# Petition — Tax Analysts & Advocates v. Blumenthal

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## Record

- **Collection:** Supreme Court brief
- **Document type:** Petition
- **Published:** January 1, 1978
- **Citation:** 434 U.S. 1086

## Text

MICHAEL Ro!

TAX ANALYSTS AND ADYOCATES,
THOMAS F. FIELD,
Petitioners,

W. MICHAEL BLUMENTHAL, Secretary
of the Treasury of the United States, et al,
Respondents.

PETITION FOR A WRIT OF CERTIORARI TO THE
UNITED STATES COURT OF APPEALS FOR
THE DISTRICT OF COLUMBIA CIRCUIT

THOMAS F. FIELD,
Attorney for Petitioners
Suite 204, 1523 L St. N.W.
Washington, D.C. 20005

Se
THE CASILLAS PRESS, INC.—1717 K Street. N. W.—Washington, 0. C.-223-1220

(i)

TABLE OF CONTENTS

CITATIONS TO OPINIONS BELOW .
JURISDICTION .
QUESTIONS PRESENTED
STATUTES INVOLVED .
STATEMENT OF THE CASE
REASONS FOR GRANTING THE WRIT:
I. The Court of Appeals decision conflicts with the
teaching of this Court in all of its recent majority

opinions about standing

Il. The Court of Appeals decision conflicts with the
decisions of other appellate courts —

A. As to whether the zone test is dead .

B. As to whether maintenance of competitive
fairness is one of the interests protected by
the Internal Revenue Code

III. The Court of Appeals decision has important
implications both within and beyond the tax area.

A. The decision will further aggravate the
chaotic situation faced by the lower courts
when they seek to determine the status of
the zone test

B. The decision will produce unfettered and
unreviewable administrative discretion with
respect to IRS rulings that lose revenue

Page

10

1]

13

14

(ii)

CONCLUSION
CERTIFICATE OF SERVICE
APPENDICES:

A. Majority opinion of the Court of Appeals for
the District of Columbia Circuit .

B. Majority opinion in American Society of Travel

Agents v. Bhimenthal, and common dissent in
that case and the instant case .

TA TABLE OF AUTHORITIES
Cases Cited:

American Society of Travel Agents, Inc. v. Blumenthal,
decided September 15, 1977(C.A.D.C.) .

Association of Data Processing Organizations v. Camp,
397 U.S. 150 (1970)

Barlow v. Collins,
397 U.S. 159 (1970)

International Business Machines Corp. v. United States,
343 F.2d 914(Ct. Cls. 1965), cert. denied 382 US.
1028 (1966) ’

Park View Heights Corporation v. City of Black Jack,
467 F.2d 1208 (C.A. 8, 1972) ae

Statutes:

5 U.S.C. Sec. 702.

la

28a

to

11,14

(iii)

Page

26 U.S.C. Sec. 901 a SF
26 U.S.C. Sec. 7805 . » &4&460..8
28 U.S.C. Sec. 1254(1) . 2
Other Authorities:
Brannon, Gerard M., Energy Taxes and Subsidies: A Report

to the Energy Policy Project of the Ford Foundation

(1974) oe a ee oe ; 6
Davis, Kenneth Culp, Administrative Law of the Seventies,

Supplementing Administrative Law Treatise, July 1977

Cumulative Supplement Oe bi er q
Economic Report of the President (1975) 3
Middle East Economic Survey, December 28, 1973 and

December 13, 1974 . cere 6
Petroleum Intelligence Weekly, January 14,1974 . 6
Rev. Rul 55-296, 1955-1 Cum. Bull. 386 . 4
Rev. Rul 68-552, 1968-2 Cum. Bull. 306 . 4
Walker, Charles M., Speech before the National Foreign

Trade Council, November 18, 1975. ; 5

In the

Supreme Court of the United States
October Term, 1977

No.

TAX ANALYSTS AND ADVOCATES,
THOMAS F. FIELD,

Petiticners,
A

W. MICHAEL BLUMENTHAL, Secretary
of the Treasury of the United States, er al.,
Respondents.

PETITION FOR A WRIT OF CERTIORARI TO THE
UNITED STATES COURT OF APPEALS FOR
THE DISTRICT OF COLUMBIA CIRCUIT

To the Honorable the Chief Justice and Associate Jus-
tices of the Supreme Court of the United States:

Petitioners pray that a writ of certiorari issue to review
the decision in this case of the United States Court of
Appeals for the District of Columbia Circuit, rendered on
June 15, 1977.

CITATIONS TO OPINIONS BELOW

The decision of the District Court is reported at 390
F. Supp. 927 (D.D.C. 1975). The majority decision of

to

the Court of Appeals is as yet unreported and is printed
as Appendix A, hereto. The common dissent in the in-
stant case and in American Society of Travel Agents, Inc.
v. Blumenthal is also unreported and is reprinted as Ap-
pendix B, together with the majority opinion in the Jrave/
Agents case.

JURISDICTION

The judgment of the District Court was filed on Febru-
ary 5, 1975. The majority opinion of the Court of Ap-
peals was filed on June 15, 1977. Thereafter. on June
27, 1977, the petitioners filed a motion asking for an ex-
tention of time for filing a motion for rehearing until 14
days after the dissenting judge filed his separate views,
but this motion was denied. Petitioners then asked this
Court for an extension of time for filing a petition for a
writ of certiorari, and, by order dated August 22, 1977,
the period for filing this petition was extended to and in-
cluding November 12, 1977. The opinion of the dissent-
ing judge in the Court of Appeals was filed September 15,
1977.

The jurisdiction of this Court is invoked under 28 U.S.C.,

Section 1254(1).

QUESTIONS PRESENTED

1. When determining whether a plaintiff has standing
to sue, has this Court allowed the zone of interest test to
“become extinct’?

2. If not, was the zone of interest test properly ap-
plied by the Court of Appeals to bar a suit by a domes-
tic oil producer who suffers actual competitive injury as

a result of erroneous and illegal Internal Revenue Service
rulings which benefit the foreign operations of his compe-
titors?

STATUTES INVOLVED

The statutes involved are 5 U.S.C. Sec. 702, and 26
U.S.C. Secs. 901 and 7805.

STATEMENT OF THE CASE

Petitioner Tax Analysts and Advocates (TAA) is a non-
profit corporation organized under the laws of the District
of Columbia in 1970 for the purpose of promoting tax
reform. It represents over 175 individual supporters, each
of whom is a United States taxpayer who has contributed
financially to TAA to ensure that the Internal Revenue
Service (IRS) does not grant special interest groups unduly
favorable tax treatment beyond that which the IRS may
lawfully provide.

Petitioner Thomas F. Field is the owner of the entire
working interest in a small, currently producing oil well
located in Venango County, Pennsylvania. The well is
not subject to price controls, and the price received for
its output is therefore determined by “the price of the
approximateiy 15 percent of energy imported [into the
U.S.] as oil. . .”!

| The quoted language is from the 1975 Economic Report of the
President, transmitted to Congress in February 1975. That report
states, at pages 74-5, that “The structure of the U.S. energy market
is such that the price of the approximately 15 percent of energy im-
ported as oil sets the unconstrained domestic energy price as well.”

,

wy

4

Section 7805 of the Internal Revenue Code empowers
the Secretary of the Treasury to promulgate rules and
regulations for the enforcement “of this title”. Section
901 of the Code is among those with respect to which
both rules and regulations have been published. That sec-

tion allows qualifying United States taxpayers to claim a
foreign tax credit for “the amount of any income, war
profits, and excess profits taxes paid or accrued during
the taxable year to any foreign country or to any pos-
session of the United States.”

Under Section 901(b), a credit against federal income
taxes can be taken only for foreign income taxes paid;
no credit is allowed for foreign sales taxes, excise taxes,
or severance taxes. Nor may a credit be claimed for ro-
yalties paid to a foreign government. These non-income
taxes and royalties are treated as ordinary business ex-
penses; they therefore result in a deduction from gross
income rather than in tax credits which can offset U.S.
tax on a dollar-for-dollar basis.

Beginning in the 1950’s, the principal oil producing na-
tions in the Middle East, North Africa, and South America
promulgated a series of formal income tax statutes which
appeared to impose net income taxes on United States

companies producing oil in those nations. In 1955 and
1968, the Internal Revenue Service published rulings that
the “income taxes” paid on oil production to Saudi Arabia
and Libya, respectively, were creditable taxes. Rev. Rul.
55-296, 1955-1 Cum. Bull. 386; Rev. Rul. 68-552, 1968-2
Cum. Bull. 306. In addition, the Internal Revenue Service
has issued a substantial number of unpublished rulings to
United States oil companies, holding that payments of
“income taxes” made to the other principal OPEC nations
are also creditable taxes under Section 901.

In recent years, the nature of the purported “income
taxes’ imposed on oil production by the principal oil ex-
porting nations has changed both in character and amount.
Since at least 1973, if not earlier, the purported “income
taxes” imposed by the OPEC governments have been cal-
culated so as to produce a fixed per barrel “government
take” without regard to the profits or losses of the pro-
ducing firms.? Because these imposts are calculated on
a fixed per barrel basis, and because they have no relation-
ship to the actual gross or net income of the oil compa-
nies paying them, it seems quite obvious that they no
longer constitute creditable income taxes — if they ever
did.

The Treasury Department is aware of these facts. For
example, in his November 18, 1975 speech to the Na-
tional Foreign Trade Council, Charles M. Walker, who was
then the Assistant Secretary of the Treasury for Tax Pol-
icy, stated that “. . . the tax systems of the OPEC coun-
tries impose very high taxes which have many of the
characteristics of royalties.” And a prominent, recent
scholarly study makes the same point:

There is every reason to assert that the bulk
of the oil company payments to host countries
are in fact royalties and that this is relevant to
the eligibility of these payments for full foreign

tax credit.
* 7 *

> The computation of the OPEC “government take” involves multi-
plication of the number of barrels produced in a given period oy a
constant figure which is a percentage of a fictional reference price
selected by the respective foreign governments to provide the desired
per barrel government revenue, reduced by a fixed per barrel amount
(continued)

6

On the grounds of tax theory, therefore, the
extension of the foreign tax credit to the OPEC
charge is highly questionable.?

In light of these facts, petitioner Tax Analysts and Ad-
vocates on February 19, 1974 filed a detailed administra-
tive petition with the Commissioner of Internal Revenue
explaining the impact of the conversion of OPEC taxes
into a fixed per barrel “government take” and pointing
out the illegality under those circumstances of the Inter-
nal Revenue Service rulings permitting the “income taxes”
in question to be credited against U.S. tax liabilities. The
petition also called on the Commissioner to exercise the
discretion granted by Section 7805 to revoke the rulings
in question. The Commissioner did not respond.

Petitioners Tax Analysts and Advocates and Field then
filed a complaint on June 17, 1974, seeking a declaratory
judgment that the challenged Internal Revenue Service rul-
ings were unlawful, and asking for an injunction requiring
the Internal Revenue Service to withdraw them. This com-
plaint was subsequently amended on August 13, 1974.
Both the original and the amended complaint pointed out

2 (continued)
denominated as a “royalty” and small per barrel operating costs.
For further information on the computation, see Petroleum Intelli-
gence Weekly, January 14, 1974, at page 6. For further informa-
tion on the changes made by OPEC in the method of computing
the “government take”, see the Middle East Economic Survey, De-
cember 28, 1973, p. 3a and December 13, 1974 (supplement).

”

3 Gerard M. Brannon, Energy Taxes and Subsidies: A Report
to the Energy Policy Project of the Ford Foundation (1974) pages
94-96.

that the revenue loss to the United States Treasury, if the
challenged rulings were not revoked, would be approxi-
mately $3 billion in 1974.

In addition to this revenue loss to the Treasury, peti-
tioner Field sought relief in the amended complaint from
two injurious effects of the challenged IRS rulings which
he suffered in his capacity as a domestic oil producer. He
pointed out, first, that the price for foreign oil charged by
the oH producers who have received the challenged rulings
determines the market price for oil in the United States
(see footnote 1, supra) and that these prices are lower be-
cause of the tax advantages conferred by the rulings.
Therefore, the rulings result in his obtaining lower prices
for his oil production.

Field also alleged that the Internal Revenue Service rul-
ings increase the net income from foreign oil production
over what it would be if payments to foreign governments
could only be deducted from gross income, as is the case
domestically. This results in higher investment returns
from foreign oil production than from domestic produc-
tion, and lessens the price that Field could receive if he
were to offer his working interest for sale.

Petitioner Field also alleged that he would be required
to pay higher federal income taxes because the Internal
Revenue Service rulings improperly reduce the tax burden
of American companies producing oil abroad. Petitioner
Tax Analysts and Advocates alleged that its supporters, as
federal taxpayers, would likewise be required to pay higher
federal income taxes.

On February 5, 1975, the District Court issued an opin-
ion and order dismissing the complaint solely on the ground

that petitioners lacked standing. 390 F. Supp. 927 (D.D.C.)
Thereafter, both petitioners appealed.

The Court of Appeals, with one judge dissenting, con-
cluded that both petitioners, as taxpayers, lacked standing
“because they have suffered no judicially cognizable in-
jury in this capacity...” In addition, while acknowledg-
ing “that appellant Field has suffered injury in fact” in
his capacity as a domestic oil producer, it also held that
he failed to satisfy the “zone test’’ which was announced
by this Court in 1970.4 The existence (or lack of exist-
ence) of the zone test, and its possible contours, are there-
fore the focus of this petition.

REASONS FOR GRANTING THE WRIT

I.

THE COURT OF APPEALS DECISION CONFLICTS WITH
THE TEACHING OF THIS COURT IN ALL OF ITS RE-
CENT MAJORITY OPINIONS ABOUT STANDING.

Since 1970, when it announced the “zone test” in As-
sociation of Data Processing Organization v. Camp, 397
U.S. 150, this Court has decided twenty major standing
cases, almost all of them by a divided Court. With re-
spect to the so-called “zone test,’ the teaching of the
eighteen most recent of these decisions seems to be un-
equivocal: the zone test is dead.

The suggestion that the zone test for standing has been
allowed to die a natural death has been strongly advanced

+ The zone test was developed and applied in two companion
cases: Association of Data Processing Organizations v. Camp, 397
U.S. 150, and Barlow y. Collins, 397 U.S. 159.

9

by Professor Kenneth Culp Davis, probably the leading
American writer on the subject of administrative law. In
the introduction to the July 1977 Cumulative Supplement
to his Administrative Law of the Seventies he states (p. 6)
that:

The “zone” test enunciated in 1970 was unsatis-
factory, but it has apparently died from neglect;
the Supreme Court has not asserted it since 1970
although it has been relevant to many cases.

Similarly, in the text of his July 1977 Supplement, Profes-
sor Davis states (at p. 181) that:

The [Supreme] Court deserves commendation
for its benign neglect of the “zone”’ test it enun-
ciated in 1970 in the Data Processing opinion.
Since the Court has not mentioned that test in
its latest eighteen majority opinions about stand-
ing, and since it was relevant to a good many
of the cases .. . it has become extinct, as it
should.

Thus, if the teaching of the leading American scholar
on the subject of standing is accepted, the Court below
has erred by reviving an “unsatisfactory” test of standing,
which this Court has allowed to “become extinct.” Not
only does this deny justice to the petitioners, but it im-
properly prevents adjudication of a case which presents
questions of considerable public importance.

On the other hand, if Professor Davis is wrong in his
interpretation of this Court’s eighteen most recent siand-
ing decisions, it is highly important to make that point
clear, for the guidance of the lower courts and practition-
ers. Otherwise, the unfortunate ambiguity that now sur-
rounds the zone test will continue to create mischief.

10

THE COURT OF APPEALS DECISION CONFLICTS
WITH THOSE OF OTHER APPELLATE COURTS.

A. As to whether the zone of interest test is dead:

As the majority opinion of the Court of Appeals in
this case has pointed out, “‘at least one circuit court has
chosen forthrightly to state its opposition to the [zone
of interest] test." The case to which the majority refers
is Park View Heights Corporation yv. City of Black Jack,
467 F.2d 1208 (C.A. 8, 1972). That case re ersed a Dis-
trict Court’s holding that two nonprofit corporations and
eight individual plaintiffs lacked standing to challenge a
municipal zoning ordinance. At the beginning of its dis-
cussion of the standing issue (p. 1212. n. 4) the Eighth
Circuit stated:

At this beginning point of our “standing” dis-

cussion, we record our preference for simplify-
ing the “law on standing.” We think that all

that is required for a plaintiff to have standing
to sue for a constitutional or a statutory viola-
tion is a showing of “injury in fact”.

Accordingly. if petitioner Field, or another similarly
situated individual, were to bring the present suit in the
Eighth Circuit, he would have standing. An important
right, such as access to the courts for the redress of in-
juries, should not depend to such an extent on the geo-
graphical location in which suit is brought. Review by
this court is needed to establish greater geographical uni-
formity with respect to the zone test, assuming that test
still exists.

1]

B. As to whether maintenance of compctitive fair-
ness is one of the interests protected by the In-
ternal Revenue Code.

The result of the Court of Appeals decision in this case
is to leave business competitors without effective judicial
protection when the Commissioner of Internal Revenue
abuses the discretion granted him under Section 7805 of
the Internal Revenue Code, through the issuance of rulings
that favor one competitor at the expense of another. The
Appeals Court is quite frank about this: ‘The existence
of competitive ramifications flowing from the challenged
agency action,” it states at page 26 of the slip opinion,
“is not sufficient evidence to infer that Congress arguably
intended to protect or regulate competitive interests.”

This aspect of the Court of Appeals opinion is sharply
in conflict with the landmark decision of the Court of
Claims in /nternational Business Machines Corp. v. United
States, 343 F.2d 914 (1965), cert. denied, 382 U.S. 1028
(1966). That case, like this one, involved a situation in
which the Internal Revenue Service had favored one com-
petitor over another by the issuance of a ruling that was
erroneous and illegal. The International Business Machines
Corporation argued that the Internal Revenue Code did
not permit discrimination of this sort.

In the course of accepting IBM’s arguments, the Court

of Claims pointed out (at p. 920) that abuse of the discre-
tion granted to the Commissioner’of Internal Revenue with
respect to rulings is reviewable “‘in the same way as other
discretionary administrative determinations.’ It alsc stated
that Section 7805(b) of the Internal Revenue Code embodied
the Congressional intent that the Court of Appeals in the
present case was unable to discern:

12
Congress can direct the Service and the courts to
take account, in a specified area, of discrimina-
tion, of equality of treatment, and of the tax bur-
dens imposed on competitors or persons in the
same or a comparable situation. Where that is
what Congress has declared, the policy of the tax
law emphasizes, in that particular sector more
than in the rest of the tax field, the component
of equal treatment; courts are then bound to vin-
dicate that special interest just as they are, gen-
erally, to see that the uniform taxes Congress has
sought to levy are paid .. . With respect to In-
ternal Revenue Service rulings and regulations,
the Congressional mandate does direct administra-
tive and judicial attention to this factor of equa-
lity (among others). /nternational Business Ma-
chines Corp., supra, at 919

The fact that the present case involves competitive dis-
crimination arising from IRS rulings issued under Section
901 of the Internal Revenue Code, whereas the /BM case
involved rulings issued under Section 4191, is not a point
of distinction, because the discretion granted under Sec-
tion 7805 of the Code extends to all rulings and regula-
tions “for the enforcement of this title.” As a conse-
quence, were the /BM case to arise today, it seems prob-
able that, in addition to the other standing objections
raised in the 1965 case by the government, the firm would
also be faced with the claim that the Internal Reveuue
Service has what the dissenting judge in the present case
calls “virtually unfettered discretion in adjusting . . . eco-
nomic relationships.”’ (See dissent, p. 2, n. 2)

13

Ill

THE COURT OF APPEALS DFCISION HAS IMPORTANT
IMPLICATIONS BOTH WITHIN AND BEYOND THE TAX
AREA.

A. The decision will further aggravate the chaotic
situation faced by the lower courts when they
seek to determine the status of the zone test.

Currently, both judges and litigants face a chaotic situa-
tion when seeking to determine the justiciability of a claim
in light of the zone of interest test. The existing confu-
sion should be ended. The majority opinion in the Court
of Appeals in the present case contains (slip opinion, p. 13)
a plea for greater clarity in this area:

.. . [The Supreme] Court has not attempted a
detailed explanation of the purpose, meaning, or
scope of the [zone test] standard. The deficien-
cies, ambiguities, and unresolved questions inher-
ent in the zone test have been the subject of
voluminous criticism. There has also been con-
fusion in the application of this prudential stand-
ard in the courts. Some courts have chosen to
ignore the zone test; at least one circuit court
has chosen forthrightly to state its opposition to
the test. Perhaps the most common pattern is
to announce in conclusory terms that the zone
standard has or has not been satisfied. (Foot-
notes omitted.)

A judicial standard which is so thoroughly riven with
ambiguity and imprecision is a fertile source of both wasted
judicial effort and inequality in the treatment of similarly
situated parties. Accordingly, the zone of interest test
cries out for clarification — or for decent burial.

14

B. The decision of the Court of Appeals will pro-
duce unfettered and unreviewable administra-
tive discretion with respect to IRS rulings that
lose revenue.

Internal Revenue Service rulings are regularly reviewed
by the courts, but the rulings which are commonly sub-
jected to judicial scrutiny are those that have increased an
individual's or a firm’s tax payments. The peculiarity of
this case, like the /BM case, supra, is that it involves so-
called “giveaway rulings.” These are IRS administrative
determinations that /ose rather than raise revenue.

Revenue-losing IRS rulings have had — and continue to
have — an important impact on our tax system. Whether
they can be subjected to judicial scrutiny will be deter-
mined to a considerable degree by the outcome of this
case. Unless such rulings can be subjected to judicial review
in an orderly manner, we will be faced vith what the dis-
senting judge in the Court of Appeals calls (dissent, p. 2,

n. 2) “The spectre of . . . unreviewable discretion [which
can be] exercised in contradiction to the commands of
Congress...”

Provided that injury in fact is demonstrated, both revenue-
lesing and revenue-raising IRS rulings should be subjected to
judicial review in the same fashion. To the extent that
the zone of interest test is a barrier to that legitimate
goal, it should be interred or appropriately modified. The
Commissioner of Internal Revenue should not be empow-
ered to commit wrongs for which there is no judicial re-
medy.

15

CONCLUSION

For the foregoing reasons, this petition for a writ of
certiorari should be granted.

Respectfully submitted,

THOMAS F. FIELD
Counsel for Petitioners

16

CERTIFICATE OF SERVICE

I, Thomas F. Field, attorney for the petitioners and a
member of the bar of the United States Supreme Court,
do hereby certify that on this 11th day of November
1977, I served copies of the foregoing petition for writ
of certiorari on the attorneys of record for the respon-
dents herein, Scott P. Crampton, Earl J. Silbert, Richard
Farber, and Leonard J. Henzke, Jr. and on the Solicitor
General of the United States, Wade H. McCree, Jr., by
mailing three copies of the same, postage prepaid, to each
of them at their offices at the Department of Justice,
Washington, D.C. 20530, and (in the case of Silbert) at
the U.S. Courthouse, Washington, D.C. 20001.

Thomas F. Field
Attorney for Petitioners

la

APPENDIX A
Notice: This opinion is subject to formal revision before publication
in the Federal Reporter or U.S.App.D.C. Reports. Users are requested
to notify the Clerk of any formal errors in order that corrections may be
made before the bound volumes go to press.

United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

No. 76-1304

TAX ANALYSTS AND ADVOCATES,
THOMAS F. FIELD, APPELLANTS

Vv.

MICHAEL BLUMENTHAL, Secretary of
Treas iry of the United States, et al.

Appeal from the United States District Court
/ for the District of Columbia

/ (D.C. Civil 74-917)

Argued 8 January 1976
Decided 15 June 1977

Joseph Onek, with whom Eldon V. C. Greenberg and
Richard A. Frank were on the brief, for appellants.

Leonard J. Henzke, Jr., Attorney, Tax Division De-
partment of Justice, with whom Scott P. Crampton, As-
sistant Attorney General, Earl J. Silbert, United States

2a

Attorney, and Richard Farber, Attorney, Tax Division
Department of Justice, were on the brief, for appellees.

Before: BAZELON, Chief Judge, TAMM and WILKEY,*
Circuit Judges

Opinion for the Court filed by Circuit Judge WILKEY.

Chief Judge Bazelon dissents and will file a statement
of separate views at a later date.

WILKEY, Circuit Judge: The appellants in this case
are Tax Analysts and Advocates (TAA), a non-profit
corporation organized under the laws of the District of
Columbia for the purpose of promoting tax reform, and
Thomas F. Field, Executive Director of TAA. Appel-
lants filed suit in the District Court’ seeking a declara-
tory judgment that certain published and private rulings
of the Internal Revenue Service (IRS) allowing tax
credits for payments made to foreign nations in con-
nection with oil extraction and production are contrary
to the Internal Revenue Code (Code) and therefore un-

. ™ After oral argument, District Judge Justice, United States
District Judge for the Eastern District of Texas, the third
member of the panel, who was sitting by designation pur-
suant to 28 U.S.C. § 292(d), found it necessary to recuse
himself. By random selection, Circuit Judge Wilkey was
assigned to replace him on the panel and was assigned to
write the opinion on 9 February 1977.

1 Jurisdiction is alleged under 28 U.S.C. §§ 1340, 2201, 2202,
and 5 U.S.C. §§ 702, 703. Amended Complaint, { 2, Joint
Appendix (J.A.) at 39. These latter statutory provisions
no longer serve as a basis for jurisdiction in the federal
courts. See Califano v. Sanders, 45 U.S.L.W. 4209, 4211 (23
Feb. 1977).

Prior to the filing of this suit in the District Court, appel-
lants filed a petition with the Commissioner of the Internal
Revenue Service seeking to have the Revenue Rulings at
issue in this case revoked. According to appellants, no re-
sponse was made to the petition. Amended Complaint, §{ 23,
24, J.A. at 45.

3a

lawful.? In addition, appellants sought an injunction
requiring the IRS to withdraw the rulings and to collect
taxes from oil companies for all periods not barred by the
statute of limitations in those cases where foreign tax
credits were taken pursuant to the ruling.* Both appel-
lants claim to have standing to sue as federal taxpayers;
TAA makes this claim as the representative of its mem-
bers, who are federal taxpayers,‘ while appellant Field
relies on his status as an individual taxpayer.’ In ad-
dition, appellant Field contends that he had standing
as a competitor in his capacity as the owner of the en-
tire working interest in a currently producing domestic
oil well.’

On a motion by the defendants,’ the District Court
(Hart, J.) dismissed the complaint * on the grounds that
appellants lacked standing to bring the action.” We
agree with the District Judge and conclude that both
appellants lack standing as federal taxpayers because
they have suffered no judicially cognizable injury in this

* Amendment Complaint, J.A. at 45.
* Id. at 45-46.

‘Id. 13, J.A. at 39.

‘Id. 9 4(a), J.A. at 39.

*Id.© 4(b), J.A. at 39-40. The oil well is located in Venango
County, Pennsylvania; the oil produced at this location is
not subject to price controls imposed by the federal gov-
ernment. Id.

’The defendants in this case are the Secretary of the
Treasury and the Commsisioner of the IRS. Both are sued in
their official capacities. Amended Complaint, ©* 5, 6, J.A.
at 40.

* Appellants filed their original complaint on 17 June 1974.
The complaint was amended on 13 August 1974 to reflect
appellant Field’s acquisition of the entire working interest
in a domestic oil well.

°390 F. Supp. 927 (D.D.C. 1975).

4a

capacity, and thus affirm the District Court on the ra-
tionale stated in its opinion.’® In addition, we conclude
that Appellant Field, while suffering injury in a fact
as a competitor dealing in oil extraction and production,
does not assert an interest that falls within the ‘zone
of interests” protected by the relevant provisions of the
Code and therefore does not have standing in this con-
text. Accordingly, we affirm the order of the District
Court. |

I. THE NATURE OF APPELLANTS’ CHALLENGE

A. The Challenged Agency Action

Section 901(b) of the Code allows qualified citizens
of the United States and domestic corporations to claim

*° As federal taxpayers, both appellants claim ‘a personal
pecuniary interest in requiring that the IRS assess and
collect taxes owed by other taxpayers to the fullest possible
extent under the provisions of the Code.”” Amended Complaint,
11 3, 4, J.A. at 39. According to the appellants, the published
and private IRS rulings at issue in the case cause injury in
fact to this interest by decreasing the amount of taxes paid
into the Federal Treasury by United States companies oper-
ating abroad in the area of oil extraction and production.
Appellants aver that the monetary loss to the United States
Treasury attributable to the treatment of the foreign income
taxes on income from oil production as creditable against
United States tax liability, rather than as deductible costs
of business, amounted to $3 billion in 1974. Amended Com-
plaint, § 16, J.A. at 42. According to appellants, this decrease
in revenue causes their federal income taxes to rise in some
unstated amount.

With respect to these claims of taxpayer standing, we
affirm the District Court’s finding of no injury in fact and
adopt the reasoning of the District Court as put forth at 390
F.Supp. 932-38. Since appellants have not satisfied this basic
constitutional requirement of injury in fact, there is no need
to explore the other inquiries relevant to prudential limita-
tions on standing. See text and notes at notes 29 to 34, infra.
See also Harrington V. Bush, No. 75-1862, Slip Op. at 28 n.68
(D.C. Cir. 18 February 1977).

Sa

a tax credit for “the amount of any income, war profits,
and excess profits taxes paid or accrued during the tax-
able year to any foreign country. ...”* This credit
can be taken only for foreign income taxes paid;* no
credit is allowed for the payment of excise taxes, sever-
ance taxes, mineral royalties, or similar payments to
foreign governments. Excise taxes, severance taxes, and
royalty payments are treated, when appropriate, as or-
dinary business expenses and therefore result in deduc-
tions from gross income rather than in tax credits which
can offset tax liability on a dollar-for-dollar basis.

Beginning in the 1950’s, the principal oil producing
nations in the Middle East. North Africa and South
America promulgated a series of formal income tax
statutes which imposed net income taxes on United States
companies producing oil in those nations.** In 1955, the
IRS published Revenue Ruling 55-296 which allowed a
foreign tax credit for income taxes paid to Saudi
Arabia."* In 1968 the Service promulgated Revenue Rul-
ing 68-552 allowing a foreign tax credit for income taxes
imposed by Libya.** In addition, the IRS has issued sev-
eral private rulings allowing foreign tax credits for

1 28 U.S.C. § 901(b) (1).

1228 U.S.C. § 903 provides that “the term ‘income, war
profits, and excess profits taxes’ shall include a tax paid in
lieu of a tax on income, war profits, or excess profits other-
wise generally imposed by any foreign country... .” Appel-
lants claim that the payments to foreign nations at issue in
this case cannot be considered as “in lieu of’ taxes within
the meaning of Section 903. We accept this contention as
being true for the limited purpose of ruling on the question
of standing. See note 19, infra.

1s Amended Complaint, 9 9, J.A. at 40.
** 1955-1 Cum. Bull. 386.
© 1968-2 Cum. Bull. 306.

6a

income taxes levied by Iran, Kuwait, and Venezuela in
connection with oil production in those countries.**

Appellants contend that the income taxes paid by
United States companies to the foreign nations listed
above are not creditable taxes within the meaning of Sec-
tion 901(b) of the Code. Rather, appellants assert that
these taxes are in substance either rolayties paid for the
right to extract oil from land owned by the foreign na-
tions, or excise, severance, or similar taxes which are not
creditable under Section 901(b).*° Appellant Field, as
the owner of a domestic oil well, pays the owner of the
land on which his well is located a regular royalty pay-
ment for the right to extract oil from the land;*> under
the Code, appellant can deduct these payments from gross
income but cannot credit them against his tax liability.
In effect, appellants allege that the IRS has exalted form
over substance in allowing the tax credits at issue; all
of the injuries which appellants put forth to support
their standing flow from this decision to treat the for-
eign income taxes as creditable taxes, rather than as
deductible expenses, for their taxpaying competitors.

Having outlined the substantive merits of appellants’
claims, it remains to relate this aspect of the case to the
issue of standing. Under the relevant Supreme Court
directive, we “must accept as true all material allega-
tions of the complaint, and must construe the complaint
in favor of the complaining party.” This standard of
review dictates that we assume that the IRS has im-
properly allowed a tax credit for the payments to foreign
nations in connection with oil extraction and production.

** Amended Complaint, { 10, J.A. at 41; Brief for Appellees
at 5.

** Amended Complaint, © 12, J.A. at 41.

** Amended Complaint, © 18, 19, J.A. at 42.

** Warth v. Seldin, 422 U.S. 490, 501 (1975).

7a

This assumption as to illegality does not in and of itself
confer standing on anyone to challenge the illegality.*°
Rather, as this court has stated, “the proper inquiry is
whether the illegality does injury to an interest of the
complaining party.” ** We now turn to an examination
of the interests and injuries put forth by appellant
Field to support his standing as a competitor in this
case.*? :

B. Competitor Standing

As an independent domestic oil producer, appellant
Field competes in the domestic market with those com-
panies which are granted tax credits for the income
taxes paid to foreign nations. As a competitor, appellant
Field claims that the Internal Revenue Code grants him
a protected interest in competitive fairness and equity
in matters of federal taxation which has been injured
by the published and private rulings made pursuant
to Section 901(b). Appellant believes that this asserted
interest confers on him the right to “challenge[] as
inequitable and illegal the favorable treatment received
by others as a result of Internal Revenue Service ac-
tion.” **

* See United States v. Richardson, 418 U.S. 166, 179
(1974) ; Harrington v. Bush, supra, note 10, Slip. op. at 11
n.31.

** Harrington v. Bush, supra note 10, Slip. op. at 11
(emphasis in original).

2 The issue of taxpayer standing has been dealt with in
text and notes at notes 4 to 10, supra, and will not concern us
during the remainder of our analysis.

** Brief for Appellants at 18. There are statutory provisions
providing for judicial review of IRS action at the request of
one whose taxes are in question. See 26 U.S.C. § 6123(a).
These challenges usually take place within the context of a
refund or deficiency suit.

[Continued]

8a

Appellant alleges two injuries in his capacity as a
competitor. As the first injury appellant Field alleges
that the IRS rulings “result in his obtaining lower prices
for his oi] production than he would receive if the in-
ternational companies could only deduct and not credit
their oil production related payments.” *' The rulings
at issue in this case enable the international companies
to pay far less income tax to the United States than
if these payments were merely deductible. A substantial
portion of the oil produced in Saudi Arabia, Libya, Ku-
wait, Iran and Venezuela by United States companies is
exported to the United States. The prices charged by
the international companies largely determine the market
price for uncontrolled crude oil received by independent
producers such as appellant Field. According to ap-
pellants, the lower taxes paid by the international com-
panies allow these companies to sell their foreign oil in
the United States at lower prices than would prevail if
the companies could only deduct and not credit their
foreign income tax payments.** Thus, as a consequence,
appellant Field contends that the IRS rulings result in
competitive injury due to the loss of potential income
in the sale of his domestically produced oil.

The second injury of a competitive nature alleged by
Appellant Field concerns the impact of the challenged
rulings on the value of his operating interest in his
domestic oil well. According to appellant Field, the

7s [Continued]

Appellant presents a different type of case in this action
by attempting to use alleged competitive injury to himself as
the basis for the challenge of the IRS action; he does not put
forth the question of his own tax liability or that of the
international companies taking advantage of the tax credit
allowed by the challenged rulings as the basis for his standing.

** Amended Complaint, © 18, J.A. at 44.
** Id. § 19, J.A. at 44.

9a

challenged IRS rulings increase the net income from
foreign oil production over what it would be if the for-
eign payments could only be deducted from gross income
for federal tax purposes.” Thus, as a result of the rul-
ings, foreign oil production yields higher investment re-
turns and investors are more willing to invest in foreign
oil production than they would be if the rulings had not
been promulgated.*’ The value of foreign oil well invest-
ments is therefore increased relative to similar domestic
investments, to the alleged competitive detriment of ap-
pellant Field.

The asserted competitive interest and alleged injuries
presented by appellant Field will now be tested against
the standards developed by the Supreme Court in the
area of standing.”

II. ANALYSIS OF STANDING CLAIMS

A. Preliminary Considerations

The standing doetrine has two sources: the “case or
controversy” requirement of Article III of the Constitu-
tion,” and judicially imposed rules of self-restraint
known as “prudential limitations.” In the context of
this case, we have occasion to apply both the constitu-
tional and prudential dimensions of the standing doc-
trine and thus to illuminate the relationship between

26 Td.
7 Td.

*® Sec Harrington Vv. Bush, supra note 10, Slip. op. at 28
n.68.

** The Supreme Court first clearly stated the constitutional
nature of the injury in fact requirement in Flast v. Cohen,
392 U.S. 83 (1968) and has been consistent in this interpreta-
tion in all subsequent discussions of standing.

” Sce Warth v. Seldin, 422 U.S. 490, 498 (1975).

10a

these two elements of the doctrine.*' The Article III con-
stitutional requirement is one of “injury in fact, economic
or otherwise;” * such injury is the “irreducible constitu-
tional minimum which must be present in every case.” *’
If a court finds that there is no injury in fact, ‘no
other inquiry is relevant to consideration of . . . stand-
ing.” ** The vast majority of the case law on standing
at all levels of the federal court system has been di-
rected at defining this constitutionally based concept of

injury in fact.

Prudential limitations, on the other hand, are not
constitutional requirements; these limitations are de
veloped and imposed by the Supreme Court in its super-
visory capacity over the federal judiciary.* It is clear
that Congress may remove these prudential limitations
by statute; Congress has chosen to exercise this authority
on various occasions.** There has been no Congressional
authorization of appellants’ action here; therefore, the
prudential limitations developed by the Supreme Court

‘1 We deny the claims as to taxpayer standing because we
find no injury in fact; see note 10, supra. With respect to
competitor standing, however, we recognize that injury in
fact has occurred but proceed to deny standing based on a
prudential limitation; see Part II.B.2, infra.

3: Ass'n of Data Processing Serv. Orgs., Inc. Vv. Camp, 397
U.S. 150, 152 (1970).

3s Harrington V. Bush, supra note 10, Slip op. at 28 n.68.

%* Schlesinger V. Reservists to Stop the War, 418 U.S. 208,
227 n.16 (1974).

> See, e.g., Warth v. Seldin, 422 U.S. 490, 498 (1975).

* For a collection of statutes in which Congress has re-
moved the prudential standing barriers, see C. Wright, et al.,
Federal Practice and Procedure § 3531 (p. 71, 1977 Supple-
ment). For the clearest example of the operation of this
Congressional control over prudential limitations in the ju-

lla

are fully applicable in this context.*’ To date, at least
three prudential limitations have been announced by the
Court. The first of these limitations to be enunciated,
and the one which will be the focus of our concern in
Part B.2, infra, is the so-called “zone test: “whether
the interest sought to be protected by the complainant
is arguably within the zone of interests to be protected
or regulated by the statute or consitutional guarantee
in question.” ** The two additional prudential limitations
relating to causation “ and redressability of the griev-

dicial context, see Trafficante v. Metropolitan Life Ins. Co.,
409 U.S. 205 (1972).

**We believe that the fact that the limitations of the
standing doctrine beyond injury in fact are termed “pru-
dential limitations,” does not mean that the lower courts
have discretion as to whether to apply these limitations or
not. The Supreme Court has announced these prudential
limitations in its supervisory capacity over the federal ju-
diciary and, in the context of cases such as the one now
before us, we believe there is a nondiscretionary duty to
apply the limitations. This duty to apply the standard does
not detract from the discretion involved in determining
whether the standard has been satisfied.

** The “zone test” is not a “test” in the sense that it is
capable of mechanical application to a set of facts with an
easily discernable and certain result. Rather, it is, as this
court has stated, one of a “series of inquiries” designed
to determine if a particular party has standing. Harrington v.
Bush, supra note 10, Slip op. at 28 (emphasis in original).
As an inquiry, the standard involves a great deal of discre-
tion in its application. See note 64, infra. It is, therefore,
for purposes of convenience that we refer to it as a “‘test;”
this lable is not intended to obscure the discretion and neces-
sary ambiguity inherent in the inquiry.

* Ass'n of Data Processing Serv. Orgs., Inc. v. Camp, 397
U.S. 150, 153 (1970).

*° See Linda R.S. v. Richard D., 410 U.S. 614, 617 (19738) :
Simon v. Eastern Ky. Welfare Rights Org., 426 U.S. 26, 41-
42 (1973). See also Harrington Vv. Bush, supra note 10, Slip
op. at 28 n.68.

la

ance‘! need not be faced in the context of this case.
The application of the zone test to deny standing in this
case bears out the notion that, as this court has stated,
“a valid claim of standing rests on more than [the]
assertion of {a judicially} cognizable injury.” *

B. Competitor Standing

1. Injury in Fact. We conclude that appellant Field
has suffered injury in fact in his capacity as a com-
petitor.** Although appellant’s economic injury is rela-
tively small in magnitude,‘ this does not negate our
finding of injury in fact.“ Appellant Field has alleged
“a distinct and palpable injury to himself” ** which meets
the requirements of Article III of the Constitution; given
that the constitutional hurdle has been surmounted, we
must now proceed to examine appellant’s claim in light
of the zone test.“

*t See Simon V. Eastern Ky. Welfare Rights Org., 426 U.S.
26, 28 (1976) ; Schlesinger Vv. Reservists to Stop the War, 418
U.S. 208, 222 (1974). See also Harrington v. Bush, supra
note 10, Slip op. at 28 n.68.

*? Harrington V. Bush, supra note 10, Slip op. at 28 n.68.

*? See Ass'n of Data Processing Serv. Orgs., Inc. Vv. Camp,
397 U.S. 150 (1970); Arnold Tours, Inc. Vv. Camp, 400 U.S.
45 (1970).

* The oil well owned by appellant Field is quite small: see
Brief for Appellants at 11.

** See United States v. SCRAP, 412 U.S. 669, 689 n.14
(1973) (identifiable trifle is sufficient for purposes of standing
doctrine). The appellee’s arguments to the contrary are
frivolous; see Brief for Appellees at 10, 26-27.

‘© Warth v. Seldin, 422 U.S. 490, 501 (1975).

** See Simon V. Eastern Ky. Welfare Rights Org., 426 U.S.
26, 39 n.19 (1976).

Sd

l3a

Zz. Zone of Interests. The zone test was announced
and applied in 1970 in the companion cases of Associa-
tion of Data Processing Organizations v. Camp“ and
Barlow v. Collins.” In addition, the test has been ap-
plied by the Court in two subsequent cases.” In apply-
ing the zone test in these four cases, the Court has not
attempted a detailed explanation of the purpose, meaning,
or scope of the standard. The deficiencies, ambiguities,
and unresolved questions inherent in the zone test have
been the subject of voluminous criticism."* There has also
been confusion in the application of this prudential stand-
ard in the courts.“* Some courts have chosen to ignore
the zone test;™* at least one circuit court has chosen
forthrightly to state its opposition to the test.‘ Perhaps
the most common pattern is to announce in conclusory

terms that the zone standard has or has not been satis-
fied.”*

**See note 32, supra. The Data Processing case also in-
volved a claim of competitive injury.

**° 397 U.S. 159 (1970).

*° Investment Co. Inst., v. Camp, 401 U.S. 617 (1971);
Arnold Tours, Inc. v. Camp, 400 U.S. 45 (1970).

** A complete bibliography of these criticisms is set forth in
Note, Standing to Challenge Exclusionary Land Use Control
Devices in Federal Courts after Warth v. Seldin, 29 Stan.L.
Rev. 323 (1977). (hereinafter referred to as Note).

*? See, e.g., Pecos Ass'n V. Stans, 452 F.2d 1233, 1235 (10th
Cir. 1971) (“The interests are within the zone protected by
the APA").

*? See, e.g., Florida v. Weinberger, 492 F.2d 488 (5th Cir.
1974).

** Park View Hetghts Corp. v. City of Black Jack, 467 F.2d
1208 (&th Cir. 1972).

** See K. Davis, Administrative Law of the Seventies 512
(1976).

EEE

l4a

The zone test admittedly presents the courts with an
ambiguous and imprecise standard to apply; such am-
biguity and imprecision are certainly not foreign to the
courts, however, and none of the approaches to the zone
test outlined above has contributed to the clarification of
the concept.” Suggestions that the zone test is no longer
a constituent element of the standing doctrine are, in our
view, clearly incorrect. Indeed, all of the available evi-
dence in Supreme Court cases suggests that the zone
standard remains the law in this context.*’ We believe
that the zone test is fully applicable in this context; since
we rest our denial of standing to appellant Field as a
competitor squarely on the zone standard, we shal! put
forth in some detail the manner in which this decision
has been reached.

a. Purpose of Zone Test. The zone test serves no inde-
pendent purpose but, rather, constitutes one method to
ensure that the basic purposes and policies of the stand-
ing doctrine itself are effectuated. Although the purpose
of the standing doctrine has been the subject of consider-

% See notes 52 to 54, supra. In another context, Justice
Powell has recognized that the prudential limitations are
“less easily defined” inquiries than those involving injury
in fact. Singleton v. Wueff, 44 U.S.L.W. 5218 (29 June 1976)
(Powell, J., concurring in part and dissenting in part). The
ambiguous nature of the prudential inquiries is not, without
more, a valid reason to ignore the zone standard.

‘7 In all of the Supreme Court’s standing decisions rendered
since the zone test was announced in 1970 in which the zone
standard has not been applied but in which it has been
appropriate to make reference to this test, the Court has cited
this standard with approval. See Sierra Club v. Morton, 405
U.S. 727, 733 (1972) ; United States v. SCRAP, 412 U.S. 669,
686 n.13 (1973); United States v. Richardson, 418 U.S. 166,
176 n.9 (1974); Schlesinger V. Reservists to Stop the War,
418 U.S. 208, 224 n.14 (1974); Simon v. Eastern Ky. Welfare
Rights Org., 426 U.S. 26, 39 n.19 (1976).

lSa

able debate among the commentators,** the Supreme
Court has been consistent in identifying two basic pur-
poses of the doctrine. The first purpose, or basic policy,
is to ensure the complete adversarial presentation of the
issues before the court.** The second purpose concerns
the “proper—and properly limited—role of the courts in
a democratic society.” * That is, the standing doctrine
can be employed to define the proper judicial role rela-
tive to the other major governmental institutions in the
society."* As the Court has stated, the “prudential rules
of standing .. . serve to limit the role of the courts in
resolving public disputes.” *

We believe that the zone test is particularly suited to
the task of furthering the second stated purpose of the
standing doctrine relating to the role of the federal judi-
ciary. The zone test, by its very language, implicates
the relationship between the legislative and judicial
branches as the predominant factor in its operation—
“the zone of interests to be protected or regulated by the
statute ...in question.” “* Thus, the zone test serves the
purpose of allowing courts to define those instances when
it believes the exercise of its power at the instigation of
a particular party is not congruent with the mandate of
the legislative branch in a particular subject area.

** See Note, supra note 51, at 335 n.72.

** See Baker v. Carr, 369 U.S. 186, 204 (1962); Flast v.
Cohen, 392 U.S. 83, 95 (1968).

* Warth v. Seldin, 422 U.S. 490, 498 (1975).

*! See generally United States v. Richardson, 418 U.S. 166
(1974); Schlesinger V. Reservists to Stop the War, 418 U.S.
208 (1974).

* Warth v. Seldin, 422 U.S. 490, 500 (1975).
°3 See note 39, supra. (emphasis added).

l6a

By its choice of language, the Supreme Court has indi-
cated that the zone test is a quite generous standard; “
on the other hand, the test is obviously meant to serve as
a limitation on those who can use the federal courts as
a forum for grievances emanating from agency action
taken pursuant to a particular statutory mandate. These
competing considerations serve to frame the bounds of
a court’s discretion in applying the zone test. The discre-
tion of a court to deny standing on the basis of the zone
standard is not undefined; the zone test limitation is
grounded in Congressional action as embodied in statute.
The zone test therefore cannot be used arbitrarily to
deny access to the courts; it is based on discerned Con-
gressional purpose, a purpose which can be more clearly
or differently defined as Congress wishes.

The most severe difficulties with the zone test derive
from questions as to the proper technique to employ in
order to discern the Congressional intention in a manner
which does not defeat other basic tenets of the law of
standing. In particular, these difficulties revolve around
the decision as to which statutory provision to examine
for evidence of regulatory or protective intent and the
proper role of legislative history in making the threshold
decision on standing.

b. Proper Statutory Provision. The IRS rulings being
challenged in this case were issued pursuant to Section
901 of the Code. The question then becomes: does the
court look to this section of the statute (the Code) to
determine which interests are arguably to be regulated
or protected for purposes of the zone test, or should the
court look to other sections of the statute for evidence of
arguable regulatory or protective intent? The Supreme
Court decisions dealing with the zone test do not provide

** The particular words which give the test this quality are
“arguably” and “zone”.

17a

a conclusive answer to this inquiry.** As will be seen,
this decision is of particular significance in the context
of this case.*° Appellants urge us to adopt the second
alternative—to examine statutory provisions other than
those which form the basis for the lawsuit.*’ In this
regard, appellants refer us to additional provisions in
the Code which they believe contain the necessary evi-
dence of Congressional intent sufficient to satisfy the zone
test in this case.** We cannot agree with this approach;
instead, we shall look only to Section 901 of the Code in
our application of the zone test. Why we should do so
readily becomes apparent.

Our decision to adopt this approacii rests on two rea-
sons—one general, the other with particular reference to
the statutory scheme involved in this case. Generally, the
statutory provision at issue in a given case, in this in-
stance Section 901 of the Code, frames the substantive
issue which a court will decide if the action proceeds to
a determination on the merits. If the necessary arguable
intent is found in the particular provision, this fact fur-
ther ensures that the complaining party will have a strong
connection to the controversy and that it will serve the
policy of complete adversariness in the litigation which
has as its focus the particular statutory provision.” If,
on the other hand, standing is granted on the basis of

* See cases listed at notes 48, 50, supra.
** See text at notes 69 to 70, infra.

*’ Appellants contend that we “must examine [the] general
purpose” of the Code. (Brief at 20) to determine if the com-
petitive interests “are within the zone of interests protected
by the Internal Revenue Code.” (Brief at 8). See also Brief
for Appellants at 17-19.

** These additional provisions of the Code are sections 501,
502, 511-13, and 7805(b).

** See text and notes at notes 58 to 59, supra.

18a

intent inferred from statutory provisions which perhaps
embody different goals and policies, this connection to the
controversy may well be lessened. Therefore, as a gen-
eral rule we believe that the particular statutory section
should be the focus of analysis when applying the zone
test.

The wisdom of this decision to examine the particular
statutory section is particularly apparent in the context
of this case. The Internal Revenue Code is a extraordi-
narily complex statute which does not have a single, uni-
fied purpose. Rather, the Code is intended to accomplish
a wide variety of economic and social goals and purposes.
If litigants are allowed to transfer the Congressional
purpose and intent embodied in one section of the Code
into other contexts and situations regulated by different
provisions of the Code, the possibilities for litigation
would indeed be endless. We do not therefore believe
that litigants can “borrow” the arguable regulatory or
protective intent embodied in one provision of the Code,
and apply it to a provision where that intent is not evi-
dent, in order to satisfy the zone test. A contrary deci-
sion in this context would distort the role of the courts
in relation to the legislative branch, precisely what the
zone test serves to prevent, in the area of revenue col-
lection.

In support of their argument that the court should
look beyond the particular statutory provision, appellants
refer us to the decision of this court in Constructores
Civiles de Centroamerica, S.A. v. Hannah.” In that case
action taken pursuant to the Foreign Assistance Act of
1961” was challenged. In determining that appellants in
that case satisfied the zone test, the court looked to the

7° 459 F.2d 1183 (D.C. Cir., 1972).
71 22 U.S.C. § 2251 et. seq. (1970).

19a

genera! statement of policy found in the statute. Ap-
pellants in this case contend that the court’s reliance on
the broad general language of the preamble in the Con-
structores case supports their view that purposes em-
bodied in other sections of the Code support their stand-
ing under the zone test. The court’s action in Construc-
tores was not, however, inconsistent with the technique
we have chosen to employ in this case. In Constructores
it was acceptable to examine both particular and general
provisions because these provisions shared an identity of
purpose. Indeed, in this context, it was necessary to ex-
amine the general language of the preamble to ensure
that a grant of standing would not be inconsistent with
the statutory purpose. No such similar situation is pre-
sented in this case and we therefore confine our inquiry
to Section 901 of the Code.

ce. The Role of Legislative History. In the process of
deciding disputes which are properly before them, courts
regularly examine in some depth and in great detail the
legislative history of statutes involved in the disputes.
In the context of appiying the zone test to the issue of
standing, however, such full-scale examinations of legis-
lative history present special dangers and should there-
fore be avoided.** The dangers and deficiencies in the
traditional approach to legislative history in this context
are three in number.

First, and most significant, a full-scale examination of
the legislative policy underlying a statutory provision
may well lead to a prejudgment of the merits of the case.
A canvassing of the entire legislative background may
lead to a decision on the question of standing based on
an assessment of the strength or weakness of the claims

459 F.2d 1183, 1188-89 (1972).

** See Barlow v. Collins, 397 U.S. 159, 168 (1970) (Bren-
nan, J., concurring in the result and dissenting).

20a

being presented.* Such a result or tendency would be
inconsistent with a primary theme in the law of standing
—that the question of standing is a matter apart and
distinct from the merits of the substantive claims put
forth.* It is totally acceptable to grant standing to a
party to pursue an unsuccessful claim; a traditional ex-
amination of legislative history might well undermine
this basic proposition.

Second, the question as to precisely which interests are
meant to be regulated or protected by a statutory provi-
sion is not likely to have been faced in the legislative
history in any convincing or dispositive manner. Rather,
the express language of the statute is likely to be more
accurate in this regard. Thus, as.a source of evidence
as to whether the particular interests of a particular
plaintiff are within the relevant zone,” the legislative

**It was the fear of confusing the preliminary issue of
standing with the merits which caused Justices Brennan and
White in Barlow v. Collins, 897 U.S. 159, 168-170 (1970) to
argue that examination of standing should stop with the
constitutionally-spawned inquiry as to injury in fact and
should not reach the “zone of interest” inquiry at all. By not
relying on legislative history, as the Supreme Court indicated
in Arnold Tours, Inc. v. Camp, 400 U.S. 45, 46 (1970) was
proper, we avoid the danger of the court settling the merits in
the guise of ruling on standing and thus meet the concern
voiced by Justices Brennan and White.

"Ss See, e.g., Ass’n of Data Processing Serv. Orgs., Inc. V.
Camp, 397 U.S. 150, 153 (1970); Warth v. Seldin, 422 US.
490, 500 (1975).

** We are aware of the confusion surrounding the meaning
of which interests are relevant to the zone test. Sree K. Davis,
Administrative Law Treatise § 22.00-1 (1970 Supplement).

Essentially, the confusion surrounds what exactly has to fall -

within the relevant zone: 1) the parties themselves; 2) the
interests of the parties in general; or 3) the particular in-
terest the parties are asserting in the litigation. It seems
clear to us that the particular interests are the relevant in-

21a

history is likely to be unilluminating.”

Third, a full-scale examination of legislative history
presents the distinct possibility that the generous nature
of the zone test, which results from the language of the
test itself, will be undermined. Such an approach may
lead to a requirement that there be affirmative evidence
that the Congress intended that a plaintiff situated pre-
cisely as the plaintiff then standing before the court be
regulated or protected. Any tendency to move in this
direction would detract from the flexibility of the zone
standard provided by the requirement that the plaintiffs’
interest be only “arguably” within the zone. Thus, if
Congress had in general terms legislated against competi-
tion in a statute, it is not difficult to find that particular
competitive interests, which may not have been mentioned
in the legislative history at all, are “arguably” within
the zone of interests."* The “arguable” language of the
zone test thus serves to resolve potential ambiguities in
the legislative history and obviates the need to consult
it in the same detail as is done when the merits of the
dispute are being resolved.

Given these deficiencies in the traditional techniques
of fully examining legislative history, we believe the ap-
propriate test to be as follows: whether the complaining
party has stated an interest which is arguable from the
face of the statute. Although the Supreme Court has not
explicitly endorsed this as the appropriate operational

terests in the context of an application of the zone standard.
Professor Davis agrees. Id.

** The success of a workable standing doctrine must be
measured in some degree by the ease with which it can be
applied. This more limited role for legislative history at this
threshold stage in litigation promotes this additional goal.

** This is essentially what the Supreme Court did in Arnold
Tours v. Camp, 400 U.S. 45 (1970).

999

technique, it has come close to so doing in one case.”
Thus, we believe that this approach is both consistent
with the guidance we have been given by the Supreme
Court and that it is supportive of other policies underly-
ing the standing doctrine.*

C. Application of Zone Test to Appellant Field.

Having described what we believe.to be the purpose
of the zone test and the manner in which it should op-
erate, it is now possible to formulate with precision the
relevant zone test inquiry with respect to appellant
Field’s standing as a competitor: did Congress arguably
legislate with respect to competition in Section 901 of the
Code so as to protect the competitive interests of domestic
oil producers?

We answer the posed query in the negative for the
following reasons. The purpose of the tax credit pro-
vision of Section 901 of the Code is to prevent the double
taxation of any United States companies operating abroad.
This purpose is clear from the face of the statute itself,
and has been consistently confirmed in the case law
dealing with this particular provision in other contexts."

Id.

®°° Having stated and justified this general approach to legis-
lative history, it is necessary to state a caveat. We do not
rule out any role for legislative history at this stage, and we
would expect to be informed by the parties if the legislative
history contained clear evidence of an intent either to allow
the appellant’s interests as a basis for standing or to deny
standing to a party in this position.

** See, e.g., Bunet V. Chicago Portrait Co., 285 U.S. 1, 2
(1932); Bank of America National T.E.S. Ass'n Vv. United
States, 459 F.2d 513, 519 (Ct. Cl. 1972), cert. denied, 409 U.S.
949 (1972); Rinehart Vv. United States, 429 F.2d 1286, 1288
(10th Cir. 1970) ; Associated Tcl. & Tel. Co. v. United States,
306 F.2d 824, 832-33 (2d Cir. 1962), cert. denied, 371 U.S.
950 (1962).

23a

The tax credit envisioned in Section 901 is also available
to U.S. companies operating outside the sphere of oil
extraction and production, with the same purpose of
avoiding the double taxation of United States taxpayers,
whether such companies have domestic competition or
not. Given this purpose, it is obvious that the pro-
tective intent of the statutory section extends to all
those U.S. companies doing business abroad and paying
foreign income taxes.

in addition it cannot be said that parties in the posi-
tion of appellant Field are arguably intended to be
regulated by the provision granting tax credits; that is,
appellant Field cannot be said to fall within the regula-
tory field of concern without stretching the concept of
regulation to implausible limits.** Therefore, we con-
clude that the interests being asserted by Appellant
Field as a competitor are not the interests arguably in-
tended to be protected by the tax credit provision of sec-
tion 901 which is the statutory basis for the challenge
in this case. The congruence between the purpose of the
statute (to prevent the double taxation of particular
parties) and the interests asserted by appellant (com-
petitive interest in fairness) is not sufficient to invoke
the federal judicial power.”

® See text and notes at notes 86 to 89, infra. Appellant is
not directly regulated by the rulings being challenged in this
case. Rather, a more appropriate description is that he op-
erates in an industry which is regulated by the rulings but
does not operate in that sphere of the industry which is the

“object of the regulation.

** Cf. cases cited at notes 48-50, supra; in these cases the
congruence between the purpose of the statute (to legislate
against competition generally) and the asserted interests
(particular types of competition) was sufficient to satisfy the
“arguable” terminology of the zone test.

24a

We find it significant, as we noted earlier,‘ that ap-
pellants do not in their submissions to us attempt to
persuade the court that appellant Field’s asserted com-
petitive interests fall within the zone of interests rele-
vant to Section 901. Rather, appellants rely entirely
on other provisions of the Code to argue that the zone
sandard has been satisfied.” We have rejected this ap-
proach and put forth our reasons for so doing in part
II.B.2(b), supra. This failure to address the issue of
the zone standard as it relates to the statutory provision
being challenged suggests that a convincing argument
in this regard is lacking. Perhaps the most apprepriate
way in which we can emphasize the strength of our de-
cision to deny standing on the basis of the zone standard
is to sketch out the arguments which would need to be
made in order to satisfy the zone standard in this con-
text.

The argument that appellant Field’s interests fall
within the relevant zone of Section 901 rests on the
premise that Section 901 can arguably be read not only
as a decision to grant a tax credit to those who have
paid foreign income taxes but also as a decision not to
grant a tax credit to those who have made other sorts
of payments, such as royalties, to foreign governments.”
Under this “reverse zone of interest” analysis, competi-
tors such as appellant Field could argue that they fall
within the zone protected by the negative implication of
the statutory provision.

We cannot accept this “reverse zone of interest anal-
ysis” which would extend standing to all those who may

“* See note 67, supra.
** See note 68, supra.

** This seems to rest on the misapprehension that the stat-
ute is directed exclusively at the tax scheme and problems of
the petroleum industry, which we pointed out above was not so.

25a

be able to allege injury because they were not regulated
or protected by a particular statutory provision. Such
an approach would render the zone standard meaning-
less. Although the text is a generous one, the terms
“arguable” and “zone” are subject to definition in the
context of particular factual situations such as presented
in this case. To define the terms by reference to what
they do not mean in these factual settings is clearly
inappropriate.

There is one further argument concerning the zone of
interests surrounding Section 901 which deserves men-
tion. It can be argued that the decision to grant the
international companies a tax credit has competitive con-
sequences for parties such as appellant Field which bring
him within the relevant zone. That is, since the chal-
lenged rulings have an impact on appellant Field in his
capacity as an oil producer, he must therefore fall with-
in the intended zone of Section 901. Every decision by
a government agency generates consequences and various
forms of impact on a wide range of valid interests held
by a diverse range of parties. There is no doubt that
the decisions embodied in the challenged revenue rulings
have had an impact on appellant Field. But the con-
cepts of consequence and impact are not the proper guide
posts to define the relevant zone of interests; reference to
these concepts does not aid greatly in determining whether
a protected interest exists, but rather serve as part of
the vocabulary in defining the relationship between an
alleged injury and an asserted interest.

Thus, consequences and forms of impact do play an
important role in the law of standing; these concepts are
relevant in determining whether there has been injury
in fact. So, we have not ignored the competitive con-
sequences and impact of the challenged rulings on ap-
pellant Field; we have taken these into account in de
termining that appellant has suffered competitive injury

26a

in fact. A standing determination, such as the one in-
volved with appellant Field as a competitor, involves
separate stages of analysis;*’ we cannot simply trans-
fer the analytical concepts employed in one stage (injury
in fact) to the other stages of analysis dealing with
prudential limitations. We cannot define the zone of
interests as being the equivalent in every case of the
“zone of impact” or the “zone of consequences.” To do
so would establish a standing doctrine based solely on
the existence of harm to a party; it is clear that, under
current Supreme Court doctrine which we are obliged to
apply, such a result is unacceptable “ as contrary to the
stated purposes of the doctrine.”

In summary, we cannot look to a “reverse zone of
interests” or to the consequences and impact of the chal-
lenged agency action to define a zone within which ap-
pellant Field’s competitive interests fall. Rather, we
must make our decision as to whether the party before
us is an intended beneficiary of the statutory provision
on the basis of the interests we believe Congress argu-
ably intended to regulate or protect in the legislation.
We cannot conclude that Congress arguably intended to
regulate or protect the competitive interests of appel-
lant Field in Section 901. The existence of competitive
ramifications flowing from the challenged agency action
is not sufficient evidence to infer that Congress arguably
intended to protect or regulate competitive interests. The
arguments to the contrary fail for the reasons cited
above. Without a clearer indication from Congress from
which could be constructed a plausible argument that the
competitive interests are “arguably” to be regulated or
protected, we cannot as a prudential matter make the

** See Harrington V. Bush, supra note 10, Slip op. at 28 n.68.
8 Jd.
* See notes 59 and 60, supra.

27a

federal courts available as a forum for third-party chal-
lenges to IRS action such as the one presented here.”

CONCLUSION

We recognize that as the result of our decision in this
case it is likely that the revenue rulings at issue in the
case may go unchallenged in federal court due to the
lack of a proper party to sue. This eventuality does not,
however, operate in favor of granting standing to the
parties in this case." The standing doctrine should not
be manipulated to guarantee that there is a party to
bring any action in court that some persons may think de-
sirable to have adjudicated. Since we cannot conclude
that appellants have standing under the current frame-
work of analysis provided by the Supreme Court, the
order of the District Court in this case is

Affirmed.

*° A similar challenge to an IRS ruling was made in Simon
Vv. Eastern Ky. Welfare Rights Org., 426 U.S. 26 (1976). In-
deed, this case was held in abeyance by order of this court to
await guidance from the Supreme Court in this area. In
Simon, however, the Court denied standing on grounds not
relevant to this case.

The Court in Simon explicitly chose “not to reach the ques-
tion of whether a third party ever may challenge IRS treat-
ment of another... .” 426 U.S. at 37. The appellee in this
case has urged us to adopt such a blanket prohibition (Brief
for Appellees at 37-43), but we, too, decline to speak to this
issue.

* See note 20, supra.

28a

APPENDIX Be —_
Notice: This opinion is subject to formal revision before publication

in the Federal Reporter or U.S.App.D.C. Reports. Users are requested
to notify the Clerk of any formal errors in order that corrections may be

made before the bound volumes go to press. :

United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

No. 75-1782
AMERICAN SOCIETY OF TRAVEL AGENTS, INC., ET AL.,
APPELLANTS
Vv.
MICHAEL BLUMENTHAL, SECRETARY OF TREASURY, ET AL.

Appeal from the United States District Court
for the District of Columbia

(D.C. Civil 74-1081)

Argued October 20, 1976
Decided September 15, 1977

Thomas J. Bacas, with whom Paul S. Quinn was on
the brief, for appellants.

Leonard J. Henzke, Jr., Attorney, Tax Division, De-
partment of Justice, with whom Scott P. Crampton, As-
sistant Attorney General, Earl J. Silbert, United States

Bills of costs must be filed within 14 days after entry of judgment. The
court looks with disfavor upon motions to file bills of costs out of time.

29a

Attorney, and Ann B. Durney, Attorney, Tax Division,
Department of Justice, were on the brief, for appellees.

Before BAZELON, Chief Judge, MCGOWAN and Robs,
Circuit Judges.

Opinion for the court filed by Circuit Judge McGowan.
Dissenting opinion filed by Chief Judge BAZELON.*

McGowan, Circuit Judge: This is an appeal from the
District Court’s dismissal of a complaint challenging the
administration of the federal tax laws, not in relation
to the tax liabilities of plaintiffs-appellants, but as to
third parties not before the court. It thus presents a
threshold issue of standing to sue reminiscent of Justice
Stewart’s observation, concurring in Simon v. Eastern
Kentucky Welfare Rights Organization, et al., 426 U.S.
26, 46 (1975), that he could not “imagine a case, at least
outside the First Amendment area, where a_ person
whose own tax liability was not affected ever could have
standing to litigate the federal tax liability of someone
else.” Because Eastern Kentucky—an obviously relevant
case—was pending before the Supreme Court at the time
this appeal was first scheduled for oral argument, we
deferred our consideration to await the Supreme Court’s
outcome. We now hold, by reference to the Supreme
Court’s disposition of Eastern Kentucky, that there was
a fatal want of standing here; and we affirm the District
Court’s judgment for that reason.

I

Appellants, the American Society of Travel Agents
(ASTA) and several individual travel agencies, complain

* The dissenting opinion filed by Chief Judge Bazelon in this
case is also to be filed as a dissent to No. 75-1304, Tax Ana-
lysts and Advocates v. Blumenthal (D.C. Cir., June 15, 1977).

30a

of the failure of the federal tax authorities to assess
taxes upon certain income received by the American
Jewish Congress (AJC) and other organizations enjoy-
ing tax exemptions under § 501(c)(3) of the Internal
Revenue Code.’ In particular, they object to the tax-
exempt treatment accorded to income derived from the
operation of travel programs by § 501(c) (3) organiza-
tions. Appellants assert that such income should be taxed
as so-called unrelated business income, i.e., income ob-
tained from a business the conduct of which is “not
substantially related . . . to the exercise of perform-
ance... {of the] purpose or function constituting the
basis” for an organization’s § 501 exemption. See I.R.C.
§513(a). Alternatively, appellants contend that the AJC
and other exempt organizations have become so heavily
involved in the travel business that their § 501(c) (3)
exemptions should be eliminated altogether.

By memorandum order, the District Court decided that
neither count of appellants’ complaint stated a claim
upon which relief could be granted. 36 A.F.T.R.2d 75-

1T.R.C. §501(c) (3) (as amended, 1976) contains the fol-
lowing list of exempt organizations:

Corporations, and any community chest, fund, or foun-
dation, organized and operated exclusively for religious,
charitable, scientific, testing for public safety, literary, or
educational purposes, or to foster national or international
amateur sports competition (but only if no part of its
activities involve the provision of athletic facilities or
equipment), or for the prevertion of cruelty to children
or animals, no part of the net earnings of which inures to
the benefit of any private shareholder or individual, no
substantial part of the activities of which is carrying on
propaganda, or otherwise attempting, to influence legis-
lation (except as otherwise provided in subsection (h)),
and which does not participate in, or intervene in (includ-
ing the publishing or distributing of statements), any
any political campaign on behalf of any candidate for pub-
lic office.

3la

5142 (D.D.C. May 23, 1975). It observed that allega-
tions like those raised by plaintiffs would necessitate
“careful consideration of the particular facts and cir-
cumstances of each case.” Unwilling to embark upon
such an enterprise, the court declared that its jurisdic-
tion could “not be invoked to undertake continuing super-

= of IRS’s administration of the Internal Revenue
io

The District Court’s reluctance to become embroiled,
at the instance of taxpayers not directly involved, in the
intricacies of tax law enforcement is both understand-
able and far from irrational in terms of jurisictional
principles. However, we believe that, looking to the Su-
preme Court’s opinion in Eastern Kentucky, dismissal of
appellants’ action should be accomplished by resolution
of the preliminary question of standing. We conclude
that appellants have failed to demonstrate any actual
injury resulting from appellees’ administration, with re-
spect to third parties, of the statutory provisions govern-
ing tax-exempt organizations. We find that appellants
here, like the complainants in Eastern Kentucky, “have
failed to carry (the) burden” of establishing “that, in
fact, the asserted injury was the consequence of defend-
ants’ actions, or that prospective relief will remove the
harm.” 426 U.S. at 45, quoting Warth v. Seldin, 422 U.S.
490, 505 (1975).

Il

Appellants’ basic grievance may be simply stated. Pri-
vate travel agents earn their livelihood, primarily on a
commission basis, through the sale of transportation and
travel-related services in both domestic and foreign mar-
kets. One especially common function performed by travel
agents is the arrangement of so-called tour packages, con-
sisting of transportation, accommodations, meals, and a
variety of other features. Such packages are sold together

——

32a

at one price, a portion of which the agent retains as a
commission.

Appellants allege that, in recent years, a number of
tax-exempt organizations, including the AJC, have be-
come increasingly involved in preparing tour packages
and offering such packages to their members. Appellants
further allege that the tax-exempt status of these or-
ganizations has enabled them to sell tour packages at
prices lower than those which private travel agents must
charge in order to earn a reasonable profit. Thus, so it
is said, the AJC and other unspecified organizations have
improperly used their tax exemptions to obtain an unfair
competitive advantage in the sale of tour packages.

Operation of an extensive travel program is, in appel-
lants’ view, substantially unrelated to the religious,
charitable, scientific, or educational purposes which jus-
tify many § 501(c) (3) exemptions, including that en-
joyed by the AJC. Consequently, appellants urge that
income from such a travel program should be subjected
to the same tax treatment accorded to income earned by
ordinary ASTA members. Somewhat less vigorously, ap-
pellants maintain that if the § 501(c) (3) organizations
at issue conduct travel businesses of significant size, then
those organizations are no longer operated “exclusively”
for religious, charitable, scientific, or educational pur-
poses, and thereby forfeit their § 501(c) (3) exemptions.

We do not reach the merits, because we believe ap-
pellants have not alleged any judicially cognizable “in-
jury in fact,’’ and thus have failed to establish their
standing to bring this suit. “Injury in fact” has long
been regarded as the foremost standing prerequisite, and
the only one of constitutional dimension. See, e.g., United
States v. SCRAP, 412 U.S. 669, 686-89 & n. 14 (1973);
Sierra Club v. Morton, 405 U.S. 727, 733 (1972); and
Flast v. Cohen, 392 U.S. 83, 99-101 (1968). Under Arti-
cle III of the Constitution, federal courts are limited to

33a

the adjudication of cases and controversies. In order to
guarantee the adversarial litigation posture demanded by
this constitutional language, plaintiffs seeking to invoke
federal court jurisdiction have been required to demon-
strate that they have suffered some acti:a! injury attribu-
table to defendants.

Here, appellants claim to have been injured by ap-
pellees’ improper administration of the Internal Revenue
Code, and seek injunctive relief. However, appellants
have not indicated with sufficient specificity either the
manner in which their alleged injury occurred or the
nature of that injury. Appellants point to no prospective
customers who spurned the services of ASTA members
because of appellees’ allegedly inequitable tax treatment
of § 501(c) (3) organizations. Nor do appellants identify
tour package purchasers who in fact patronized the AJC
or some other tax-exempt organization, but who might
legitimately be expected to do business with a private
travel agent in the event appellees enforced the relevant
tax code provisions according to appellants’ recommenda-
tions. Instead, appellants complain in more abstract
terms, alleging injury arising from appellees’ creation of
an unfair competitive atmosphere, and seeking relief in
the form of the more congenial competitive environment
which would supposedly result from proper tax enforce-
ment policy. We regard this sort of injury claim as too
speculative to support standing under the circumstances
presented here.

We conceive that this disposition is not only sustained,
but also largely mandated, by Eastern Kentucky. In that
case, several indigents and organizations composed of
indigents attacked a 1969 Revenue Ruling which revised
the criteria under which non-profit hospitals might qual-
ify for tax-exempt status as charitable institutions. In
particular, the challenged ruling eliminated the require-
ment contained in a 1956 ruling to the effect that a non-
profit hospital desirous of charitable classification “must

34a

be operated to the extent of its financial ability for those
not able to pay for the services rendered.” Deletion of
this language, argued the Eastern Kentucky plaintiffs,
was directly responsible for several refusals by tax-
exempt hospitals to provide needed services to indi-
viduals unable to pay a deposit or advance fee. Plain-
tiffs further alleged that similar refusals could be ex-
pected in the future if the offending Revenue Ruling was
not changed.

As indicated above, the Supreme Court held that
“'s]peculative inferences are necessary to connect [plain-
tiffs’] injury to the challenged actions...,” and “[m]ore-
over, the complaint suggests no substantial likelihood that
victory in this suit would result’ in receipt of the hos-
pital treatment desired. 426 U.S. at 45-46. The Court
explained its conclusion by commenting upon what it per-
ceived as the tenuous connection between the injury suf-
fered and the relief sought by plaintiffs:

‘I]t does not follow ... that the denial of access to
hospital services in fact results from petitioners’ new
Ruling, or that a court-ordered return by petitioners
to their previous policy would result in these respond-
ents’ receiving the hospital services they desire. It is
purely speculative whether the denials of service
specified in the complaint fairly can be traced to peti-
tioners’ “encouragement” or instead result from deci-
sions made by the hospitals without regard to the
tax implications.

It is equally speculative whether the desired exer-
cise of the court’s remedial powers in this suit would
result in the availability to respondents of such serv-
ices. So far as the complaint sheds light, it is just
as plausible that the hospitals to which respondents
may apply for service would elect to forego favorable
tax treatment to avoid the undetermined financial

Pts in pore

35a

drain of an increase in the level of uncompensated
services.”

Id. at 42-43.

s J ustice Powell’s opinion for the Court made clear that the
finding of a standing deficiency in Eastern Kentucky rested
upon a constitutional foundation.

[W]hen a plaintiff’s standing is brought into issue the
relevant inquiry is whether .. . the plaintiff has shown
an injury to himself that is likely to be redressed by a
favorable decision. Absent such a showing, exercise of its
power by a federal court would be gratuitous and thus
inconsistent with the Art. III limitation.

The necessity that the plaintiff who seeks to invoke ju-
dicial power stand to profit in some personal interest re-
mains an Art. III requirement.

The standing question in this suit therefore turns upon
whether any individual respondent has established an
actual injury, or whether the respondent organizations
have established actual injury to any of their indigent
members.

[T]he “case or controversy” limitation of Art. III still re-
quires that a federal court act only to redress injury that
fairly can be traced to the challenged action of the
defendant ....

Id. at 38-41 (footnotes omitted).

In a recent case decided by another panel of this court, in-
quiries relating to causation and redressability of an alleged
injury are characterized as “prudential limitations.” Tax
Analysts and Advocates v. Blumenthal, No. 75-1304, slip op.
at 11-12 (D.C. Cir. June 15, 1977); and see also Harrington v.
Bush, No. 75-1862, slip op. at 28 n. 68 (D.C. Cir. Feb. 18,
1977), where such inquiries are portrayed as being separate
and apart from the “constitutional threshold of injury-in-
fact.” The implication of these statements is that, although

36a

ASTA’s complaint in the appeal before us reveals in-
adequacies closely comparable to those which afflicted
the pleadings filed by the indigents and indigent organi-
zations in Eastern Kentucky. Appellants here must rely
solely on speculation in their attempt to assert that their
business or profits would improve in the event that ap-
pellees began to tax the travel-related income of § 501(c)
(3) organizations. Appellants have not demonstrated that
they would reap any tangible benefit if the court were to
order the relief sought.

As appellees argue in their supplemental memorandum,
the lower cost of the tour packages offered by the AJC
and other tax-exempt organizations may well be attribut-
able at least in significant part to the use of volunteer
labor or the willingness to accept lower profits than would
commercial travel agents. Moreover, even if appellants
were to prevail in this suit, members of $ 501(c) (3) or-
ganizations might for a variety of reasons continue to
prefer the travel programs operated by their own or-
ganizations. Alternately, such organizations might shift
to tour packages whose religious or educational orienta-
tion would be more readily apparent. A third possibility
is that travel by members of § 501(c) (3) organizations
would simply decline.

considerations of causation or redressability may conceivably
operate to deprive particular plaintiffs of standing, such
factors can in no event rise to the level of constitutional sig-
nificance. Justice Powell’s words in Eastern Kentucky, espe-
cially the passages quoted above, are at odds with this
approach. Causation and redressability, far from being pru-
dential matters to be evaluated seriatim only after constitu-
tional standing has been established, are part and parce! of the
“injury in fact” requirement arising from the “case or con-
troversy” language in Article III. Causation and redress-
ability thus represent not additional independent standing
hurdles which prospective litigants must clear, but rather
identifiable aspects of the “injury in fact” test which has long
been recognized as the primary standing criterion in the fed-
eral courts.

ae

37a

_

If any of these consequences, or some combination of
them, ensued from a decision favorable to appellants, pri-
vate travel agents would enjoy no gain whatever from
their successful litigation. This is precisely the sort of
situation in which the Supreme Court failed to find
standing in Eastern Kentucky.*

By emphasizing their asserted competitor status, ap-
pellants seek to distinguish Eastern Kentucky. Appellants
contend that, as competitors of the AJC and certain other
$ 501(c) (3) organizations, they are entitled to protest
tax treatment of such organizations in federal court.‘

* Although Justice Stewart’s concurring statement in
Eastern Kentucky dramatically denotes the special problems
attendant upon the establishment of standing in the tax cases,
under the circumstances of this case we find, as did the
Eastern Kentucky majority, no need to reach “the question
of whether a third party ever may challenge IRS treatment
of another.” 426 U.S. at 37. The conventional “injury in fact”

prerequisite was simply not met by appellants in the record
before us.

* Appellants also rely on their competitor status to estab-
lish that they are within the “zone of interests to be protected
or regulated by” the relevant Internal Revenue Code pro-
visions. The so-called “zone of interests” test stems from the
Supreme Court’s companion opinions in Association of Data
Processing Organizations, Inc. v. Camp, 397 U.S. 150, 153
(1970) and Barlow v. Collins, 397 U.S. 159, 164-65 (1970).
As the Court observed in Eastern Kentucky, the “zone of
interests” test presents “a second, nonconstitutional standing
requirement.” 426 U.S. at 39 n.19. In an effort to demon-
strate that the “unrelated business” concept was incorporated
into the Code in order to protect competitors of tax-exempt
organizations, appellants point to both the legislative history
of I.R.C. §513 and the regulations promulgated regarding
that section. See, e.g., H.R. REP. No. 2319, 81st Cong., 2d
Sess. 36 (1950); S. REP. No. 2375, 81st Cong., 2d Sess. 27-31
(1950); and 26 C.F.R. § 1.513-1(b) (1976). Given our dis-
position of this case under the “injury in fact” rubric, we
need not address appellants’ “zone of interests” argument.

38a

For support of their position, appellants rely heavily on
Association of Data Processing Organizations, Inc. v.
Camp, 397 U.S. 150 (1970). In that case, the Court
held that private competitors had standing to challenge
a ruling by the Comptroller of the Currency which al-
lowed national banks to provide data processing services
to other banks and bank customers. Appellants emphasize
that the Supreme Court has, in its Eastern Kentucky
opinion, recently reaffirmed the vitality of the Data
Processing decision. See 426 U.S. at 45 n. 25.

Our response is threefold. First, the rather cryptic
phrasing of Data Processing does not clearly define the
contours of competitor standing as conceived by the Su-
preme Court. The opinion by Justice Douglas for the
Court provides little guidance as to the precise nature of
the requirements which must be satisfied before com-
petitor standing can be sustained.”

Secondly, and more significantly, Data Processing was
not a tax case. Whatever may be the impact of com-
petitor standing when ordinary administrative action is

* Two examples may be cited. The first involves the identity
of the parties who must be sued by a litigant alleging com-
petitor standing. In Data Processing, one of the respondents
was American National Bank & Trust Company, a national
bank which was offering data processing services pursuant
to the controverted ruling by the Comptroller of the Currency.
Justice Douglas’s opinion does not disclose whether a success-
ful claim of competitor standing necessitates naming one or
more specific competitors as party oponents. Here, only the
Secretary of the Treasury and the Commissioner of Internal
Revenue were named as defendants. No organizations holding
§ 501(c) (3) tax exemptions were made parties. We note that
in Eastern Kentucky, Justice Powell stressed the fact that no
tax-exempt hosp.tal was a defendant. See 426 U.S. at 41. Also
omitted from the Data Processing opinion was all discussion
of the chain of causation connecting the challenged adminis-
trative action to the injury allegedly suffered by competitors
of regulated enterprises. That chain was patently much shorter
and more direct in Data Processing than it is in this case.

39a

at issue, we do not believe that Data Processing should be
read to endorse standing for any private business, in-
dividual or corporate, which wishes to contest the tax
treatment of a competitor.

Finally, § 501(c) (3) organizations occupy a different
posture with respect to the sale of tour packages than
did the national banks with respect to the provision of
data processing services. Here, the AJC and other such
groups will clearly remain free to pursue their travel
businesses, however the tax status is finally re-
solved. By contrast, in Data Processing, if the Comp-
troller of the Currency’s ruling had been overturned on
judicial review, the offering of data processing services
by national Danks would have been illegal, and peti-
tioners undoubtedly would have faced no further com-
petition from that source, absent statutory revision.

For all these reasons, we do not believe that the Data
Processing decision controls the standing issue in the
present litigation.* Since we are convinced that the East-
ern Kentucky analysis of standing is the one we are

*In Taz Analysts, supra note 2, a panel of this court re-
cently found economic injury in fact, adequate to meet the
Article III test of standing. Appellant in that case was the
owner of a small domestic oil well. Rightly or wrongiy, he
characterized himself as a competitor of the major oi! com-
panies producing and importing oil from abroad. He claimed
to have suffered economic harm because the IRS had acqui-
esced in the tax credit treatment of certain sums paid by large
oil companies to foreign governments. Appellant in Taz
Analysts asserted that these sums represented foreign excise
taxes or royalties, not foreign income taxes, and that there-
fore, they should be treated as deductible business expenses,
not tax credits. Having found such allegations sufficient to
establish injury in fact, the Taz Analysts panel then addressed
the prudential “zone of interests” test, and found that the
court house door was barred on that score. By reason of this
latter finding, the panel did not think it necessary to pursue
what it termed the “two additional prudential limitations
relating to causation and redressability of the grievance... .”
Slip op. at 11-12 (footnote omitted); and see note 2 supra.

40a

bound to apply in this case, and that under it appellants
lacked standing to maintain this suit, the judgment of
dismissal is affirmed.’

It is so ordered.

’ The dissent observes of the foregoing opinion that “it con-
structs a constitutional standard of injury in fact that would
effectively preclude taxpayer suits claiming competitive in-
jury.” The word “constructs” is hardly an apt characteriza-
tion of the majority's effort, in purpose and effect, to follow
as faithfully as possible the Supreme Court’s disposition of
Eastern Kentucky—the case which, prior to that disposition,
all members of the panel appeared to regard as almost cer-
tainly controlling.

It would thus seem that the dissent’s quarrel is essentially
with the approach taken by the Supreme Court majority in
Eastern Kentucky, and not with anything the panel majority
has itself contrived. The dissent asserts that that approach
is an impolitic and unwarrantable return to the rigors of com-
mon law pleading, and one that is incompatible with a rational
determination of assessibility to the federal courts. Althouch
in this instance the dissent purports to see distinctions which
enable it to assert that Eastern Kentucky was rightly denied
by the Supreme Court, it is manifest that this is not an under-
taking it finds either necessary or congenial. As is usually
the case in such circumstances, the differentiations here made
in terms of economic probabilities are less than conclusive.

It is no disrespect to the Supreme Court to say that the
concept of standing appears to be undergoing development.
Warth v. Seldin, supra, and Eastern Kentucky, with their new
emphasis upon causation and redressibility, indicate that at
least a majority of the Court is no longer content with a con-
stitutional concept of injury in fact limited to an assurance
that the interest asserted will guarantee an effective adver-
sarial presentation. Causation and redressability have now
explicitly been comprehended within that concept. Whether
this is only a tightening up of pleading requirements, or
whether it is a way station on the road to a holding of non-
justiciability in certain classes of litigation, neither we nor
the dissent can say. In such circumstances it is surely the
function of an intermediate appellate court to be guided by
standing requirements as they are currently articulated by the
Supreme Court in closely comparable contexts.

4la

BAZELON, Chief Judge, dissenting in No. 75-1304, Tax
Analysts and Advocates v. Blumenthal, and in No. 75-
1782, American Society of Travel Agents, Inc. v. Blum-
enthal: Two panels of the Court hold, for partially in-
consistent reasons, that a taxpayer suffering competitive
injury lacks standing to challenge tax rulings applicable
to a third party. Because I disagree with the reasoning
of both panels, I must respectfully dissent.

I have decided to write a common dissent on both
decisions because I believe that, although each panel
develops a different aspect of standing doctrine, both are
in fact responding to a common but implicit apprehension
of taxpayer standing.’ I share that apprehension. The
spectre of the Internal Revenue Service (IRS) defending
a multiplicity of suits challenging the tax liabilities of
third parties is not a happy one.* Taxes and courts are a

* The majority opinion in No. 75-1782, American Society of
Travel Agents, Inc. v. Blumenthal, states with admirable
candor that the case “presents a threshold issue of standing
to sue reminiscent of Justice Stewart’s observation, concurring
in Simon v. Eastern Kentucky Welfare Rights Organization,
et al., 426 U.S. 26, 46 (1975), that he could not ‘imagine a
case, at least outside the First Amendment area, where a
person whose own tax liability was not affected ever could
have standing to litigate the federal tax liability of someone
else.’"” Maj. op. at 2. Although the opinion does not directly
address this question, it constructs a constitutional standard of
injury in fact that would effectively preclude taxpayer suits
claiming competitive injury. The majority opinion in No.
75-1304, Tax Analysts and Advocates v. Blumenthal, explicitly
declines to address the issue of “whether a third party ever
made challenge IRS treatment of another.” Maj. op. at 27
n.90. However, the discussion uf the “zone of interests” test
in the opinion seems designed, “as a prudential matter,” id.
at 26, to eliminate such challenges from a federal forum.

? On the other hand, it must be recognized that the Code is a
statutory system designed delicately to balance the relation-
ships among economic entities. To permit tax liability to be
challenged only by the taxpayer himself is in effect to permit

42a

volatile political combination; our jurisdiction in this area
has for that reason been circumscribed by statute.’ But
whether a federal forum should be closed to such suits
is a profound and complicated issue, and at base one
that should be decided by Congress. At present Congress
has decided that we do have jurisdiction to hear cases
such as those presently before us,‘ and we are obligated
to exercise this statutory jurisdiction.

the IRS virtually unfettered discretion in adjusting these eco-
nomic interrelationships. The spectre of such unreviewable
discretion, especially when, as is alleged in these two cases,
it is exercised in contradiction to the commands of Congress,
is also discomforting.

*26 U.S.C. § 7421(a), for example, provides that, exc t in
certain exceptional circumstances, “no 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
persun is the person against whom such tax was assessed.”
The purpose of the statute 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 and Navigation Co., Inc., 370 U.S. 1, 7 (1962). Our
jurisdiction is similarly limited in the area of federal taxes by
the Declaratory Judgment Act, which authorizes courts of the
United States to issue declaratory judgments “except with
respect to Federal taxes....” 28 U.S.C. § 2201.

‘In Simon v. Eastern Kentucky Welfare Rights Org., 426
U.S. 26, 36-37 (1976), the Supreme Court specifically left open
the question of whether statutory or immunity bars would
ever permit a third party to ‘challenge IRS treatment of
another.” This court has held, however, that since 26 U.S.C.
§ 7421(a) only forbids suits instigated “for the purpose of
restraining the assessment or collection of any tax,” (emphasis
added), it does not bar suits seeking to compel the collection
of taxes. Eastern Kentucky Welfare Rights Org. v. Simon, 506
F.2d 1278, 1284 (D.C. Cir. 1974), vacated on other grounds,
426 U.S. 26 (1976). We have also held that the scope of the
prohibition in the Declaratory Judgment Act, 28 U.S.C. § 2201,
is “coterminous” with that of 26 U.S.C. § 7421(a), id. at
1284-85, and hence that in suits seeking to compel the collec-
tion of taxes we are authorize to provide declaratory relief.

43a

Appellants have alleged circumstances that would have
justified standing had they been seeking review of an or-
dinary administrative ruling. What concerns me most
deeply about these decisions is that both deny appellants
standing not on principles specifically applicable to tax-
payers suits, but on the basis of general doctrines of the
law of standing. The consequence is that general stand-
ing law is distorted to accommodate the purpose of shield-
ing the IRS.

In No. 75-1782, American Society of Travel Agents,
Inc. v. Blumenthal, appellants, numerous commercial
travel agencies and the American Society of Travel
Agents (ASTA), a non-profit corporation organized to
represent the professional interests of travel agents, al-
lege that certain organizations tax exempt under 26
U.S.C. § 501(c) (3),° and the American Jewish Congress
(AJC) in particular, actually package and offer to the
public large scale commercial travel programs. Appel-
lants argue that such commercial activities are illegal
in corporations exempt under § 501(c)(3),* and that

*26 U.S.C. § 501(c) (3) exempts from taxation

[c]orporations and any community chest, fund, or
foundation, organized and operated exclusively for re-
ligious, charitable, scientific, testing for public safety,
literary, or educational purposes, or to foster national or
international amateur sports competition (but only if no
part of its activities involve the provision of athletic
facilities or equipment), or for the prevention of cruelty
to children or animals, no part of the net earnings of
which inures to the benefit of any private shareholder or
individual, no substantial part of the activities of which
is carrying on propaganda, or otherwise attempting, to
influence legislation (except as otherwise provided in
subsection (h)), and which does not participate in, or
intervene in (including the publishing or distributing of
statements), any political campaign on behalf of any
candidate for public office.

* Complaint JJ 22, 23.

44a

appellants are injured by this illegality since tax-exempt
organizations can offer travel programs more cheaply
than tax-paying organizations.’ They ask that the AJC
and similar organizations be deprived of their tax-exempt
status, or, in the alternative, that income from these
commercial programs be taxed under 26 U.S.C. § 511
(a).* The majority holds that appellants fail to meet the
Article II] requirement of injury in fact. Because |
believe that appellants have alleged ordinary competitive
injury sufficient to meet the standards set out in Asso-
ciation of Data Processing Service Organizations, Inc. v.
Camp, 397 U.S. 150 (1970), I dissent from this holding.

In No. 75-1304, Tax Analysts and Advocates v. Blum-
enthal, the majority denies standing to appellant Tax
Analysts and Advocates (TAA), a non-profit corporation
organized for the purpose of promoting tax reform, and
to appellant Thomas Field, a United States taxpayer and
owner of the entire working interest in a currently
producing oil well in Pennsylvania. Appellants seek to
challenge published*® and private’ rulings by the IRS
that taxes imposed by Saudi Arabia, Libya, Iran, Ku-
wait and Venezuela are “income” taxes, and thus can
be credited against U.S. tax liability under 26 U.S.C.

7 Id. at {| 24.

*26 U.S.C. §511(a) imposes on corporations subject to
§ 501(c) (3) a tax on “unrelated business taxable income.”
“Unrelated business” is defined in § 513(a) to mean

any trade or business the conduct of which is not sub-
stantially related . . . to the exercise or performance by
such organization of its charitable, educational, or other
purpose or function constituting the basis for its exemp-
tion under section 501....

® See Revenue Ruling 55-296, 1955-1 Cum. Bull. 386; Reve-
nue Ruling 68-552, 1968-2 Cum. Bull. 306.

1° See Amended complaint § 10, Joint Appendix (JA) at 41.

ell

45a

$ 901 (b)."* Appellants allege that these taxes are in fact
either royalties or “excise, severance, or similar taxes
not creditable under Section 901(b).” ™

Appellant Field and appellant TAA as a representative
of its tax-paying members, claim injury as taxpayers.
They allege that the illegal IRS rulings cost the U.S.
Treasury approximately $3,000,000,000 in 1974, and ar-
gue that this loss causes them to pay higher federal in-
come taxes."* Appellant Field, in addition, claims that
he is injured as a competitor of those oil companies who
benefit from the illegal IRS rulings. Field alleges that
since the prices charged by these companies for imported
oil largely determine the market price for the uncon-
trolled crude oil of domestic independent producers, he
receives a lower price for his oil than would be the case
if such companies could only deduct these foreign taxes
from their gross income rather than illegally credit
them."* Moreover, since domestic producers can only de-
duct the royalties they pay to the land owners of their
oil wells,* Field claims that investment in foreign oil
production is relatively more profitable and attractive.

11 26 U.S.C. §901(b) permits a U.S. citizen or domestic
corporation to receive a tax credit for “the amount of any
income, war profits, and excess profits taxes paid or accrued
during the taxable year to any foreign country... .”

*? Amended Complaint § 14, JA at 42.
's Amended Complaint at J 14, 20, 21, JA at 42, 44.
‘* Amended Complaint at § 18, JA at 48-44.

os Appellant Field pays a royalty of one-eighth of the pro-
ceeds of all oil produced from his well to the owners of the
land on which the well is located. These royalties are ex-
pected to amount to $46.32 per year for the next five years.
See the findings of the District Court, Tax Analysts and
Advocates v. Simon, 390 F. Supp. 927, 929-30 (D.C.C. 1975).

46a

Field alleges that the IRS rulings thus “depress the
value of his operating interest in a domestic oil well.” *

The majority denies standing to both Field and the
TAA in their capacities as mere taxpayers.*’ Because as
taxpayers appellants have not met the “nexus” text of
Flast v. Cohen, 392 U.S. 83, 102-03 (1968),** and have
alleged only a “generalized grievance” the impact of
which “is plainly undifferentiated and ‘common to all
members of the public...’ Ex parte Lévitt, 302 US.
633, 634 (1937),”** I concur in that holding.”

16 Amended Complaint © 19, JA at 44.

1‘ The majority affirms the District Court’s finding of no
injury in fact and adopts its reasoning at 390 F. Supp. °32-
38. Maj. op. at 4 n.10.

18 Flast focused on the “logical nexus between the status
asserted and the claim sought to be adjudicated.” The decision
held that there were two aspects to the nexus required to sus-
tain taxpayer’s standing. “First, the taxpayer must establish
a logical link between [federal taxpayer] status and the type
of legislative enactment attacked . .. . Secondly, the taxpayer
must establish a nexus between that status and the precise
nature of the constitutional infringement alleged.” 392 U.S.

at 102.
1° United States v. Richardson, 418 U.S. 166, 176-77 (1974).

20 do not agree, however, with the majority’s conclusion
that appellants have suffered no injury in fact. Maj. op. at 4
n.10. A generalized grievance is a grievance nonetheless. Since
injury in fact is a constitutional prerequisite of standing, the
taxpayer in Flast must have suffered such an injury. Never-
theless, the Supreme Court has held that as a prudential mat-
ter, a grievance “shared in substantially equal measure by all
or a large class of citizens” should normally not “warrant
exercise of jurisdiction.” Warth v. Seldin, 422 U.S. 490, 499
(1975). Congress can, of course, “either expressly or by clear
implication” override this prudential consideration. Jd. at 501.
Appellants, however, have pointed to no statute in which
Congress has either expressly or implicitly authorized a right
of action for generalized taxpayer grievances.

Piers ser. fem an

47a

The majority also denies appellant Field standing. It
concedes the Field has suffered injury in fact sufficient
to meet Article III standards,” yet it finds that Field has
failed the second of the standing tests enunciated in
Association of Data Processing Service Organizations,
Inc. v. Camp, 397 U.S. 150 (1970). It concludes that the
interests Field seeks to protect are not “arguably within
the zone of interests to be protected or regulated” by
$901(b). In reaching this conclusion the majority is
forced to construe the “zone of interests” test in an un-
supportable manner, capable of causing unforeseeable
mischief in other areas of standing law. I dissent both
from the majority’s conclusion and from its construction.

I. INJURY IN FACT

_ Article III of the Constitution limits federal court ju-
risdiction to actual cases or controversies. The question
of standing “focuses on the party seeking to get his
complaint before a federal court,” Flast v. Cohen, 392
U.S. 83, 99 (1968), in order to determine if he “has
made out a ‘case or controversy’ between himself and the
defendant within the meaning of Act. III.” Warth v.
Seldin, 422 U.S. 490, 498 (1975). Two aspects of the
case and controversy standard are important for the law
of standing. The first is that cases and controversies
must be adversary; that is, they must be disputes over
actual or threatened injuries. Thus standing exists “only
when the plaintiff himself has suffered ‘some threatened
or actual injury resulting from the putatively illegal
action... .’ Linda R. S. v. Richard D., 410 U.S. 614,
617 (1973).” Id. at 499. Second, cases and controversies
must “be presented in a form historically viewed as
capable of judicial resolution.” Flast v. Cohen, 392 U.S.
83, 101 (1968). Thus federal courts cannot, consistent
with Article III, issue advisory opinions. Id. at 96-97.

71 Maj. op. at 12.

48a

Standing requires that a plaintiff demonstrate “an in-
jury to himself that is likely to be redressed by a favor-
able decision. Absent such a showing, exercise of its
power by a federal court would be gratuitous and thus
inconsistent with the Art. III limitation.” Simon v.
Eastern Kentucky Welfare Rights Org., 426 U.S. 26, 38
(1976). Eastern Kentucky makes clear that an injury
capable of being redressed is one that can fairly “be
traced to the challenged action of the defendant, and not
injury that results from the independent action of some
third party not before the court.” Jd. at 41-42.*°

It is, of course, settled law that in appropriate cir-
cumstances competitive injury constitutes sufficient in-
jury in fact to fulfill Article III requirements.** This is
acknowledged by the opinion in Tax Analysts.** In that
case appellant Field owns the entire working interest in a
Penrsylvania oil well. The well produces three barrels of
crude oil per month at a price of $10.28 per barrel.
Field’s anticipated profits before taxes are approximately
$203.76 per year.** He complains of economic injury be-
cause allegedly illegal IRS rulings have decreased the
value of his well and the price he receives for his crude
oil.

22 See United States v. Evans, 213 U.S. 297 (1909).

23 Like the majority in Travel Agents, I disagree with the
observation in Tar Analysts that “causation” and “redressa-
bility” are merely “prudential limitations” on standing. See
Taz Analysts at 11-12; Travel Agents at 8 n.2.

2« Schlesinger v. Reservists Committee to Stop the War, 418
U.S. 208, 223 (1974); Sierra Club v. Morton, 405 U.S. 727,
736-37 & n.11 (1972); Investment Co. Institute v. Camp, 401
U.S. 617 (1971); Arnold Tours, Inc. v. Camp, 400 U.S. 45
(1970); Association of Data Processing Service Organizations,
Inc. v. Camp, 397 U.S. 150 (1970).

?s Maj. op. at 12.
7 390 F. Supp. at 929.

etal ONG) ee OAD at A ws 8

49a

At first blush it is tempting to hold such economic
injury, if it exists, to be de minimis. However, it is ap-
parent that there can be no principled justification for
such a holding, and the Supreme Court has held that
any identifiable trifle of harm is enough to establish
standing. United States v. SCRAP, 412 U.S. 669, 689
n.14 (1973). It is also tempting to hold that Field’s
injury is too speculative. While it is true that we cannot
know with absolute certainty whether the elimination of
the allegedly illegal IRS ruling would redress Field’s
competitive injury, he has set forth a cogent economic
analysis that this would be the case. To require Field
to allege facts that would prove the laws of economics
would be ungainly, wasteful, and inconsistent with the
philosophy of pleading of the Federal Rules of Civil
Procedure. The modern conception of “notice pleading” *
does “not require a claimant to set out in detail the facts
upon which he bases his claim. To the contrary, all the
Rules require is ‘a short and plain statement of the
claim’ that will give the defendant fair notice of what
the plaintiff’s claim is and the grounds upon which it
rests.” Conley v. Gibson, 355 U.S. 41, 47 (1957). Re-
quiring Field to allege all of the facts supportive of
the chain of causation upon which his allegation of in-
jury rests would return us to the unpredictable and
fact-laden system of code pleading.**

Recognizing all this, the majority in Tax Analysts holds
that Field “has suffered injury in fact in his capacity as a

** Wright and Miller object to the term “notice pleading”
and suggest instead “modern pleading” or “simplified plead-
ing.”” WRIGHT & MILLER, FEDERAL PRACTICE AND PROCEDURE:
CiviL § 1202 (1969).

** See id.; 2A MOORE’S FEDERAL PRACTICE {YJ 8.12-8.13
(1975); CLARK, CODE PLEADING § 38 (1947); Skinner, Pre-
Trial and Discovery Under the Alabama Rules of Civil Pro-
cedure, 9 ALA. L. REV. 202, 203-05 (1957).

50a

competitor.” ** I concur in this holding. And, so far as I
can see, the competitive injury that ASTA and the other
appellants in Travel Agents claim to have suffered is
virtually indistinguishable. Yet the majority in that case
holds that appellants have no standing because they have
failed to demonstrate “any judicially cognizable ‘injury
in fact.’”*

The majority in Travel Agents holds, first, that the
very existence of appellants’ competitive injury is “too
speculative to support standing” since they do not allege
specific customers who would be gained if the AJC and
similar organizations were to lose their tax-exempt
status.** Second, the majority concludes that “[a] ppel-
lants have not demonstrated that they would reap any
tangible benefit if the court were to order the relief
sought.” If the tax-exempt status of the AJC or other
tax-exempt organizations were eliminated, these organiza-
tions might still maintain lower prices because of “volun-
teer labor or the willingness to accept lower profits”;
or members of these tax-exempt organizations might still
prefer the travel programs of their own organizations even
if more expensive; or such members might simply decide
not to travel at all.~

With all due respect, such reasoning reveals that it is
the majority, not the appellants, who is engaging in specu-
lation. The economic basis of appellants’ injury is straight-
forward, far more compelling even than that alleged by
appellant Field in Tax Analysts. Appellants allege that
because of the AJC’s

2? Maj. op. at 12. The majority te

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385005_0039%3A1. Public record. Not legal advice.