F.3d 583, 585 (6th Cir. 2005); Am. 

Bankers Ins. Group, 408 F.3d at 1338. On May 26, 2006, 

after the last of these rulings came down, the IRS issued Notice 

2006-50, discontinuing the excise tax for phone charges based 

solely on transmission time. See I.R.S. Notice 2006-50, 

2006-1 C.B. 1141 (“Notice 2006-50”).2

 

Notice 2006-50 provided a one-time exclusive mechanism 

for taxpayers to obtain a refund for excise taxes erroneously 

collected between February 28, 2003, and August 1, 2006.3

 

 

2

 The IRS modified Notice 2006-50 on January 29, 2007. See 

I.R.S. Notice 2007-11, 2007-1 C.B. 405 (“Notice 2007-11”). 

3

 The IRS promulgated a different procedure for business entities (as 

opposed to individuals) seeking an excise tax refund. See Notice 

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Id. § 5(a) (agreeing to provide refund “if the taxpayer requests 

the credit or refund in the manner prescribed in this notice”); 

id. § 5(g) (refusing to process refund requests “that do not 

follow the provisions of this notice”). Although the IRS 

collected the excise tax through telephone service providers, 

Notice 2006-50 required individual taxpayers to request a 

refund on their 2006 federal income tax returns. Id. § 5(a)(2). 

Taxpayers who otherwise did not need to file income tax 

returns nevertheless had to file a return in order to submit a 

refund request. Id. Taxpayers could request either a “safe 

harbor” amount, which required no documentation, or the 

actual amount of tax they paid, for which the IRS could 

demand documentation. 4

 Id. § 5(c); Notice 2007-11, § 11 

(setting the safe harbor at between $30 and $60 depending on 

the number of exemptions and refusing to require telephone 

 

2007-11. Enities could use the “Business and Nonprofit Estimation 

Method” formula to calculate their refund, or gather all their phone 

records during the refund period instead. See id. § 12. 

4 Notice 2006-50 ultimately proved an ineffective means of 

refunding the excise tax. According to a report issued by the 

Treasury Inspector General for Tax Administration, the IRS illegally 

collected approximately $8 billion between February 28, 2003, and 

August 1, 2006. TREASURY INSPECTOR GENERAL FOR TAX 

ADMINISTRATION, REPORT NO. 2007-30-178, ALTHOUGH STRONG 

EFFORTS WERE MADE, A SIGNIFICANT AMOUNT OF THE TELEPHONE 

EXCISE TAX OVERCOLLECTED FROM INDIVIDUAL TAXPAYERS MAY 

NEVER BE REFUNDED 6 (Sept. 26, 2007). But the IRS only 

refunded “just over half” that amount, id. at 5 n.3, as only 1.7 percent 

of the 10 to 30 million eligible individuals without income tax filling 

obligations actually sought a refund. U.S. GOVERNMENT 

ACCOUNTABILITY OFFICE, GAO-07-695, TAX ADMINISTRATION:

TELEPHONE EXCISE TAX REFUND REQUESTS ARE FEWER THAN 

PROJECTED AND HAVE HAD MINIMAL IMPACT ON IRS SERVICES 10 

(2007). 

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companies to supply customers with billing records during the 

refund period). 

Various lawsuits challenged the lawfulness and adequacy 

of the refund process. See In re Long-Distance Tel. Serv. Fed. 

Excise Tax Refund Litig., 469 F. Supp. 2d 1348 (J.P.M.L. 

2006) (Transfer Order). The Multidistrict Litigation 

(“MDL”) Panel consolidated and transferred three district 

court cases, Cohen, Sloan, and Gurrola into an MDL 

proceeding before the United States District Court for the 

District of Columbia. Id. at 1350. In each of the three 

consolidated suits, Appellants purported to represent a class of 

taxpayers who lacked the resources or expertise necessary to 

individually seek a refund under Notice 2006-50, or amounts at 

stake sufficient to make individual actions worthwhile. 5

 

Appellants claim Notice 2006-50 is substantively flawed 

because it undercompensates many taxpayers for the actual 

excise taxes paid and is procedurally flawed because the IRS 

did not comply with the notice and comment procedures 

required under the Administrative Procedure Act (“APA”), 5 

U.S.C. § 551 et seq., when it issued the notice. See Second 

Amended Complaint ¶ 2 (“The I.R.S.’s program is unlawful 

because it fails to compensate consumers for anything 

approaching the full amount of the money illegally taken, is 

without a basis in law, is arbitrary in the extreme, and was 

promulgated without any of the procedures that are required to 

accompany agency rulemaking.”). 

The district court dismissed the cases after concluding 

Appellants failed to exhaust the administrative remedies for 

 

5 The three suits differ in one important respect. The Cohen

plaintiffs separately filed a refund claim with the Service, which the 

district court dismissed as premature. Our panel decision affirmed 

the dismissal, Cohen, 578 F.3d 1, 14–15 (D.C. Cir. 2009), and that 

claim is not at issue here. 

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their refund claims and failed to state valid claims under 

federal law. In re Long-Distance Tel. Serv. Fed. Excise Tax 

Refund Litig., 539 F. Supp. 2d 281, 287 (D.D.C. 2008) (“[N]o 

refund claim, no refund suit.”). That court further found 

Notice 2006-50 was an “internal policy,” did not adversely 

affect Appellants, and therefore constituted unreviewable 

agency action. Id.; see 5 U.S.C. § 702; Bennett v. Spear, 520 

U.S. 154, 177–78 (1997) (requiring “final agency action” to be 

the “consummation” of agency decisionmaking and either 

affect legal “rights or obligations” or result in “legal 

consequences”); Trudeau v. FTC ̧456 F.3d 178, 185 (D.C. Cir. 

2006) (explaining the “final agency action” requirement is not 

jurisdictional, but rather a limitation on an APA cause of 

action). The district court also ruled Appellants’ APA claims 

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

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

539 F. Supp. 2d at 287. 

A divided panel of this court reversed, holding Notice 

2006-50 constituted final agency action reviewable under the 

APA. Cohen, 578 F.3d 1, 4–14 (D.C. Cir. 2009). Before 

doing so, the majority rejected two challenges to the court’s 

jurisdiction. In the majority’s view, neither the 

Anti-Injunction Act (“AIA”), which provides that “no suit for 

the purpose of restraining the assessment or collection of any 

tax shall be maintained in any court by any person,” 26 U.S.C. 

§ 7421(a), nor the Declaratory Judgment Act (“DJA”), which 

authorizes declaratory relief except “with respect to Federal 

taxes,” 28 U.S.C. § 2201(a), stripped the court of jurisdiction 

to hear Appellants’ claims for equitable relief. Cohen, 578 

F.3d at 5. Although the text of the AIA and DJA differ, the 

majority reasoned, our circuit precedent held the two 

“coterminous.” Id. Thus, if one did not bar Appellants’ APA 

claims, neither did the other. Id. at 13 (citing “Americans. 

United,” Inc. v. Walters, 477 F.2d 1169, 1176 (D.C. Cir. 

USCA Case #08-5088 Document #1316088 Filed: 07/01/2011 Page 7 of 53
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1973), rev’d on other grounds sub nom. Alexander v. 

“Americans United” Inc., 416 U.S. 752 (1974) (“The breadth 

of the tax exception of [the DJA] is co-extensive with the effect 

of [the AIA], and so the applicability of the latter to our 

situation is determinative of jurisdiction.”)). 

The panel dissent, on the other hand, argued the DJA 

barred Appellants’ APA claims. In the dissent’s view, our 

precedent required the AIA and DJA to be read coterminously, 

but permitted us to select the broader of the two provisions as 

the baseline. As between the two, the dissent argued “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 [DJA], 

and corresponds to the well-established principle that 

challenges to tax regulations should be brought in refund 

suits.” Id. at 18 (Kavanaugh, J., dissenting). The dissent also 

argued Appellants’ claims were not ripe because Appellants 

had not filed refund requests under Notice 2006-50. Id. at 20 

(citing Stephenson v. Brady, 927 F.2d 596 (table), 1991 U.S. 

App. LEXIS 2886, at *4 (4th Cir. 1991) (per curiam)). 

On September 21, 2009, the IRS petitioned the court for 

rehearing en banc. We granted the petition, limiting our en 

banc review to four questions, all concerning (1) whether we 

have jurisdiction and (2) whether Appellants state a valid claim 

upon which relief may be granted. Our review is de novo. 

Kassem v. Wash. Hosp. Ctr., 513 F.3d 251, 253 (D.C. Cir. 

2008). 

II 

We address jurisdiction first. See Steel Co. v. Citizens for a 

Better Env’t, 523 U.S. 83, 94 (1998). In that regard, two 

different questions are pertinent: Does section 10(a) of the 

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APA, 5 U.S.C. § 702, waive sovereign immunity with respect 

to Appellants’ claims, and does the AIA, DJA, or both provide 

“other limitations on judicial review?” 5 U.S.C. § 702. 

A 

Our jurisdiction extends generally to cases and 

controversies involving questions of federal law. 28 U.S.C. 

§ 1331. The APA—a federal law—provides a “generic cause 

of action in favor of persons aggrieved by agency action,” 

though it is not an independent source of jurisdiction. Md. 

Dep’t of Human Res. v. Dep’t of Health & Human Servs., 763 

F.2d 1441, 1445 n.1 (D.C. Cir. 1985); cf. Natural Res. Def. 

Council, Inc. v. Hodel, 865 F.2d 288, 318 (D.C. Cir. 1988) 

(“Congress has seen fit to provide broadly for judicial review 

of those actions, affecting as they do the lives and liberties of 

the American people. This is fully in keeping with fundamental 

notions in our policy that the exercise of governmental power, 

as a general matter, should not go unchecked.”); Trudeau, 456 

F.3d at 183 (“[T]he APA does not afford an implied grant of 

subject matter jurisdiction permitting federal judicial review of 

agency action.”) (quoting Califano v. Sanders, 430 U.S. 99, 

107 (1977)). 

In contrast, “[s]overeign immunity is jurisdictional” and 

“[a]bsent a waiver, . . . shields the Federal Government and its 

agencies from suit.” FDIC v. Meyer, 510 U.S. 471, 475 

(1994). Appellants, who seek only equitable relief, argue 

Congress provided the necessary waiver of immunity in § 702, 

which reads in part: 

An action in a court of the United States seeking relief 

other than money damages and stating a claim that an 

agency . . . acted or failed to act . . . shall not be 

dismissed nor relief therein be denied on the ground 

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that it is against the United States or that the United 

States is an indispensable party. 

5 U.S.C. § 702. We agree. Even construing § 702 “strictly,” 

as the Service requests, see Dep’t of the Army v. Blue Fox, Inc., 

525 U.S. 255, 260–61 (1999), there is no doubt Congress lifted 

the bar of sovereign immunity in actions not seeking money 

damages. See Trudeau, 456 F.3d at 186. The IRS is not 

special in this regard; no exception exists shielding it—unlike 

the rest of the Federal Government—from suit under the APA. 

See e.g., Foodservice & Lodging Inst., v. Regan, 809 F.2d 842 

(D.C. Cir. 1987) (per curiam) (concluding the district court 

allowed under the APA a challenge to an IRS regulation 

unrelated to the assessment or collection of tax); Tax Analysts 

& Advocates v. Shultz, 376 F. Supp. 889, 892 (D.D.C. 1974) 

(invalidating a Revenue Ruling under the APA, quoted 

approvingly in Hibbs v. Winn, 542 U.S. 88, 103 (2004)); Nat’l 

Restaurant Ass’n v. Simon, 411 F. Supp. 993, 995–99 (D.D.C. 

1976) (allowing a challenge to a Revenue Ruling to proceed 

under the APA). 

The IRS insists § 702’s waiver of sovereign immunity 

does not apply here because it does not encompass review of 

actions “committed to agency discretion.” 5 U.S.C. 

§ 701(a)(2). We previously rejected this argument when the 

Service couched it in terms of a want of “final agency action” 

under § 704, see Cohen, 578 F.3d at 7–10, and did not request 

briefing on the issue in our order granting en banc review. 

There is no need to revisit the issue now. Put simply, “Notice 

2006-50 binds the IRS.” Cohen, 578 F.3d at 8. Because the 

IRS “forfeited the discretion it retained prior to issuing the 

notice,” id. at 8, we need not address whether the APA’s “final 

agency action” requirement limits its waiver of sovereign 

immunity. In any event, we have previously held it did not. 

Trudeau, 456 F.3d at 187 (“We also hold that the waiver 

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applies regardless of whether the FTC’s press release 

constitutes ‘final agency action.’”). 

B 

Even though § 702 waives the Government’s immunity, it 

preserves “other limitations on judicial review” and does not 

“confer[] authority to grant relief if any other statute . . . 

expressly or impliedly forbids the relief which is sought.” 5 

U.S.C. § 702; see Schnapper v. Foley, 667 F.2d 102, 108 (D.C. 

Cir. 1981) (stating the Government’s immunity remains intact 

when “another statute expressly or implicitly forecloses 

injunctive [or declaratory] relief”); Smith v. Booth, 823 F.2d 

94, 97 (5th Cir. 1987) (same); Fostvedt v. United States, 978 

F.2d 1201, 1204 (10th Cir. 1992) (same); see also H.R. REP. 

NO. 94-1656, at 12, reprinted in 1976 U.S.C.C.A.N. 6121, 

6132–33 (stating that § 702 of the APA is to have no effect on 

limitations and prohibition of the AIA and DJA). The IRS 

argues the AIA and DJA provide such “other limitations” on 

our review. At the en banc stage, we may “set aside [our] own 

precedent” reading the two statutes as coterminous. Critical 

Mass Energy Project v. NRC , 975 F.2d 871, 876 (D.C. Cir. 

1992); see also id. at 880 (Randolph, J., concurring) (noting 

stare decisis is “most compelling” in cases of statutory 

interpretation) (quoting Hilton v. S.C. Pub. Rys. Comm’n ̧ 502 

U.S. 197, 205 (1991)). We therefore address separately 

whether each statute limits judicial review under the APA. 

The dissent suggests these questions of statutory 

interpretation are academic. Diss. Op. at 17 n.12. But this 

statement is puzzling. These questions are the same ones the 

dissent raised at the panel stage, the same questions the court 

granted en banc review to consider, and the same questions the 

court asked the litigants to address. The court did not grant en 

banc review to reconsider whether this case was ripe, or 

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whether Appellants failed to exhaust their administrative 

remedies. 

1 

Enacted in 1867, the AIA “apparently has no recorded 

legislative history, but its language could scarcely be more 

explicit.” Bob Jones Univ. v. Simon, 416 U.S. 725, 736 

(1974) (footnote omitted). It states: 

[N]o 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). “The manifest purpose of § 7421(a) is to 

permit the United States to assess and collect taxes alleged to 

be due without judicial intervention, and to require that the 

legal right to the disputed sums be determined in a suit for 

refund.” Enochs v. Williams Packing & Nav. Co., 370 U.S. 1, 

7 (1962) (interpreting AIA by looking at “comparable” Tax 

Injunction Act (“TIA”) of 1937, 50 Stat. 738 (codified as 

amended at 28 U.S.C. § 1341)). As the Supreme Court 

explained, the provision reflected “appropriate concern about 

the . . . danger that a multitude of spurious suits, or even suits 

with possible merit, would so interrupt the free flow of 

revenues as to jeopardize the Nation’s fiscal stability.” 

Alexander v. “Americans United” Inc., 416 U.S. 752, 769 

(1974) (Blackmun, J., dissenting); see also California v. Grace 

Brethren Church, 457 U.S. 393, 410 (1982) (interpreting TIA). 

The AIA has “almost literal effect”: It prohibits only those 

suits seeking to restrain the assessment or collection of taxes. 

Bob Jones, 416 U.S. at 737 (quoting Williams Packing, 370 

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U.S. at 6-7) 6; see also Hibbs, 542 U.S. at 102–03. Thus, in a 

late nineteenth century case, the AIA prohibited enjoining the 

collection of a tax on tobacco on the theory the tax was 

“illegally assessed.” Snyder v. Marks ̧ 109 U.S. 189, 192–93 

(1883); see also Hannewinkle v. City of Georgetown, 82 U.S. 

547, 548 (1872). Similarly, in Bob Jones University v. Simon, 

the AIA precluded injunctive relief when Bob Jones University 

lost its status as a tax exempt organization under § 501(c)(3) of 

the Internal Revenue Code. 416 U.S. at 739. An injunction 

would have impacted the university’s future tax liability 

because § 501(c)(3) organizations are exempt from FICA 

(social security) and FUTA (unemployment) taxes. Id.; see 

also “Americans United” Inc., 416 U.S. at 762 n.13 (holding a 

suit for injunctive relief barred by the AIA because “[s]o long 

as the imposition of a federal tax, without regard to its nature, 

follows from the Service’s withdrawal of § 501(c)(3) status, 

[injunctive relief is barred and] a refund suit following the 

collection of that tax is an appropriate vehicle for litigating the 

legality of the Service’s actions under § 501(c)(3).”). By 

contrast, in Hibbs v. Winn, Arizona taxpayers sought to 

invalidate an Arizona tax credit that allegedly supported 

parochial schools in violation of the Establishment Clause. 

542 U.S. at 92. The Supreme Court allowed the state 

taxpayers’ suit for declaratory and injunctive relief to proceed 

 

6

 In Williams Packing, the Supreme Court recognized a narrow 

judicially created exception to the AIA’s prohibition on injunctive 

relief: when “it is clear that [1] under no circumstances could the 

Government ultimately prevail, the central purpose of the Act is 

inapplicable and . . . [2] the attempted collection may be enjoined if 

equity jurisdiction otherwise exists.” Williams Packing, 370 U.S. at 

7. South Carolina v. Regan provides a similar escape valve in the 

absence of an alternative remedy. 465 U.S. 367, 374 (1984). 

Because we hold the AIA does not preclude Appellants’ claims, 

there is no need to inquire whether an exception to the AIA would 

apply if it did. 

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despite the comparable TIA because the suit did not alter the 

taxpayers’ individual tax liability or deplete the state’s tax 

revenue in any way. See id. at 107. 

This suit does not seek to restrain the assessment or 

collection of any tax. The IRS previously assessed and 

collected the excise tax at issue. The money is in the U.S. 

treasury; the legal right to it has been previously determined. 

As a result, this suit is similar to Hibbs. Hearing it—whatever 

its merit—will not obstruct the collection of revenue as in 

Snyder, alter Appellants’ future tax liabilities as in Bob Jones,

7

or shift the risk of insolvency as the Court feared in Grace 

Brethren Church. This suit is strictly about the procedures 

under which the IRS will return taxpayers’ money. In any 

event, whether the IRS’s procedures are upheld or the 

Appellants succeed in forcing a different set of procedures, 

those procedures are not retroactive; they do not and cannot 

affect the assessment or collection of taxes after the fact. 

But the IRS thinks otherwise. The Service argues the 

Court has construed the AIA to preclude suit in similar 

circumstances. In support, the Service points to United States 

v. Clintwood Elkhorn Mining Co., 553 U.S. 1 (2008), and 

 

7

 The IRS argues Bob Jones, and its companion case Alexander v. 

“Americans United,” Inc., support reading the AIA to preclude 

Appellants’ claims because neither “directly involve[d] assessment 

or collection.” This misconstrues the holding of Bob Jones and 

“Americans United.” In both cases, the judicial relief requested 

would have impacted the litigants’ future tax liability because only 

501(c)(3) organizations are exempt from FICA and FUTA taxes. 

Bob Jones, 416 U.S. at 727–28. The Court emphasized this point in 

characterizing both Bob Jones and “Americans United” as 

pre-enforcement cases. Id. at 727 (“This case and [“Americans 

United”] involve . . . whether, prior to the assessment and collection 

of any tax, a court may enjoin the Service . . . .”). 

USCA Case #08-5088 Document #1316088 Filed: 07/01/2011 Page 14 of 53
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United States v. Dalm, 494 U.S. 596 (1990). But Clintwood 

Elkhorn and Dalm are distinguishable. The Court’s focus in 

each was on how the AIA and § 7422(a), together, establish the 

statutory conditions upon which a taxpayer may bring a refund 

suit without interrupting the orderly assessment and collection 

of taxes. Clintwood Elkhorn and Dalm do not speak to suits 

outside the § 7422(a) refund process. See Dalm, 494 U.S. at 

601. 

The IRS envisions a world in which no challenge to its 

actions is ever outside the closed loop of its taxing authority. 

It argues assessment and collection are part of a “single

mechanism” that ultimately determines the amount of revenue 

the Treasury retains. Because this suit will ultimately affect 

the money Treasury retains, the IRS argues, it involves 

“assessment and collection.”8

 But the Supreme Court rejected 

this “single mechanism” theory of assessment and collection in 

Hibbs, choosing instead to define “assessment and collection” 

as is done in the Internal Revenue Code. “[A]ssessment” is 

not “synonymous with the entire plan of taxation,” but rather 

with “the trigger for levy and collection efforts,” 542 U.S. at 

102, and “collection” is the actual imposition of a tax against a 

plaintiff, and does not concern third-parties trying to contest 

the validity of a tax or to stop its collection. Id. at 104. The 

assessment and collection in this case are long-since completed 

and no “single mechanism” theory will revive them. 

 

8

 Furthermore, because the AIA strips the court of its authority to 

issue injunctive relief, the IRS’s proposed reading of “assessment 

and collection” would also preclude equitable relief in § 7422(a) 

proceedings (i.e. refund suits), since a refund claim may ultimately 

alter the amount of revenue the Treasury retains. This result, 

however, is at odds with the Service’s subsequent argument that 

Appellants could obtain the relief they sought in a refund suit. Oral 

Arg. 41. 

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The IRS has a third theory—this one structural rather than 

textual. The IRS argues, as did the dissent at the panel stage, 

that the AIA bars Appellants’ APA claims because a complex 

regulatory scheme requires 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.” 

Cohen, 578 F.3d at 17 (Kavanaugh, J., dissenting). But this 

neglects the nuance. The Supreme Court, this court, and other 

circuits have allowed challenges to tax laws outside the context 

of a 26 U.S.C. § 7422(a) proceeding (a refund suit). For 

example, in South Carolina v. Regan, the Supreme Court 

rejected the IRS’s argument that, because a taxpayer could 

have filed a refund suit instead, the AIA prohibited a suit in 

which South Carolina challenged the constitutionality of a 

federal statute imposing restrictions on the state’s issuance of 

bonds. 465 U.S. at 378. The Court concluded the AIA “was 

intended to apply only when Congress has provided an 

alternative avenue for an aggrieved party to litigate its claims 

on its own behalf.” Id. at 381. For reasons developed more 

fully below, a refund suit is not an “alternative avenue” here. 

Similarly, this court has allowed constitutional claims 

against the IRS to go forward in the face of the AIA. Thus, in 

We the People Foundation, Inc. v. United States, we held the 

AIA “[b]y its terms,” did not bar “a straight First Amendment 

Petition Clause claim,” 485 F.3d 140, 143 (D.C. Cir. 2007) 

(Kavanaugh, J.), even though it did bar a tax collection claim 

“couched . . . in constitutional terms,” id.; see also, e.g,

Foodservice & Lodging Inst., 809 F.2d at 846 n.10 (allowing 

APA challenge to IRS tip regulation). Contrary to the IRS’s 

position here, We the People does not support reading the AIA 

to reach all disputes tangentially related to taxes. Quite the 

opposite. It requires a careful inquiry into the remedy sought, 

the statutory basis for that remedy, and any implication the 

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17 

remedy may have on assessment and collection. This is in 

accord with the holdings of several other courts. See, e.g.,

Linn v. Chivatero, 714 F.2d 1278 (5th Cir. 1983) (allowing 

Fourth Amendment claim against IRS for return of seized 

materials); see also Tax Analysts & Advocates ̧ 376 F. Supp. at 

892 (allowing action to compel IRS to collect additional taxes); 

McGlotten v. Connally, 338 F. Supp. 448, 453–54 (D.D.C. 

1972) (three judge court) (allowing challenge to IRS grants of 

income tax exemptions to discriminatory organizations). The 

principle the case law elucidates is therefore quite simple: The 

AIA, as its plain text states, bars suits concerning the 

“assessment or collection of any tax.” It is no obstacle to 

other claims seeking to enjoin the IRS, regardless of any 

attenuated connection to the broader regulatory scheme. As 

Appellants’ suit does not implicate assessment or collection, 

the AIA does not apply. 

2 

Having established our authority to hear Appellants’ claim 

for injunctive relief, we pause to consider whether it is 

necessary, or prudent, to wander further. Appellants claim 

not to care about the declaratory relief they seek, as it may 

become academic if they succeed in enjoining the IRS. Even 

so, Appellants refuse to waive the argument. Admittedly, it is 

odd “to think that a court with authority to issue [an injunction] 

is without power to declare the rights of the parties in 

connection therewith.” Tomlinson v. Smith, 128 F.2d 808 (7th 

Cir. 1942). Nevertheless, establishing our jurisdiction over 

Appellants’ claim for declaratory relief is not an academic 

exercise. Appellants do not abandon their claim and the DJA 

is a distinct grant of judicial authority, separate and apart from 

the court’s power to award injunctive relief under 28 U.S.C. 

§ 1331. Moreover, if the district court determines an 

injunction is not warranted on remand, questions about its 

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18 

jurisdiction to hear Appellants’ claim for declaratory relief will 

unnecessarily prolong the case even further. We therefore 

venture onward, and consider whether the DJA is an “other 

limitation[] on judicial review,” 5 U.S.C. § 702, precluding the 

court’s power to award Appellants the declaratory relief they 

seek. 

As before, our inquiry begins with the statutory text. 

Unlike the AIA, the DJA seems to carve out of its ambit any 

suit “with respect to Federal taxes.” 28 U.S.C. § 2201(a). 

But precedent interprets the DJA and AIA as coterminous. 

See E. Kentucky Welfare Rights Org. v. Simon, 506 F.2d 1278, 

1284 (D.C. Cir. 1974); “Am. United,” Inc., 477 F.2d at 1176. 

In other words, “with respect to Federal taxes” means “with 

respect to the assessment or collection of taxes.” This 

interpretation is consistent with law in several other circuits. 

See United Mine Workers of Am. 1992 Benefit Plan v. Leckie 

Smokeless Coal Co. (In re Leckie Smokeless Coal Co.), 99 F.3d 

573, 583–84 (4th Cir. 1996); Ecclesiastical Order of ISM of 

AM v. IRS, 725 F.2d 398, 404–05 (6th Cir. 1984); Perlowin v. 

Sassi, 711 F.2d 910, 911 (9th Cir. 1983) (per curiam); McCabe 

v. Alexander, 526 F.2d 963 (5th Cir. 1976) (per curiam); 

Tomlinson, 128 F.2d at 811. 

The panel dissent read things differently. While 

acknowledging our prior interpretation of the AIA and DJA as 

coterminous, the dissent questioned such cases’ precedential 

value, and wondered why a coterminous reading of the two 

statutes narrowed the scope of the DJA rather than broadening 

the scope of the AIA. Cohen ̧ 578 F.3d at 18. Favoring the 

latter, the dissent concluded the text of the DJA (and 

deductively that of the AIA) “squarely precludes this APA suit 

at this time.” Id. at 17. But the dissent went further, 

suggesting our precedent stemmed from a different and unruly 

era in which judges viewed statutory text not as an analytic 

starting point, but as a necessary formality in crafting opinions. 

USCA Case #08-5088 Document #1316088 Filed: 07/01/2011 Page 18 of 53
19 

To remedy this, the dissent urged the “en banc Court [to] clear 

this up,” “pay greater attention to statutory text,” and “not find 

[the AIA and DJA] coterminous.” Id. at 19 n.6. 

So is Appellants’ APA challenge properly characterized as 

a suit “with respect to Federal taxes”? It is in the sense the 

action is against the IRS, the agency charged with 

administering our federal tax system, and concerns refund 

procedures for a previously collected federal tax. This suit 

eludes that characterization in the sense its result—regardless 

of who wins—will not directly affect the disposition of any 

federal tax. Even if Appellants win, it does not follow that 

they are entitled to a tax refund. Whatever Appellants 

ultimately hope to achieve, this is not a refund suit. The IRS 

may still adopt a new version of the same notice after fixing 

any substantive and procedural defects. Which scope of “with 

respect to Federal taxes” is correct then—the broad one or the 

narrow one? 

Despite our obligation to begin with the statutory text, 

discerning our jurisdiction to hear Appellants’ request for 

declaratory relief must come not from staring hard at the phrase 

“with respect to Federal taxes,” but from its 

context—linguistic, historical, and functional. A fuller 

consideration of the phrase reveals that both “actions brought 

under section 7428 of the Internal Revenue Code of 1986, 

[and] a proceeding under section 505 or 1146 of title 11,” are 

outside the tax exception. 28 U.S.C. § 2201(a). To oust the 

courts of jurisdiction, it is not enough that claims relate in the 

loose sense to “Federal taxes”; they must also not pertain to the 

status and classification of section 501(c)(3) organizations 

(i.e., 26 U.S.C. § 7428 proceedings), unpaid tax liability of the 

debtor in a Chapter 11 reorganization (i.e., 11 U.S.C. § 505 

proceedings), or the tax effects of a Chapter 11 reorganization 

plan if not obtained from the IRS within 270 days (i.e., 11 

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U.S.C. § 1146 proceedings). These carve outs are notable: 

first, because they cabin the phrase “with respect to Federal 

taxes,” thus implying an all-encompassing reading is 

inappropriate, and second, because each relates to tax 

assessment or collection, thus suggesting the term “Federal 

taxes” similarly pertains to assessment or collection. 

The earliest cases construing the DJA’s tax exception also 

rejected a broad construction of the statute. In Tomlinson v. 

Smith, 128 F.2d 808 (7th Cir. 1942), for example, the IRS 

sought to collect a partnership’s taxes from the owners of a 

property leased by the partnership. The property’s trustee 

sued the IRS in federal court seeking declaratory relief 

concerning title to the debt. The IRS argued the court was 

precluded by the DJA from declaring the parties’ rights 

concerning the property, because the action related to federal 

taxes and impinged on the Service’s collection efforts. On 

appeal from entry of an interlocutory injunction, the court 

determined the matter was appropriate for injunctive relief 

under a previous version of the AIA9

 because “plaintiff is not 

the alleged tax debtor” and “sues in the capacity of a trustee for 

the purpose of protecting the mortgage lien on property” the 

IRS was encumbering to extract taxes owed by the partnership. 

Id. at 810–11. The court then considered whether declaratory 

relief was barred by the DJA, and concluded: 

It is unreasonable to think that a court with authority 

to issue a restraining order is without power to declare 

the rights of the parties in connection therewith. In 

other words, it is our view that the language which 

excepts federal taxes from the Declaratory Judgment 

 

9

 Congress subsequently amended the AIA to preclude suits by 

third-party property holders. Federal Tax Lien Act of 1966, Pub. L. 

No. 89-719, § 110, 80 Stat. 1125, 1144. 

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21 

Act is co-extensive with that which precludes the 

maintenance of a suit for the purpose of restraining 

the assessment or collection of a tax. 

Id. (emphasis added). 

The Second Circuit relied on Tomlinson in a 1962 decision 

involving similar facts. Bullock v. Latham, 306 F.2d 45, 47 

(2d Cir. 1962). Although Bullock v. Latham did not explicitly 

hold the AIA and DJA were co-extensive, it quoted 

Tomlinson’s determination that the court’s ability to provide 

injunctive relief was “determinative of its jurisdiction” to 

provide declaratory relief. Id. at 47. Bullock thus follows 

Tomlinson by reading the DJA’s federal tax exemption 

narrowly. It applies to “controversies involving tax liabilities 

of parties qua taxpayers,” but not all conceivable controversies 

relating to Federal taxes, even those altering the Service’s 

ability to assess and collect. Id. at 48. 

Congress did not intend to provide declaratory relief for 

litigants when the AIA barred injunctive relief. Holding to the 

contrary, as the IRS urges, would vitiate the structural design 

of the DJA. The legislative history speaks directly to this 

point. A year after passing the DJA, in § 405 of the Revenue 

Act of 1935, Congress amended the statute to expressly except 

disputes “with respect to Federal taxes.” The Senate Finance 

Committee Report explained the animating purpose of the 

amendment, noting “[t]he application of the Declaratory 

Judgments Act to taxes would constitute a radical departure 

from the long-continued policy of Congress (as expressed in 

[the AIA] and other provisions) with respect to the 

determination, assessment, and collection of Federal taxes.” 

S. REP. NO. 74-1240, at 11 (1935) (emphasis added). 

USCA Case #08-5088 Document #1316088 Filed: 07/01/2011 Page 21 of 53
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When reading the legislative history, the Supreme Court 

declared: “[i]t is clear enough that one ‘radical departure’ 

which was averted by the amendment was the potential 

circumvention of the ‘pay first and litigate later’ rule by way of 

suits for declaratory judgments in tax cases.” Flora v. United 

States, 362 U.S. 145, 165 (1960). By design, the DJA tax 

exception serves a critical but limited purpose. It strips courts 

of jurisdiction to circumvent the AIA by providing declaratory 

relief in cases “restraining the assessment or collection of any 

tax.” 28 U.S.C. § 2201(a). Our prior case law—that from 

another era—also acknowledged the instructive role the DJA’s 

legislative history plays in its construction. See, e.g., E. Ky. 

Welfare Rights Org., 506 F.2d at 1285 n.11 (citing examples of 

1935 cases attempting to circumvent the prohibitions of the 

AIA by using the DJA); “Americans United” Inc., 477 F.2d at 

1176. The same is true of the first court to describe the DJA 

as “coterminous,” see McGlotten, 338 F. Supp. at 453 n.22, as 

well as other circuits to consider the issue, see, e.g., In re 

Leckie Smokeless Coal Co., 99 F.3d at 585; Ecclesiastical 

Order of ISM of AM, 725 F.2d at 405. 

Of course, “it is the enacted text rather than the unenacted 

legislative history that prevails.” Owner-Operator Indep. 

Drivers Ass’n, Inc. v. Mayflower Transit, LLC, 615 F.3d 790, 

792 (7th Cir. 2010) (Easterbrook, J.). “Legislative 

history—what would in contract interpretation be called 

extrinsic ambiguity—does not justify revising a text that has no 

intrinsic ambiguity or any difficulty in application.” Id. 

Here, “with respect to Federal taxes” is intrinsically 

ambiguous. It does not bar all suits against the IRS, and thus 

does not encompass everything conceivably “with respect to 

Federal taxes.” Having eliminated this broad interpretive 

gloss, what is and is not “with respect to Federal taxes” is left a 

mystery, with no great direction from the statutory text. 

Although we have questioned the utility of relying on 

USCA Case #08-5088 Document #1316088 Filed: 07/01/2011 Page 22 of 53
23 

legislative history, see, e.g., Block v. Meese, 793 F.2d 1303, 

1309–10 (D.C. Cir. 1986) (Scalia, J.), the legislative history of 

the DJA is quite small—a single paragraph—and surprisingly 

straightforward. It bears repeating: “Your committee believes 

that the orderly and prompt determination and collection of 

Federal taxes should not be interfered with.” S. REP. NO. 

74-1240, at 11 (1935) (emphasis added). 

Finally, a functional concern exists with construing the 

DJA’s exception to bar relief otherwise allowed under the AIA. 

The court would have jurisdiction to enjoin the parties 

appearing before it, but not to declare their rights. This defies 

common sense, however, “since an injunction of a tax and a 

judicial declaration that a tax is illegal have the same 

prohibitory effect on the federal government’s ability to assess 

and collect taxes.” Bentsen, 82 F.3d at 933. A 

non-coterminous reading of the two statutes thus poses an 

insurmountable obstacle. The court would not have 

jurisdiction to provide declaratory relief but could effectively 

do so anyway. 

The Supreme Court suggested an answer to this riddle in 

Hibbs. Recall, Arizona taxpayers challenged the 

constitutionality of an Arizona statute permitting tax credits for 

contributions to Arizona parochial schools. 542 U.S. at 92. 

To determine whether jurisdiction existed, the Court had to 

interpret the Tax Injunction Act (TIA), 28 U.S.C. § 1341. The 

TIA, “modeled” after the AIA, id. at 102, “shields state tax 

collections from federal-court restraints,” id. at 104. Before 

beginning its interpretive quest, the Court “identif[ied] the 

relief sought.” Id. at 99. As Appellants do here, the Arizona 

taxpayers sought both an injunction and a declaratory 

judgment. Id. Rather than bifurcate the inquiry, however, as 

we do here, the Court classified the requested remedies as a 

single form of relief—“prospective relief only.” Id. 

USCA Case #08-5088 Document #1316088 Filed: 07/01/2011 Page 23 of 53
24 

(“Respondents seek prospective relief only. Specifically, their 

complaint requests ‘injunctive relief . . . .’ Complaint 7, App. 

15. . . . [,] a ‘declaration . . . .’ Ibid. [and] ‘[a]n order . . . .’ 

Complaint 7-8, App. 15.”); see also Grace Brethren Church,

457 U.S. at 408 (“[T]here is little practical difference between 

injunctive and declaratory relief.”). 

A coterminous reading of the DJA and the AIA makes 

sense in light of Hibbs, which construed the relief Appellants 

seek in the singular, as equitable relief, and not separately, as 

an injunction and declaratory judgment. In this light, the case 

is greatly simplified. The DJA falls out of the picture because 

the scope of relief available under the DJA is subsumed by the 

broader injunctive relief available under the AIA. 

But what to make of the bugle sounding the textualist 

battle cry? It is true, the AIA and DJA use different words. 

But this observation does not beget a certain interpretive result. 

A baker who receives an order for “six” donuts and another for 

“half-a-dozen” does not assume the terms are requests for 

different quantities of donuts. Similarly, a man does not 

receive different directions to Dupont Circle if he is told by one 

person to “take the Metro” and by another to “catch the Red 

Line.” What the AIA accomplishes by denying its application 

to “any suit for the purpose of restraining the assessment or 

collection of any tax” the DJA accomplishes by an exception 

“with respect to Federal taxes.” By nature, language is 

simultaneously robust and precise. Different verbal 

formulations can, and sometimes do, mean the same thing. 

In sum, we hold that APA § 702’s waiver of sovereign 

immunity permits Appellants’ APA cause of action and neither 

the AIA nor DJA otherwise limits our review. 

 

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III 

We now consider whether Appellants state a valid cause of 

action. Under § 704, “[a]gency action made reviewable by 

statute and final agency action for which there is no other 

adequate remedy in a court are subject to judicial review.”10 5 

U.S.C. § 704. The IRS argues, and Appellants concede, if an 

adequate remedy at law exists, equitable relief is not available 

under the APA. 

The IRS and the dissenting opinion contend § 7422(a) of 

the Internal Revenue Code, the refund suit mechanism, 

provides Appellants the relief they seek.11 That provision 

bars any lawsuit for recovery of excessive or wrongfully 

collected 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). 

At first blush, § 7422(a) does not apply. This is not a suit 

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

been erroneously or illegally assessed or collected.” Id. 

Even if Appellants are entirely successful, they cannot recover 

the wrongfully assessed tax unless they follow whatever new 

 

10 Section 704 “is not a jurisdiction-conferring statute.” Trudeau, 

456 F.3d at 183; see also Micei Int’l. v. Dep’t. of Commerce, 613 

F.3d 1147, 1152 (D.C. Cir. 2010); Oryszak v. Sullivan, 576 F.3d 522, 

525 n.2 (D.C. Cir. 2009). 

11 To clarify, although 28 U.S.C. § 1346(a)(1) grants concurrent 

jurisdiction to district courts and the Court of Federal Claims, the 

Code speaks of refund suits as those filed “under section 7422(a),” 

26 U.S.C. § 6532, and “filed with the Secretary,” id. § 7422(a). 

USCA Case #08-5088 Document #1316088 Filed: 07/01/2011 Page 25 of 53
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administrative procedures the IRS decides to implement. 12 

This suit is an APA action; it questions the administrative 

procedures by which the IRS allows taxpayers to request 

refunds for the wrongfully collected excise tax. Moreover, 

§ 7422(a) would not provide Appellants the equitable relief 

they seek. Section 7422(a) provides “for the recovery of any 

internal revenue tax.” Id. It does not, at least explicitly, 

allow for prospective relief. The Service itself unknowingly 

concedes this point, as it believes the AIA and DJA preclude 

equitable remedies outside of a refund suit and is agnostic 

concerning the availability of broad equitable remedies as part 

of a refund suit. Apparently, even if § 7422(a) allowed for an 

injunction or declaratory judgment, the relief would be 

individualized, not class wide as Appellants seek. Each 

taxpayer would have to litigate separately the Service’s use of 

Notice 2006-50. As the IRS explained at oral argument: “just 

because we lose in one court doesn’t mean that we give up.” 

Oral Arg. Tr. 39. 

The dissent assumes a refund suit provides an adequate 

remedy at law. If this were the case, it is undisputed 

Appellants would have to proceed through Notice 2006-50. If 

adequate, Notice 2006-50 would render Appellants’ claims 

unripe before they filed their refund actions. See Full Value 

 

12 The dissent argues Appellants’ “objectives” are monetary: 

“billions of dollars in additional refunds” and a “class-wide jackpot.” 

Diss. Op. at 2, 3. But this framing is misleading. Although 

Appellants may ultimately seek additional refunds if IRS Notice 

2006-50 is invalidated and they succeed in substituting a more 

“effective” (and perhaps more fruitful) refund mechanism in its 

stead, Appellants’ APA suit is a distinct part of their bifurcated 

litigation strategy. It offers no monetary relief, tax refund or 

otherwise. Furthermore, the IRS is no victim. And Appellants are 

not raiders in pursuit of an unwarranted windfall; they are aggrieved 

citizens in search of accountability. 

USCA Case #08-5088 Document #1316088 Filed: 07/01/2011 Page 26 of 53
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Advisors, LLC v. SEC, No. 10-1053, slip op. at 9 (D.C. Cir. 

Feb. 4, 2011) (“[Petitioner’s] failure to fully comply with the 

Commission’s process (i.e. exhaust) has left some of its claims 

unfit for review (i.e. unripe) and that is perhaps not surprising 

given the two doctrines’ common origins; they are both 

‘prudential doctrines’ designed to ‘respond to pragmatic 

concerns about the relationship between courts and agencies.’” 

(quoting John Doe, Inc. v. Drug Enforcement Admin., 484 F.3d 

561, 567 (D.C. Cir. 2007))). 

But the adequacy of Notice 2006-50 is the gravamen of 

Appellants’ suit. Appellants claim Notice 2006-50 is 

unlawful, and therefore inadequate, because it was not subject 

to notice and comment rulemaking and is substantively 

unreasonable. As a result, Appellants argue they do not have 

to comply with Notice 2006-50 to challenge it. In support 

they cite McCarthy v. Madigan, a case where the Supreme 

Court cites several cases in which circumstances weighed 

against requiring administrative exhaustion. 503 U.S. 140, 

147–49 (1992). In Barry v. Barchi, a horse trainer challenged 

a New York law allowing for summary suspension of his 

professional license without a presuspension hearing. 443 

U.S. 55, 60–62 (1979). The Board suspended Barchi’s license 

for fifteen days, a time period shorter than the thirty days in 

which the Board had to issue a final order. Id. at 59, 61. In 

Gibson v. Berryhill, a state board, composed entirely of 

members of the optometry association, sought to revoke the 

licenses of a small number of optometrists who worked for a 

corporation, a violation of the association’s membership code. 

411 U.S. 564, 567–68 (1973). The threatened optometrists 

argued the Board was unconstitutionally constituted. Id. at 

569–70. Finally, in McCarthy itself, the Court declined to 

require exhaustion because the Court found “Congress ha[d] 

not meaningfully addressed the appropriateness of requiring 

exhaustion in this context” and the plaintiff’s “individual 

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interests outweigh[ed] countervailing institutional interests 

favoring exhaustion.” 503 U.S. at 149. The Court 

concluded: “exhaustion has not been required where the 

challenge is to the adequacy of the agency procedure itself, 

such that ‘the question of the adequacy of the administrative 

remedy . . . [is] for all practical purposes identical with the 

merits of [the plaintiff’s] lawsuit.’” Id. at 148 (quoting 

Barchi, 433 U.S. at 63). 

This is precisely such a case. Congress has not required 

exhaustion in APA suits challenging the adequacy of IRS 

procedures, only in suits “for the recovery of any internal 

revenue tax.” 26 U.S.C. § 7422(a). Although the cases from 

which the Court’s synthesis is drawn are distinguishable on 

their facts, the animating principle is a perfect fit: it is 

“improper to impose an exhaustion requirement” when the 

allegation is that the “administrative remedy furnishes no 

effective remedy at all.” Id. at 156 (Rehnquist, J., concurring 

in the judgment). 

In sum, this suit is sui generis. Allowing Appellants to 

proceed without first filing a refund claim will not open the 

courthouse door to those wishing to avoid administrative 

exhaustion procedures in other cases. In the tax context, the 

only APA suits subject to review would be those cases 

pertaining to final agency action unrelated to tax assessment 

and collection. More broadly, litigants could not avoid 

exhaustion when challenging agency decisionmaking, because 

McCarthy and its progeny apply only when litigants challenge 

the exhaustion scheme itself. And once litigated, precedent 

would preclude later litigants challenging exhaustion 

procedures from relying on McCarthy in a court that had 

previously rejected the same argument. 

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The dissent argues Appellants fail to exhaust their claims 

under either § 703 or § 704 of the APA because a tax refund 

suit is an otherwise adequate procedure “for a taxpayer to 

wrangle with the IRS over taxes, refunds, or the legality of IRS 

tax collection or refund practices.” Diss. Op. at 6. But this 

argument conflates the existence of an alternative remedy with 

an “adequate remedy.” Even if equitable relief were possible 

in a § 7422 proceeding, it would be cold comfort to direct 

Appellants to proceed in a series of individual suits, submitting 

themselves one by one to the very refund procedures that they 

claim to be unlawful. The dissent suggests Appellants could 

avoid this inefficiency by winning a single case that would 

have preclusive effect across the nation. But the IRS has 

already shown itself unwilling to accept the binding effect of 

judicial opinions from one circuit to another, and the Supreme 

Court is highly unlikely to provide a nationwide decree 

because it rarely grants certiorari in an individual tax refund 

dispute. Another obstacle to Supreme Court review arises 

where, as here, the taxpayer wins at the appellate stage and is 

left with no avenue for seeking certiorari. See Electr. Fittings 

Corp. v. Thomas & Betts Co. ̧ 307 U.S. 241, 242 (1939) (“A 

party may not appeal from a judgment or decree in his 

favor . . . .”); Camreta v. Greene, -- S. Ct. --, 2011 WL 

2039369, at *2 (2011) (“As a matter of practice and prudence, 

we have generally declined to consider cases at the request of a 

prevailing party.”) Furthermore, the cases upon which the 

dissent relies are inapposite. Clintwood Elkhorn, Hibbs,

“Americans United”, and Bob Jones involved taxpayer 

challenges to the validity of an individual tax—paradigmatic 

refund suits. See e.g., Clintwood Elkhorn, 553 U.S. at 4 (coal 

tax); Hibbs, 542 U.S. at 103–04 (parochial school tax credits). 

For example, “Americans United” and Bob Jones Univ. 

addressed corporations’ status as § 501(c)(3) tax-exempt 

non-profit organizations. See “Americans United” Inc., 416 

U.S. at 762; Bob Jones, 416 U.S. at 746–47. None of the 

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30 

cases involved a challenge to an IRS regulation, action, or 

procedure unrelated to the individual assessment or collection 

of taxes. Cf. Foodservice & Lodging Inst., 809 F.2d at 846 

n.10 (allowing APA challenge to IRS tip regulation without 

individual refund suits). 

Finally, the dissent concocts an extravagant scenario in an 

effort to show that a refund suit would be an adequate 

alternative remedy. In the dissent’s view, Appellants should 

have “skip[ped] the administrative process altogether and 

directly file[d] tax refund suits under 28 U.S.C. § 1346(a)(1).” 

Diss. Op. at 10. Then, in order to rebuff the IRS’s inevitable 

motion to dismiss for failure to exhaust administrative 

remedies, the Appellants could assert that, under McCarthy, 

their lack of exhaustion is excusable because the IRS’s 

administrative remedies are unreasonable and unlawful. Id. 

The first problem is, as explained above, this is not a 

refund suit—Appellants are seeking equitable relief rather than 

“recovery of any internal revenue tax.” 26 U.S.C. § 7422(a). 

Therefore allowing Appellants’ APA suit to proceed does not 

“duplicate existing procedures for review of agency action.” 

Bowen v. Mass., 487 U.S. 879, 903 (1988). Indeed, allowing 

judicial review of Appellants’ APA suit is consistent with the 

APA’s underlying purpose—“remov[ing] obstacles to judicial 

review of agency action,” Id. at 904 (quoting Shaughnessy v. 

Pedreiro, 349 U.S. 48, 51 (1955),—and the proper 

construction of § 704, Bowen, 487 U.S. at 904 (rejecting a 

“restrictive” interpretation of § 704). Even putting that aside, 

however, the dissent’s theory could contradict the language of 

§ 7422, which states: “No suit or proceeding shall be 

maintained in any court for the recovery of any internal 

revenue tax . . . until a claim for refund or credit has been duly 

filed with the Secretary.” This language seems not to make an 

exception for suits challenging the legality of administrative 

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31 

procedures. Without deciding whether a McCarthy-based 

objection to exhaustion procedures is cognizable in a refund 

suit, we note that in McCarthy itself, “Congress ha[d] not 

meaningfully addressed the appropriateness of requiring 

exhaustion.” 503 U.S. at 149. And for this reason, it is far 

from clear Appellants could challenge Notice 2006-50 in a 

refund suit without first having to proceed through it. 

The dissent’s defense of the IRS’s prerogatives is ironic. 

The IRS promulgated Notice 2006-50 as a way to avoid 

thousands of successful corporate refund suits and to spare 

individuals, who—unlike their corporate counterparts—had no 

incentive to pursue costly litigation against the IRS. By 

promulgating the 2006 rule, the IRS effectively conceded a 

case-by-case resolution would be both inefficient and unfair. 

The moral of the dissent’s story is that such remedies are now 

perfectly adequate. 

IV 

The IRS argues this suit is not ripe because it is a 

“pre-enforcement” action. The aim of the ripeness doctrine is 

to “prevent the courts, through avoidance of premature 

adjudication, from entangling themselves in abstract 

disagreements over administrative policies, and also to protect 

the agencies from judicial interference until an administrative 

decision has been formalized and its effects felt in a concrete 

way by the challenging parties.” Abbott Labs. v. Gardner, 387 

U.S. 136, 148–49 (1967), abrogated on other grounds by 

Califano, 430 U.S. 99 (1977). “The ripeness inquiry probes 

the fitness for review of the legal issue presented, along with 

(in at least some cases) ‘the hardship to the parties of 

withholding court consideration.’” Teva Pharm. USA, Inc. v. 

Sebelius, 595 F.3d 1303, 1308 (D.C. Cir. 2010) (quoting Nat’l 

Park Hospitality Ass’n v. Dep’t of Interior, 538 U.S. 803, 808 

USCA Case #08-5088 Document #1316088 Filed: 07/01/2011 Page 31 of 53
32 

(2003)); see also Nat’l Park Hospitality Ass’n, 538 U.S. at 

807–08 (refusing to hear a pre-enforcement challenge because 

agency guidelines did not carry the force of law); Unity08 v. 

Fed. Election Comm’n, 596 F.3d 861, 865 (D.C. Cir. 2010) 

(“[A] claim that a challenge to an agency’s final legal position 

must await an enforcement proceeding is analyzed under the 

ripeness doctrine’s requirement[] that issues be fit for 

review . . . .”) “This court has long understood the approach 

in Abbott Labs to incorporate a presumption of reviewability.” 

Sabre, Inc. v. Dep’t of Transp., 429 F.3d 1113, 1119 (D.C. Cir. 

2005) (citing Nat’l Automatic Laundry Cleaning Council v. 

Shultz, 443 F.2d 689, 694 (D.C. Cir. 1971)); see also Nat’l 

Ass’n of Home Builders v. U.S. Army Corps of Eng’rs, 417 

F.3d 1272, 1282 (D.C. Cir. 2005) (quoting Nat’l Mining Ass’n 

v. Fowler, 324 F.3d 752, 757 (D.C. Cir. 2003)). 

We rejected the Service’s pre-enforcement argument at 

the panel stage and did not grant en banc review to reconsider 

it. The panel held this case was a post-enforcement action, 

and therefore fit for review, because Notice 2006-50 

constituted final and reviewable agency action barring 

Appellants “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.” Cohen, 

578 F.3d. at 6–13; cf., McGuirl v. United States, 360 F. Supp. 

2d 129, 132 (D.D.C. 2004) (reviewing post-enforcement 

challenge); Nat’l Restaurant Ass’n, 411 F. Supp. at 995–99; 

Tax Analysts & Advocates, 376 F. Supp. at 892, quoted 

approvingly in Hibbs, 542 U.S. at 103–04 & n.6. 

The dissent tweaks this argument by describing this case 

as a “pre-application” challenge, rather than a 

“pre-enforcement” challenge. Diss. Op. at 17. Thus, the 

dissent shifts focus from the fitness of Notice 2006-50, which 

the dissent concedes, Diss. Op. at 12, to the alleged “benefit” 

USCA Case #08-5088 Document #1316088 Filed: 07/01/2011 Page 32 of 53
33 

Appellants seek, i.e. the hardship inquiry. Diss. Op. at 15. 

But again, conceiving of Appellants as taxpayers looking for a 

handout is flawed. The APA does not offer any monetary 

award. Nor is the money the IRS wrongfully took a benefit 

the Service may choose (or not choose) to bestow upon 

Appellants, such as amnesty for undocumented immigrants, 

see Reno v. Catholic Social Services, 509 U.S. 43, 46 (1993), 

or a government certification, see Toilet Goods Ass’n, Inc. v. 

Gardner, 387 U.S. 158, 161, 165 (1967). 

The dissent argues any delay caused by filing individual 

refund claims would not “constitute [a] sufficient hardship.” 

Diss. Op. at 13. But, in the context of APA challenges, we 

have previously said “[lack of] hardship cannot tip the balance 

against judicial review,” Nat’l Ass’n of Home Builders v. U.S. 

Army Corps of Eng’rs, 440 F.3d 459, 465 (D.C. Cir. 2006) 

(quoting Nat’l Mining Ass’n, 324 F.3d at 756–57) (alterations 

in original), “is largely irrelevant,” Electric Power Supply 

Ass’n v. FERC, 391 F.3d 1255, 1263 (D.C. Cir. 2004), and “is 

not an independent requirement divorced from the 

consideration of the institutional interests of the court and 

agency,” AT&T Corp. v. FCC, 349 F.3d 692, 700 (D.C. Cir. 

2003). “[O]nce we have determined that an issue is clearly fit 

for review, there is no need to consider ‘the hardship to the 

parties of withholding court consideration.’” Action for 

Children’s Television v. FCC, 59 F.3d 1249, 1258 (D.C. Cir. 

1995) (quoting Abbott Labs., 387 U.S. at 149). When the 

hardship Appellants suffer is compliance with allegedly 

unlawful administrative procedures, we have consistently held 

claims are ripe for review. See Wyo. Outdoor Council v. U.S. 

Forest Service, 165 F.3d 43, 51 (D.C. Cir. 1999) (dismissing 

NEPA claim as unripe but considering procedural claim); 

Action for Children’s Television, 59 F.3d at 1258. Moreover, 

the Supreme Court implied the same in Reno—the case upon 

which the dissent primarily relies. Reno, 509 U.S. at 60–61 

USCA Case #08-5088 Document #1316088 Filed: 07/01/2011 Page 33 of 53
34 

(distinguishing McNary v. Haitian Refugee Center, Inc., 498 

U.S. 479, 487 (1991)). 

The practical consequence of the dissent’s ripeness 

argument is a judicially created exemption for the IRS from 

suit under the APA. There may be good policy reasons to 

exempt IRS action from judicial review. Revenue protection 

is one. See Hibbs, 542 U.S. at 104–05. But Congress has not 

made that call. Cf. 5 U.S.C. § 701(b)(1)(A)–(H) (stating 

exceptions to the APA’s definition of “agency”); Hibbs, 542 

U.S. at 105 (“Nowhere does the legislative history announce a 

sweeping congressional direction to prevent ‘federal-court 

interference with all aspects of state tax administration.’”); 

Armstrong v. Bush, 924 F.2d 282, 289 (D.C. Cir. 1991) 

(concluding, based on the legislative history of the APA, 

Congress “wanted to avoid a formalistic definition of 

‘agency’”). And we are in no position to usurp that choice on 

the basis of ripeness. Cf. Mayo Found. for Med. Educ. & Res. 

v. United States, 131 S. Ct. 704, 713 (2011) (noting in the 

context of tax regulations “the importance of maintaining a 

uniform approach to judicial review of administrative action” 

(quoting Dickinson v. Zurko, 527 U.S. 150, 154 (1999)). 

V 

The litigation position of the IRS throughout the history of 

the excise tax has been startling. But the taxpayers’ response 

to Notice 2006-50 is not so shocking. After conceding the 

excise tax was collected illegally, the Service set up a virtual 

obstacle course for taxpayers to get their money back. 

This suit is not about the excise tax, its assessessment, or 

its illegal collection. Nor is it about the money owed the 

taxpayers. This suit is about the obstacle course, and the 

decisions made by the IRS while setting it up. As a result, we 

USCA Case #08-5088 Document #1316088 Filed: 07/01/2011 Page 34 of 53
35 

have federal question jurisdiction, and neither the AIA nor the 

DJA provide a limitation on our exercise of it. Because 

Appellants have no other adequate remedy at law, the district 

court should consider the merits of their APA claim on remand. 

So ordered. 

USCA Case #08-5088 Document #1316088 Filed: 07/01/2011 Page 35 of 53
KAVANAUGH, Circuit Judge, with whom Chief Judge 

SENTELLE and Circuit Judge HENDERSON join, dissenting:

From 2003 to 2006, millions of Americans paid excessive 

taxes on long-distance telephone calls. In 2006, the 

Government announced that it would refund the overpaid 

taxes. In IRS Notice 2006-50 (in what we will refer to as the 

2006 “refund rules”), the Government established a simple 

process for obtaining refunds. Taxpayers who wanted to 

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

could simply check a box on their 2006 income tax returns.

Those who wished to claim an amount greater than the 

standard amount could file a Form 8913 with their 2006 

income tax returns and itemize the refund due. And those 

who would not otherwise file a tax return for 2006 could file a 

newly created Form 1040EZ-T to claim the standard amount, 

and attach Form 8913 to claim an amount greater than the 

standard. Those who missed out when filing their 2006 tax 

returns could file – and even today, still can file – amended 

2006 returns to claim the refund. Someone unsatisfied with 

the refund amount or with the IRS’s refund rules could file a 

tax refund suit in district court or the Court of Federal Claims. 

See 28 U.S.C. § 1346(a)(1).

Approximately 90 million Americans followed those 

simple instructions and promptly received their refunds. As 

remedial government programs go, this one worked 

reasonably well.1

 1 The majority opinion suggests that the IRS’s refund program 

didn’t work well because the Government did not give refunds to 

people who did not request refunds. See Maj. Op. at 5 n.4. We find 

that an odd criticism. The IRS aggressively publicized the refund 

procedure so that people who were due refunds would know how to 

request them. Ninety million taxpayers managed to do so.

USCA Case #08-5088 Document #1316088 Filed: 07/01/2011 Page 36 of 53
2

The ten individual plaintiffs in this case were aware of 

the 2006 refund rules. But so far as the record reveals, none 

of them chose any of the readily available alternatives for 

obtaining a refund. None checked the standard refund box on 

their 2006 tax returns. Nor did any file a Form 8913 with 

their 2006 tax returns to claim a refund amount greater than 

the standard refund. Nor did any file a Form 1040EZ-T. Nor 

did any file a tax refund suit to complain about the amount 

available from the IRS or the refund rules. 

Instead, plaintiffs decided to up the ante. They filed a 

purported class-action lawsuit in U.S. District Court. 

Plaintiffs sued under the Administrative Procedure Act, 

claiming that the IRS’s 2006 refund rules were promulgated 

without proper notice and that the refund scheme would not 

fully compensate them for their overpaid taxes. Plaintiffs 

seek declaratory and injunctive relief. They want a judicial 

declaration that the refund scheme is unlawful and an 

injunction ordering the Government to devise a new refund 

process so as to correct the alleged flaws.

The reader may wonder why plaintiffs didn’t simply file 

the relevant forms with the IRS to get refunds, and if 

dissatisfied with the amounts they received or with the IRS’s 

refund rules, bring individual tax refund suits. After all, each 

plaintiff could have raised complaints about the refund rules 

in such a case, and each plaintiff’s litigation would have long 

since concluded by now. The answer seems to be that 

plaintiffs are litigating primarily on behalf of others, not 

themselves. Plaintiffs’ ultimate objectives are class 

certification and a court order that the U.S. Government pay 

billions of dollars in additional refunds to millions of as-yetunnamed individuals who never sought refunds from the IRS 

or filed tax refund suits. It seems that plaintiffs have 

deliberately avoided filing individual refund claims with the 

IRS and filing tax refund suits because they think they have a 

better chance of obtaining class certification if they don’t take 

USCA Case #08-5088 Document #1316088 Filed: 07/01/2011 Page 37 of 53
3

those steps. And class certification is a necessary prerequisite 

to the class-wide jackpot plaintiffs are seeking here. 

In any event, regardless of this case’s unusual 

background and its potentially large effect on the U.S. 

Treasury, the present appeal raises only a straightforward 

legal question. 

The issue, boiled down to its essentials, is whether 

plaintiffs can raise their objections to the 2006 refund rules in 

this APA suit – or instead must raise their claims in tax refund 

suits after first filing refund claims with the IRS. It is 

important to underscore that the fundamental issue here is 

timing: It concerns when plaintiffs can raise their objections 

to the 2006 refund rules in court, not whether plaintiffs can 

raise their objections to the 2006 refund rules in court. 

For two alternative reasons, plaintiffs cannot maintain 

this APA suit. First, the APA itself bars this suit because 

plaintiffs have an adequate alternative judicial remedy, 

namely tax refund suits. Second, under the ripeness doctrine, 

plaintiffs must file refund claims with the IRS before bringing 

suit to challenge the 2006 refund rules. We will address each 

point in turn.

I

The Government contends that the Administrative 

Procedure Act itself bars plaintiffs from maintaining this APA 

suit. See Gov’t Br. at 63. We agree. Under §§ 703 and 704 

of the APA, plaintiffs cannot maintain this APA suit because 

they have an alternative congressionally specified judicial 

forum in which to pursue their complaints about the 2006 

refund rules – namely, a tax refund suit.

The APA provides for judicial review of agency action. 

But the APA may not be invoked when Congress has 

USCA Case #08-5088 Document #1316088 Filed: 07/01/2011 Page 38 of 53
4

specified other judicial review procedures. Section 703 of the 

APA states: “The form of proceeding for judicial review is 

the special statutory review proceeding relevant to the subject 

matter in a court specified by statute,” provided that the 

statutorily specified review proceeding is not “inadequa[te].” 

5 U.S.C. § 703 (emphasis added). Relatedly, § 704 of the 

APA provides: “Agency action made reviewable by statute 

and final agency action for which there is no other adequate 

remedy in a court are subject to judicial review.” 5 U.S.C. 

§ 704 (emphasis added). 

For our purposes, both provisions make the same point: 

A party cannot bring a freestanding APA suit when Congress 

has specified a different judicial review procedure “relevant to 

the subject matter,” so long as that congressionally specified 

review procedure is “adequate.” See, e.g., ATTORNEY 

GENERAL’S MANUAL ON THE ADMINISTRATIVE PROCEDURE 

ACT 101 (1947) (describing adequate remedy under § 704 by 

cross-reference to § 703).2

As the Supreme Court has explained, the APA “does not 

provide additional judicial remedies in situations where the 

Congress has provided special and adequate review 

procedures.” Bowen v. Massachusetts, 487 U.S. 879, 903 

(1988).

3

 2 Those § 703 and § 704 requirements are related to a bedrock 

principle of the American legal system: Equitable relief is not 

available when there is an adequate remedy at law. See Judiciary 

Act of 1789, § 16, 1 Stat. 73, 82; Bob Jones Univ. v. Simon, 416 

U.S. 725, 742 n.16 (1974) (referring to “the background of general 

equitable principles disfavoring the issuance of federal injunctions 

against taxes, absent clear proof that available remedies at law were 

inadequate”); Richards v. Delta Airlines, Inc., 453 F.3d 525, 531

n.6 (D.C. Cir. 2006) (“The general rule is that injunctive relief will 

not issue when an adequate remedy at law exists.”).

 

3 Numerous cases have applied that principle. See ICC v. 

Brotherhood of Locomotive Engineers, 482 U.S. 270, 282 (1987)

USCA Case #08-5088 Document #1316088 Filed: 07/01/2011 Page 39 of 53
5

 

(“Hobbs Act specifies the form of proceeding for judicial review of 

ICC orders,” citing § 703); Whitney Nat’l Bank in Jefferson Parish 

v. Bank of New Orleans & Trust Co., 379 U.S. 411, 420 (1965) 

(“where Congress has provided statutory review procedures 

designed to permit agency expertise to be brought to bear on 

particular problems, those procedures are to be exclusive”); Garcia 

v. Vilsack, 563 F.3d 519, 523-25 (D.C. Cir. 2009) (discrimination 

suit against Department of Agriculture afforded an “adequate 

remedy in court” and thus precluded APA challenge); Watts v. SEC, 

482 F.3d 501, 508 (D.C. Cir. 2007) (“a challenge to an agency’s 

refusal to comply with a Rule 45 subpoena should proceed and be 

treated not as an APA action but as a Rule 45 motion to compel,” 

citing § 703); Wright v. Dominguez, No. 04-5055, 2004 WL 

1636961, at *1 (D.C. Cir. 2004) (de novo district court review of 

decisions of Equal Employment Opportunity Commission 

precluded APA challenge to EEOC’s procedures); Women’s Equity 

Action League v. Cavazos, 906 F.2d 742, 750-51 (D.C. Cir. 1990) 

(individual private suits against institutions afforded adequate 

remedy to private parties alleging discrimination under Titles VI 

and IX; Court noted that “under our precedent, situation-specific 

litigation affords an adequate, even if imperfect, remedy”); Coker v. 

Sullivan, 902 F.2d 84, 89-90 (D.C. Cir. 1990) (judicial review of 

state administrative hearings and federal suit against offending 

states afforded adequate remedy in court to preclude APA suit 

seeking to compel the Department of Health and Human Services to 

enforce states’ compliance with emergency assistance plans); 

Cabais v. Egger, 690 F.2d 234, 240-41 (D.C. Cir. 1982) (challenge 

to individual benefit reduction afforded “adequate remedy in court” 

to Social Security recipients seeking to challenge the Department of 

Labor’s interpretation of a federal statute); Nassar & Co. v. SEC, 

566 F.2d 790, 792 n.3 (D.C. Cir. 1977) (where there was statutory 

procedure for obtaining review of an SEC order, APA suit for 

declaratory judgment was barred); Nader v. Volpe, 466 F.2d 261, 

266 (D.C. Cir. 1972) (“when Congress has specified a procedure 

for judicial review of administrative action, courts will not make 

nonstatutory remedies available without a showing of patent 

violation of agency authority or manifest infringement of 

substantial rights irremediable by the statutorily-prescribed method 

of review”) (footnote omitted).

USCA Case #08-5088 Document #1316088 Filed: 07/01/2011 Page 40 of 53
6

The Supreme Court has summarized the key principle in 

terms that are directly on point in this case: “Congress did not 

intend the general grant of review in the APA to duplicate 

existing procedures for review of agency action.” Id.; see 

also Darby v. Cisneros, 509 U.S. 137, 146 (1993) (“Congress 

intended by [§ 704] simply to avoid duplicating previously 

established special statutory procedures for review of agency 

actions.”).

Here, Congress has established a judicial procedure that, 

to use the terms of § 703, is “relevant to the subject matter” –

namely, a tax refund suit. Section 1346(a)(1) of Title 28 

provides:

 

The district courts shall have original jurisdiction, 

concurrent with the United States Court of Federal 

Claims, of . . . [a]ny civil action against the United States 

for the recovery of any internal-revenue tax alleged to 

have been erroneously or illegally assessed or collected, 

or any penalty claimed to have been collected without 

authority or any sum alleged to have been excessive or in 

any manner wrongfully collected under the internalrevenue laws . . . .

As the Supreme Court and this Court have explained on many 

occasions, the tax refund suit is a statutorily designed judicial 

procedure for a taxpayer to wrangle with the IRS over taxes, 

refunds, or the legality of IRS tax collection or refund 

practices. See generally United States v. Clintwood Elkhorn 

Mining Co., 553 U.S. 1, 4 (2008); Hibbs v. Winn, 542 U.S. 88,

103-04 (2004); United States v. Williams, 514 U.S. 527, 536 

(1995); Alexander v. “Americans United” Inc., 416 U.S. 752, 

762 (1974); Bob Jones Univ. v. Simon, 416 U.S. 725, 746-47 

(1974); Inv. Annuity, Inc. v. Blumenthal, 609 F.2d 1, 9 (D.C. 

Cir. 1979). 

USCA Case #08-5088 Document #1316088 Filed: 07/01/2011 Page 41 of 53
7

The only remaining question is whether the tax refund 

suit is “adequate” here. It plainly is. In tax refund suits, 

plaintiffs and others similarly situated could obtain judicial 

review of their complaints about the 2006 refund rules. In 

such suits, plaintiffs could obtain the larger refunds they 

seek,4 as well as appropriate injunctive or declaratory relief. 

See South Carolina v. Regan, 465 U.S. 367, 373-81 & 377-78

n.16 (1984); Americans United, 416 U.S. at 761-62; Bob 

Jones, 416 U.S. at 748 n.22.

5

 4 Plaintiffs acknowledge that they ultimately want additional 

refunds of the taxes wrongly collected, in addition to equitable 

relief. Indeed, they would not have standing to challenge the 2006 

refund rules unless they wanted additional refunds.

5 In challenging the adequacy of tax refund suits, plaintiffs hint 

that declaratory and injunctive relief might be available only in 

APA suits, and not in tax refund suits. That is wrong; indeed, the 

Supreme Court has indicated just the opposite. 

To begin with, the Declaratory Judgment Act bars declaratory 

relief “with respect to Federal taxes,” 28 U.S.C. § 2201(a), and the 

Anti-Injunction Act bars injunctions “for the purpose of restraining 

the assessment or collection of any tax,” 26 U.S.C. § 7421(a). By 

their terms, those statutory bars apply in APA suits as well as in tax 

refund suits. See 5 U.S.C. § 702 (preserving “other limitations on 

judicial review”). Therefore, if a taxpayer could obtain equitable 

relief in an APA suit, as plaintiffs here argue, the taxpayer could 

also obtain such relief in a tax refund suit. That point alone suffices 

to show that the tax refund suit is an adequate forum for plaintiffs 

to seek appropriate declaratory and injunctive relief.

In addition, precedent demonstrates that declaratory relief and 

injunctive relief are available in tax refund suits. The Supreme 

Court has indicated that injunctive relief is available in the tax 

context, despite the terms of the Anti-Injunction Act. See South 

Carolina v. Regan, 465 U.S. at 373-81 & 377-78 n.16; Bob Jones, 

416 U.S. at 748 n.22. Moreover, the Supreme Court has suggested 

that injunctive relief would be available only in tax refund suits –

and not in APA suits – where, as here, Congress has provided tax 

refund suits as “an alternative avenue for an aggrieved party to 

litigate its claims.” South Carolina v. Regan, 465 U.S. at 381; 

USCA Case #08-5088 Document #1316088 Filed: 07/01/2011 Page 42 of 53
8

Because plaintiffs can raise their objections to the 2006 

refund rules and obtain tax refunds and appropriate equitable 

relief in a tax refund suit, the tax refund suit is an adequate 

alternative judicial procedure.6

 

compare id. at 373-81 & 377-78 n.16 (injunction available in nontax-refund suit only because plaintiffs could not pursue tax refund 

suit) with Bob Jones, 416 U.S. at 748 & n.22 (injunction not 

available in APA suit because plaintiffs could pursue tax refund 

suit); see also Americans United, 416 U.S. at 761-62. The Supreme 

Court has not had occasion to expressly state that it would allow 

claims for declaratory relief in tax refund suits, although that 

presumably also would be permitted under the South Carolina v. 

Regan/Americans United/Bob Jones reasoning. After all, injunctive 

relief typically entails a declaration plus an order to do or refrain 

from doing something, meaning that declaratory relief is, in 

essence, a lesser-included version of injunctive relief. As plaintiffs 

rightly say, it would be “logically incoherent” and “nonsensical” to 

allow injunctive relief but forbid declaratory relief. See Cohen Br. 

at 22, 37; see also California v. Grace Brethren Church, 457 U.S. 

393, 408 (1982) (“there is little practical difference between

injunctive and declaratory relief”). 

 The majority opinion seems 

to suggest that the tax refund suit is not adequate because the 

2006 refund rules are alleged to be unlawful. See Maj. Op. at 

27-28. That badly misstates the relevant issue. The merits of 

plaintiffs’ claims are distinct from the adequacy of the 

specified judicial review procedure. The proper question here 

Finally, it bears mention that the Government has 

acknowledged that plaintiffs could obtain appropriate declaratory 

and injunctive relief in tax refund suits. See Tr. of Oral Arg. at 39-

41. 

6 Even if there were somewhat greater equitable relief 

available in this APA suit than in a tax refund suit (which there 

isn’t), we have said that “the alternative remedy need not provide 

relief identical to relief under the APA, so long as it offers relief of 

the ‘same genre.’” Garcia, 563 F.3d at 522 (quoting El Rio Santa 

Cruz Neighborhood Health Ctr. v. Dep’t of Health & Human 

Services, 396 F.3d 1265, 1272 (D.C. Cir. 2005)).

USCA Case #08-5088 Document #1316088 Filed: 07/01/2011 Page 43 of 53
9

is whether the tax refund suit is an adequate forum for 

plaintiffs to raise their arguments that the 2006 refund rules 

are unlawful. The answer is yes.7 

The majority opinion seems to think that, in invoking 

§§ 703 and 704, we are advancing an exhaustion argument. 

See Maj. Op. at 26-29. We are not. There is a difference 

between (i) the doctrine requiring exhaustion of 

administrative remedies and (ii) the §§ 703/704 principle that 

applies when, as here, Congress has provided alternative 

judicial procedures. Bowen, 487 U.S. at 903. The Supreme 

Court in Bowen distinguished those two principles. Id. at 

902-03. The majority opinion here melds them into an 

undifferentiated stew and then uses administrative exhaustion 

case law to try to respond to our §§ 703/704 argument. The 

cases concerning exhaustion of administrative remedies are 

not responsive to our §§ 703/704 argument. The §§ 703/704 

question is whether the tax refund suit is the proper judicial

forum specified by Congress for plaintiffs to raise their 

claims.

8

 7 The majority opinion cites one case from 1987 in which this 

Court allowed a suit that might have been brought as a refund suit 

to proceed under the APA. See Foodservice & Lodging Inst., Inc. 

v. Regan, 809 F.2d 842, 846 (D.C. Cir. 1987). But that case did not 

address the §§ 703/704 point about alternative judicial procedures 

specified by Congress. It is therefore obviously not a relevant 

precedent on the §§ 703/704 issue. See Arizona Christian School 

Tuition Organization v. Winn, 131 S. Ct. 1436, 1448-49 (2011) 

(conclusion overlooked, not raised, or assumed sub silentio in prior 

cases is not precedent). 8

 APA §§ 703 and 704 require plaintiffs to bring their claims 

in tax refund suits; in those tax refund suits, plaintiffs in turn would 

be statutorily required – absent some legitimate exception to the 

exhaustion requirement – to first exhaust their administrative 

remedies. See 26 U.S.C. § 7422(a) (“No suit or proceeding shall be 

maintained in any court for the recovery of any internal revenue tax 

alleged to have been erroneously or illegally assessed or collected, 

USCA Case #08-5088 Document #1316088 Filed: 07/01/2011 Page 44 of 53
10

In response to this point, the majority opinion relies 

heavily on McCarthy v. Madigan, 503 U.S. 140, 148 (1992), 

which says that administrative exhaustion sometimes may not 

be required when a plaintiff challenges the adequacy of the 

administrative procedures themselves. Reliance on McCarthy

simply highlights the majority opinion’s confusion about the 

§§ 703/704 issue and about the distinction between 

exhaustion of administrative remedies and alternative judicial 

procedures. In tax refund suits, plaintiffs can raise all of their 

arguments – including about the adequacy of the 

administrative exhaustion requirement that applies in tax 

refund suits as a result of 26 U.S.C. § 7422(a). To be very 

clear and very specific: Plaintiffs here could try to skip the 

administrative process altogether and directly file tax refund 

suits under 28 U.S.C. § 1346(a)(1). In such tax refund suits, 

if plaintiffs had not first exhausted their administrative 

remedies, the IRS no doubt would move to dismiss the suits 

because of plaintiffs’ failure to exhaust pursuant to 26 U.S.C. 

§ 7422(a). At that point, plaintiffs could raise to the courts 

their McCarthy-based argument that they do not have to 

exhaust administrative remedies – for example, if they believe 

 

or of any penalty claimed to have been collected without authority, 

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 with the Secretary, according to the provisions of law in 

that regard, and the regulations of the Secretary established in 

pursuance thereof.”).

Contrary to what the Government argues, the § 7422(a) 

exhaustion requirement would apply not because § 7422(a) itself 

requires that this APA suit be deemed a tax refund suit preceded by 

exhaustion of administrative remedies. Rather, the § 7422(a) 

exhaustion requirement would apply because §§ 703 and 704 of the 

APA, in conjunction with 28 U.S.C. § 1346(a)(1), require plaintiffs 

to bring their claims in tax refund suits, and § 7422(a) in turn

requires exhaustion in those tax refund suits.

USCA Case #08-5088 Document #1316088 Filed: 07/01/2011 Page 45 of 53
11

the exhaustion requirement is unconstitutional.

9

 And the 

courts considering the refund suits could address plaintiffs’ 

McCarthy-based no-need-to-exhaust arguments. The courts 

may well reject such attempts to evade the exhaustion 

requirement. Even so, the burden of participating in a 

statutorily imposed exhaustion requirement does not make an 

alternative judicial forum inadequate for purposes of APA 

§§ 703/704. The key point is that in tax refund suits, 

plaintiffs could raise any complaint they have about the 2006 

tax refund rules – including any complaint they have about 

the exhaustion requirement that attaches to tax refund suits. 

Given that undisputed fact, McCarthy is no answer to our 

main point here: APA §§ 703/704 require dismissal of this 

APA suit because the tax refund suit is the congressionally 

specified judicial forum “relevant to the subject matter.” 5 

U.S.C. § 703.

In sum, the tax refund suit is the proper judicial forum for 

plaintiffs to raise their complaints about the 2006 refund rules. 

Because the tax refund suit is a special statutory judicial 

review proceeding relevant to the subject matter and because 

it is an adequate forum, plaintiffs cannot maintain this APA 

challenge to the 2006 refund rules.

II

The Government alternatively raises a mix of 

administrative exhaustion, finality, and ripeness principles in 

arguing that plaintiffs must file refund claims with the IRS 

before suing. See Gov’t Br. at 54-69. Those three doctrines 

are notoriously intermingled. See 2 RICHARD J. PIERCE, JR., 

ADMINISTRATIVE LAW TREATISE § 15.17 (5th ed. 2010)

(exhaustion, finality, and ripeness “overlap significantly, and

 9 In the two cases McCarthy cited in describing this exception, 

the plaintiffs had argued that the exhaustion requirement was 

unconstitutional. See 503 U.S. at 148. 

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12

. . . are sometimes indistinguishable”); Ticor Title Ins. Co. v. 

FTC, 814 F.2d 731 (D.C. Cir. 1987) (three-judge panel issued 

three separate opinions for a unanimous conclusion: one 

based on exhaustion, one based on finality, and one based on 

ripeness). 

We conclude that the ripeness doctrine precludes 

consideration of plaintiffs’ claims at this time and requires 

plaintiffs to file refund claims with the IRS before suing. 

(The ripeness bar is separate from and in addition to the APA 

§§ 703/704 bar that we discussed above.)

“Ripeness is a justiciability doctrine” that is “drawn both 

from Article III limitations on judicial power and from 

prudential reasons for refusing to exercise jurisdiction.” Nat’l 

Park Hospitality Ass’n v. Dep’t of Interior, 538 U.S. 803, 

807-08 (2003). A challenge to an agency regulation is ripe 

for judicial review where (i) the issue is fit for decision and 

(ii) delay would impose hardship on the plaintiffs. In the 

classic formulation, the Supreme Court stated that a claim is 

ripe where “the legal issue presented is fit for judicial 

resolution, and where [the] regulation requires an immediate 

and significant change in the plaintiffs’ conduct of their 

affairs with serious penalties attached to noncompliance.” 

Abbott Laboratories v. Gardner, 387 U.S. 136, 153 (1967).

The principal issue here concerns the second prong of the 

ripeness doctrine: hardship. Do the 2006 refund rules require, 

in the words of Abbott Laboratories, “an immediate and 

significant change in the plaintiffs’ conduct of their affairs 

with serious penalties attached to noncompliance?” Id. at 

153. The answer is obviously no. Unlike a regulation that 

imposes obligations or prohibits conduct (backed by 

sanctions), a payment scheme like that established by the 

2006 refund rules does not require “an immediate and 

significant change” in plaintiffs’ conduct. 

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13

To borrow the words of a recent Supreme Court ripeness 

decision, the 2006 tax refund procedure “does not command 

anyone to do anything or to refrain from doing anything; it 

does not grant, withhold, or modify any formal legal license, 

power, or authority; it does not subject anyone to any civil or 

criminal liability; and it creates no legal rights or obligations.” 

Nat’l Park Hospitality Ass’n, 538 U.S. at 809 (applying 

Abbott Laboratories and quoting Ohio Forestry Ass’n, Inc. v.

Sierra Club, 523 U.S. 726, 733 (1998)) (alterations omitted). 

Rather, the refund rules mark a path for taxpayers to obtain 

money back from the Government. The refund scheme 

“leaves a [taxpayer] free to conduct its business as it sees fit.” 

Nat’l Park Hospitality Ass’n, 538 U.S. at 810. Thus, 

requiring plaintiffs to challenge the refund rules only after 

they apply to the IRS for refunds will have “no irremediably 

adverse consequences” for plaintiffs. Id. (alteration 

omitted).10 

Moreover, it is well settled that the mere “burden of 

participating in further administrative and judicial 

proceedings does not constitute sufficient hardship” for 

purposes of the ripeness analysis. AT&T Corp. v. FCC, 349 

F.3d 692, 702 (D.C. Cir. 2003); see also Ohio Forestry Ass’n, 

523 U.S. at 734-35 (burden of going through additional 

 10 See also Reno v. Catholic Social Services, Inc., 509 U.S. 43, 

57-61 (1993) (no hardship in requiring aliens to apply for amnesty 

under agency’s amnesty rules before suing to challenge agency’s

amnesty rules); Toilet Goods Ass’n, Inc. v. Gardner, 387 U.S. 158, 

164-66 (1967) (no hardship where “the impact of the administrative 

action could [not] be said to be felt immediately by those subject to 

it in conducting their day-to-day affairs”); Devia v. NRC, 492 F.3d 

421, 427 (D.C. Cir. 2007) (claim of hardship “insubstantial” when 

party “not required to engage in, or to refrain from, any conduct”); 

Sprint Corp. v. FCC, 331 F.3d 952, 958 (D.C. Cir. 2003) (no 

hardship where agency action leaves plaintiff “free to conduct its 

business as it sees fit” and there are no “adverse effects of a strictly 

legal kind”) (quoting Ohio Forestry Ass’n, 523 U.S. at 733).

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14

proceedings is not a sufficient hardship to render an agency 

action ripe for review); Nuclear Energy Institute, Inc. v. EPA, 

373 F.3d 1251, 1313 (D.C. Cir. 2004) (requiring party to raise 

claims in agency and judicial proceedings “works no hardship 

. . . sufficient to render its claims ripe”); Clean Air 

Implementation Project v. EPA, 150 F.3d 1200, 1205 (D.C. 

Cir. 1998) (requiring party to raise claim in agency 

proceeding is not sufficient hardship for purposes of 

ripeness); Florida Power & Light Co. v. EPA, 145 F.3d 1414, 

1421 (D.C. Cir. 1998) (“The only conceivable hardship 

Florida P&L will endure as a result of postponement is the 

burden of participating in further administrative and judicial 

proceedings. Such claims, however, do not constitute 

sufficient hardship for the purposes of ripeness.”). Here, 

therefore, the burden of filing a refund claim with the IRS 

before suing does not constitute sufficient hardship for 

purposes of the Abbott Laboratories ripeness inquiry.

Plaintiffs and the majority opinion suggest that it would 

be easier to mount one APA challenge rather than a series of 

individual tax refund suits. See Maj. Op. at 26, 29. But as the 

Supreme Court has explained in a similar context, that theory 

“does not explain . . . why one initial site-specific victory (if 

based on the Plan’s unlawfulness) could not, through 

preclusion principles, effectively carry the day. And, in any 

event, the Court has not considered this kind of litigation cost 

saving sufficient by itself to justify review in a case that 

would otherwise be unripe.” Ohio Forestry Ass’n, 523 U.S. at 

734-35 (citation omitted); see also Clean Air Implementation 

Project, 150 F.3d at 1206. The Supreme Court has stated that 

the “case-by-case approach that this requires” is “the 

traditional, and remains the normal, mode of operation of the 

courts.” Lujan v. Nat’l Wildlife Fed’n, 497 U.S. 871, 894 

(1990).

Put simply, the general ripeness principle that emerges 

from the case law and that governs here is this: When an 

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15

agency rule prohibits conduct backed by sanctions or imposes 

an obligation backed by sanctions, an aggrieved party often 

may challenge the rule immediately and need not wait to 

challenge it in its defense to an enforcement action after 

violating the rule. The rationale is that a party should not be 

forced into the “dilemma” of violating an allegedly unlawful 

rule and risking a heavy sanction “if they’ve guessed wrong 

and the rule is upheld in the penalty proceeding.” Abbs v. 

Sullivan, 963 F.2d 918, 926 (7th Cir. 1992) (internal citations 

omitted); see also Reno v. Catholic Social Services, Inc., 509 

U.S. 43, 57 (1993) (describing this “dilemma”). By contrast, 

as the Supreme Court decided in Reno v. Catholic Social 

Services, when an agency rule establishes criteria for an 

individual to obtain money or a benefit of some kind from the 

government, a party must first apply to the government for the 

money or benefit before bringing suit to challenge the agency 

rule. See 509 U.S. at 57-61. Requiring a party to apply for 

the money or benefit before suing to challenge the agency rule 

does not pose the Abbott Laboratories “dilemma” because the 

party will not face any sanctions if the rule is ultimately 

upheld.11 

Allowing this APA suit to go forward at this time is flatly 

inconsistent with the ripeness principles articulated in cases 

such as Abbott Laboratories, Reno v. Catholic Social 

Services, and National Park Hospitality Association. 

Plaintiffs must file a refund claim with the IRS before 

bringing suit.

 11 Professor Pierce has described the Court’s ripeness 

jurisprudence as precluding “pre-application judicial review of any 

rule that purports to describe criteria for obtaining any form of 

government benefit, e.g., social security, veterans benefits, any 

license, or exemption from any regulatory obligation.” 2 RICHARD

J. PIERCE, JR., ADMINISTRATIVE LAW TREATISE § 15.14 (5th ed. 

2010). 

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It is true that our Court – albeit not the Supreme Court –

has sometimes permitted judicial review when an issue was fit 

for resolution, notwithstanding a lack of hardship to the 

plaintiffs from waiting, so long as there were “no significant 

agency or judicial interests militating in favor of delay.”

Nat’l Ass’n of Home Builders v. U.S. Army Corps of Eng’rs, 

440 F.3d 459, 465 (D.C. Cir. 2006) (quoting Nat’l Mining 

Ass’n v. Fowler, 324 F.3d 752, 756-57 (D.C. Cir. 2003); see 

also Electric Power Supply Ass’n v. FERC, 391 F.3d 1255,

1263 (D.C. Cir. 2004) (“The hardship prong under the 

ripeness doctrine is largely irrelevant in cases . . . in which 

neither the agency nor the court have a significant interest in 

postponing review.”); AT&T Corp. v. FCC, 349 F.3d 692, 700 

(D.C. Cir. 2003) (“where there are no institutional interests 

favoring postponement of review, a petitioner need not satisfy 

the hardship prong”); Action for Children’s Television v. 

FCC, 59 F.3d 1249, 1258 (D.C. Cir. 1995) (“there is no need 

to consider the hardship to the parties of withholding court 

consideration, [where] there would be no advantage to be had 

from delaying review”) (internal quotation marks and citation 

omitted). 

But here, there are “significant agency or judicial 

interests militating in favor of delay.” Nat’l Ass’n of Home 

Builders, 440 F.3d at 465. Those interests are some of the 

very interests that are protected by the ripeness doctrine: the 

courts’ interest in not “entangling themselves in abstract 

disagreements over administrative policies,” and the IRS’s 

interest in being protected from “judicial interference until an 

administrative decision has been formalized and its effects felt 

in a concrete way by the challenging parties.” Abbott 

Laboratories, 387 U.S. at 148-49; see also Ohio Forestry 

Ass’n, 523 U.S. at 735-37. For example, plaintiffs claim that 

it was too difficult for taxpayers to gather the paperwork 

needed to justify a claim for more than the standard refund 

amount. That is precisely the kind of claim where court 

review would benefit from prior agency application and 

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17

analysis. Indeed, if the agency agreed with a taxpayer’s 

argument on that issue, there would be no need for judicial 

involvement at all. Also, plaintiffs claim that the IRS did not 

provide adequate notice of the refund procedure. That too is 

the kind of claim where judicial resolution would benefit from 

a considered agency analysis of the design and limitations of 

the notification process.

In any event and perhaps more to the point, we don’t 

need to guess how the Abbott Laboratories test applies to the 

kind of agency rule at issue here. The Supreme Court has told 

us how – in cases such as Reno v. Catholic Social Services

and National Park Hospitality Association. Those cases stand 

for the proposition that pre-application challenges to rules that 

set forth criteria for government payments or benefits are not 

ripe.

* * *

Under the APA, plaintiffs must file tax refund suits to 

raise their complaints about the 2006 refund rules. 

Alternatively, the ripeness doctrine precludes plaintiffs from 

suing until after they file refund claims with the IRS. For 

either of those two alternative and independent reasons, 

plaintiffs’ APA suit should be dismissed.12

 12 In arguing that we should not entertain plaintiffs’ APA claim 

now, the Government also raises yet another alternative argument: 

that the Declaratory Judgment Act and the Anti-Injunction Act

together bar APA suits challenging IRS refund rules. That 

argument raises extremely difficult issues of statutory 

interpretation, as the panel opinions in this case explored. But that 

statutory question ultimately is not necessary to our resolution of 

the case because §§ 703/704 of the APA and the ripeness doctrine 

each independently bar this suit. The majority opinion chides us for 

not addressing the additional statutory issue regarding the 

Declaratory Judgment and Anti-Injunction Acts. See Maj. Op. 

 We respectfully 

dissent.

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18

 

at 11. Having found two separate and independent bars to 

plaintiffs’ suit, we see no need to consider the several other 

objections raised by the Government. Of course, in order to allow 

this suit to go forward, the majority opinion by contrast must 

consider and reject each of the Government’s objections. That’s 

why the majority opinion needs to address the statutory issue 

regarding the Declaratory Judgment and Anti-Injunction Acts, and 

we do not.

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