United States Court of Appeals,

Fifth Circuit.

No. 91–1083.

APACHE BEND APARTMENTS, LTD., et al. Plaintiffs–Appellants,

v.

UNITED STATES of America, Acting Through the INTERNAL REVENUE

SERVICE Defendant–Appellee.

June 25, 1992.

Appeal from the United States District Court for the Northern

District of Texas.

Before GOLDBERG, JOLLY, and WIENER, Circuit Judges.

GOLDBERG, Circuit Judge:

In an effort to dampen the impact of the radical changes

brought about by the Tax Reform Act of 1986, Congress provided

certain taxpayers exemptions from the new tax laws. In many

instances, Congress designed these exemptions, known as "transition

rules," to favor only one or a very few taxpayers. The method by

which Congress selected those taxpayers that would enjoy the

benefit of the transition rules is the subject of this lawsuit.

Plaintiffs are taxpayers that were not granted any relief

under the transition rules. Claiming that they are similarly

situated to those taxpayers to whom the transition rules do apply,

they brought this lawsuit to challenge the constitutionality of the

transition rules under the Uniformity Clause and equal protection

component of the Due Process Clause of the United States

Constitution. They argued that Congress exhibited favoritism to

those taxpayers with strong congressional lobbies, and thus
 

1The court initially reserved ruling on the equal protection

claim in order to allow the parties to submit evidence on whether

there was a rational basis for the classification. 702 F.Supp.

at 1298. In an unpublished order, the court granted summary

judgment in favor of the government, finding nothing in the

evidence tendered to the court undermining the rationality of the

classification. 

 

2We are also assisted by the scholarly work of Professor

Lawrence Zelenak, whose law review article on the subject case

has facilitated our research and contributed to our analysis of

the issues. See Lawrence Zelenak, Are Rifle Shot Transition

Rules and Other Ad Hoc Legislation Constitutional?, 44 Tax L.Rev.

563 (1989). 

discriminated against those taxpayers, like plaintiffs, that "were

not fortunate to have an ear in Congress." 132 Cong.Rec. H

8,389–90 (daily ed. Sept. 25, 1986) (statement of Rep. Kolbe).

Plaintiffs sought declaratory and injunctive relief, requesting

that the court enjoin the enforcement of the transition rules so

that no taxpayer could benefit from them.

In a published opinion, the district court articulated the

relevant facts, parsed the legislative history of the Tax Reform

Act, studied the precedents germane to the issues raised, and

detailed the legal basis for its decision. 702 F.Supp. 1285

(N.D.Tex.1988). In the end, it concluded that although these

plaintiffs had standing to raise their claims, and although the

court otherwise had jurisdiction to award the requested relief, the

transition rules of the Tax Reform Act of 1986 were not

constitutionally infirm.1

Our task on appeal is simplified by the exemplary efforts of

the district court.2 We need not retrace all of its steps to
 

3We agree with the analysis of the district court, 702

F.Supp. at 1294–95, rejecting the government's contention that

this suit is barred by the Anti–Injunction Act and the

Declaratory Judgment Act insofar as plaintiffs seek to have the

court nullify the transition rules. See Zelenak, supra note 2,

44 Tax L.Rev. at 614–15 & n. 251. We do entertain serious doubts

as to whether the court would have jurisdiction to enjoin the

enforcement of the Tax Reform Act of 1986 as a whole, as

plaintiffs requested in their complaint. See id. at 615 n. 252. 

Our concern need not detain us, however, because having

determined that the court has jurisdiction to enjoin the

enforcement of the transition rules, we must address their

constitutionality in any event. Cf. City of Los Angeles v.

Lyons, 461 U.S. 95, 103 S.Ct. 1660, 75 L.Ed.2d 675 (1983)

(question whether a court has jurisdiction to award one form of

relief is to be determined independently of whether the court has

jurisdiction to award some other form of relief); Society of

Separationists v. Herman, 959 F.2d 1283 (5th Cir.1992) (en banc)

(same).

We also concur in the district court's rejection of

plaintiffs' constitutional challenge to the transition rules

under the Uniformity Clause of the Constitution, Art. I, §

8, clause 1. 702 F.Supp. at 1295–96 & n. 11. 

affirm its judgment. Rather, we limit our discussion to two

issues: first, whether these plaintiffs have standing to enjoin

the application of the transition rules, and second, whether the

transition rules violate the equal protection component of the Due

Process Clause. In all other respects, we agree with the district

court's reasoning.3

I. STANDING

The district court concluded that plaintiffs have standing to

challenge the constitutionality of the transition rules. Under

what the district court described as general standing principles,

the court reasoned that plaintiffs suffered an injury, traceable to

the Tax Reform Act, which the court could redress by prohibiting

the enforcement of the transition rules. 702 F.Supp. at 1291.
The standing question is complicated in this case by the

nature of the relief sought by plaintiffs. They do not ask for the

benefit of the transition rules that favor only the select

taxpayers. Rather, they seek equality in treatment through the

nullification of the transition rules. That is, they merely wish

to have the court enjoin the government from providing the tax

breaks presently accorded the select taxpayers through the

transition rules so that all taxpayers will be treated alike.

Thus, plaintiffs do not expect to obtain any tangible benefit or

economic relief from their lawsuit, only the elimination of what

they perceive to be discriminatory treatment.

The requested relief raises concerns about redressibility.

It is well settled that a plaintiff has standing to bring a claim

in federal court only if he can show an actual or threatened

injury, attributable to the defendant, which the court can redress.

Heckler v. Mathews, 465 U.S. 728, 104 S.Ct. 1387, 1394, 79 L.Ed.2d

646 (1984). If we view the injury suffered by plaintiffs in this

case as the increased tax liability attendant to the new tax laws,

then one might argue convincingly that nullifying the transition

rules will in no way redress plaintiffs' injury, for they will

continue to bear the increased tax liability even in the absence of

the transition rules. Indeed, the only impact of nullification

would be to impose that same tax liability upon those taxpayers

enjoying favorable treatment under the transition rules. Viewed in

that light, it would appear that plaintiffs have no standing

because the relief sought would not redress the economic injury
suffered. In essence, they would be litigating the tax liability

of third parties—the taxpayers favored by the transition rules.

But in fact, the injury alleged by plaintiffs is not

exclusively an economic one. Rather, plaintiffs contend that the

disparity in treatment is itself a judicially cognizable injury,

attributable to the government by virtue of its enforcement of the

transition rules, which the federal court can redress. The court

can redress this injury, in plaintiffs' view, either by making the

transition rules applicable to plaintiffs (insofar as they are

similarly situated), or by eliminating the transition rules

altogether so that no one gets a tax break. In their complaint, as

we have indicated, plaintiffs have pursued the latter course. They

seek the satisfaction of knowing that the Tax Reform Act treats no

one any better than them: If plaintiffs are not going to get the

tax break, then no other similarly situated taxpayer should receive

one, either.

We believe that the nullification of the transition rules so

as to abrogate the tax breaks accorded to the select few under the

transition rules would provide appropriate redress for the injuries

alleged by plaintiffs. With respect to plaintiffs' equal

protection claim, Heckler v. Mathews, 465 U.S. 728, 104 S.Ct. 1387,

79 L.Ed.2d 646 (1984), is right on point. In that case, the

Supreme Court held that nondependent male retirees had standing to

bring an equal protection challenge to a law favoring nondependent

female retirees, even though the only redress available to him
would be the abrogation of benefits to the nondependent female

retirees: A severability clause in the statute provided that if

the statute were declared unconstitutional, the favorable treatment

accorded to female retirees would be eliminated. Thus, the male

plaintiff had no chance of obtaining the benefits afforded to

female retirees under the statute; the most he could hope for was

equality in treatment through the discontinuation of benefits to

females. Reasoning that the injury in an equal protection case is

not the denial of benefits alone but the denial of equal treatment

as well, the Court concluded that "the appropriate remedy is a

mandate of equal treatment, a result that can be accomplished by

withdrawal of benefits from the favored class as well as by

extension of benefits to the excluded class." Mathews, 104 S.Ct.

at 1395 (emphasis in original) (citing Iowa–Des Moines Nat'l Bank

v. Bennett, 284 U.S. 239, 52 S.Ct. 133, 76 L.Ed. 265 (1931)). The

Court explained:

[W]e have never suggested that the injuries caused by a

constitutionally underinclusive scheme can be remedied only by

extending the program's benefits to the excluded class. To

the contrary, we have noted that a court sustaining such a

claim faces "two remedial alternatives: it may either declare

the statute a nullity and order that its benefits not extend

to the class that the legislature intended to benefit, or it

may extend the coverage of the statute to include those who

are aggrieved by the exclusion."

Id. 104 S.Ct. at 1394–95 (quoting Welsh v. United States, 398 U.S.

333, 90 S.Ct. 1792, 1807, 26 L.Ed.2d 308 (1970) (Harlan, J.,

concurring in result)).

The equal protection challenge levied by plaintiffs in this
 

4Even though eliminating the transition rules would not

affect plaintiffs' pocketbooks directly, it would do so

indirectly. The tax collector would garner more contributions

for the public purse from the entities exempted by the transition

rules. In theory, the additional tax revenue collected from

those taxpayers exempted from taxation by the transition rules

make it more likely that the budgetary requirements would be met

with lower taxation for every taxpayer. In other words,

eliminating preferences for the few would mean lower taxes for

the many. As the government concedes in this court: "In the

instant case, a very few taxpayers have received an extra

benefit, while the vast majority could be said to be extra

burdened. The burden is thus spread among the many." (R.163) 

case is, for standing purposes, identical to the equal protection

claim made in Mathews. Plaintiffs contest the classification as

"constitutionally underinclusive," attributable to plaintiffs'

political impotence, an inability to garner political favoritism

from members of Congress. Like Mathews, they ask the court to

strike down the scheme even though such a remedy would only strip

benefits from the favored class; it would not directly enlarge

their own pocketbooks.4 Of course, such a remedy would work to

eliminate the disparity in treatment and thus restore equality to

the statutory scheme. And

because [the taxpayer plaintiffs] personally [have] been

denied benefits that similarly situated [favored taxpayers]

receive, [theirs] is not a generalized claim of the right

possessed by every citizen, to require that the Government be

administered according to law.

Mathews, 104 S.Ct. at 1396 n. 9 (quotations and citations omitted).

Some might suggest that the rule of Mathews—conferring

standing in equal protection cases in which the only remedy

available to the disfavored class is the elimination of benefits to

the favored class—should be reserved for those cases involving
 

5Professor Zelenak observes that "[t]here is language in the

Mathews opinion suggesting that the "serious noneconomic injuries

to those persons who are personally denied equal treatment solely

because of their membership in a disfavored group,' are

essentially the injuries of being stereotyped or stigmatized." 

Zelenak, supra note 2, 44 Tax L.Rev. at 619 (1989). He posits

that the Court could confine the reach of Mathews by limiting

equal protection standing to plaintiffs who have been stigmatized

or stereotyped by the classification, and that, unlike

classifications based on race or gender, the classification in

this case carries no stigma or stereotype. In the end, however,

Professor Zelenak concludes that the Court would not give such a

cramped reading to the Mathews opinion and would find standing in

this case. Id. 

 

6Interestingly, Mathews involved a challenge to a statutory

scheme favoring nondependent female retirees. The lawsuit was

brought by nondependent male retirees, hardly a class suffering

from the archaic stigma that would make them feel that they were

"less worthy participants in the political community." See also

Orr v. Orr, 440 U.S. 268, 99 S.Ct. 1102, 1111–1114, 59 L.Ed.2d

306 (1979) (striking down state statute that authorized the

imposition of alimony obligations on husbands, but not wives). 

stigmatic injury of the "archaic" variety: discrimination based on

a characteristic of the person disfavored, such as race, alienage,

national origin, gender, residence, age, or legitimacy.5 We do not

share that view. As we explain in Part II.A. of this opinion, a

classification scheme violates equal protection even if the

classifications are not drawn along suspect or quasi-suspect lines;

classifications of any sort that are not rationally related to a

legitimate governmental interest are unconstitutional. Equal

protection is not concerned exclusively with archaic stigmas.6

When a plaintiff alleges that he has been "personally denied equal

treatment," Mathews, 104 S.Ct. at 1395 (emphasis added)—that he has

been denied a particular benefit accorded to others who are

similarly situated—he has alleged an equal protection injury,

regardless of the nature of the stigma that attaches to the

disfavored class. See Allegheny Pittsburgh Coal Co. v. County
Comm'n, 488 U.S. 336, 109 S.Ct. 633, 102 L.Ed.2d 688 (1989)

(holding that formula used for property valuation was

unconstitutional because it valued comparable properties

differently); see also City of New Orleans v. Dukes, 427 U.S. 297,

96 S.Ct. 2513, 49 L.Ed.2d 511 (1976) (entertaining but rejecting

equal protection challenge to city ordinance which contained a

"grandfather clause"); United States R.R. Retirement Bd. v. Fritz,

449 U.S. 166, 101 S.Ct. 453, 66 L.Ed.2d 368 (1980) (entertaining

but rejecting equal protection challenge to statutory scheme which

provided select employees with windfall benefits).

Here, plaintiffs allege that they have been denied tax breaks

afforded to other similarly situated taxpayers by the transition

rules. Contrast Allen v. Wright, 468 U.S. 737, 104 S.Ct. 3315,

3326–27, 82 L.Ed.2d 556 (1984) (no standing because plaintiffs

themselves had not been denied equal treatment). They say that

there is no rational basis for denying them the tax breaks. Were

we to agree with plaintiffs on the merits, we could redress that

injury either by extending to them the transitional relief accorded

to the select taxpayers or by nullifying the transition rules

altogether. Under either course, we could achieve the "mandate of

equal treatment." Mathews, 104 S.Ct. at 1395 (emphasis in

original).

We are also persuaded, for similar reasons, that these

plaintiffs have standing to bring a challenge to the classification

under the Uniformity Clause of the Constitution: "If being treated
 

7Professor Zelenak notes that there is an argument against

extending the rationale of Mathews to the Uniformity Clause

context. He observes that the Uniformity Clause makes no

references to the rights of individuals but focuses instead on

the rights of states. See United States v. Ptasynski, 462 U.S.

74, 103 S.Ct. 2239, 76 L.Ed.2d 427 (1983); Knowlton v. Moore,

178 U.S. 41, 89, 20 S.Ct. 747, 766, 44 L.Ed. 969 (1900). 

Arguably, therefore, individuals have no standing to raise a

challenge under the Uniformity Clause. Professor Zelenak rejects

that argument because "[r]ights of States are, in the final

analysis, meaningful only inasmuch as they create rights in

persons within those States. The tax uniformity clause has

meaning only as a guarantee that persons will not be

discriminated against in taxation because of where they happen to

be located." Zelenak, supra note 2, 44 Tax L.Rev. at 621. 

 

8The district court held that plaintiffs had "taxpayer

standing" to bring their uniformity clause challenge. 702

F.Supp. at 1292 (applying the two-prong test of Flast v. Cohen,

392 U.S. 83, 88 S.Ct. 1942, 20 L.Ed.2d 947 (1968) (taxpayer

standing to bring establishment clause challenge to federal

spending on parochial schools)).

It appears that these plaintiffs fit neatly within the

two-prong test for taxpayer standing set forth in Flast

insofar as their uniformity clause challenge is concerned: 

They challenge the exercise "of congressional power under

the taxing and spending clause of Art. I, § 8, of the

Constitution," Valley Forge College v. Americans United for

Separation of Church and State, Inc., 454 U.S. 464, 478, 102

S.Ct. 752, 761, 70 L.Ed.2d 700 (1982) (emphasis added), and

allege that the "challenged enactment exceeds specific

constitutional limitations upon the exercise of the taxing

and spending power" (that the tax is prohibited by the

Uniformity Clause of the Constitution, a limitation on

unequally is itself sufficient injury to establish equal protection

standing, then being taxed nonuniformly should be itself sufficient

injury to establish uniformity clause standing." Zelenak, supra

note 2, 44 Tax L.Rev. at 620 (1989).7

In all, we conclude that plaintiffs have standing to press

their constitutional claims under the equal protection component of

the Due Process Clause and under the Uniformity Clause of the

Constitution.8 But for the reasons expressed by the district
Congress' taxing power). Id. at 479, 102 S.Ct. at 762

(emphasis added). Contra Zelenak, supra note 2, 44 Tax

L.Rev. at 623 & n. 278 ("The difficulty, in a case like

Apache Bend, is in identifying the spending necessary to

support taxpayer standing."). We note that the Supreme

Court has not yet identified a provision in the

Constitution, other than the Establishment Clause, which

operates as a limitation on the taxing and spending power so

as to vest plaintiffs with taxpayer standing. Zelenak,

supra note 2, 44 Tax L.Rev. at 624 ("It is unlikely that the

Supreme Court will ever recognize taxpayer standing in suits

based on any part of the Constitution other than the

Establishment Clause."). Because we conclude that these

plaintiffs have standing under traditional standing

principles, we need not decide, and express no opinion on,

whether these plaintiffs would otherwise have taxpayer

standing under Flast. 

court, and as we shall elaborate with respect to the equal

protection claim, we do not find the classification scheme

constitutionally infirm.

II. EQUAL PROTECTION

As Congress debated the passage of the Tax Reform Act of 1986,

it became quite clear that the package of legislation would

necessarily include transition rules: exemptions from the new tax

laws designed to assist those taxpayers that had relied on the

previous tax laws in making significant investment decisions. For

the most part, these ad hoc tax provisions were not available to

all taxpayers, but only to those on behalf of whom particular

members of Congress had requested the exemptions. Members of

Congress appeased their requesting constituents by according them

transitional relief, yet avoided threatening the viability of the

tax package by evading the extension of transitional relief across

the board. A transition rule of general application, as opposed to

these "rifle shot" transition rules, would have been far more
costly in terms of tax revenue, albeit eminently fairer.

This method of doling out tax breaks raised more than a few

eyebrows in Congress. Several members of Congress expressed

concern that similarly situated taxpayers were not being treated

equally. 702 F.Supp. at 1287–89 (quoting 132 Cong.Rec. S 8,128

(daily ed. June 23, 1986) (statement of Sen. Levin); id. at S

13,810 (daily ed. Sept. 26, 1986); 132 Cong.Rec. H 8,389–90 (daily

ed. Sept. 25, 1986) (statement of Rep. Kolbe); 132 Cong.Rec. S

7,654 (daily ed. June 17, 1986) (statement of Sen. Metzenbaum)).

Others conceded their use of raw political power to obtain

transition rules for favored constituents. Id. Even in this

court, the government acknowledges that "political considerations

definitely played a significant role in the selection process ...

[and] the focus of the debate was on subjective factors [as opposed

to objective factors]." (R.135)

Plaintiffs contend that no rational basis exists for Congress'

classification as between those taxpayers afforded relief under the

transition rules and those who were not. They maintain that but

for the fact that they did not have "the right people speaking for

[them]" in Congress, 132 Cong.Rec. S 13,874 (daily ed. Sept. 26,

1986) (statement of Sen. Metzenbaum), they are similarly situated

to those taxpayers who presently enjoy tax breaks accorded by the

transition rules. In plaintiffs' view, this

classification—providing benefits only to those taxpayers with

connections in Congress and the political savvy to exploit those
relationships—amounts to a violation of equal protection.

A.

In order to properly adjudge plaintiffs' claim, we first

establish the relevant legal framework. When a fundamental right

is at stake, or the classification at issue is inherently

suspect—classification based on race, national origin, and

alienage—the courts evaluate the legislation under the most

exacting standard: strict scrutiny. Town of Ball v. Rapides

Parish Police Jury, 746 F.2d 1049, 1059 (5th Cir.1984). Such a

classification "will almost never be based on legitimate

governmental reasons," and to survive judicial review, "must

further a compelling governmental interest which cannot be served

by alternative means less burdensome to the suspect class or

fundamental right or interest." Id. (footnotes omitted). Thus,

under strict scrutiny, legislative classifications must serve a

compelling governmental interest and be narrowly tailored to the

achievement of that interest.

The courts examine legislative classifications not involving

"suspect" classes but involving other classifications "giv[ing]

rise to recurring constitutional difficulties"—gender and

illegitimacy—under an "intermediate" or "heightened" scrutiny. Id.

at 1059–60. Although not as exacting as strict scrutiny, this

intermediate scrutiny nevertheless demands that the "quasi-suspect"

classification serve important governmental interests and be

substantially related to the achievement of those interests. Id.;
 

9Plaintiffs' reliance on Corfield v. Coryell, 6 F.Cas. 546

(No. 3,230) (CCED Pa.1825) is unavailing, for that case

delineated the scope of rights under the Privileges and

Immunities Clause of Article 4, § 2, Clause 1 of the

Constitution, not the equal protection component of the Due

Process Clause. 

City of Cleburne, Tex. v. Cleburne Living Center, 473 U.S. 432, 105

S.Ct. 3249, 3255, 87 L.Ed.2d 313 (1985).

The classifications at issue in this case are neither

"suspect" nor "quasi-suspect." This is an equal protection

challenge to tax legislation, a form of economic regulation. The

Supreme Court has exhibited special deference to legislative bodies

in this arena. Indeed, tax legislation carries with it a

"presumption of constitutionality," Regan v. Taxation With

Representation of Washington, 461 U.S. 540, 547, 103 S.Ct. 1997,

2002, 76 L.Ed.2d 129 (1983) (quoting Madden v. Kentucky, 309 U.S.

83, 87–88, 60 S.Ct. 406, 407–08, 84 L.Ed. 590 (1940), and

"[l]egislatures have especially broad latitude in creating

classifications and distinctions in the tax statutes." Id.

Contrary to plaintiffs' argument, taxation does not implicate a

fundamental right and, thus, classifications in tax schemes are not

subject to strict scrutiny.9 Rather, the Court "presumes the

challenged statutory distinctions are constitutional and requires

only that they be rationally related to a legitimate [governmental]

interest." Town of Ball, 746 F.2d at 1058. To be sure, the

Supreme Court recently applied the rational relation test in a

case, like this one, involving an equal protection challenge to a

tax scheme. See Allegheny Pittsburgh Coal Co. v. County Comm'n,
488 U.S. 336, 109 S.Ct. 633, 102 L.Ed.2d 688 (1989). The Court

reiterated the principle that so long as "the selection or

classification is neither capricious nor arbitrary, and rests upon

some reasonable consideration of difference or policy, there is no

denial of equal protection of the law." Id. 109 S.Ct. at 638

(quoting Brown–Forman Co. v. Kentucky, 217 U.S. 563, 573, 30 S.Ct.

578, 580, 54 L.Ed. 883 (1910)).

That the Supreme Court has only in rare instances struck down

economic regulations is hardly surprising, for the rational basis

test is not nearly as rigorous as the strict or intermediate

scrutiny tests. Though not a tax case, the Court's decision in

City of New Orleans v. Dukes, 427 U.S. 297, 96 S.Ct. 2513, 49

L.Ed.2d 511 (1976), provides an illustrative example of the Court's

application of the rational basis test. In Dukes the Court upheld

a "grandfather clause" that exempted two pushcart food vendors from

a law prohibiting the sale of food from pushcarts in the historic

French Quarter, the "Vieux Carre," of New Orleans. The government

asserted an interest in preserving "the appearance and custom

valued by the Quarter's residents" and maintaining the charm and

character that attracted tourists. Id. 96 S.Ct. at 2515. The

City's ban of pushcart food vendors from the French Quarter applied

to all vendors except for those who had "continuously operated the

same business within the Vieux Carre ... for eight or more years."

Only two vendors qualified for the exception. A panel of this

court found a "pivotal defect" in the City of New Orleans'

classification scheme. We found no foundation in the hypothesis
that the "favored class" was any more likely "to operate in a

manner more consistent with the traditions of the Quarter than

would any other operator" and "no reason to believe that length of

operation "instills in the [favored] licensed vendors (or their

likely transient operators) the kind of appreciation for the

conservation of the Quarter's tradition' that would cause their

operations to become or remain consistent with that tradition."

Id. (quoting 501 F.2d 706, 711–12 (5th Cir.1974)). We thus

concluded that the classification violated equal protection because

it did not bear a rational relation to the asserted government

interest.

The Supreme Court did not agree. It explained that

[l]egislatures may implement their program step by step in

such economic areas, adopting regulations that only partially

ameliorate a perceived evil and deferring complete elimination

of the evil to future regulations ... [R]ather than proceeding

by the immediate and absolute abolition of all pushcart food

vendors, the city could rationally choose initially to

eliminate vendors of more recent vintage. This gradual

approach to the problem is not constitutionally impermissible.

Id. 96 S.Ct. at 2517. Like the classification scheme at issue in

the instant case, "[t]he grandfather clause in Dukes was

legitimated by the purpose of protecting "substantial reliance

interests' " in the favored class. See Zelenak, supra note 2, 44

Tax L.Rev. at 582. The Supreme Court elucidated:

The city could reasonably decide that newer businesses were

less likely to have built up substantial reliance interests in

continued operation in Vieux Carre and that the two vendors

who qualified under the "grandfather clause"—both of whom had

operated in the area for over twenty years rather than
eight—had themselves become part of the distinctive character

and charm that distinguishes the Vieux Carre. We cannot say

that these judgments so lack rationality that they constitute

a constitutionally impermissible denial of equal protection.

Dukes, 96 S.Ct. at 2518.

Significantly, the Dukes Court overruled Morey v. Doud, 354

U.S. 457, 77 S.Ct. 1344, 1 L.Ed.2d 1485 (1957), "the only case in

the last half century to invalidate wholly economic regulation

solely on equal protection grounds." 96 S.Ct. at 2518. Morey

involved a state statute regulating the issuance of money orders,

but exempting the American Express Company by name from all of the

statutory provisions. The government asserted an interest in

protecting consumers when transacting in money orders. The state

posited that because American Express was of "unquestionable

solvency and high financial standing," it was reasonable for the

state to exempt it from the regulations. The Supreme Court in

Morey did not buy the argument. Morey, 354 U.S. at 469, 77 S.Ct.

at 1352. It found that the classification bore only a "remote

relationship" to the asserted government interest of protecting the

public. The Court bluntly disapproved of "the creation of a closed

class by the singling out of ... a named company." Id.

By explicitly overruling Morey in Dukes, the Supreme Court has

opened the door to legislative classifications that single out

individuals for preferential treatment, so long as the grounds for

doing so have some conceivable foundation in reason. The

implication of Dukes to the case at bar is evident; as Professor

Zelenak explains:
The problem presented to a challenger of an ad hoc tax

revision by the overruling of Morey is apparent. In Morey,

the Court adopted the suggested attitude of suspicion to laws

which single out one person for special treatment. The

overruling thus would seem to indicate that the Court now

rejects the notion that such laws should be viewed with any

particular suspicion.

Zelenak, supra note 2, 44 Tax L.Rev. at 582. Under Dukes,

legislative classifications which amount to "the creation of a

closed class by the singling out of ... a named company," Morey,

354 U.S. at 469, 77 S.Ct. at 1352, can withstand scrutiny under the

rational basis test.

Another case that reaffirms the judicial deference accorded

economic regulation under the rational basis test and illustrates

the challenges faced by plaintiffs in this case is the Supreme

Court's decision in United States R.R. Retirement Bd. v. Fritz, 449

U.S. 166, 101 S.Ct. 453, 66 L.Ed.2d 368 (1980). Fritz involved

classifications and transitional measures in the Railroad

Retirement Act of 1974. The Act, designed to restructure the

railroad retirement system, generally eliminated a windfall benefit

that inured to employees who had worked for both railroad and

nonrailroad employers: those employees qualified for both railroad

retirement and social security benefits. The Act eliminated those

dual benefits for all but a limited class of employees. One class

consisted of those employees who were unretired, had ten years of

railroad employment and sufficient nonrailroad employment to

qualify for social security benefits, and performed some railroad

service in the calendar year 1974 or had a current connection with

the railroad as of December 31, 1974. 449 U.S. at 172, 101 S.Ct.
at 458.

Employees who did not qualify for this exemption because they

were not employed by a railroad in 1974 and had no "current

connection" with it at the end of 1974 brought a class action suit

challenging the classification under the equal protection component

of the Due Process Clause. Id. at 173, 101 S.Ct. at 458. They

claimed to be similarly situated to those employees who continued

to receive the windfall of dual benefits. The district court

agreed and held that a legislative differentiation based solely on

whether an employee was active in the railroad business in 1974 was

not "rationally related to the congressional purposes of insuring

the solvency of the railroad retirement system and protecting

vested benefits." Id. at 174, 101 S.Ct. at 459.

The Supreme Court reversed, finding the classification scheme

constitutionally acceptable. It explained that "Congress could

properly conclude that persons who had actually acquired statutory

entitlement to windfall benefits while still employed in the

railroad industry had a greater equitable claim to those benefits

than the members of [plaintiff's] class who were no longer in

railroad employment when they became eligible for dual benefits."

Id. at 178, 101 S.Ct. at 461. Citing Dukes, the Court reasoned

that "[b]ecause Congress could have eliminated windfall benefits

for all classes of employees, it is not constitutionally

impermissible for Congress to have drawn lines between groups of

employees for the purpose of phasing out those benefits." Id. at
177, 101 S.Ct. at 460 (citing Dukes, 96 S.Ct. at 2517). "The "task

of classifying persons for ... benefits ... inevitably requires

that some persons who have an almost equally strong claim to

favored treatment be placed on different sides of the line,' and

the fact that the line might have been drawn differently at some

points is a matter for legislative, rather than judicial,

consideration." Id. at 179, 101 S.Ct. at 461 (quoting Mathews v.

Diaz, 426 U.S. 67, 83–84, 96 S.Ct. 1883, 1893, 48 L.Ed.2d 478

(1976)).

B.

The Supreme Court's decision in Dukes (overruling Morey ) and

Fritz "suggest that the mode of analysis employed by the Court ...

virtually immunizes social and economic legislative classifications

from judicial review." Fritz, 449 U.S. at 183, 101 S.Ct. at 464

(Brennan, J., dissenting). Nevertheless, not all economic

regulations pass the rational relation test; some regulations fail

even this lenient examination. The Court has invalidated tax

classifications on equal protection grounds when it has found

absolutely no reasonable basis for the classifications. See, e.g.,

Allegheny Pittsburgh Coal Co. v. County Comm'n, 488 U.S. 336, 109

S.Ct. 633, 102 L.Ed.2d 688 (1989) (formula for property valuation

based on most recent sale resulting in relative overvaluation, and

thus higher tax assessment, for comparable properties); Williams

v. Vermont, 472 U.S. 14, 105 S.Ct. 2465, 2472, 86 L.Ed.2d 11 (1985)

(higher tax on purchase of out-of-state automobiles based on

out-of-state residency); Metropolitan Life Ins. v. Ward, 470 U.S.
869, 105 S.Ct. 1676, 84 L.Ed.2d 751 (1985) (lower gross premiums

tax rate on domestic insurance companies); City of Cleburne, Texas

v. Cleburne Living Center, 473 U.S. 432, 105 S.Ct. 3249, 87 L.Ed.2d

313 (1985) (zoning ordinance which excluded group homes for the

mentally retarded); Zobel v. Williams, 457 U.S. 55, 102 S.Ct.

2309, 72 L.Ed.2d 672 (1982) (state dividend distribution plan

favoring established residents over new residents); United States

Dept. of Agriculture v. Moreno, 413 U.S. 528, 93 S.Ct. 2821, 37

L.Ed.2d 782 (1973) (denial of food stamps to households containing

a non-relative).

Plaintiffs contend that Williams and Ward, supra, lend support

for striking down the transition rules. In Williams, the Court

struck down a state law that exempted the payment of state sales

taxes by state residents who bought cars out-of-state, but imposed

the tax on those moving into the state who had bought cars

out-of-state. The Court reasoned:

residence at the time of purchase is a wholly arbitrary basis

on which to distinguish among present Vermont registrants....

The purposes of the statute would be identically served, and

with an identical burden, by taxing each. The distinction

between them bears no relation to the statutory purpose.

105 S.Ct. at 2472.

Because Williams and Ward, another case striking down tax

classifications, involved discrimination based on residency, they

provide limited precedential value with respect to other

classifications. The Court's inclination to invalidate the
classifications in Williams and Ward is perhaps best explained by

the Court's distaste for "parochial discrimination." Ward, 105

S.Ct. at 1681. As the Court wrote in Ward:

The Equal Protection Clause forbids a State to discriminate in

favor of its own residents solely by burdening "the residents

of other state members of our federation." ... The validity

of the view that a State may not constitutionally favor its

own residents by taxing foreign corporations at a higher rate

solely because of their residence is confirmed by a long line

of this Court's cases so holding.

Id. at 1682 (quoting Allied Stores of Ohio, Inc. v. Bowers, 358

U.S. 522, 79 S.Ct. 437, 3 L.Ed.2d 480 (1959)). In Williams, the

Court wrote:

"[E]qual treatment for in-state and out-of-state taxpayers

similarly situated is the condition precedent for a valid use

tax on goods imported from out of state." A State may not

treat those within its borders unequally solely on the basis

of their different residences or States of incorporation.

105 S.Ct. at 2471–72 (quoting Halliburton Oil Well Co. v. Reily,

373 U.S. 64, 70, 83 S.Ct. 1201, 1204, 10 L.Ed.2d 202 (1963)). See

also Zobel, 102 S.Ct. at 2314–15 (duration of residency not

rationally related to state's interest).

Allegheny is the most apposite, and most recent, case wherein

the Court invalidated a tax classification scheme. The Court held

that assessments on real property based on most recent acquisition

price violated equal protection. The court reasoned that

acquisition price did not necessarily correlate with the market

value: recently sold property would be valued much higher than

identical property that had not been sold for a long time. The
Court concluded that the distinction was truly arbitrary and

capricious:

the fairness of one's allocable share of the total property

tax burden can only be meaningfully evaluated by comparison

with the share of others similarly situated relative to their

property holdings. The relative undervaluation of comparable

property in Webster County over time therefore denies

petitioner the equal protection of the law.

109 S.Ct. at 639. The Court emphasized that "[t]he Equal

Protection Clause "applies only to taxation which in fact bears

unequally on persons or property of the same class.' " Id. at 637

(quoting Charleston Fed. Sav. & Loan Ass'n v. Alderson, 324 U.S.

182, 190, 65 S.Ct. 624, 629, 89 L.Ed. 857 (1945) (collecting

cases)). But even Allegheny is of limited assistance to us because

it did not involve classifications which were a product of

legislative "line-drawing." Compare Fritz, 449 U.S. at 179, 101

S.Ct. at 461. Rather, it involved a formula for valuation found

fundamentally flawed insofar as the formula produced "a disparity

in assessed values of similar property." 109 S.Ct. at 639.

C.

We now apply these legal principles to the constitutional

challenge levied in this case to determine whether the transition

rules can withstand plaintiffs' attack. Under the rational basis

test, we must first consider whether the challenged legislation has

a legitimate government purpose. If so, we consider whether the

challenged classification promotes that legislative purpose. Town

of Ball, 746 F.2d at 1058–59 n. 36 (quoting Western & S. Life Ins.

Co. v. State Bd. of Equalization, 451 U.S. 648, 668, 101 S.Ct.
2070, 2083, 68 L.Ed.2d 514 (1981)).

The district court concluded that Congress had a legitimate

governmental purpose in creating the transitional rules:

The Court finds that making adjustments under a new tax law

for those who would be unduly burdened is "a legitimate

governmental purpose' and does not violate the Constitution.

Such pervasive changes in the tax law have seldom been seen in

our country. Numerous taxpayers may have taken actions based

upon the old tax law. Some of these taxpayers may be unduly

burdened by the new Act. Congress certainly has the right to

draft legislation to protect a group of taxpayers who are so

affected.

702 F.Supp. at 1297. We agree that the legislature has a

legitimate governmental purpose in making exceptions from the

general application of the Tax Reform Act to protect "substantial

reliance interests." Dukes, 96 S.Ct. at 2518. We find nothing

inherently invidious in Congress wanting to "soften the blow of the

new law on businesses that undertook projects under the [old] tax

law, only to be told the rules would be changed in the middle of

the game." 132 Cong.Rec. S8,128 (daily ed. June 23, 1986)

(statement of Sen. Levin).

But that does not end our inquiry, for we must evaluate not

only the purpose of the legislation, but the purpose and legitimacy

of the classifications as well. To do that, we must first identify

the classification. Plaintiffs take the position that:

[w]hile assisting all taxpayers with general transition relief

would be a valid and appropriate governmental purpose, the

objective of providing selective exemptions to only a few,

based upon their access to politicians, is an illegitimate and
prohibited objective ... There can never be a legitimate

public purpose served by the arbitrary selection of a favored

few from the general applicability of a taxing statute.

Plaintiffs would have us define the "favored" class as those

taxpayers with "access to influential members of Congress."

Their argument is not without some foundation. The district

court catalogued the many references in the legislative history to

political favoritism exhibited by members of Congress. See 702

F.Supp. at 1287–89. For example, the Chairman of the Senate

Finance Committee confessed that

[i]t would be foolish of me to say that, on occasion, politics

did not enter those judgments. If the Speaker of the House

requested the chairman of the Ways and Means Committee a

transition rule, my hunch is that [he] would give it

reasonably high priority in his thinking.

If Senator Dole requested one of me, I would give it

reasonably high priority in my thinking.

132 Cong.Rec. S13,786 (daily ed. Sept. 26, 1986) (statement of Sen.

Packwood). Another Senator "admitted using his position on the

committee to obtain special treatment for his constituents." 702

F.Supp. at 1288.

I do not mind saying to my colleagues that I have used my

position on the Finance Committee to the advantage of the

people of Minnesota.... I have used my position to get

special rules for my people....

132 Cong.Rec. S8,221 (daily ed. June 24, 1986) (statement of Sen.

Durenberger).

Moreover, it is quite plain that absent "access to the
conference committee which enabled them to obtain a so-called

transition rule so their activity could continue to be taxed under

the old law," 132 Cong.Rec. S13,810 (daily ed. Sept. 26, 1986)

(statement of Sen. Levin), there was little, if any, chance that a

taxpayer would receive transitional relief. As one Senator asked:

"[W]hat about those who could not come to Washington and make their

case? What about those who could not hire the lobbyists to present

their appeal? Where is the fairness to them?" Id.

While we recognize that politics played a part in determining

to whom the transition rules would apply, we nevertheless believe

that, in view of the great deference accorded by the Supreme Court

to tax legislation, the classifications contain no constitutional

malady. Congress sought to give transitional relief to those

taxpayers who petitioned for relief and demonstrated, most

convincingly, that they relied substantially on the old tax laws in

making major investment decisions. Not every application for

transitional relief was granted, however, political clout

notwithstanding. Congressional staff members examined more than

one thousand requests for rifle shot transition relief before

recommending the inclusion of several hundred. As the Senate

Finance Committee Chairman explained:

I did not sit down and go through all 1,000–plus requests

one by one, nor did I try to hold the public hearing on all

1,000 of them. Even if I could give the witnesses 10 minutes

each, there would be 10,000 witnesses, and 100,000 minutes.

So what we did is to say to the staff, "Here are the

rules by which transitions are to be selected. Try to avoid

violating those rules." By and large they were successful.
We asked them to try to pass upon the merits of the rest.

132 Cong.Rec. S13,904 (daily ed. Sept. 27, 1986) (statement of Sen.

Packwood); see also id. 132 Cong.Rec. S13,786 (daily ed. Sept. 26,

1986) ("[A]s honestly as we could, we tried to be fair in the

transitions and we tried to make sure that they did not violate the

basic tenets of the bill."). Congress could not grant every

request for transitional relief, for that would have threatened the

success of the Act, which, by design of the President and Congress,

was to be revenue neutral, neither raising nor lowering the

aggregate level of federal revenue collections.

Of course, "a concern for the preservation of resources

standing alone can hardly justify the classification used in

allocating those resources." Plyler v. Doe, 457 U.S. 202, 227, 102

S.Ct. 2382, 2400, 72 L.Ed.2d 786 (1982). But choices had to be

made: tough choices. And as far as we can tell from the

legislative history, Congress made their decisions based on the

merits of the applications for transitional relief made to the

Finance Committee. We realize that those taxpayers with political

connections had better access to the Committee than others.

Nevertheless, nothing suggests that Congress aimed to exclude

others or that Congress designed the classifications with such a

purpose in mind:

If the adverse impact on the disfavored class is an apparent

aim of the legislature, its impartiality would be suspect.

If, however, the adverse impact may reasonably be viewed as an

acceptable cost of achieving a larger goal, an impartial

lawmaker could rationally decide that that cost should be

incurred.
Fritz, 449 U.S. at 181, 101 S.Ct. at 462 (Stevens, J. concurring).

Moreover, it appears that Plaintiffs never sought transitional

relief from the Tax Reform Act. That places them in an especially

difficult position to challenge the rifle shot rules. They did not

ask for, and therefore did not receive, the congressional manna:

Congress cannot be expected to search out on its own those

taxpayers whose peculiar circumstances give them strong

equitable arguments for special relief from general tax

provisions; rather, such taxpayers must come to Congress.

Thus providing a special rule for one taxpayer, but not for

the other, is rationally related to the legitimate purpose of

providing relief for deserving taxpayers, to the extent that

can be done without the need for Congress to initiate a hunt

for those taxpayers.... [A] legislature should be able to

provide special relief for those deserving taxpayers it has

found, without providing relief for others it has not found.

Zelenak, supra note 2, 44 Tax L.Rev. at 575–76.

We hold that the classifications made by Congress were not

arbitrary. It accorded transitional relief to those deserving

taxpayers who applied for such relief and established most

convincingly that they relied substantially on the old tax laws in

making major investment decisions.

III. CONCLUSION

Even in a democratic government, preferences and inequalities

are inevitable. In the legislative arena, as demonstrated in this

case, lines must be drawn, and those lines often appear arbitrary.

That may mean that in some instances, two seemingly identical

persons will receive seemingly unequal treatment. Pure equity is
sometimes eschewed for the ultimate goal of adopting legislation.

Preferences also permeate the other two branches of

government, especially when discretion plays a role. The judicial

branch engages in the process of making decisions that appear to

favor some and disfavor others. Sentencing provides a prime

example. Similarly situated defendants rarely receive precisely

the same sentence, although Congress has endeavored to achieve

uniformity through the Sentencing Guidelines. The judiciary also

determines whether laws and rules are to be applied retroactively

or merely prospectively. Prisoners on death row tell of the

inequality they perceive from those judicial decisions. The

executive branch dispenses preferential treatment in the eyes of a

citizen charged with a crime when the government fails to prosecute

another citizen allegedly guilty of the same crime.

In all, our government, falling short of the utopia that we

might hope for, can only strive for equality in classifications.

But it would be unrealistic for us to expect perfect equality.

This is not to say that we are undisturbed by the methodology

employed by Congress in its dispensation of transitional relief.

We would be less than candid if we did not confess that we are

somewhat troubled, if not astonished, that political connections

played such a large role in the creation of this ad hoc tax

legislation. But as members of the judiciary, we "may not sit as

a superlegislature to judge the wisdom or desirability of
 

10I concur in the result reached by the majority's opinion,

which determines that the plaintiffs' claim fails on the merits. 

legislative policy determinations made in areas that neither affect

fundamental rights nor proceed along suspect lines." Dukes, 96

S.Ct. at 2517. Nor do we write on a clean jurisprudential slate.

We may not apply a more rigorous scrutiny to this ad hoc tax

legislation than the Supreme Court prescribes, even though "[t]he

very existence of such legislation suggests that the legislative

process has been subverted to serve purely private ends." Zelenak,

supra note 2, 44 Tax L.Rev. at 581.

We conclude that the Supreme Court would not likely condemn

the transition rules, but would find instead that these "statutory

classification are sufficiently justified as being the outcome of

a power struggle among competing private interests." Id. at 569

(citing Posner, The DeFunis Case and the Constitutionality of

Preferential Treatment of Racial Minorities, 1974 Sup.Ct.Rev. 1,

28).

The judgment of the district court is AFFIRMED.

E. Grady Jolly, Circuit Judge, Dissenting and Specially Concurring

in the Result:10

Despite the majority's resourceful efforts to find standing to

assert a claim for equal protection in this case, I am compelled to

dissent respectfully from the majority's conclusion that the

plaintiffs -- who claim no economic injury for themselves but seek
only to deny economic benefits to others -- have standing to bring

this case.

The majority holds that the plaintiffs have standing to pursue

their claims under the equal protection component of the Due

Process Clause of the Fifth Amendment. Standing to assert such a

claim requires that the plaintiff be harmed as a member of an

injured class that can be given a lawfully cognizable definition.

I fail to see that the transition rules created a "class" as the

term is applied to equal protection of the laws. A traditional

equal protection class is defined by some characteristic of the

persons disfavored, such as race, state residence, age, legitimacy,

or even holding later-acquiring property. See, e.g., Williams v.

Vermont, 472 U.S. 14 (1985). In each such case, the plaintiff

class is defined by the characteristics of the class that form the

basis of discrimination and injury, such as illegitimate persons

who are prevented from receiving an inheritance or qualified black

persons who are prevented from voting.

The plaintiff class as defined in the majority opinion appears

to be those taxpayers who were not afforded relief under the

transition rules. This class would even include those taxpayers

who have personal and political influence in Congress but, who, in

their lobbying efforts, were unsuccessful in securing a transition

rule for themselves. Thus, the disfavored plaintiff class is all

taxpayers in the United States except those successful in obtaining

a transition rule benefit. This alleged affected class is so

amorphous, so generalized, and so totally lacking in a common

identifiable grievance as to be legally non-cognizable.
The majority would argue that this view ignores the nature of

the equal protection injury that the plaintiffs assert -- the

"disparity in treatment" that can be remedied by the "satisfaction

of knowing that the Tax Reform Act treats no one any better than

them..." Apache Bend ___ F.2d ___, ___ [manuscript, p.6] This

injury is one that apparently every taxpayer in the country

suffered. If this is a constitutionally cognizable injury under

the equal protection requirement, then the taxpayers of this

country suffer a judicially redressible injury each time Congress

passes a bill granting benefits to some but not to all. No court

has ever gone to this extreme that the majority now pioneers.

Failing to recognize the limits of the case, the majority

cites Heckler v. Mathews, 465 U.S. 728 (1984). Although the case

supports the view that lost economic benefit is not required in

order to suffer an injury, and that unequal treatment alone may

constitute such an injury, the discriminatory effect described by

Justice Brennan in Mathews is not the character of discrimination

described by the plaintiffs in our case. The discriminatory

effect, i.e., the injury, that gives rise to a claim of equal

protection is discrimination that

by perpetuating `archaic and stereotypic notions' or by

stigmatizing members of the disfavored group as 'innately

inferior' and therefore as less worthy participants in

the political community, can cause serious noneconomic

injuries to those persons who are personally denied equal

treatment solely because of their membership in a

disfavored group. 

Mathews, 465 U.S. at 739-740 quoting Mississippi University for

Women v. Hogan, 458 U.S. 718, 725 (1982). 

The plaintiffs suggest that the noneconomic injury they suffer
 

11The majority relies greatly upon the work of Professor

Lawrence Zelanak, in his article, Are Rifle Shot Rules and Other

Ad Hoc Legislation Constitutional?, 44 Tax L.Rev. 563 (1989). 

Even Professor Zelanak, as the majority notes, does not consider

Mathews to extend noneconomic injury as far the majority would

have it reach for the purposes of standing. See Apache Bend

Apts. v. United States, ___ F.2d ___, ___, n. 5; Zelanak, Rifle

Shots, 44 Tax L.Rev. at 619. 

as members of the disfavored class can be remedied with a judicial

order that the Tax Reform Act treat no one better than them. Thus,

their only injury is the burden of the knowledge that other people

are treated more favorably; in short, suffering envy is their

injury. The plaintiffs do not allege that their "burden" is widely

shared, or known, by other citizens, nor can they allege that this

burden perpetuates an "archaic" "stigma" that identifies the

plaintiffs as belonging to a class of "less worthy participants in

the political community." The plaintiffs do not and cannot claim

to be stigmatized by obscure tax laws. Simply, the injury

described by the plaintiffs is an injury beyond the scope of

allowable injury described by the Mathews court.11 See Biszko v.

RIHT Financial Corp., 758 F.2d 769, 773 (1st Cir. 1985).

Giving to it a dressed up face, the plaintiffs' injury is only

an "abstract injury in nonobservance of the Constitution" by the

government, or its failure to "be administered according to law."

Such injuries may not form the basis of standing in our courts.

See, e.g. Allen, 468 U.S. at 754; Valley Forge Christian College v.

Americans United for Separation of Church & State, Inc., 454 U.S.

464, 482, 485 (1982) citing Schelsinger v. Reservists Committee to

Stop the War, 418 U.S. 208 (1974). The plaintiffs have, at best,

alleged a "personal injury as a consequence of the alleged
 

12Because the majority does not reach the arguments

presented concerning taxpayer standing under Flast v. Cohen, 392

U.S. 83 (1968), and the uniformity clause, I find it unnecessary

to address these issues. 

constitutional error," which is not more than "the psychological

consequence presumably produced by the observation of conduct with

which one disagrees." Valley Forge, 454 U.S. at 486.

Because the plaintiffs have not alleged an injury under the

equal protection requirement, I respectfully dissent from the

majority's recognition of the plaintiffs' standing to maintain this

action.12