Thames Shipyard & Repair Co. v. Galveston Central Appraisal District

IN THE UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT United States Court of Appeals

Fifth Circuit

FILED

November 7, 2008

No. 08-40138 Charles R. Fulbruge III

Clerk

THAMES SHIPYARD & REPAIR CO, also known as

The Thames Shipyard & Repair Company

Plaintiff-Appellant

v.

GALVESTON CENTRAL APPRAISAL DISTRICT;

GALVESTON COUNTY APPRAISAL REVIEW BOARD

Defendants-Appellees

Appeal from the United States District Court

for the Southern District of Texas

USDC No. 3:07-CV-125

Before REAVLEY, CLEMENT, and PRADO, Circuit Judges.

PER CURIAM:*

Plaintiff-Appellant Thames Shipyard & Repair Co. appeals the district

court’s dismissal of its case for want of subject matter jurisdiction. Plaintiff

contends that its suit to invalidate a state tax assessment on a dry dock does not

fall within the Tax Injunction Act, 28 U.S.C. § 1341, because its complaint does

not expressly seek injunctive or declaratory relief, the assessment was imposed

*

Pursuant to 5TH CIR. R. 47.5, the court has determined that this opinion should not

be published and is not precedent except under the limited circumstances set forth in 5TH CIR.

R. 47.5.4.

No. 08-40138

before suit was filed, and the governmental entities named as defendants are not

responsible for assessing or collecting the tax. We review de novo whether

§ 1341 prevented the district court from exercising jurisdiction over Plaintiff’s

suit. Washington v. Linebarger, Goggan, Blair, Pena & Sampson, LLP, 338 F.3d

442, 444 (5th Cir. 2003).

The Tax Injunction Act states:

The district courts shall not enjoin, suspend or restrain the

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

plain, speedy and efficient remedy may be had in the courts of such

State.

28 U.S.C. § 1341. This statute reflects “the fundamental principle of comity

between federal courts and state governments that is essential to ‘Our

Federalism,’ particularly in the area of state taxation.” Fair Assessment in Real

Estate Ass’n, Inc. v. McNary, 454 U.S. 100, 103, 102 S. Ct. 177, 179 (1981). Thus,

§ 1341 “imposes an equitable duty on federal district courts to refrain from

exercising jurisdiction over claims arising from state revenue collection except

when the remedies the state provides could prevent a taxpayer from asserting

a federal right.” McQueen v. Bullock, 907 F.2d 1544, 1547 (5th Cir. 1990)

(footnote omitted). This broad jurisdictional barrier applies equally to requests

for declaratory and injunctive relief. California v. Grace Brethren Church, 457

U.S. 393, 408-09, 102 S. Ct. 2498, 2507-08 (1982).

We agree with the district court that Plaintiff’s suit to invalidate the

property tax assessment of the dry dock on federal constitutional and other

grounds, for which it seeks a judgment that “[t]he Dry Dock is not subject to

taxation in Galveston County, Texas,” is in substance a request for declaratory

relief barred by the Tax Injunction Act. We also reject as illusory the distinction

drawn by Plaintiff between its suit and one that directly attempts to restrain,

enjoin, or suspend the assessment or collection of tax. “[F]ederal courts must

guard against interpretations of the Tax Injunction Act which might defeat its

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purpose and text.” Arkansas v. Farm Credit Servs. of Cent. Ark., 520 U.S. 821,

827, 117 S. Ct. 1776, 1780 (1997). Under general tax principles, “an assessment

is closely tied to the collection of a tax,” in that it serves as “the official recording

of liability that triggers levy and collection efforts.” Hibbs v. Winn, 542 U.S. 88,

101, 124 S. Ct. 2276, 2285-86 (2004). A declaration that Plaintiff’s dry dock is

exempt from the assessed tax would necessarily preclude collection of that tax

by any arm of the State. Plaintiff’s effort to invalidate an assessment prior to its

actual collection by other state authorities therefore plainly interferes with the

State’s ability to collect taxes—precisely what the Tax Injunction Act prohibits.

The cases cited by Plaintiff—Hibbs and Jefferson County v. Acker, 527 U.S.

423, 433, 119 S. Ct. 2069, 2076 (1999)—are inapposite. Hibbs held that the Act

does not bar a suit prospectively to enjoin the granting of state tax credits to

third parties. 542 U.S. at 95-96, 124 S. Ct. at 2282-83 (affirming the appeals

court’s ruling that the Act does not prohibit an Establishment Clause challenge

in federal court to tax credits granted to third parties who donated money to

organizations that provided scholarships for private religious secondary schools).

Here, Plaintiff filed suit in a federal forum to avoid paying its own tax bill, not

to invalidate tax benefits accorded to third parties. Nor is this a state-initiated

tax collection suit in which a defendant taxpayer may properly seek to invalidate

the tax, as held in Jefferson County. 527 U.S. 423, 443-45, 119 S. Ct. 2069, 2076-

77 (holding a tax-collection suit initiated by the State does not “restrain” state

action within the meaning of the Act, and in such a suit the taxpayer may assert

defenses to the validity of the tax). To the contrary, both Hibbs and Jefferson

County recognize that the Tax Injunction Act squarely bars an anticipatory

federal suit such as Plaintiff’s to prevent the collection of tax by the State. See

Hibbs, 542 U.S. at 106, 124 S. Ct. at 2288 (characterizing a taxpayer’s federal

suit to avoid paying its own taxes as one that “fall[s] within § 1341’s undisputed

compass”); Jefferson County, 527 U.S. at 433, 119 S. Ct. at 2076 (“By its terms,

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the Act bars anticipatory relief, suits to stop (‘enjoin, suspend or restrain’) the

collection of taxes.”).

Finally, Plaintiff does not contend that Texas law fails to provide a “plain,

speedy, and efficient remedy” for pressing its federal due process and commerce

clause claims, and, notably, this Court has acknowledged that Texas courts

provide adequate remedies for claims similar to those asserted here.

See McQueen, 907 F.2d at 1547-48 & n.9. In fact, Plaintiff has already brought

an identical suit in state court.

Accordingly, the district court did not err in concluding that the Tax

Injunction Act precludes federal jurisdiction over Plaintiff’s suit.

AFFIRMED.

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