Court Opinion

ID: 9492068
Source: CourtListenerOpinion
Date Created: 2023-08-05 14:31:17.654133+00
Date Added: 2024-06-11T17:55:05.431365
License: Public Domain

LUTTIG, Circuit Judge,
dissenting:
Today, for the first time in history, a federal court of appeals orders a federal district court to issue a writ of mandamus to the Internal Revenue Service under the Mandamus and Venue Act (which, it bears reminding, authorizes a court to compel an official only to perform a “mandatory or ministerial obligation which is so plainly prescribed as to be free from doubt”), in the face of the Tax Anti-Injunction Act (which, it likewise bears reminding, withholds jurisdiction from the federal courts over suits filed “for the purposes of restraining the assessment or collection of any tax”) directing the IRS to forgo the assessment and collection of taxes that all agree are owed by a taxpayer. And this, despite the fact that the taxpayer has the alternative remedy of a post payment refund action, as the majority itself acknowledges, and thus has no irreparable injury, and that the IRS is likely under no duty of law at all to forgo its assessment and collection efforts, but is certainly not under an indisputable discretionless duty to do so.
The significance of today’s decision is evident from the mere statement of the court’s holding. But it would be plain, if not from this, then from the court’s repeated uncomfortable protestations of the “narrowness” of its holding and its own felt need to assure us (if unconvincingly) that it has “not declared ‘open season’ on mandamus suits against the IRS.” Ante at 513.
Because the court’s extraordinary holding is directly and clearly foreclosed by not one, but two, federal statutes, not even to mention Supreme Court decisions, I dissent.
The two errors committed by the court in reaching its remarkable holding — its conclusions that there is no adequate alternative remedy to mandamus relief in this case and that there is a legal certainty the taxpayer will prevail in its dispute with the IRS — are so manifest that all of the bluster mustered by the majority toward the IRS cannot disguise them and little by way of discussion is needed to explain them.
First, although addressed second by the court for understandable reasons, the court holds that the plaintiff estate will be “irreparably injured” in the absence of in-junctive relief because the estate does not have an adequate alternative remedy to redress its alleged harm. The sole substantive reason given by the court for this conclusion (and this in barely two sentences, see ante at 510) is that “the actions of the IRS are transparently baseless, in that [the statute of limitations has run on the assessment and collection of additional taxes, and] [a] refund suit under such circumstances is an inadequate remedy,” id.
Of course, the “baselessness” of the IRS’ actions, even if that it be, but see infra at 515-17, is separate from and wholly irrelevant to the only legally relevant question of whether the estate does in fact have an adequate alternative remedy in the form of an administrative refund procedure. And it is undisputed that the estate does possess such a remedy: it can simply pay the unpaid balance of its assessed tax liability and then commence a postpayment refund action, like every other taxpayer must do. See I.R.C. §§ 6511, 6532, 7422. As the Supreme Court held in Bob Jones University v. Simon:
These review procedures [a petition to the Tax Court or the payment of taxes, exhaustion of IRS internal refund procedures, and the filing of suit] offer petitioner a full, albeit delayed, opportunity to litigate the legality of the Service’s [action],
416 U.S. 725, 746, 94 S.Ct. 2038, 40 L.Ed.2d 496 (1974); see also United States v. American Friends Service Committee, 419 U.S. 7, 11, 95 S.Ct. 13, 42 L.Ed.2d 7 (1974) (noting that plaintiffs will have a *515“full opportunity to litigate” their tax liability in a refund suit); Alexander v. “Americans United” Inc., 416 U.S. 752, 762, 94 S.Ct. 2053, 40 L.Ed.2d 518 (1974)(same).
For the remaining four paragraphs of its treatment of the “irreparable injury” requirement, see ante at 510-12, the majority turgidly complains about the inefficiency due to delay and the unfairness due to litigation costs of requiring the taxpayer to pursue this long-established procedure for taxpayer challenges to the IRS. See, e.g., id. at 511 (“We simply will not, as the IRS requests, require the Estate to continue this fight in yet another forum, [forcing it to] assemble the substantial sum needed to pay its manufactured deficiency ... and again pay its attorney to file a suit for refund of that payment.”); id. at 511 (“We will not require this waste of private, agency, and judicial resources”).
The problem with invocation of this line of reasoning is that the Supreme Court squarely rejected it twenty-five years ago in Bob Jones, observing even at that time that “[t]he Court [had] dismissed out of hand similar contentions nearly 60 years ago, and [that it found] such arguments no more compelling [than it had] then.” Bob Jones, 416 U.S. at 746, 94 S.Ct. 2038. In Bob Jones, the taxpayer, like the estate in this case, contended that it would suffer irreparable injury if it were forced to litigate the availability of a tax exemption in a postpayment refund action. The Supreme Court rejected the taxpayer’s arguments that a refund action would be an inadequate remedy, despite the fact that, as the Court recognized, such an action would “present serious problems of delay” and “place [the taxpayer] in a precarious financial position,” id. at 747, 94 S.Ct. 2038 — the precise consequences relied upon by the majority here to justify its conclusion that an administrative refund action is inadequate. The delay and the resulting harm caused by a requirement of postpayment prosecution were justified, said the Court, “in light of the powerful governmental interests in protecting the administration of the tax system from premature judicial interference.” Id.
Simply stated, the Supreme Court has confronted and rejected the very arguments relied upon by the majority herein. The Court has repeatedly held that the postpayment administrative refund action available to the estate in this case is an adequate alternative remedy to injunctive relief. The existence of this alternative remedy alone confirms the singular inappropriateness of the extraordinary mandamus remedy ordered by the majority.
Although the majority is evidently more convinced of its conclusion that the estate has a “certainty of success on the merits” of its dispute with the IRS than it is of its conclusion that the estate lacks an adequate alternative remedy, its error in this conclusion is no less palpable. “[U]nder the most liberal view of the law and the facts” — the controlling standard of law, Enoch v. Williams Packing & Navigation Co., 370 U.S. 1, 7, 82 S.Ct. 1125, 8 L.Ed.2d 292 (1962); see also American Friends, 419 U.S. at 10, 95 S.Ct. 13 (noting that relevant inquiry is whether “it[is] clear that the Government could in no circumstances ultimately prevail on the merits”)— it is not even tenable, given the Supreme Court’s decision in Lewis v. Reynolds, 284 U.S. 281, 52 S.Ct. 145, 76 L.Ed. 293 (1932), to maintain that the estate is legally certain to succeed in its dispute with the Service. In fact, if there were but two options (which of course there are not), it would be far more tenable to maintain that the IRS, not the estate, is legally certain to prevail in the action. But, as often is the case, the truth is actually somewhere on the continuum between these two alternatives, with neither party certain to succeed but the IRS more likely to do so than the plaintiff.
In Lewis, the Commissioner initially allowed an estate administrator’s deduction for attorney’s fees, but disallowed the administrator’s deduction for inheritance *516taxes paid to the state, and assessed a deficiency. The administrator paid the deficiency and petitioned for are fund, arguing that the disallowance of the inheritance tax deduction was improper. In the ensuing refund proceeding, the Commissioner agreed that his initial disallowance of the inheritance tax deduction was improper, but reversed himself on the attorney’s fees deduction, disallowing it. As a result, the estate owed additional taxes beyond those already paid. Accordingly, even though the statute of limitations for the assessment and collection of taxes had run, the Commissioner rejected the estate’s petition for refund — retaining, in payment of taxes due as a result of the eventual disal-lowance of the attorney’s fees deduction, the monies that would otherwise have been refunded to the estate due to the initial improper disallowance of the inheritance tax deduction.
Upon certiorari to the Court of Appeals, which had affirmed the trial court’s determination that the Commissioner had had the authority to redetermine and reassess the estate’s tax even after the statute of limitations had run, the Supreme Court affirmed, reasoning as follows:
Although the statute of limitations may have barred the assessment and collection of any additional sum, it does not obliterate the right of the United States to retain payments already received when they do not exceed the amount which might have been properly assessed and demanded.
Lewis, 284 U.S. at 283, 52 S.Ct. 145.
Lewis may well be dispositive, in the government’s favor, of the legitimacy of the IRS’ actions in this case. Here, as in Lewis, the IRS had, in its July 31, 1992, “Estate Tax Closing Letter,” and well before the statute of limitations ran, already assessed the tax owed by the estate (in the amount of $261,262.99). In its original complaint, the estate even concedes that this assessment had been made: “On July 31, 1992 an Estate Tax Closing letter was issued, by the District Director, confirming, as per the above agreement, that the total Estate taxes had now been assessed at $261,262.99.” See J.A. at 4 (emphasis added). Indeed, here, as in Lewis, the taxpayer had even agreed to payment of the assessed tax. And here, in effect if not also as a matter of law, as in Lewis, the taxpayer had actually paid the tax: in Lewis, the taxpayer had forwarded to the IRS the entire assessed amount and, here, the taxpayer forwarded a check in the amount of $67,976 and proof of a foreign tax payment for which it expected a credit in the amount of the remainder of the assessed and agreed-upon tax amount. Finally, in both cases — in response to the taxpayer’s refund action in Lewis and to the taxpayer’s foreign tax credit request here — the IRS thereafter determined in the course of evaluating the taxpayer’s request for a reduction in the assessed amount that the taxpayer was not entitled to the reduction because of the discovery of tax liabilities which, in the words of the Supreme Court in Lewis, “might have been properly assessed and demanded” but which were not, and therefore denied the relief.
The Court in Lewis was oblique in its ultimate reasoning as to why it authorized the IRS’ actions in that case. It may well have been because the Court concluded that the Service had not in any sense assessed a tax through its disallowance of the attorney’s fees deduction; rather, it had merely refused to reduce the previously assessed tax amount. If this was the Court’s rationale — and, given that the Court authorized the IRS’ actions against a challenge that the Service had assessed a tax after the statute of limitations on assessments had run, it would seem almost certain that it was — then the IRS’ actions in this case were unquestionably within its authority, because here, too, the IRS did nothing more than deny the taxpayer’s request for a reduction in the amount of tax previously assessed. However, to the extent that the Court did conclude that the IRS had effectively assessed a tax because *517of the belated disallowance of the attorney’s fees deduction in Lewis, and nonetheless allowed that assessment despite the statute of limitations, to that same extent would it appear on the authority of that case that the IRS was allowed effectively to assess a tax on the overlooked assets here. For, on the dispositive question presented to the Court in Lewis and to this court of whether there was an untimely assessment of tax, there is no more of an assessment of tax outside the statute of limitations here than in Lewis— and the majority offers not a single word of explanation for its conclusion otherwise.
Of course, that it appears on the authority of Lewis that the IRS may well have acted lawfully in denying the estate’s foreign tax credit in the amount requested— and most certainly appears to have done so on the most “liberal” view of the law — is dispositive of whether the taxpayer estate is, as required for the issuance of a writ of mandamus in the face of the Anti-Injunction Act, “certain to succeed” on the merits of its dispute with the Service. If it appears on the basis of the extant Supreme Court authority that the IRS may well prevail on the merits, or even that it is at least possible that it will do so (which presumably not even the majority could deny explicitly), then a fortiori it cannot be said that the taxpayer is certain to succeed on the merits of the suit.
Therefore, of the two hurdles that the plaintiff estate must overcome to establish its entitlement to a writ of mandamus ordering the IRS to terminate tax assessment and collection efforts, in the face of the Tax Anti-Injunction Act, the plaintiff plainly does not clear either.
Whether one sympathizes or not with the majority’s frontier instincts in this case, see, e.g., ante at 511-12 (“[T]he IRS has insisted — despite its utter lack of legal support — that the Estate should pay it more money. Such actions can have one of two possible causes: the IRS’s shocking ignorance of the laws it administers, or its utter disregard for the limits of those laws.”); id. at 511 (“Where, as here, the IRS acts in complete disregard for the tax code, it should not be surprised to find itself stripped of the code’s protections.”), the IRS, no less than any other litigant, is entitled to the protection of the law. On the ground that the plaintiff has not even arguably satisfied the applicable requirements of law, I would afford the Service that protection and deny plaintiff the unprecedented mandamus relief it seeks, and now — even to its own surprise no. doubt-^has received from this court.
I respectfully dissent.