Court Opinion

ID: 4165244
Source: CourtListenerOpinion
Date Created: 2017-05-02 16:05:10.431189+00
Date Added: 2024-06-11T09:21:10.879456
License: Public Domain

FILED
                                                                        United States Court of Appeals
                                       PUBLISH                                  Tenth Circuit

                      UNITED STATES COURT OF APPEALS                            May 2, 2017

                                                                            Elisabeth A. Shumaker
                             FOR THE TENTH CIRCUIT                              Clerk of Court
                         _________________________________

THE GREEN SOLUTION RETAIL, INC.,
a Colorado corporation; KYLE
SPEIDELL,

      Plaintiffs - Appellants,

v.                                                            No. 16-1281

UNITED STATES OF AMERICA;
INTERNAL REVENUE SERVICE; JOHN
KOSKINEN, Internal Revenue Service
Commissioner; DAVID HEWLETT, in
his official capacity, Auditor for the
Internal Revenue Service,

      Defendants - Appellees.
                      _________________________________

                     Appeal from the United States District Court
                             for the District of Colorado
                          (D.C. No. 1:16-CV-00257-RPM)
                       _________________________________

James D. Thorburn, Thorburn Walker, LLC, Greenwood Village, Colorado (Richard
Walker, with him on the briefs), for Plaintiffs-Appellants.

Patrick J. Urda, Attorney, Tax Division (Caroline D. Ciraolo, Principal Deputy Assistant
Attorney General; Diana L. Erbsen, Deputy Assistant Attorney General; Gilbert S.
Rothenberg, Attorney; Richard Farber, Attorney; and Robert C. Troyer, Acting United

      
          Mr. Hewlett was referred to as such throughout the proceedings, including the
district court’s judgment and the subsequent notice of appearance filed with this court.
However, there is mention (and accompanying exhibits demonstrating) that his name is
actually David Hewell. Because it is unclear, and neither party moved to amend the
name, we retain the designation of David Hewlett for purposes of this decision.
States Attorney, with him on the brief), United States Department of Justice, Washington,
D.C., for Defendants-Appellees.
                        _________________________________

Before HARTZ, MATHESON, and McHUGH, Circuit Judges.
                 _________________________________

McHUGH, Circuit Judge.
                    _________________________________

                                I.     INTRODUCTION

       The Green Solution Retail, Inc. and one of its owners, Kyle Speidell (collectively,

Green Solution), sued to enjoin the Internal Revenue Service (IRS) and related parties

from investigating Green Solution’s business records. The district court dismissed Green

Solution’s complaint for lack of subject matter jurisdiction, concluding the Anti-

Injunction Act and the Declaratory Judgment Act bar this action. The court relied on our

decision in Lowrie v. United States, where we held that lawsuits challenging “activities

leading up to and culminating in” an assessment are barred. 824 F.2d 827, 830 (10th Cir.

1987). On appeal, Green Solution contends the district court had jurisdiction to hear its

claims because the Supreme Court has implicitly overruled Lowrie in its recent decision

Direct Marketing Association v. Brohl, 135 S. Ct. 1124 (2015). We conclude we are still

bound by Lowrie and affirm.

                                 II.    BACKGROUND

       Green Solution is a Colorado-based marijuana dispensary with several locations

across the state. The IRS is currently auditing Green Solution’s tax returns for the 2013

and 2014 tax years to determine whether it should apply 26 U.S.C. § 280E (I.R.C.

                                             2
§ 280E), which forbids federal tax deductions and credits to companies trafficking in a

“controlled substance” as defined by the Controlled Substances Act (CSA). The IRS

made initial findings that Green Solution trafficked in a controlled substance and is

criminally culpable under the CSA. The IRS then requested that Green Solution turn over

documents and answer questions related to whether Green Solution is disqualified from

taking credits and deductions under § 280E.1 It is undisputed the IRS has not made an

assessment or begun collection proceedings.

          Green Solution sued the IRS and related parties in the United States District Court

for the District of Colorado, seeking to enjoin the IRS from investigating whether it

trafficked in a controlled substance in violation of federal law, and seeking a declaratory

judgment that the IRS is acting outside its statutory authority when it makes findings that

a taxpayer has trafficked in a controlled substance. Green Solution claimed it would

suffer irreparable harm if the IRS were allowed to continue its investigation because a

denial of deductions would (1) deprive it of income, (2) constitute a penalty that would

effect a forfeiture of all of its income and capital, and (3) violate its Fifth Amendment

rights.

          The IRS moved to dismiss for lack of subject matter jurisdiction under Federal

Rule of Civil Procedure 12(b)(1). According to the IRS, Green Solution’s claim for

          1
        In connection with its investigation of Green Solution, the IRS issued a summons
to Colorado’s Marijuana Enforcement Division seeking “information about the type of
products sold, the weight of the products sold and the identity of [Green Solution’s]
purchasers.” Green Solution filed a petition to quash the motion, which is currently
pending in the United States District Court for the District of Colorado. See No. 1:16-
mc-00137 (D. Colo., filed June 27, 2016).

                                               3
injunctive relief is foreclosed by the Anti-Injunction Act (AIA), which bars suits “for the

purpose of restraining the assessment or collection of any tax.” I.R.C. § 7421(a).

Similarly, the IRS asserted that the claim for declaratory relief violated the Declaratory

Judgment Act (DJA), which prohibits declaratory judgments in certain federal tax

matters. 28 U.S.C. § 2201.

       The district court agreed with the IRS that the AIA and DJA barred Green

Solution’s claims, relying on Lowrie v. United States, where we held that the AIA applies

“not only to the actual assessment or collection of a tax, but [also] to activities leading up

to, and culminating in, such assessment and collection.” 824 F.2d 827, 830 (10th Cir.

1987). The court further concluded that Green Solution’s request for declaratory relief on

the ground the IRS was acting outside of its authority was similarly barred by the DJA.

Accordingly, the court dismissed the action with prejudice for lack of subject matter

jurisdiction. Green Solution timely appealed. We have jurisdiction under 28 U.S.C.

§ 1291.

                                   III.   DISCUSSION

       The Controlled Substances Act (CSA) makes it unlawful to knowingly or

intentionally “manufacture, distribute, or dispense . . . a controlled substance.” 21 U.S.C.

§ 841(a)(1). Despite its legalization in twenty-eight states (and Washington, D.C.) for

medical use and in eight states (and Washington, D.C.) for recreational use, marijuana is

still classified as a federal “controlled substance” under schedule I of the CSA. Id.

§ 812(c)(10); 21 C.F.R. § 1308.11 (Schedule I); see also Denial of Petition to Initiate

Proceedings to Reschedule Marijuana, 81 Fed. Reg. 53,688, 53,688 (Aug. 12, 2016)

                                              4
(“[M]arijuana continues to meet the criteria for Schedule I.”). Schedule I drugs have “a

high potential for abuse” and are classified as those for which there is “no currently

accepted medical use in treatment in the United States.” 21 U.S.C. § 812(b)(1)(A)–(B).

       Although still illegal federally, the Justice Department has declined to enforce

§ 841 when a person or company buys or sells marijuana in accordance with state law. In

2015 and 2016, Congress reinforced this arrangement by defunding the Justice

Department’s prosecution of the exchange of medical marijuana where it is legal under

state law. Consolidated and Further Continuing Appropriations Act, 2015 Pub. L. No.

113-235, § 538, 128 Stat. 2130, 2217 (2014); Consolidated Appropriations Act, 2016,

Pub. L. No. 114-113, § 542, 129 Stat. 2242, 2332–33 (2015); see also United States v.

McIntosh, 833 F.3d 1163, 1169–70 (9th Cir. 2016).

       But while “today prosecutors will almost always overlook federal marijuana

distribution crimes in Colorado,” it does not mean the “tax man” is willing to turn a blind

eye. Feinberg v. C.I.R., 808 F.3d 813, 814 (10th Cir. 2015). Section 280E of the Internal

Revenue Code provides:

       No deduction or credit shall be allowed for any amount paid or incurred
       during the taxable year in carrying on any trade or business if such trade or
       business . . . consists of trafficking in controlled substances (within the
       meaning of schedule I and II of the Controlled Substances Act) which is
       prohibited by Federal law . . . .

As discussed, marijuana is still a controlled substance under the CSA, and the IRS has

pursued numerous marijuana dispensaries in Colorado and elsewhere to recoup unlawful

business deductions. See, e.g., Feinberg, 808 F.3d at 814; Olive v. C.I.R., 792 F.3d 1146,

1147 (9th Cir. 2015).

                                             5
       Green Solution’s lawsuit seeks to enjoin the IRS from obtaining information

related to its initial findings that Green Solution is dispensing marijuana in violation of

the CSA and is thus ineligible for deductions under § 280E. But under the AIA, a litigant

may not bring a “suit for the purpose of restraining the assessment or collection of any

tax . . . in any court by any person, whether or not such person is the person against

whom such tax was assessed.” I.R.C. § 7421(a). The Supreme Court has long held the

AIA is jurisdictional.2 See Enochs v. Williams Packing & Navigation Co., 370 U.S. 1, 5

(1962) (AIA’s purpose “is to withdraw jurisdiction from the state and federal courts to

entertain suits seeking injunctions prohibiting the collection of federal taxes”); see also

       2
         We “have an independent obligation to determine whether subject-matter
jurisdiction exists, even in the absence of a challenge from any party.” Arbaugh v. Y&H
Corp., 546 U.S. 500, 514 (2006). The issue of subject matter jurisdiction may not be
forfeited or waived. Id. The Supreme Court has also instructed that “drive-by
jurisdictional rulings . . . have no precedential effect.” Steel Co. v. Citizens for a Better
Env’t, 523 U.S. 83, 91 (1998). In Hobby Lobby Stores, Inc. v. Sebelius, a three-judge
concurring opinion in our en banc panel would have found the AIA not jurisdictional, but
a “waivable defense.” 723 F.3d 1114, 1157–59 (10th Cir. 2013) (en banc) (Gorsuch, J.,
concurring), aff’d sub nom. Burwell v. Hobby Lobby Stores, Inc., 134 S. Ct. 2751 (2014).
But that position did not garner a majority of the en banc court, perhaps because we have
held to the contrary that the AIA is jurisdictional. See, e.g., Sterling Consulting Corp. v.
United States, 245 F.3d 1161, 1167 (10th Cir. 2001); Kirtley v. Bickerstaff, 488 F.2d 768,
769 (10th Cir. 1973); Williams v. Wiseman, 333 F.2d 810, 811 (10th Cir. 1964). This
position is consistent with the conclusion of every circuit to examine this question. See,
e.g., Hotze v. Burwell, 784 F.3d 984, 991 (5th Cir. 2015), cert. denied, 136 S. Ct. 1165
(2016); Liberty Univ., Inc. v. Lew, 733 F.3d 72, 87 (4th Cir. 2013); RYO Mach., LLC v.
U.S. Dep’t of Treasury, 696 F.3d 467, 470 (6th Cir. 2012); Hansen v. Dep’t of Treasury,
528 F.3d 597, 601 (9th Cir. 2007). This combined weight of authority amounts to more
than “drive-by jurisdictional rulings” and, without contrary en banc or Supreme Court
authority, we cannot conclude the AIA is a “waivable defense” and not a jurisdictional
bar.

                                              6
Jefferson Cty. v. Acker, 527 U.S. 423, 434–35 (1999). Thus, if the AIA applies, we may

not reach the merits of Green Solution’s claims.

       Nor may Green Solution make an end-run around the AIA through its request for

declaratory relief. The DJA allows a federal district court to grant declaratory relief “[i]n

a case of actual controversy within its jurisdiction, except with respect to Federal

taxes . . .” 28 U.S.C. § 2201 (emphasis added). The DJA’s tax exception is

“coterminous” with the AIA’s prohibition. Cohen v. United States, 650 F.3d 717, 730–31

(D.C. Cir. 2011) (en banc). In other words, “with respect to Federal taxes” means

“restraining the assessment or collection of any tax.” Id. at 727.

       On appeal, Green Solution first contends that a suit to enjoin an investigation into

whether a business trafficked in a controlled substance is a step removed from a suit to

“restrain[] the assessment or collection of any tax” and is accordingly not precluded by

the AIA.3 Although Green Solution acknowledges that this Circuit in Lowrie held that the

AIA bars “activities leading up to, and culminating in assessment,” it contends the

Supreme Court in Direct Marketing Ass’n v. Brohl, 135 S. Ct. 1124 (2015), implicitly

overruled Lowrie.4 Green Solution next argues the AIA does not preclude this suit, even

       3
        And if the AIA bars this suit, the DJA claims are likewise barred because the two
Acts are coterminous. See Cohen v. United States, 650 F.3d 717, 730–31 (D.C. Cir. 2011)
(en banc).
       4
         At oral argument, Green Solution conceded that the IRS’s investigation is an
“activity leading up to” the assessment, which under Lowrie is barred by the AIA.
Because it is uncertain whether Green Solution intended also to concede its arguments
that § 280E is a penalty, and the IRS is acting outside its authority, we address those
arguments on the merits.

                                              7
if Lowrie controls, because (1) the IRS is acting outside its authority by investigating

whether Green Solution violated criminal law, and (2) section 280E is a penalty and not a

“tax” subject to the AIA. We reject Green Solution’s arguments and affirm the district

court’s dismissal of the action.

             A.    Whether Direct Marketing Implicitly Overruled Lowrie

       Green Solution asks us to depart from our holding in Lowrie that the AIA bars

“activities leading up to, and culminating in, . . . assessment,” Lowrie, 824 F.2d at 830, in

favor of a holding that the AIA has no application unless the lawsuit restrains—meaning

in some degree stops—the assessment or collection of a tax. But “we are bound by the

precedent of prior panels absent en banc reconsideration or a superseding contrary

decision by the Supreme Court.” Barnes v. United States, 776 F.3d 1134, 1147 (10th Cir.

2015) (internal quotation marks omitted). Although the Supreme Court decision need not

be “on all fours with our precedent,” it must “contradict[] or invalidate[] our prior

analysis” to be considered superseding authority. United States v. Brooks, 751 F.3d 1204,

1209–10 (10th Cir. 2014); compare Barnes, 776 F.3d at 1147 (refusing to overrule our

prior precedent because the Supreme Court authority was not “so indisputable and

pellucid . . . that it constitutes intervening (i.e., superseding) law that would permit us to

hold (without en banc consideration)” to the contrary), with Auraria Student Hous. at the

Regency, LLC v. Campus Vill. Apartments, LLC, 843 F.3d 1225, 1242 (10th Cir. 2016)

(concluding intervening Supreme Court authority “undermine[d] the rationale of our

decision . . . and warrant[ed] our retreat from its holding”). Green Solution contends that

                                               8
the Supreme Court has provided just such superseding authority in Direct Marketing

Ass’n v. Brohl, 135 S. Ct. 1124 (2015).

         To determine whether Direct Marketing has implicitly overruled Lowrie such that

this panel is not horizontally bound by it, we begin with a discussion of our AIA

precedent. We then examine the Supreme Court’s decision in Direct Marketing to

determine whether it has clearly undermined the rationale of our decision in Lowrie.

Ultimately, we conclude Green Solution has failed to show that Direct Marketing’s

reasoning so undermines Lowrie that this panel is not bound by that precedent. “Whether

the Declaratory Judgment and Anti-Injunction Acts bar [a plaintiff’s] claim is a question

of law that we review de novo.” Ambort v. United States, 392 F.3d 1138, 1140 (10th Cir.

2004).

1. AIA and Lowrie

         Congress designed the AIA to enable “a minimum of preenforcement judicial

interference” and “to require that the legal right to the disputed sums be determined in a

suit for refund.” Bob Jones Univ. v. Simon, 416 U.S. 725, 736 (1974) (internal quotation

marks omitted); Lowrie v. United States, 824 F.2d 827, 830 (10th Cir. 1987) (“The intent

behind the [AIA] is the protection of the government’s need to assess and collect taxes as

expeditiously as possible without preenforcement judicial interference and to require that

disputed sums of taxes due be determined in suits for refund.”); see also Fla. Bankers

Ass’n v. U.S. Dep’t of the Treasury, 799 F.3d 1065, 1074 (D.C. Cir. 2015) (“If taxpayers

could challenge the validity of a tax and forego payment during the pendency of the

                                             9
lawsuit, it would so interrupt the free flow of revenues as to jeopardize the Nation’s fiscal

stability.” (internal quotation marks omitted)).

       Accordingly, we held in Lowrie that the AIA applies “not only to the actual

assessment or collection of a tax, but is equally applicable to activities leading up to, and

culminating in, such assessment and collection.” 824 F.2d at 830. Several other circuits

agree. See, e.g., Cohen v. United States, 650 F.3d 717, 727 (D.C. Cir. 2011) (en banc)

(“[The AIA] requires a careful inquiry into the remedy sought, the statutory basis for that

remedy, and any implication the remedy may have on assessment and collection.”

(emphasis added)); Dickens v. United States, 671 F.2d 969, 971 (6th Cir. 1982) (“A suit

designed to prohibit the use of information to calculate an assessment is a suit designed

for the purpose of restraining an assessment under the [AIA].” (internal quotation marks

omitted)); Kemlon Prods. & Dev. Co. v. United States, 638 F.2d 1315, 1320 (5th Cir.

1981) (“[T]his ban against judicial interference is applicable not only to the assessment or

collection itself, but is equally applicable to activities which are intended to or may

culminate in the assessment.” (internal quotation marks omitted)); Koin v. Coyle, 402

F.2d 468, 469 (7th Cir. 1968) (“True, the suit does not directly and expressly aim at the

assessment. But it is directed expressly at the means to that end, and in our view is

substantially aimed at restraining the assessment.”); 14 Mertens Law of Federal Income

Taxation § 49E:45 (2007) (“Administrative determinations and investigations necessary

to an assessment are part of that process, for purposes of [the AIA].”).

                                             10
       Thus, as Green Solution concedes, the district court’s decision dismissing the

action for lack of subject matter jurisdiction was correct, if Lowrie still controls. We now

consider that question.

2. Direct Marketing and the Tax Injunction Act

       Green Solution contends the Supreme Court implicitly overruled the Lowrie line

of cases in Direct Marketing Ass’n v. Brohl, 135 S. Ct. 1124 (2015). In Direct Marketing,

a group of online retailers sued in federal court to enjoin the Colorado state taxing

authority from requiring the retailers to, among other things, disclose certain information

about their customers, including names, home addresses, and amounts spent. Id. at 1128.

The district court concluded this requirement violated the Commerce Clause because it

discriminated against and placed undue burdens on interstate commerce. Id. at 1128–29.

       On appeal, the Tenth Circuit did not reach the merits of the retailers’ claim.

Instead, we concluded the Tax Injunction Act (TIA) deprived the district court of subject

matter jurisdiction. Direct Mktg. Ass’n v. Brohl, 735 F.3d 904, 906 (10th Cir. 2013). The

TIA protects against federal interference in state tax matters, but contains similar

language to the AIA, providing: “district courts shall not enjoin, suspend or restrain the

assessment, levy or collection of any tax under State law where a plain, speedy and

efficient remedy may be had in the courts of such State.” 28 U.S.C. § 1341. Using an

argument similar to Green Solution’s here, the retailers argued that Colorado’s reporting

requirement merely “related” to the use tax, which was not enough to bring their suit

“under the umbrella of the TIA as a suit seeking to enjoin the collection of a state tax.”

Direct Mktg., 735 F.3d at 912.

                                             11
       We focused on the word “restrain,” defining it as “to limit, restrict, or hold back”

the assessment, levy, or collection of taxes. Id. at 913; see also id. at 912 (“[T]he TIA

bars more than suits that would enjoin tax collection. It also prohibits federal lawsuits

that would ‘restrain the . . . collection’ of a state tax.”). Applying that definition to the

facts, we concluded the “lawsuit, if successful, would limit, restrict, or hold back the

state’s chosen method of enforcing its tax laws and generating revenue” because it would

“hamper Colorado’s ability to raise revenue.” Id. at 913–14. Because the lawsuit had the

“potential to restrain tax collection,” we held that it “trigger[ed] the jurisdictional bar” in

the TIA. Id. at 913 (emphasis added).

       The Supreme Court reversed. Direct Mktg. Ass’n v. Brohl, 135 S. Ct. 1124 (2015).

In doing so, the Court referred to the AIA to guide its interpretation of the TIA, noting

that “[a]lthough the TIA does not concern federal taxes, it was modeled on the Anti-

Injunction Act (AIA), which does.” Id. at 1129. The Court explained: “We assume that

words used in both Acts are generally used in the same way, and we discern the meaning

of the terms in the AIA by reference to the broader Tax Code.” Id.

       First, the Court defined the term “assessment” as “an official action taken based on

information already reported to the taxing authority.” Id. at 1130. While the Court

explained that assessment “might also be understood more broadly to encompass the

process by which [an] amount is calculated,” it clarified that assessment is “the official

recording of a taxpayer’s liability, which occurs after information relevant to the

calculation of that liability is reported to the taxing authority.” Id. (emphases added).

Accordingly, the Court explained that, historically, “assessment was understood as a step

                                               12
in the taxation process that occurred after, and was distinct from, the step of reporting

information pertaining to tax liability.” Id. After defining “assessment,” the court then

defined the words “levy” and “collection,” and concluded “the three terms refer to

discrete phases of the taxation process that do not include informational notices or private

reports of information relevant to tax liability.” Id. at 1129; see also id. (“[T]he Federal

Tax Code has long treated information gathering as a phase of tax administration

procedure that occurs before assessment, levy, or collection.”).

        The Supreme Court then rejected our definition of “restrain”—to include any suit

that would “limit, restrict, or hold back”—as too broad. Id. at 1132. The Court did this for

two reasons. First, because the word “restrain” acts on “assessment,” “levy,” and

“collection,” and “not on an all-encompassing term like ‘taxation,’” the Court reasoned

that:

        To give “restrain” the broad meaning selected by the Court of Appeals
        would be to defeat the precision of that list, as virtually any court action
        related to any phase of taxation might be said to “hold back” “collection.”
        Such a broad construction would thus render “assessment and levy”—not to
        mention “enjoin and suspend”—mere surplusage, a result we try to avoid.

Id. The Supreme Court also rejected our definition of “restrain” because it would “lead[]

the TIA to bar every suit” “that would have a negative impact on States’ revenues.” Id. at

1133. Second, the Court rejected our definition because the word “restrain” is paired with

the words “enjoin” and “suspend,” which are remedies that “restrict or stop official action

to varying degrees, strongly suggesting that ‘restrain’ does the same.” Id. at 1132.

        In applying these definitions to the facts of the case, and noting that we favor

“clear boundaries in the interpretation of jurisdictional statutes,” the Supreme Court

                                              13
concluded the retailers’ reporting requirements were not an act of “assessment,” “levy,”

or “collection” because, although “[e]nforcement of the notice and reporting

requirements may improve Colorado’s ability to assess and ultimately collect its sales and

use taxes from consumers,” “the state still needs to take further action to assess the

taxpayer’s use-tax liability and to collect payment from him.” Id. at 1131. The Court

elaborated that “[t]he question—at least for negative injunctions—is whether relief to

some degree stops ‘assessment, levy or collection,’ not whether it merely inhibits them.”

Id. at 1133 (emphases added).

       Justice Ginsburg concurred, but emphasized that the retailers were “not

challenging [their] own or anyone else’s tax liability or tax collection responsibilities.”

Id. at 1136 (Ginsburg, J., concurring). The concurrence explained that “[a] different

question would be posed . . . by a suit to enjoin reporting obligations imposed on a

taxpayer . . . in lieu of a direct challenge to an ‘assessment.’” Id. And Justice Ginsburg

noted the “Court does not reach today the question whether the claims in such a suit, i.e.,

claims suitable for a refund action, are barred by the [TIA].” Id.

3. Application

       The question we must answer today is whether Direct Marketing contradicts,

invalidates, or undermines our reasoning in Lowrie, such that this panel is no longer

bound by horizontal stare decisis. See Auraria Student Hous. at the Regency, LLC v.

Campus Vill. Apartments, LLC, 843 F.3d 1225, 1242 (10th Cir. 2016); Barnes v. United

States, 776 F.3d 1134, 1147 (10th Cir. 2015); United States v. Brooks, 751 F.3d 1204,

                                             14
1209–10 (10th Cir. 2014). We conclude that while Direct Marketing calls our holding in

Lowrie into question, that question cannot be answered by this panel acting alone.

       The differences between the two opinions are significant. Direct Marketing

involved the TIA, while Lowrie considered the AIA. The TIA and the AIA are different

statutes located in different titles of the United States Code. See I.R.C. § 7421 (AIA); 28

U.S.C. § 1341 (TIA). Although the TIA was modeled on the AIA, the Acts serve

different purposes. The TIA is designed to protect against federal interference in state tax

matters, while the AIA serves to protect the IRS’s ability to collect taxes without

interference, requiring taxpayers in most cases to challenge the taxes in a refund suit.5

       And although the Supreme Court in Direct Marketing “assume[d] that words used

in both Acts are generally used in the same way,” 135 S. Ct. at 1129, the Acts contain

different language. The AIA provides that, subject to certain exceptions, “no suit for the

purpose of restraining the assessment or collection of any tax shall be maintained in any

court by any person.” I.R.C. § 7421(a). The TIA provides that “district courts shall not

enjoin, suspend or restrain the assessment, levy or collection of any tax under State law

where a plain, speedy and efficient remedy may be had in the courts of such State.” 28

U.S.C. § 1341.

       The Supreme Court concluded the word “restrain” in the TIA refers to suits that to

some degree stop, not merely inhibit, the assessment, levy, or collection of taxes. It came

       5
         I.R.C. § 6213(a) is an exception to the refund requirement, allowing a taxpayer to
petition the Tax Court prepayment for redetermination within ninety days of receiving a
notice of deficiency.

                                             15
to this conclusion for two reasons, the first of which supports the argument that Direct

Marketing implicitly overruled Lowrie, the second of which does not.

       First, the Supreme Court reasoned that the word “restrain” in the TIA “acts on a

carefully selected list of technical terms—‘assessment, levy, collection’—not on an all-

encompassing term, like ‘taxation.’” 135 S. Ct. at 1132. The Court explained that “any

court action related to any phase of taxation might be said to ‘hold back’ ‘collection,’”

rendering “assessment and levy” a “mere surplusage.” Id. (emphasis added). Like the

TIA, in the AIA the word “restrain” acts on the words “assessment” and “collection.”

       Lowrie construed the AIA to preclude suits that challenge “activities leading up

to” an assessment or collection, which could potentially include suits only tangentially

related to assessment or collection, and that thereby merely inhibit assessment, rather

than stop it to some degree. See id. (rejecting our definition of “restrain” as “to hold

back” because “virtually any court action related to any phase of taxation might be said to

hold back collection” (internal quotation marks omitted)). Green Solution argues that

because the AIA, like the TIA, uses the words “assessment” and “collection” rather than

“taxation,” we should reject Lowrie’s inclusion of “activities leading up to, and

culminating in, such assessment and collection” and instead require that the lawsuit

would in some degree stop an assessment or collection.

       But the Supreme Court also provided a second rationale for interpreting “restrain”

in the TIA to mean suits that to some degree stop, rather than merely inhibit, the

assessment, levy, or collection of taxes. The Court reasoned that “‘[r]estrain,’ standing

alone, can have several meanings,” so it looked “to the company ‘restrain’ keeps” in the

                                             16
TIA. Id. The Court explained that “restrain” keeps company with “enjoin” and

“suspend,” both “terms of art in equity . . . that restrict or stop official action to varying

degrees, strongly suggesting that ‘restrain’ does the same.” Id.

       Unlike in the TIA, “restrain” in the AIA stands alone. Recall that the AIA 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.” I.R.C. § 7421(a). To the extent it keeps

company, it does so with the phrase “for the purpose of restraining the assessment or

collection.” Thus, unlike in the TIA, the injunctive relief barred by the AIA need not

actually restrain an assessment or collection, it need only have restraint of those functions

as its purpose. This language comports with our reasoning in Lowrie, that the AIA applies

“not only to the actual assessment and collection of a tax, but is equally applicable to

activities leading up to, and culminating in, such assessment and collection. 824 F.2d at

830 (emphasis added). That is, suits barring “activities leading up to[] and culminating

in” assessment may be barred if they are filed “for the purpose of restraining” an

assessment.

       In addition, Justice Ginsburg’s concurrence in Direct Marketing would limit that

case to its unique facts.6 It noted that the retailers were “not challenging [their] own or

anyone else’s tax liability or tax collection responsibilities,” and explained that “[a]

different question would be posed . . . by a suit to enjoin reporting obligations imposed

       6
       Justice Breyer and Justice Sotomayor joined in the relevant portion of Justice
Ginsburg’s concurrence. Direct Mktg. Ass’n v. Brohl, 135 S. Ct. 1124, 1135–36 (2015)
(Ginsburg, J., concurring).

                                               17
on a taxpayer . . . in lieu of a direct challenge to an ‘assessment.’” Direct Mktg., 135 S.

Ct. at 1136 (Ginsburg, J., concurring). Justice Ginsburg explained, the “Court does not

reach today the question whether the claims in such a suit, i.e., claims suitable for a

refund action, are barred by the [TIA].” Id. Unlike Green Solution, the retailers in Direct

Marketing could not seek relief in a state refund action because the inquiries to the

retailers were aimed at increasing the tax liability of their customers, not themselves.

Thus, it is uncertain whether a majority of the Supreme Court would hold the TIA bars a

federal action seeking to enjoin the state taxing authority from enforcing reporting

obligations against the taxpayer. And it is therefore even more unsettled how the Court

would assess a similar action to enjoin federal taxing authorities under the distinct

language of the AIA. When three concurring Justices say that Direct Marketing did not

reach the situation now before us, and no Justice disputed that statement, we can hardly

say that Direct Marketing so undermined the authority of Lowrie in this context that we

must retreat from its holding.

                                 B. Additional Arguments

       Green Solution asserts that even if Lowrie is still good law, the AIA does not

preclude this suit. First, Green Solution contends the IRS was acting outside its authority

in investigating whether Green Solution trafficked in a controlled substance, which it

claims is a criminal investigation properly carried out by the United States Attorney.7

       7
        After oral argument, Green Solution submitted supplemental authority pursuant
to Federal Rule of Appellate Procedure 28(j), raising two new arguments with respect to
the IRS’s authority: (1) Congress did not provide the IRS with standards to determine
whether to deny deductions under § 280E, and (2) the IRS failed to go through a formal

                                             18
According to Green Solution, “While § 280E is within the Tax Code, the CSA is not.

Thus, a determination of whether a taxpayer violated the CSA is not within the authority

of the IRS.” Green Solution claims it is not seeking to enjoin the IRS from enforcing

§ 280E, which it acknowledges would be precluded by the AIA, but that it seeks only to

enjoin the IRS’s investigation of alleged federal drug law violations, which Green

Solution claims falls outside the protection of the AIA.

       But § 280E has no requirement that the Department of Justice conduct a criminal

investigation or obtain a conviction before § 280E applies. See Alpenglow Botanicals,

LLC v. United States, No. 16-cv-00258-RM-CBS, 2016 WL 7856477, at *4 (D. Colo.

Dec. 1, 2016) (unpublished) (“If Congress had wanted such an investigation to be carried

out or conviction to be obtained, then it could easily have placed such language in

§ 280E.”). Instead, the IRS’s obligation to determine whether and when to deny

deductions under § 280E, falls squarely within its authority under the Tax Code. See

I.R.C. § 6201(a) (authorizing and requiring the IRS “to make the inquiries,

determinations, and assessments of all taxes . . . imposed by this title”); I.R.C. § 7602(a)

(authorizing the IRS to “examine any books, papers, records, or other data which may be

relevant or material to” “determining the liability of any person for any internal revenue

tax”); see also United States v. Clarke, 134 S. Ct. 2361, 2364 (2014) (holding the IRS

rulemaking process before enforcing § 280E. But Green Solution never raised these
arguments in the district court or in its appellate briefs, and “it is well established that we
will not consider issues raised for the first time in a Rule 28(j) letter.” Flores-Molina v.
Sessions, 850 F.3d 1150, 1172 n.16 (10th Cir. 2017) (internal quotation marks omitted).

                                              19
“has broad statutory authority to summon a taxpayer to produce documents or give

testimony relevant to determining tax liability”). Thus, the AIA is implicated here.8

       Second, Green Solution argues that § 280E is a penalty, not a tax subject to the

AIA. Again we disagree. A “penalty” is defined as “an exaction imposed by statute as

punishment for an unlawful act.” United States v. La Franca, 282 U.S. 568, 572 (1931).

The disallowance of a deduction is not an exaction imposed as punishment. “Deductions

. . . are not a matter of right. Neither do they turn upon equitable considerations. They are

a matter of legislative grace.” See United States v. Akin, 248 F.2d 742, 743 (10th Cir.

1957). Moreover, Green Solution does not cite a single case that holds the disallowance

of a deduction constitutes a “penalty” and falls outside the AIA’s reach. Bob Jones

University v. Simon, 416 U.S. 725, 738 (1974), and Alexander v. Americans United, Inc.,

416 U.S. 752, 760–61 (1974), both involved the disallowance of deductions for charitable

contributions, and neither was held to be a penalty. Section 280E is not a penalty.

                                  IV.    CONCLUSION

       The Supreme Court’s decision in Direct Marketing Ass’n v. Brohl did not clearly

undermine our reasoning in Lowrie. Thus, because the IRS’s investigation of Green

Solution’s business records is an “activity leading up to” an assessment, we conclude

Green Solution’s lawsuit was filed for the purpose of restraining any such assessment and

is therefore barred by the AIA and DJA. We affirm.

       8
         To the extent Green Solution argues the IRS exceeded its authority under the
Internal Revenue Code, we lack subject matter jurisdiction to consider the merits of the
argument. We decide here only that the IRS’s efforts to assess taxes based on the
application of § 280E fall within the scope of the AIA.

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