Court Opinion

ID: 9464795
Source: CourtListenerOpinion
Date Created: 2023-08-04 23:42:39.262416+00
Date Added: 2024-06-11T17:38:49.113113
License: Public Domain

COFFIN, Chief Judge,
dissenting.
Because I feel that authorities do not compel and policy counsels against the court’s expansive reading of the “restraining . . . collection” language of the Anti-Injunction Act, 26 U.S.C. § 7421(a), I respectfully dissent. If the court, quoting United States v. Dema, 544 F.2d 1373, 1376 (7th Cir. 1976), were correct that an individual can never challenge any “activities which are intended to or may culminate in the assessment or collection of taxes”, then the government could adopt bizarre practices with impunity. Under the court’s logic the government could file a large tax lien for an assessment based on patently illegal evidence (or no evidence at all), and the individual could not challenge the lien, at least if the government later were able to allege that some portion of the assessment, however small, could be legally supported. By extension, a court could not stop the government from garnisheeing an individual’s wages, or even illegally invading someone’s home in search of evidence that might culminate in the assessment or collection of a tax. The court, of course, cannot be understood as sanctioning such a result, but I see no respectable way, under its statutory reading, to foreclose it.
I cannot believe that Congress meant such a reading,1 and I do not believe that the statutory language or the Supreme Court’s interpretation of § 7421 compels it. The Court has said that the purpose of § 7421 is to protect “the Government’s need to assess and collect taxes as expeditiously as possible with a minimum of pre-enforcement judicial interference, ‘and to require that the legal right to the disputed sums be determined in a suit for a refund.’ ” Bob Jones University v. Simon, 416 U.S. 725, 736, 94 S.Ct. 2038, 2046, 40 L.Ed.2d 496 (1974), quoting Enochs v. Williams Packing & Navigation Co., 370 U.S. 1, 7, 82 S.Ct. 1125, 8 L.Ed.2d 292 (1962).2 The only sensible reading of § 7421 is as a bar to suits that attempt to challenge a taxpayer’s liability or the amount of that liability except through the accepted channels of the deficiency suit in the Tax Court or the suit for a refund in a district court. I would not read § 7421 to bar a suit challenging allegedly illegal IRS activities where the tax liability itself is not at issue. This reading protects legitimate government interests in the orderly assessment and collection of taxes without allowing the IRS complete freedom to take actions insulated from all review, even from the review normally provided by deficiency or refund suits.3
This reading is not inconsistent with existing authority. As I have said, this is not the kind of case that the Supreme Court thought § 7421 was meant to cover. Bob Jones University, supra, was a suit to prevent revocation of tax-exempt status. Liability was very much at issue. The broad rule that the majority draws from United States v. Dema, 544 F.2d at 1376 (appeal from an order restraining the IRS from issuing subpoenas or requesting records), was in turn borrowed from Koin v. Coyle, 402 F.2d 468 (7th Cir. 1968), a suit to prevent the IRS from using illegally seized evidence. The other kinds of cases that the Seventh Circuit evidently had in mind were suits to prevent revocation of tax-exempt *999status and suits to prevent police from passing information to the IRS. See United States v. Dema, 544 F.2d at 1381 (dissenting opinion). The tax liability itself was the real subject of dispute in these contexts. The collateral issues these cases involved could be adequately resolved in refund suits.
A dispute over liability was likewise the central issue in those cases that have held that § 7421 bars a suit challenging a tax lien.4 Hudson v. Crenshaw, 224 F.2d 324 (4th Cir. 1955); Larson v. House, 112 F.2d 930 (5th Cir. 1940); MBI Motor Co., Inc. v. Lotus/East, Inc., 399 F.Supp. 774 (E.D. Tenn.1975); Starr v. Salemi, 329 F.Supp. 1150 (N.D.Ill.1971); Lynn v. Scanlon, 234 F.Supp. 140 (E.D.N.Y.1964). But see Calafut v. Commissioner of Internal Revenue, 277 F.Supp. 266 (M.D.Pa.1967).5
The government’s policy arguments are not persuasive. This situation is not analogous to a mortgage that has been partially paid off. Rather appellee has asserted that the original lien, in its entirety, was illegally imposed. Certainly if an illegal mortgage were filed, the named mortgagor could sue to have the mortgage lifted. Here, it became evident in May of 1974 when the Supreme Court decided United States v. Giordano, 416 U.S. 505, 94 S.Ct. 1820, 40 L.Ed.2d 341 (1974), that the evidence on which the lien was based had been obtained illegally. At that point there was no legal basis to the lien, and the IRS should have withdrawn it. Cf. 26 U.S.C. § 6325(a) (authorizing the Commissioner to release a lien that has become legally unenforceable). Instead the IRS allowed the lien to continue in effect with no legal basis whatsoever until July of 1975 when a new assessment, far smaller than the original one, was computed on the basis of legal evidence. At that point the IRS became lawfully entitled to a lien in the smaller amount, but it did not file that lien or reduce the existing lien. If the IRS would lose priority now were this lien to be declared illegal, that would be a problem of its own making. It would be deprived of super-priority that was illegally achieved and not deserved.
Additionally, I think the government’s— and the court’s — stress on administrative burden is not applicable to the position I take. I would not require the IRS to reduce a legal lien every time a partial payment is made. I would only require the IRS to release illegal liens where their illegality has been settled and where the suit challenging the lien is not an attempt to challenge collaterally the individual’s tax liability. I presume that the IRS does not routinely file illegal liens.
Even if § 7421 does not cover this case, however, appellee must establish the traditional equitable prerequisites — irreparable injury and inadequate remedy at law. The district court found that they were satisfied. I agree that there is no adequate remedy at law because the lien will remain in effect at its current amount until the taxpayer is able to satisfy his liability. A suit for a refund is no comfort to an individual who is unable to raise the money owed.
It is more difficult to decide whether appellee has been injured by the government action. I agree that the lien is a restraint on free enjoyment of his property in a theoretical sense. See Bay State Harness Horse Racing and Breeding Ass’n, Inc. v. PPG Industries, Inc., 365 F.Supp. 1299, *10001304-05 (D.Mass.1973) (three judge court). However, as the court has pointed out, ap-pellee made no allegation that he was unable to use his property for any specific purpose. Nor is it clear to me whether or not the IRS still intends to force the sale of real property that this suit was originally filed to stop. Therefore, I would remand this case for a hearing on the specific issue of injury to appellee that would result if the relief were denied. See Pizzarello v. United States, 408 F.2d 579, 587 (2d Cir. 1969).

. There is no legislative history of this provision. See Bob Jones University v. Simon, 416 U.S. 725, 736, 94 S.Ct. 2038, 40 L.Ed.2d 496 (1974).

. “The Court has also identified ‘a collateral objective of the Act — protection of the collector from litigation pending a suit for refund.’ ” Bob Jones University, 416 U.S. at 737, 94 S.Ct. at 2046, quoting Enochs v. Williams Packing & Navigation Co., 370 U.S. 1, 7-8, 82 S.Ct. 1125, 8 L.Ed.2d 292 (1962).

. The legality of the lien cannot be litigated through a refund suit. This situation is, therefore, to be contrasted with that in Bob Jones where the Court rejected the contention that § 7421 as applied would violate the due process clause of the Fifth Amendment, saying, “This is not a case in which an aggrieved party has no access at all to judicial review. Were that true, our conclusion might well be different.” Bob Jones University, 416 U.S. at 746, 94 S.Ct. at 2050.

. At least one court has held that § 7421 did not bar a challenge to a federal tax lien. United States v. Coson, 286 F.2d 453 (9th Cir. 1961) (suit to quiet title pursuant to 28 U.S.C. § 2410).

. In Calafut the assessment was admitted, and the court, mentioning § 7421, held that the taxpayer could not sue for removal of a tax lien or for an order that the IRS must accept an automobile at its assessed value. The court interpreted the suit as one “to force the Government to accept the automobile in payment at the value established in the previous tax proceedings”, 277 F.Supp. at 267, and dismissed thé complaint for failure to state a cause of action upon which relief could be granted. The court seems to have concluded that no relief was appropriate because the taxpayer failed to allege any illegal government action. So understanding this case, I have no quarrel with the result.