Cohen v. United States

United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued September 29, 2010 Decided July 1, 2011

No. 08-5088

NEILAND COHEN,

APPELLANT

v.

UNITED STATES OF AMERICA,

APPELLEE

Consolidated with 08-5093, 08-5174

Appeals from the United States District Court

for the District of Columbia

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

On Petition for Rehearing En Banc

Thomas Goldstein argued the cause for appellants. With

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

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

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

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

Griffin, and Randy J. Hart.

2

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

support of appellants.

Gilbert S. Rothenberg, Acting Deputy Assistant Attorney

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

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

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

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

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

Before: SENTELLE, Chief Judge, GINSBURG, HENDERSON,

ROGERS, TATEL, GARLAND, BROWN, GRIFFITH, AND

KAVANAUGH, Circuit Judges.

Opinion for the Court filed by Circuit Judge BROWN.

Dissenting opinion filed by Circuit Judge KAVANAUGH,

with whom Chief Judge SENTELLE and Circuit Judge

HENDERSON join.

BROWN, Circuit Judge: After illegally collecting a three

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

Service”) created a refund procedure for taxpayers to recoup

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

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

as we granted rehearing en banc only to determine whether we

have the authority to hear the case. We do.

3

I1

The Internal Revenue Code imposes a three percent excise

tax on phone calls. 26 U.S.C. § 4251. Telephone service

providers collect the tax and pay it over to the IRS. See id.

§ 4291. Individual taxpayers are not required to calculate

their own excise tax liability or to maintain adequate

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

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

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

§ 4252(b). Decades ago, these requirements posed no

problem, as phone companies based their billing on multiple

factors, including the key components of distance and time.

Nat’l R.R. Passenger v. United States, 431 F.3d 374, 375 (D.C.

Cir. 2005). The telecommunications revolution has changed

all that. Many consumers now pay strictly based on

transmission time; frequently, rates no longer vary based on the

distance of a call. Id. Despite recognizing this shift, the IRS

continued to collect taxes on all long-distance

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

(“Notice 2005-79”); see also Rev. Rul. 79-404, 1979-2 C.B.

382 (determining communication between ships at sea or other

offshore facilities and telephone subscribers in the United

States were subject to the excise tax though the charges varied

only based on transmission time).

Multiple corporate taxpayers brought refund suits

claiming the excise tax was illegal and several circuits,

including this one, concluded time-only rate structures render

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

1

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

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

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

decision in summarizing the background here.

4

431 F.3d at 375–76. While these lawsuits proceeded, the IRS

remained adamant regarding the continuing applicability of the

excise tax. After it lost an appeal in the Eleventh Circuit, see

Am. Bankers Ins. Group v. United States, 408 F.3d 1328 (11th

Cir. 2005), the Service declared it would continue to litigate the

applicability of the tax and directed phone service providers to

continue collecting the tax, even from individuals in the

Eleventh Circuit’s jurisdiction. Notice 2005-79. The IRS

further ordered taxpayers to continue paying the tax, but

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

Taxpayers were advised, however, the Service would not

process place-holder refund claims while related cases

remained pending in federal courts of appeals. Id.

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

application of § 4251. All held the tax inapplicable to

long-distance rates calculated without reference to distance.

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

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

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

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

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

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

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

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

2006-1 C.B. 1141 (“Notice 2006-50”).2

Notice 2006-50 provided a one-time exclusive mechanism

for taxpayers to obtain a refund for excise taxes erroneously

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

2

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

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

3

The IRS promulgated a different procedure for business entities (as

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

5

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

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

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

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

collected the excise tax through telephone service providers,

Notice 2006-50 required individual taxpayers to request a

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

Taxpayers who otherwise did not need to file income tax

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

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

harbor” amount, which required no documentation, or the

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

demand documentation. 4 Id. § 5(c); Notice 2007-11, § 11

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

the number of exemptions and refusing to require telephone

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

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

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

4

Notice 2006-50 ultimately proved an ineffective means of

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

Treasury Inspector General for Tax Administration, the IRS illegally

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

August 1, 2006. TREASURY INSPECTOR GENERAL FOR TAX

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

EFFORTS WERE MADE, A SIGNIFICANT AMOUNT OF THE TELEPHONE

EXCISE TAX OVERCOLLECTED FROM INDIVIDUAL TAXPAYERS MAY

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

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

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

obligations actually sought a refund. U.S. GOVERNMENT

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

TELEPHONE EXCISE TAX REFUND REQUESTS ARE FEWER THAN

PROJECTED AND HAVE HAD MINIMAL IMPACT ON IRS SERVICES 10

(2007).

6

companies to supply customers with billing records during the

refund period).

Various lawsuits challenged the lawfulness and adequacy

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

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

2006) (Transfer Order). The Multidistrict Litigation

(“MDL”) Panel consolidated and transferred three district

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

proceeding before the United States District Court for the

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

consolidated suits, Appellants purported to represent a class of

taxpayers who lacked the resources or expertise necessary to

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

stake sufficient to make individual actions worthwhile. 5

Appellants claim Notice 2006-50 is substantively flawed

because it undercompensates many taxpayers for the actual

excise taxes paid and is procedurally flawed because the IRS

did not comply with the notice and comment procedures

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

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

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

because it fails to compensate consumers for anything

approaching the full amount of the money illegally taken, is

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

promulgated without any of the procedures that are required to

accompany agency rulemaking.”).

The district court dismissed the cases after concluding

Appellants failed to exhaust the administrative remedies for

5

The three suits differ in one important respect. The Cohen

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

district court dismissed as premature. Our panel decision affirmed

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

claim is not at issue here.

7

their refund claims and failed to state valid claims under

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

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

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

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

affect Appellants, and therefore constituted unreviewable

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

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

the “consummation” of agency decisionmaking and either

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

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

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

jurisdictional, but rather a limitation on an APA cause of

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

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

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

539 F. Supp. 2d at 287.

A divided panel of this court reversed, holding Notice

2006-50 constituted final agency action reviewable under the

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

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

jurisdiction. In the majority’s view, neither the

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

the purpose of restraining the assessment or collection of any

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

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

authorizes declaratory relief except “with respect to Federal

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

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

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

majority reasoned, our circuit precedent held the two

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

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

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

8

1973), rev’d on other grounds sub nom. Alexander v.

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

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

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

situation is determinative of jurisdiction.”)).

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

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

precedent required the AIA and DJA to be read coterminously,

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

the baseline. As between the two, the dissent argued “reading

the two statutes to coterminously bar declaratory and

injunctive relief with respect to federal taxes is consistent with

precedent, adheres to the plain text of the later-enacted [DJA],

and corresponds to the well-established principle that

challenges to tax regulations should be brought in refund

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

argued Appellants’ claims were not ripe because Appellants

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

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

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

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

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

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

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

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

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

2008).

II

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

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

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

9

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

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

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

A

Our jurisdiction extends generally to cases and

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

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

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

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

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

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

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

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

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

the American people. This is fully in keeping with fundamental

notions in our policy that the exercise of governmental power,

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

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

subject matter jurisdiction permitting federal judicial review of

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

107 (1977)).

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

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

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

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

Congress provided the necessary waiver of immunity in § 702,

which reads in part:

An action in a court of the United States seeking relief

other than money damages and stating a claim that an

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

dismissed nor relief therein be denied on the ground

10

that it is against the United States or that the United

States is an indispensable party.

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

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

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

the bar of sovereign immunity in actions not seeking money

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

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

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

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

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

allowed under the APA a challenge to an IRS regulation

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

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

(invalidating a Revenue Ruling under the APA, quoted

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

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

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

under the APA).

The IRS insists § 702’s waiver of sovereign immunity

does not apply here because it does not encompass review of

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

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

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

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

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

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

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

IRS “forfeited the discretion it retained prior to issuing the

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

agency action” requirement limits its waiver of sovereign

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

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

11

applies regardless of whether the FTC’s press release

constitutes ‘final agency action.’”).

B

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

preserves “other limitations on judicial review” and does not

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

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

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

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

when “another statute expressly or implicitly forecloses

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

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

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

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

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

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

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

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

precedent” reading the two statutes as coterminous. Critical

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

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

stare decisis is “most compelling” in cases of statutory

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

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

whether each statute limits judicial review under the APA.

The dissent suggests these questions of statutory

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

statement is puzzling. These questions are the same ones the

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

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

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

banc review to reconsider whether this case was ripe, or

12

whether Appellants failed to exhaust their administrative

remedies.

1

Enacted in 1867, the AIA “apparently has no recorded

legislative history, but its language could scarcely be more

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

(1974) (footnote omitted). It states:

[N]o suit for the purpose of restraining the assessment

or collection of any tax shall be maintained in any

court by any person, whether or not such person is the

person against whom such tax was assessed.

26 U.S.C. § 7421(a). “The manifest purpose of § 7421(a) is to

permit the United States to assess and collect taxes alleged to

be due without judicial intervention, and to require that the

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

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

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

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

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

explained, the provision reflected “appropriate concern about

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

with possible merit, would so interrupt the free flow of

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

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

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

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

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

suits seeking to restrain the assessment or collection of taxes.

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

13

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

late nineteenth century case, the AIA prohibited enjoining the

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

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

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

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

the AIA precluded injunctive relief when Bob Jones University

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

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

would have impacted the university’s future tax liability

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

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

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

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

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

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

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

collection of that tax is an appropriate vehicle for litigating the

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

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

invalidate an Arizona tax credit that allegedly supported

parochial schools in violation of the Establishment Clause.

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

taxpayers’ suit for declaratory and injunctive relief to proceed

6

In Williams Packing, the Supreme Court recognized a narrow

judicially created exception to the AIA’s prohibition on injunctive

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

Government ultimately prevail, the central purpose of the Act is

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

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

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

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

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

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

apply if it did.

14

despite the comparable TIA because the suit did not alter the

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

revenue in any way. See id. at 107.

This suit does not seek to restrain the assessment or

collection of any tax. The IRS previously assessed and

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

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

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

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

Snyder, alter Appellants’ future tax liabilities as in Bob Jones,7

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

Brethren Church. This suit is strictly about the procedures

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

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

Appellants succeed in forcing a different set of procedures,

those procedures are not retroactive; they do not and cannot

affect the assessment or collection of taxes after the fact.

But the IRS thinks otherwise. The Service argues the

Court has construed the AIA to preclude suit in similar

circumstances. In support, the Service points to United States

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

7

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

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

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

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

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

would have impacted the litigants’ future tax liability because only

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

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

characterizing both Bob Jones and “Americans United” as

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

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

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

15

United States v. Dalm, 494 U.S. 596 (1990). But Clintwood

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

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

statutory conditions upon which a taxpayer may bring a refund

suit without interrupting the orderly assessment and collection

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

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

601.

The IRS envisions a world in which no challenge to its

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

It argues assessment and collection are part of a “single

mechanism” that ultimately determines the amount of revenue

the Treasury retains. Because this suit will ultimately affect

the money Treasury retains, the IRS argues, it involves

“assessment and collection.”8 But the Supreme Court rejected

this “single mechanism” theory of assessment and collection in

Hibbs, choosing instead to define “assessment and collection”

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

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

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

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

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

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

assessment and collection in this case are long-since completed

and no “single mechanism” theory will revive them.

8

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

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

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

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

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

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

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

Arg. 41.

16

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

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

that the AIA bars Appellants’ APA claims because a complex

regulatory scheme requires that “challenges to tax laws,

regulations, decisions, or actions ordinarily be brought in

refund suits after plaintiffs have sought a refund from, and

exhausted their administrative remedies with, the IRS.”

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

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

circuits have allowed challenges to tax laws outside the context

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

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

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

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

which South Carolina challenged the constitutionality of a

federal statute imposing restrictions on the state’s issuance of

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

intended to apply only when Congress has provided an

alternative avenue for an aggrieved party to litigate its claims

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

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

Similarly, this court has allowed constitutional claims

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

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

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

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

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

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

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

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

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

to reach all disputes tangentially related to taxes. Quite the

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

the statutory basis for that remedy, and any implication the

17

remedy may have on assessment and collection. This is in

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

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

Fourth Amendment claim against IRS for return of seized

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

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

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

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

income tax exemptions to discriminatory organizations). The

principle the case law elucidates is therefore quite simple: The

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

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

other claims seeking to enjoin the IRS, regardless of any

attenuated connection to the broader regulatory scheme. As

Appellants’ suit does not implicate assessment or collection,

the AIA does not apply.

2

Having established our authority to hear Appellants’ claim

for injunctive relief, we pause to consider whether it is

necessary, or prudent, to wander further. Appellants claim

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

become academic if they succeed in enjoining the IRS. Even

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

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

is without power to declare the rights of the parties in

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

Cir. 1942). Nevertheless, establishing our jurisdiction over

Appellants’ claim for declaratory relief is not an academic

exercise. Appellants do not abandon their claim and the DJA

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

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

§ 1331. Moreover, if the district court determines an

injunction is not warranted on remand, questions about its

18

jurisdiction to hear Appellants’ claim for declaratory relief will

unnecessarily prolong the case even further. We therefore

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

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

court’s power to award Appellants the declaratory relief they

seek.

As before, our inquiry begins with the statutory text.

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

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

But precedent interprets the DJA and AIA as coterminous.

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

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

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

respect to the assessment or collection of taxes.” This

interpretation is consistent with law in several other circuits.

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

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

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

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

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

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

Tomlinson, 128 F.2d at 811.

The panel dissent read things differently. While

acknowledging our prior interpretation of the AIA and DJA as

coterminous, the dissent questioned such cases’ precedential

value, and wondered why a coterminous reading of the two

statutes narrowed the scope of the DJA rather than broadening

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

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

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

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

suggesting our precedent stemmed from a different and unruly

era in which judges viewed statutory text not as an analytic

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

19

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

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

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

So is Appellants’ APA challenge properly characterized as

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

action is against the IRS, the agency charged with

administering our federal tax system, and concerns refund

procedures for a previously collected federal tax. This suit

eludes that characterization in the sense its result—regardless

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

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

they are entitled to a tax refund. Whatever Appellants

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

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

any substantive and procedural defects. Which scope of “with

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

narrow one?

Despite our obligation to begin with the statutory text,

discerning our jurisdiction to hear Appellants’ request for

declaratory relief must come not from staring hard at the phrase

“with respect to Federal taxes,” but from its

context—linguistic, historical, and functional. A fuller

consideration of the phrase reveals that both “actions brought

under section 7428 of the Internal Revenue Code of 1986,

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

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

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

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

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

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

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

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

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

20

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

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

taxes,” thus implying an all-encompassing reading is

inappropriate, and second, because each relates to tax

assessment or collection, thus suggesting the term “Federal

taxes” similarly pertains to assessment or collection.

The earliest cases construing the DJA’s tax exception also

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

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

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

property leased by the partnership. The property’s trustee

sued the IRS in federal court seeking declaratory relief

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

precluded by the DJA from declaring the parties’ rights

concerning the property, because the action related to federal

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

appeal from entry of an interlocutory injunction, the court

determined the matter was appropriate for injunctive relief

under a previous version of the AIA9 because “plaintiff is not

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

the purpose of protecting the mortgage lien on property” the

IRS was encumbering to extract taxes owed by the partnership.

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

relief was barred by the DJA, and concluded:

It is unreasonable to think that a court with authority

to issue a restraining order is without power to declare

the rights of the parties in connection therewith. In

other words, it is our view that the language which

excepts federal taxes from the Declaratory Judgment

9

Congress subsequently amended the AIA to preclude suits by

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

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

21

Act is co-extensive with that which precludes the

maintenance of a suit for the purpose of restraining

the assessment or collection of a tax.

Id. (emphasis added).

The Second Circuit relied on Tomlinson in a 1962 decision

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

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

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

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

injunctive relief was “determinative of its jurisdiction” to

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

Tomlinson by reading the DJA’s federal tax exemption

narrowly. It applies to “controversies involving tax liabilities

of parties qua taxpayers,” but not all conceivable controversies

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

ability to assess and collect. Id. at 48.

Congress did not intend to provide declaratory relief for

litigants when the AIA barred injunctive relief. Holding to the

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

of the DJA. The legislative history speaks directly to this

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

Act of 1935, Congress amended the statute to expressly except

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

Committee Report explained the animating purpose of the

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

Judgments Act to taxes would constitute a radical departure

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

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

determination, assessment, and collection of Federal taxes.”

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

22

When reading the legislative history, the Supreme Court

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

which was averted by the amendment was the potential

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

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

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

exception serves a critical but limited purpose. It strips courts

of jurisdiction to circumvent the AIA by providing declaratory

relief in cases “restraining the assessment or collection of any

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

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

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

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

1935 cases attempting to circumvent the prohibitions of the

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

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

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

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

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

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

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

legislative history that prevails.” Owner-Operator Indep.

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

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

history—what would in contract interpretation be called

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

intrinsic ambiguity or any difficulty in application.” Id.

Here, “with respect to Federal taxes” is intrinsically

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

does not encompass everything conceivably “with respect to

Federal taxes.” Having eliminated this broad interpretive

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

mystery, with no great direction from the statutory text.

Although we have questioned the utility of relying on

23

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

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

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

straightforward. It bears repeating: “Your committee believes

that the orderly and prompt determination and collection of

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

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

Finally, a functional concern exists with construing the

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

The court would have jurisdiction to enjoin the parties

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

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

judicial declaration that a tax is illegal have the same

prohibitory effect on the federal government’s ability to assess

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

non-coterminous reading of the two statutes thus poses an

insurmountable obstacle. The court would not have

jurisdiction to provide declaratory relief but could effectively

do so anyway.

The Supreme Court suggested an answer to this riddle in

Hibbs. Recall, Arizona taxpayers challenged the

constitutionality of an Arizona statute permitting tax credits for

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

To determine whether jurisdiction existed, the Court had to

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

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

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

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

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

taxpayers sought both an injunction and a declaratory

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

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

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

24

(“Respondents seek prospective relief only. Specifically, their

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

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

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

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

injunctive and declaratory relief.”).

A coterminous reading of the DJA and the AIA makes

sense in light of Hibbs, which construed the relief Appellants

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

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

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

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

broader injunctive relief available under the AIA.

But what to make of the bugle sounding the textualist

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

But this observation does not beget a certain interpretive result.

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

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

different quantities of donuts. Similarly, a man does not

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

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

Line.” What the AIA accomplishes by denying its application

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

collection of any tax” the DJA accomplishes by an exception

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

simultaneously robust and precise. Different verbal

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

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

immunity permits Appellants’ APA cause of action and neither

the AIA nor DJA otherwise limits our review.

25

III

We now consider whether Appellants state a valid cause of

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

statute and final agency action for which there is no other

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

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

adequate remedy at law exists, equitable relief is not available

under the APA.

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

the Internal Revenue Code, the refund suit mechanism,

provides Appellants the relief they seek. 11 That provision

bars any lawsuit for recovery of excessive or wrongfully

collected taxes “until a claim for refund or credit has been duly

filed with the Secretary, according to the provisions of law in

that regard, and the regulations of the Secretary established in

pursuance thereof.” 26 U.S.C. § 7422(a).

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

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

been erroneously or illegally assessed or collected.” Id.

Even if Appellants are entirely successful, they cannot recover

the wrongfully assessed tax unless they follow whatever new

10

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

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

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

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

11

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

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

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

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

26

administrative procedures the IRS decides to implement. 12

This suit is an APA action; it questions the administrative

procedures by which the IRS allows taxpayers to request

refunds for the wrongfully collected excise tax. Moreover,

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

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

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

allow for prospective relief. The Service itself unknowingly

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

equitable remedies outside of a refund suit and is agnostic

concerning the availability of broad equitable remedies as part

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

injunction or declaratory judgment, the relief would be

individualized, not class wide as Appellants seek. Each

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

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

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

Oral Arg. Tr. 39.

The dissent assumes a refund suit provides an adequate

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

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

adequate, Notice 2006-50 would render Appellants’ claims

unripe before they filed their refund actions. See Full Value

12

The dissent argues Appellants’ “objectives” are monetary:

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

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

Appellants may ultimately seek additional refunds if IRS Notice

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

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

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

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

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

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

citizens in search of accountability.

27

Advisors, LLC v. SEC, No. 10-1053, slip op. at 9 (D.C. Cir.

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

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

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

given the two doctrines’ common origins; they are both

‘prudential doctrines’ designed to ‘respond to pragmatic

concerns about the relationship between courts and agencies.’”

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

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

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

Appellants’ suit. Appellants claim Notice 2006-50 is

unlawful, and therefore inadequate, because it was not subject

to notice and comment rulemaking and is substantively

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

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

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

Court cites several cases in which circumstances weighed

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

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

a New York law allowing for summary suspension of his

professional license without a presuspension hearing. 443

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

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

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

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

members of the optometry association, sought to revoke the

licenses of a small number of optometrists who worked for a

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

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

argued the Board was unconstitutionally constituted. Id. at

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

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

not meaningfully addressed the appropriateness of requiring

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

28

interests outweigh[ed] countervailing institutional interests

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

concluded: “exhaustion has not been required where the

challenge is to the adequacy of the agency procedure itself,

such that ‘the question of the adequacy of the administrative

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

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

Barchi, 433 U.S. at 63).

This is precisely such a case. Congress has not required

exhaustion in APA suits challenging the adequacy of IRS

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

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

which the Court’s synthesis is drawn are distinguishable on

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

“improper to impose an exhaustion requirement” when the

allegation is that the “administrative remedy furnishes no

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

in the judgment).

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

proceed without first filing a refund claim will not open the

courthouse door to those wishing to avoid administrative

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

only APA suits subject to review would be those cases

pertaining to final agency action unrelated to tax assessment

and collection. More broadly, litigants could not avoid

exhaustion when challenging agency decisionmaking, because

McCarthy and its progeny apply only when litigants challenge

the exhaustion scheme itself. And once litigated, precedent

would preclude later litigants challenging exhaustion

procedures from relying on McCarthy in a court that had

previously rejected the same argument.

29

The dissent argues Appellants fail to exhaust their claims

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

suit is an otherwise adequate procedure “for a taxpayer to

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

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

argument conflates the existence of an alternative remedy with

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

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

Appellants to proceed in a series of individual suits, submitting

themselves one by one to the very refund procedures that they

claim to be unlawful. The dissent suggests Appellants could

avoid this inefficiency by winning a single case that would

have preclusive effect across the nation. But the IRS has

already shown itself unwilling to accept the binding effect of

judicial opinions from one circuit to another, and the Supreme

Court is highly unlikely to provide a nationwide decree

because it rarely grants certiorari in an individual tax refund

dispute. Another obstacle to Supreme Court review arises

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

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

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

party may not appeal from a judgment or decree in his

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

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

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

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

dissent relies are inapposite. Clintwood Elkhorn, Hibbs,

“Americans United”, and Bob Jones involved taxpayer

challenges to the validity of an individual tax—paradigmatic

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

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

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

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

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

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

30

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

procedure unrelated to the individual assessment or collection

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

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

individual refund suits).

Finally, the dissent concocts an extravagant scenario in an

effort to show that a refund suit would be an adequate

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

have “skip[ped] the administrative process altogether and

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

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

motion to dismiss for failure to exhaust administrative

remedies, the Appellants could assert that, under McCarthy,

their lack of exhaustion is excusable because the IRS’s

administrative remedies are unreasonable and unlawful. Id.

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

refund suit—Appellants are seeking equitable relief rather than

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

Therefore allowing Appellants’ APA suit to proceed does not

“duplicate existing procedures for review of agency action.”

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

judicial review of Appellants’ APA suit is consistent with the

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

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

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

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

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

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

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

maintained in any court for the recovery of any internal

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

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

exception for suits challenging the legality of administrative

31

procedures. Without deciding whether a McCarthy-based

objection to exhaustion procedures is cognizable in a refund

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

meaningfully addressed the appropriateness of requiring

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

from clear Appellants could challenge Notice 2006-50 in a

refund suit without first having to proceed through it.

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

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

thousands of successful corporate refund suits and to spare

individuals, who—unlike their corporate counterparts—had no

incentive to pursue costly litigation against the IRS. By

promulgating the 2006 rule, the IRS effectively conceded a

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

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

perfectly adequate.

IV

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

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

to “prevent the courts, through avoidance of premature

adjudication, from entangling themselves in abstract

disagreements over administrative policies, and also to protect

the agencies from judicial interference until an administrative

decision has been formalized and its effects felt in a concrete

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

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

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

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

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

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

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

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

32

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

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

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

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

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

must await an enforcement proceeding is analyzed under the

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

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

in Abbott Labs to incorporate a presumption of reviewability.”

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

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

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

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

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

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

We rejected the Service’s pre-enforcement argument at

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

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

and therefore fit for review, because Notice 2006-50

constituted final and reviewable agency action barring

Appellants “from pursuing their refunds in court by virtue of

the fact that they did not exhaust their administrative remedies

under the only available avenue—Notice 2006-50.” Cohen,

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

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

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

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

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

The dissent tweaks this argument by describing this case

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

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

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

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

33

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

But again, conceiving of Appellants as taxpayers looking for a

handout is flawed. The APA does not offer any monetary

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

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

Appellants, such as amnesty for undocumented immigrants,

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

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

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

The dissent argues any delay caused by filing individual

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

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

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

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

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

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

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

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

not an independent requirement divorced from the

consideration of the institutional interests of the court and

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

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

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

parties of withholding court consideration.’” Action for

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

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

hardship Appellants suffer is compliance with allegedly

unlawful administrative procedures, we have consistently held

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

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

NEPA claim as unripe but considering procedural claim);

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

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

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

34

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

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

The practical consequence of the dissent’s ripeness

argument is a judicially created exemption for the IRS from

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

exempt IRS action from judicial review. Revenue protection

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

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

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

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

sweeping congressional direction to prevent ‘federal-court

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

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

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

Congress “wanted to avoid a formalistic definition of

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

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

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

context of tax regulations “the importance of maintaining a

uniform approach to judicial review of administrative action”

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

V

The litigation position of the IRS throughout the history of

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

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

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

obstacle course for taxpayers to get their money back.

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

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

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

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

35

have federal question jurisdiction, and neither the AIA nor the

DJA provide a limitation on our exercise of it. Because

Appellants have no other adequate remedy at law, the district

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

So ordered.

KAVANAUGH, Circuit Judge, with whom Chief Judge

SENTELLE and Circuit Judge HENDERSON join, dissenting:

From 2003 to 2006, millions of Americans paid excessive

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

Government announced that it would refund the overpaid

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

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

process for obtaining refunds. Taxpayers who wanted to

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

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

Those who wished to claim an amount greater than the

standard amount could file a Form 8913 with their 2006

income tax returns and itemize the refund due. And those

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

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

and attach Form 8913 to claim an amount greater than the

standard. Those who missed out when filing their 2006 tax

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

2006 returns to claim the refund. Someone unsatisfied with

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

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

See 28 U.S.C. § 1346(a)(1).

Approximately 90 million Americans followed those

simple instructions and promptly received their refunds. As

remedial government programs go, this one worked

reasonably well. 1

1

The majority opinion suggests that the IRS’s refund program

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

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

that an odd criticism. The IRS aggressively publicized the refund

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

request them. Ninety million taxpayers managed to do so.

2

The ten individual plaintiffs in this case were aware of

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

of them chose any of the readily available alternatives for

obtaining a refund. None checked the standard refund box on

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

their 2006 tax returns to claim a refund amount greater than

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

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

available from the IRS or the refund rules.

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

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

Plaintiffs sued under the Administrative Procedure Act,

claiming that the IRS’s 2006 refund rules were promulgated

without proper notice and that the refund scheme would not

fully compensate them for their overpaid taxes. Plaintiffs

seek declaratory and injunctive relief. They want a judicial

declaration that the refund scheme is unlawful and an

injunction ordering the Government to devise a new refund

process so as to correct the alleged flaws.

The reader may wonder why plaintiffs didn’t simply file

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

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

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

plaintiff could have raised complaints about the refund rules

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

since concluded by now. The answer seems to be that

plaintiffs are litigating primarily on behalf of others, not

themselves. Plaintiffs’ ultimate objectives are class

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

billions of dollars in additional refunds to millions of as-yet-

unnamed individuals who never sought refunds from the IRS

or filed tax refund suits. It seems that plaintiffs have

deliberately avoided filing individual refund claims with the

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

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

3

those steps. And class certification is a necessary prerequisite

to the class-wide jackpot plaintiffs are seeking here.

In any event, regardless of this case’s unusual

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

Treasury, the present appeal raises only a straightforward

legal question.

The issue, boiled down to its essentials, is whether

plaintiffs can raise their objections to the 2006 refund rules in

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

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

important to underscore that the fundamental issue here is

timing: It concerns when plaintiffs can raise their objections

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

raise their objections to the 2006 refund rules in court.

For two alternative reasons, plaintiffs cannot maintain

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

plaintiffs have an adequate alternative judicial remedy,

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

plaintiffs must file refund claims with the IRS before bringing

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

point in turn.

I

The Government contends that the Administrative

Procedure Act itself bars plaintiffs from maintaining this APA

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

of the APA, plaintiffs cannot maintain this APA suit because

they have an alternative congressionally specified judicial

forum in which to pursue their complaints about the 2006

refund rules – namely, a tax refund suit.

The APA provides for judicial review of agency action.

But the APA may not be invoked when Congress has

4

specified other judicial review procedures. Section 703 of the

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

the special statutory review proceeding relevant to the subject

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

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

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

APA provides: “Agency action made reviewable by statute

and final agency action for which there is no other adequate

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

§ 704 (emphasis added).

For our purposes, both provisions make the same point:

A party cannot bring a freestanding APA suit when Congress

has specified a different judicial review procedure “relevant to

the subject matter,” so long as that congressionally specified

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

GENERAL’S MANUAL ON THE ADMINISTRATIVE PROCEDURE

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

cross-reference to § 703). 2

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

provide additional judicial remedies in situations where the

Congress has provided special and adequate review

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

(1988). 3

2

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

principle of the American legal system: Equitable relief is not

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

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

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

equitable principles disfavoring the issuance of federal injunctions

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

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

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

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

3

Numerous cases have applied that principle. See ICC v.

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

5

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

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

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

(“where Congress has provided statutory review procedures

designed to permit agency expertise to be brought to bear on

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

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

suit against Department of Agriculture afforded an “adequate

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

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

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

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

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

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

decisions of Equal Employment Opportunity Commission

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

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

(individual private suits against institutions afforded adequate

remedy to private parties alleging discrimination under Titles VI

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

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

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

state administrative hearings and federal suit against offending

states afforded adequate remedy in court to preclude APA suit

seeking to compel the Department of Health and Human Services to

enforce states’ compliance with emergency assistance plans);

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

to individual benefit reduction afforded “adequate remedy in court”

to Social Security recipients seeking to challenge the Department of

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

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

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

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

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

for judicial review of administrative action, courts will not make

nonstatutory remedies available without a showing of patent

violation of agency authority or manifest infringement of

substantial rights irremediable by the statutorily-prescribed method

of review”) (footnote omitted).

6

The Supreme Court has summarized the key principle in

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

intend the general grant of review in the APA to duplicate

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

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

intended by [§ 704] simply to avoid duplicating previously

established special statutory procedures for review of agency

actions.”).

Here, Congress has established a judicial procedure that,

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

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

provides:

The district courts shall have original jurisdiction,

concurrent with the United States Court of Federal

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

for the recovery of any internal-revenue tax alleged to

have been erroneously or illegally assessed or collected,

or any penalty claimed to have been collected without

authority or any sum alleged to have been excessive or in

any manner wrongfully collected under the internal-

revenue laws . . . .

As the Supreme Court and this Court have explained on many

occasions, the tax refund suit is a statutorily designed judicial

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

refunds, or the legality of IRS tax collection or refund

practices. See generally United States v. Clintwood Elkhorn

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

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

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

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

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

Cir. 1979).

7

The only remaining question is whether the tax refund

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

plaintiffs and others similarly situated could obtain judicial

review of their complaints about the 2006 refund rules. In

such suits, plaintiffs could obtain the larger refunds they

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

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

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

Jones, 416 U.S. at 748 n.22. 5

4

Plaintiffs acknowledge that they ultimately want additional

refunds of the taxes wrongly collected, in addition to equitable

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

refund rules unless they wanted additional refunds.

5

In challenging the adequacy of tax refund suits, plaintiffs hint

that declaratory and injunctive relief might be available only in

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

Supreme Court has indicated just the opposite.

To begin with, the Declaratory Judgment Act bars declaratory

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

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

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

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

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

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

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

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

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

to seek appropriate declaratory and injunctive relief.

In addition, precedent demonstrates that declaratory relief and

injunctive relief are available in tax refund suits. The Supreme

Court has indicated that injunctive relief is available in the tax

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

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

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

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

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

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

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

8

Because plaintiffs can raise their objections to the 2006

refund rules and obtain tax refunds and appropriate equitable

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

alternative judicial procedure. 6 The majority opinion seems

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

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

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

plaintiffs’ claims are distinct from the adequacy of the

specified judicial review procedure. The proper question here

compare id. at 373-81 & 377-78 n.16 (injunction available in non-

tax-refund suit only because plaintiffs could not pursue tax refund

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

available in APA suit because plaintiffs could pursue tax refund

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

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

claims for declaratory relief in tax refund suits, although that

presumably also would be permitted under the South Carolina v.

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

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

from doing something, meaning that declaratory relief is, in

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

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

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

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

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

injunctive and declaratory relief”).

Finally, it bears mention that the Government has

acknowledged that plaintiffs could obtain appropriate declaratory

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

41.

6

Even if there were somewhat greater equitable relief

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

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

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

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

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

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

9

is whether the tax refund suit is an adequate forum for

plaintiffs to raise their arguments that the 2006 refund rules

are unlawful. The answer is yes. 7

The majority opinion seems to think that, in invoking

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

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

between (i) the doctrine requiring exhaustion of

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

applies when, as here, Congress has provided alternative

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

Court in Bowen distinguished those two principles. Id. at

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

undifferentiated stew and then uses administrative exhaustion

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

cases concerning exhaustion of administrative remedies are

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

question is whether the tax refund suit is the proper judicial

forum specified by Congress for plaintiffs to raise their

claims. 8

7

The majority opinion cites one case from 1987 in which this

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

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

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

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

specified by Congress. It is therefore obviously not a relevant

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

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

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

cases is not precedent).

8

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

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

be statutorily required – absent some legitimate exception to the

exhaustion requirement – to first exhaust their administrative

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

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

alleged to have been erroneously or illegally assessed or collected,

10

In response to this point, the majority opinion relies

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

which says that administrative exhaustion sometimes may not

be required when a plaintiff challenges the adequacy of the

administrative procedures themselves. Reliance on McCarthy

simply highlights the majority opinion’s confusion about the

§§ 703/704 issue and about the distinction between

exhaustion of administrative remedies and alternative judicial

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

arguments – including about the adequacy of the

administrative exhaustion requirement that applies in tax

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

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

administrative process altogether and directly file tax refund

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

if plaintiffs had not first exhausted their administrative

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

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

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

their McCarthy-based argument that they do not have to

exhaust administrative remedies – for example, if they believe

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

or of any sum alleged to have been excessive or in any manner

wrongfully collected, until a claim for refund or credit has been

duly filed with the Secretary, according to the provisions of law in

that regard, and the regulations of the Secretary established in

pursuance thereof.”).

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

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

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

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

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

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

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

requires exhaustion in those tax refund suits.

11

the exhaustion requirement is unconstitutional. 9 And the

courts considering the refund suits could address plaintiffs’

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

may well reject such attempts to evade the exhaustion

requirement. Even so, the burden of participating in a

statutorily imposed exhaustion requirement does not make an

alternative judicial forum inadequate for purposes of APA

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

plaintiffs could raise any complaint they have about the 2006

tax refund rules – including any complaint they have about

the exhaustion requirement that attaches to tax refund suits.

Given that undisputed fact, McCarthy is no answer to our

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

APA suit because the tax refund suit is the congressionally

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

U.S.C. § 703.

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

plaintiffs to raise their complaints about the 2006 refund rules.

Because the tax refund suit is a special statutory judicial

review proceeding relevant to the subject matter and because

it is an adequate forum, plaintiffs cannot maintain this APA

challenge to the 2006 refund rules.

II

The Government alternatively raises a mix of

administrative exhaustion, finality, and ripeness principles in

arguing that plaintiffs must file refund claims with the IRS

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

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

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

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

9

In the two cases McCarthy cited in describing this exception,

the plaintiffs had argued that the exhaustion requirement was

unconstitutional. See 503 U.S. at 148.

12

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

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

three separate opinions for a unanimous conclusion: one

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

ripeness).

We conclude that the ripeness doctrine precludes

consideration of plaintiffs’ claims at this time and requires

plaintiffs to file refund claims with the IRS before suing.

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

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

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

from Article III limitations on judicial power and from

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

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

807-08 (2003). A challenge to an agency regulation is ripe

for judicial review where (i) the issue is fit for decision and

(ii) delay would impose hardship on the plaintiffs. In the

classic formulation, the Supreme Court stated that a claim is

ripe where “the legal issue presented is fit for judicial

resolution, and where [the] regulation requires an immediate

and significant change in the plaintiffs’ conduct of their

affairs with serious penalties attached to noncompliance.”

Abbott Laboratories v. Gardner, 387 U.S. 136, 153 (1967).

The principal issue here concerns the second prong of the

ripeness doctrine: hardship. Do the 2006 refund rules require,

in the words of Abbott Laboratories, “an immediate and

significant change in the plaintiffs’ conduct of their affairs

with serious penalties attached to noncompliance?” Id. at

153. The answer is obviously no. Unlike a regulation that

imposes obligations or prohibits conduct (backed by

sanctions), a payment scheme like that established by the

2006 refund rules does not require “an immediate and

significant change” in plaintiffs’ conduct.

13

To borrow the words of a recent Supreme Court ripeness

decision, the 2006 tax refund procedure “does not command

anyone to do anything or to refrain from doing anything; it

does not grant, withhold, or modify any formal legal license,

power, or authority; it does not subject anyone to any civil or

criminal liability; and it creates no legal rights or obligations.”

Nat’l Park Hospitality Ass’n, 538 U.S. at 809 (applying

Abbott Laboratories and quoting Ohio Forestry Ass’n, Inc. v.

Sierra Club, 523 U.S. 726, 733 (1998)) (alterations omitted).

Rather, the refund rules mark a path for taxpayers to obtain

money back from the Government. The refund scheme

“leaves a [taxpayer] free to conduct its business as it sees fit.”

Nat’l Park Hospitality Ass’n, 538 U.S. at 810. Thus,

requiring plaintiffs to challenge the refund rules only after

they apply to the IRS for refunds will have “no irremediably

adverse consequences” for plaintiffs. Id. (alteration

omitted). 10

Moreover, it is well settled that the mere “burden of

participating in further administrative and judicial

proceedings does not constitute sufficient hardship” for

purposes of the ripeness analysis. AT&T Corp. v. FCC, 349

F.3d 692, 702 (D.C. Cir. 2003); see also Ohio Forestry Ass’n,

523 U.S. at 734-35 (burden of going through additional

10

See also Reno v. Catholic Social Services, Inc., 509 U.S. 43,

57-61 (1993) (no hardship in requiring aliens to apply for amnesty

under agency’s amnesty rules before suing to challenge agency’s

amnesty rules); Toilet Goods Ass’n, Inc. v. Gardner, 387 U.S. 158,

164-66 (1967) (no hardship where “the impact of the administrative

action could [not] be said to be felt immediately by those subject to

it in conducting their day-to-day affairs”); Devia v. NRC, 492 F.3d

421, 427 (D.C. Cir. 2007) (claim of hardship “insubstantial” when

party “not required to engage in, or to refrain from, any conduct”);

Sprint Corp. v. FCC, 331 F.3d 952, 958 (D.C. Cir. 2003) (no

hardship where agency action leaves plaintiff “free to conduct its

business as it sees fit” and there are no “adverse effects of a strictly

legal kind”) (quoting Ohio Forestry Ass’n, 523 U.S. at 733).

14

proceedings is not a sufficient hardship to render an agency

action ripe for review); Nuclear Energy Institute, Inc. v. EPA,

373 F.3d 1251, 1313 (D.C. Cir. 2004) (requiring party to raise

claims in agency and judicial proceedings “works no hardship

. . . sufficient to render its claims ripe”); Clean Air

Implementation Project v. EPA, 150 F.3d 1200, 1205 (D.C.

Cir. 1998) (requiring party to raise claim in agency

proceeding is not sufficient hardship for purposes of

ripeness); Florida Power & Light Co. v. EPA, 145 F.3d 1414,

1421 (D.C. Cir. 1998) (“The only conceivable hardship

Florida P&L will endure as a result of postponement is the

burden of participating in further administrative and judicial

proceedings. Such claims, however, do not constitute

sufficient hardship for the purposes of ripeness.”). Here,

therefore, the burden of filing a refund claim with the IRS

before suing does not constitute sufficient hardship for

purposes of the Abbott Laboratories ripeness inquiry.

Plaintiffs and the majority opinion suggest that it would

be easier to mount one APA challenge rather than a series of

individual tax refund suits. See Maj. Op. at 26, 29. But as the

Supreme Court has explained in a similar context, that theory

“does not explain . . . why one initial site-specific victory (if

based on the Plan’s unlawfulness) could not, through

preclusion principles, effectively carry the day. And, in any

event, the Court has not considered this kind of litigation cost

saving sufficient by itself to justify review in a case that

would otherwise be unripe.” Ohio Forestry Ass’n, 523 U.S. at

734-35 (citation omitted); see also Clean Air Implementation

Project, 150 F.3d at 1206. The Supreme Court has stated that

the “case-by-case approach that this requires” is “the

traditional, and remains the normal, mode of operation of the

courts.” Lujan v. Nat’l Wildlife Fed’n, 497 U.S. 871, 894

(1990).

Put simply, the general ripeness principle that emerges

from the case law and that governs here is this: When an

15

agency rule prohibits conduct backed by sanctions or imposes

an obligation backed by sanctions, an aggrieved party often

may challenge the rule immediately and need not wait to

challenge it in its defense to an enforcement action after

violating the rule. The rationale is that a party should not be

forced into the “dilemma” of violating an allegedly unlawful

rule and risking a heavy sanction “if they’ve guessed wrong

and the rule is upheld in the penalty proceeding.” Abbs v.

Sullivan, 963 F.2d 918, 926 (7th Cir. 1992) (internal citations

omitted); see also Reno v. Catholic Social Services, Inc., 509

U.S. 43, 57 (1993) (describing this “dilemma”). By contrast,

as the Supreme Court decided in Reno v. Catholic Social

Services, when an agency rule establishes criteria for an

individual to obtain money or a benefit of some kind from the

government, a party must first apply to the government for the

money or benefit before bringing suit to challenge the agency

rule. See 509 U.S. at 57-61. Requiring a party to apply for

the money or benefit before suing to challenge the agency rule

does not pose the Abbott Laboratories “dilemma” because the

party will not face any sanctions if the rule is ultimately

upheld. 11

Allowing this APA suit to go forward at this time is flatly

inconsistent with the ripeness principles articulated in cases

such as Abbott Laboratories, Reno v. Catholic Social

Services, and National Park Hospitality Association.

Plaintiffs must file a refund claim with the IRS before

bringing suit.

11

Professor Pierce has described the Court’s ripeness

jurisprudence as precluding “pre-application judicial review of any

rule that purports to describe criteria for obtaining any form of

government benefit, e.g., social security, veterans benefits, any

license, or exemption from any regulatory obligation.” 2 RICHARD

J. PIERCE, JR., ADMINISTRATIVE LAW TREATISE § 15.14 (5th ed.

2010).

16

It is true that our Court – albeit not the Supreme Court –

has sometimes permitted judicial review when an issue was fit

for resolution, notwithstanding a lack of hardship to the

plaintiffs from waiting, so long as there were “no significant

agency or judicial interests militating in favor of delay.”

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

440 F.3d 459, 465 (D.C. Cir. 2006) (quoting Nat’l Mining

Ass’n v. Fowler, 324 F.3d 752, 756-57 (D.C. Cir. 2003); see

also Electric Power Supply Ass’n v. FERC, 391 F.3d 1255,

1263 (D.C. Cir. 2004) (“The hardship prong under the

ripeness doctrine is largely irrelevant in cases . . . in which

neither the agency nor the court have a significant interest in

postponing review.”); AT&T Corp. v. FCC, 349 F.3d 692, 700

(D.C. Cir. 2003) (“where there are no institutional interests

favoring postponement of review, a petitioner need not satisfy

the hardship prong”); Action for Children’s Television v.

FCC, 59 F.3d 1249, 1258 (D.C. Cir. 1995) (“there is no need

to consider the hardship to the parties of withholding court

consideration, [where] there would be no advantage to be had

from delaying review”) (internal quotation marks and citation

omitted).

But here, there are “significant agency or judicial

interests militating in favor of delay.” Nat’l Ass’n of Home

Builders, 440 F.3d at 465. Those interests are some of the

very interests that are protected by the ripeness doctrine: the

courts’ interest in not “entangling themselves in abstract

disagreements over administrative policies,” and the IRS’s

interest in being protected from “judicial interference until an

administrative decision has been formalized and its effects felt

in a concrete way by the challenging parties.” Abbott

Laboratories, 387 U.S. at 148-49; see also Ohio Forestry

Ass’n, 523 U.S. at 735-37. For example, plaintiffs claim that

it was too difficult for taxpayers to gather the paperwork

needed to justify a claim for more than the standard refund

amount. That is precisely the kind of claim where court

review would benefit from prior agency application and

17

analysis. Indeed, if the agency agreed with a taxpayer’s

argument on that issue, there would be no need for judicial

involvement at all. Also, plaintiffs claim that the IRS did not

provide adequate notice of the refund procedure. That too is

the kind of claim where judicial resolution would benefit from

a considered agency analysis of the design and limitations of

the notification process.

In any event and perhaps more to the point, we don’t

need to guess how the Abbott Laboratories test applies to the

kind of agency rule at issue here. The Supreme Court has told

us how – in cases such as Reno v. Catholic Social Services

and National Park Hospitality Association. Those cases stand

for the proposition that pre-application challenges to rules that

set forth criteria for government payments or benefits are not

ripe.

***

Under the APA, plaintiffs must file tax refund suits to

raise their complaints about the 2006 refund rules.

Alternatively, the ripeness doctrine precludes plaintiffs from

suing until after they file refund claims with the IRS. For

either of those two alternative and independent reasons,

plaintiffs’ APA suit should be dismissed. 12 We respectfully

dissent.

12

In arguing that we should not entertain plaintiffs’ APA claim

now, the Government also raises yet another alternative argument:

that the Declaratory Judgment Act and the Anti-Injunction Act

together bar APA suits challenging IRS refund rules. That

argument raises extremely difficult issues of statutory

interpretation, as the panel opinions in this case explored. But that

statutory question ultimately is not necessary to our resolution of

the case because §§ 703/704 of the APA and the ripeness doctrine

each independently bar this suit. The majority opinion chides us for

not addressing the additional statutory issue regarding the

Declaratory Judgment and Anti-Injunction Acts. See Maj. Op.

18

at 11. Having found two separate and independent bars to

plaintiffs’ suit, we see no need to consider the several other

objections raised by the Government. Of course, in order to allow

this suit to go forward, the majority opinion by contrast must

consider and reject each of the Government’s objections. That’s

why the majority opinion needs to address the statutory issue

regarding the Declaratory Judgment and Anti-Injunction Acts, and

we do not.