# Petition for Writ of Certiorari — Kersting v. United States > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385009_2960%3A1 ## Record - **Collection:** Supreme Court brief - **Document type:** Petition for Writ of Certiorari - **Published:** January 1, 1992 - **Citation:** 502 U.S. 1058 ## Text 5 LY Zupreme Court, U.S. | Gjye-eC3l FILED OCT 91 1291 = $n CLERK | NO. ad IN THE Supreme Court of the United States OCTOBER TERM, 1991 HENRY F. K. KERSTING, Petitioner, Vv UNITED STATES OF AMERICA and INTERNAL REVENUE SERVICE, Respondents. PETITION FOR WRIT OF CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE NINTH CIRCUIT L. T. “BuTcH” BRADT (Counsel of Record) 6303 Feldspar Houston, Texas 77092-4716 (713) 681-2696 Fax: (713) 688-8212 MATTHEW K. CHUNG Suite 1501 220 South King Street Honolulu, Hawaii 96813 (808) 545-2060 Attorneys for Petitioner, Henry F. K. Kersting Of Counsel to Petitioner: TERRENCE B. ROBINSON One West Loop South, Suite 100 Houston, Texas 77027 (713) 736-3268 Alpha Law Brief Co.— 6113 Aletha Lane — Houston, Texas 77081 — 981-9000 i QUESTIONS PRESENTED (1) Are assessments made against a taxpayer under 26 U.S.C. Sections 6700 and 6701 penalties or taxes? (2) Does the Anti-Injunction Act (26 U.S.C. Section 7421) bar a suit to enjoin collection of penalties assessed against a taxpayer under Title 26 U.S.C. Sections 6700 and 6701? (3) Is Petitioner entitled to an evidentiary hearing on his suit to enjoin collection of penalties assessed against him under 26 U.S.C. Sections 6700 and 6701? (4) Does it violate Due Process and Equal Protec- tion requirements to deny Petitioner a pre-deprivation hearing on Petitioner’s Due Process challenge to penalties assessed against him by the I.R.S. under 26 U.S.C. Sec- tions 6700 and 6701? (5) Are the procedures for administrative and judi- cial review provided under 26 U.S.C. Section 6703 con- Stitutionally deficient? (6) What is the test to be applied in determining whether Petitioner has suffered irreparable injury as a result of conduct of the I.R.S. in assessing penalties against him under 26 U.S.C. Sections 6700 and 6701 without affording a pre-deprivation hearing? (7) What is the proper interpretation to be given to the provisions of 26 U.S.C. Section 6703 regarding pay- ment of fifteen (15% ) percent of the penalty as relates to being able to stay collection of the penalties assessed under Section 6701 and obtain judicial review? (8) Is the term “abusive tax shelter” defined under the I.R.S. Code? ii (9) What is the definition to be given to the term “tax period” as relates to penalties to be assessed under 26 U.S.C. Sections 6700 and 6701? (10) What is the Statute of Limitations for penalties assessed under 26 U.S.C. Sections 6700 and 6701? (11) Were the penalties assessed by the Internal Re- venue Service against Petitioner barred, in whole or in part, by the Statute of Limitations? (12) Must penalties assessed under 26 U.S.C. Sections 6700 and 6701 be assessed by year? (13) May a District Court refuse to receive evidence on the irreparable injury which Petitioner will suffer if Petitioner’s affidavit of irreparable injury is uncontro- verted? (14) Must a Petitioner state, in his affidavit of irre- parable financial injury, each and every fact on which he bases his conclusion that he will suffer irreparable finan- cial injury if he is denied a hearing to contest penalties assessed against him—especially when the affidavit is un- controverted? (15) May the District Court dismiss an entire case for lack of jurisdiction when part of the case involves return of property seized by the I.R.S. under a subpoena? ili PARTIES Petitioner-Appellant: Henry F. K. Kersting. Respondent-Appellees: Internal Revenue Service and the United States of America. iv TABLE OF CONTENTS CUBST INS PEGE EE ccs cccenescsccssavseseens PE eer sacde seas eee eusktessbestesteeeksiannes EE Se GUO wasn ceecciewsccsuvoveedeeadas Teche ea dada d se veer tawedetacecere set's PEAR SUT TEEE oc cb es bene acerevaveveventeves ESE REE GEE BR GOED 6c ccdsvccccovecseveres FI bain Fea eb a ae ded Oban dx CARS eR OOS A. Reasons For Granting The Writ. ................... Be SS ca eecc bers cccueesied cuca’ C. CIN CII, pc neccev te wncveanses 1. Due Process Requirements. ................000. 2. Right To Pre-deprivation Process. .............. 3. Due Process Denials By A Cost Requirement. .... 4. Substantive Due Process: Void for Vagueness. .... 5. Irreparable Injury Through Constitutional Depriva- EE RE TGR AE ISIN pa Ru ST Se ot 6. Lack of Adequate Due Process Safeguards. ...... D. The Anti-Injunction Act Does Not Bar This Action. . 7. Sections 6700 and 6701 Assess Penalties—Not PR OR ed sis c0 5d SRA ae eo Te eae ee yes 8. Petitioner’s Suit Falls Within Anti-Injunction Act D. Return of Seized Materials. CONCLUSION Exceptions. a. Likelihood of Irreparable Injury to Petitioner... b. Financial Injury May Constitute Irreparable Harm. d Applicable Statute of Limitations. ............ RSF FCS Ree ee Cece see ss tee ea SSSR CEASCESECCO Bese cee Pee tastees eee a Vv TABLE OF AUTHORITIES CASES Atwood Turnkey Drilling v. Petroleo Brasiliero, 875 F.2d SURE TSE, BORD Sc dca ciek cise ehee vacnee uae ns vss Beacon Theatres, Inc. v. Westover, 359 U.S. 500 (1959) ... Bob Jones University v. Simon, 416 U.S. 725 (1974) ..... Boddie v. Connecticut, 401 U.S. 371 (1971) ........-.... Bond v. United States, 872 F.2d 898 (9th Cir. 1989) ..... Botta v. Scanlon, 314 F.2d 392 (2nd Cir. 1963) ......... California Motor Transport Co. v. Trucking Unlimited, 404 Oe, SU CURED 6c 00d ie dene ether ated cheee diseases Doran v. Salem Inn, Inc., 422 U.S. 922 (1975) .......... Bived o. Dawes, 427 -9D. BGT LISTE): vce cs ccceweicwrsns Enochs v. William Packing & Navigation Co., 370 US. ae me | ) RRR rrr Tere errr rr erent er CT Terres Fuentes v. Shevin, 407 U.S. 67 (1972) ........0--eeeeee Gates v. U.S., 874 F.2d 584 (8th Cir. 1989) ............ H.P. Lambert Co. v. Secretary of Treasury, 354 F.2d 819 (CR. EE: dada shcavatnecevlsg eres cake eaceean International Association of Firefighters, Local 2069 v. City of Sylacauga, 436 F. Supp. 482 (N.D. Ala., E.D. 1977) Jolly v. United States, 764 F.2d 642 (9th Cir. 1985) ..... Kahn v. United States, 753 F.2d 1208 (3rd Cir. 1985) ... Lithe 0. Ladera, 359 US. SbF 4EGRR) 6 ii caddis sivas cs Mathews v. Eldridge, 424 U.S. 319 (1976) .............. Maynard v. Cartwright, 486 U.S. 356 (1988) ............ Milsen Co. v. Southland Corp., 454 F.2d 363 (7th Cir. BOTT: soci hi cca cbcedhrs vine Wires reckon Hiardirics Regal Drug Corp. v. Wardell, 260 U.S. 386 (1922) ....... Ross v. Meese, 818 F.2d 1132 (4th Cir. 1987) ........... Ryland v. Shapiro, 708 F.2d 967, 971-972 (Sth Cir. 1983) Gutierrez v. Municipal Ct. of the S.E. Judicial District, 838 Pe FOGG Coe Ga Oe ees Fade te ewer eeeeeesen Sampson v. Murray, 415 U.S. 61 (1974) ............... Schenley Distillers, Inc. v. Bingler, 145 F. Supp. 517 (W.D. Pea. T9SG) Ors De Oe eh vos hed cevckaesncdecs Spriggs v. U.S., 660 F. Supp. 789 (E.D. Va. 1987) ...... Tri-State Generation v. Shoshone River Power, Inc., 805 F.2n 353 CO as Deca bcan eee ekake vere eras United States v. Abrahams, 312 F. Supp. 1035 (S.D. N.Y. 1: Sn a eee pene neh = pre Saree tN Pe air eee ty Nt eye yA United States v. Dahlstrom, 713 F.2d 1423 (9th Cir. 1938), CORE: CO, Ce Us FE knead ere eeeecrneeneen Page 10, vi CASES Page United States v. Mazurie, 419 U.S. 544 (1975) .......... 16 United States v. National Dairy Corp., 372 U.S. 29 (1963) 16 United States v. Powell, 423 87 (1975) ....... ccc cee eeee 16 United States v. Pridgen, 403 F. Supp. 1109 (S.D. N.Y. i | EEE ee By ttn Pe en Wee aN mee 21 Von der Ahe v. Howland, 508 F.2d 364 (9th Cir. 1974) .. 29 Weir v. U.S., 716 F. Supp. 574 (N.D. Ala. 1989) ........ 26, 29 Wolff v. McDonnell, 418 U.S. 539 (1974) ...........005- 10 CONSTITUTIONS Page First Amendment to the United States Constitution ...... 8 Fifth Amendment to the United States Constitution ...... 8 STATUTES Title 5 U.S.C. Section 701-706; Administrative Proce- ei nos bead 4c ad 6 UR kaa ee eee 8 Section 6501(a) of the Internal Revenue Code of 1954, as amoenaee, 76 U.S.C. Section GIG | obec cc viel bewcesse 2, 20, 27 Section 6671(a) of the Internal Revenue Code of 1954, as gupented, 26 U.S.C. Sectiow G67E 5... scckisteesusses 2 Section 6672 of the Internal Revenue Code of 1954, as amended, 26 U.S.C. Section 6672 ...........cccees: 2 Section 6700 of the Internal Revenue Code of 1954, as amended, 26 U.S.C. Section 6700 .......... 1, 2,3, 6,7, 8,9, 20 Section 6701 of the Internal Revenue Code of 1954, as amended, 26 U.S.C. Section 6701 .......... 1, 2,3, 6,7, 8,9, 20 Section 6703 of the Internal Revenue Code of 1954, as amended, 26 US.C. Section 6703 .. 2.0.05. . ccwcees 2, 8, 15, 23 Section 7421 of the Internal Revenue Code of 1954, as amended, 26 U.S.C. Section 7421 (‘“Anti-Injunction ME Dos Vinay Ge iccn bee wk Wesuale a bee etE SUL letess 2 ee ee a NR DADE. hc nok vale ku weh kee e Ne wns 8 Title 28 U.S.C. Section 2201-2202, Declaratory Judg- NE BE Ode Bara aaa Cnidcs nd WE aioe ae we ee eee 8 ee ae a, PE PED Ss 5 og upc ev oatewan wenden 2, 8, 30 Stee GE bs ces on dawe wks idea bheckees 28 upee we Uc, Beet EASECG) nn hvac vceucvcescvavs 2 NO. IN THE Supreme Court of the United States OCTOBER TERM, 1991 HENRY F. K. KERSTING, Petitioner, V. UNITED STATES OF AMERICA and INTERNAL REVENUE SERVICE, Respondents. PETITION FOR WRIT OF CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE NINTH CIRCUIT To the Honorable Chief Justice of the United States, and to the Associate Justices of the United States Supreme Court: Henry F. K. Kersting (“Petitioner”) respectfully prays that a Writ of Certiorari issue to review the decision of the United States Court of Appeals for the Ninth Circuit, which sustained an order of the United States District Court of Hawaii dismissing Petitioner’s suit for injunctive relief to obtain a pre-deprivation hearing relating to penalties assessed against him by the Internal Revenue Service (“I.R.S.”) under 26 U.S.C. Sections 6700 and 6701. 2 REPORT OF OPINIONS The opinion of the Ninth Circuit Court of Appeals is not reported but is set forth in Appendix C. The order of the United States District Court for the District of Hawaii is not a reported opinion and is set forth in Appendices A and B. JURISDICTION The decision sought to be reviewed herein was entered by the United States Court of Appeals for the Ninth Circuit on August 2, 1991, and is set forth in Appendix C. The jurisdiction of this Court is invoked under 28 U.S.C. Section 1254(1). STATEMENT OF THE CASE This case involves the question of Petitioner’s consti- tutional right to a pre-deprivation hearing before having to pay penalties assessed against him by the I.R.S.; and whether the Anti-Injunction Act, 26 U.S.C. Section 7421(a), applies to and/or prohibits the issuance of a preliminary injunction against the I.R.S.’s collection of penalties assessed against Petitioner under I.R.C. Sections STATUTES INVOLVED The following statutes are involved in this case: 26 U.S.C. Sections 6501(a), 6671(a), 6672, 6700, 6701, 6703 and 7421; 28 U.S.C. Sections 2412 and 2462. These are set forth in Appendix D. The following Constitutional provisions are involved in this case: the First and Fifth Amendments of the United States Constitution. These are set forth in Appendix D. 3 6700 and 6701 without the affordance of a pre-depriva- tion hearing when the percentage (15%) of the total penalties assessed that Petitioner must have paid within 30 days of assessment to secure his day in court amounts to approximately $581,789.54; and when failure to pay said amount requires payment of $3,878,463 plus interest before Petitioner can seek a refund and obtain his day in court. The case further involves the irreparable injury which will be caused to Petitioner due to his inability to pay the penalties assessed against him and the imminent denial of his right to Due Process and Equal Protection under the Fifth Amendment of the United States Con- stitution. In October 1989, without prior hearing or meaningful opportunity to be heard, the I.R.S. issued two notices of penalties against Petitioner under 26 U.S.C. Sections 6700 and 6701, totaling $3,878,463 plus interest.’ 1. The first notice received by Petitioner, dated October 16, 1989, showed a “penalty assessment” under Section 6700, of $1,545,- 201.00 for the “tax period December 31, 1988;” and indicated that the amount of the penalty for promoting an abusive tax shelter is the “greater of $1,000 or 20% of the gross income derived or to be derived from the activity.” In order for him to contest the penalty, the notice allowed Petitioner thirty (30) days from the date of the notice to pay “15% of the penalty and file a claim for refund on form 843.” The notice further described the remedies after denial of the claim. The text ended with the words “[i]f you do not take these actions, you will have to pay the full amount shown below.” On the “Return This Part . . .” portion of the notice were the words “Amount You CAE: i ecadeans $1,545,201.00” The second notice, imposed under Section 6701 and dated October 23, 1989, also identified as a Notice of Penalty Charge, showed an additional penalty assessment against Petitioner in the amount of $2,330,000.00, plus interest in the amount of $3,262.67 charged on the prior balance of $1,545,201.00, for a total balance due of $3,878, 463.67. The second notice continued by saying that if Petitioner wanted 4 Being unable to pay 15% of the amounts shown as “penalty assessments,’ or approximately $581,769.53, within the required thirty (30) days to obtain his day in court; with no pre-deprivation hearing on the penalties, or even a meeting, much less any notice of the factual basis of the penalties, Petitioner invoked the equity jurisdiction of the District Court and filed suit against the United States and the I.R.S. Petitioner’s five count complaint raised claims chal- lenging Sections 6700, 6701 and 6703 of the Code as a violation of Petitioner’s constitutional rights.” Petitioner also filed a Motion for Preliminary Injunction. to contest the assessment, he had “30 days from the date of this notice to pay 15% of the penalty and file a claim for refund on form 843.” The notice further warned: “[i]Jf you do not take these actions, you will have to pay the full amount shown below.” The amount shown below on the “Return . . .” portion of the notice is follows: “Amount You Owe ......... $3,878,463.67. This is the same amount shown on the notice as “Balance Due.” 2. Count I alleged that Section 6703 violated Petitioner’s right to procedural Due Process for failing to allow a _predeprivation hearing prior to requiring payment of fifteen (15%) percent of the total assessment. The count further sought a predeprivation hearing and an order enjoining collection of the penalties assessed. Count II chailenged Sections 6700, 6701 and 6703 as being viola- tive of the Due Process and Equal Protection Clauses of the United States Constitution as applied to Petitioner because the statutes pro- vide no notice of what exactly is the prohibited conduct and because he can only get his day in court by paying nearly $600,000 within 30 days of assessment, as a prerequisite to filing a refund claim and thereby obtaining judicial review of the penalties assessed. Count III sought to enjoin certain activities of the I.R.S. that chill or interfere with Petitioner’s First Amendment rights of free speech. Count IV sought to enjoin the I.R.S. from interfering in Petitioner’s Fifth Amendment right to liberty and property. Count V sought to force the I.R.S. to return documents which the I.R.S. subpoenaed from Petitioner in January, 1989, in a separate pro- ceeding and which had not been returned—-documents which were necessary to attempt to understand and respond to the penalty assessments imposed against Petitioner. 5 The District Court was presented with a complicated denial of Petitioner’s constitutional right to Due Process, to notice and hearing. By Larry Tahara’s declaration (infra), Respondents admitted the arbitrary and capri- cious nature of the assessments against the Petitioner herein. On November 13, 1989, within thirty days of the first assessment, a hearing was had on Petitioners Motion for Preliminary Injunction. Petitioner supported his mo- tion with three (3) affidavits and over 150 pages of ex- hibits. Petitioner attested to the demands contained in the two notices of penalty charge; his inability to afford or raise within 30 days the nearly $600,000, or 15% of the total penalty charge required by the notice before filing a refund claim and a challenge to the penalty assess- ments; and Petitioner attested to the irreparable injury which he would suffer by being forced into bankruptcy if he was denied a pre-deprivation hearing. Petitioner’s counsel, by affidavit, described, inter alia, the failure of the I.R.S. to have a pre-assessment meeting or hearing. The third affidavit provided an expert opinion by Joe Alfred Izen, Jr. Esq., that the term “abusive tax shelter” is undefined by the Code, and that the validity of deductions generated by Petitioner’s corporations was before the United States Tax Court in Dixon v. Com- missioner, Docket No. 83-9283. The pending decision in Dixon bears directly on whether such deductions gener- ated by the corporations with which Petitioner is associ- ated, if valid, could be considered “abusive.” Respondents served their opposing papers containing the Declaration of Larry Tahara (“Tahara”), the Revenue Agent generating the penalty notices, Tahara’s declara- 6 tion showed that he based the assessment against Peti- tioner solely on the income of the various corporations with which Petitioner is associated. Tahara further stated that he had no idea what income Petitioner individually earned from the alleged promotion or from the corpora- ticns. Tahara assessed Petitioner individually just the same. Specifically, Tahara stated that he based the assessment against Petitioner solely on the income of the various corporations with which Petitioner is associated. Tahara determined that the corporations with which Petitioner is associated took in some $10,000,000 in gross income from 1982 through 1988. To determine the amounts of the penalty assessments against Petitioner under Section 6700 and 6701, Tahara said he calculated the penalties by determining a figure: “ . . equal to 10% of the total fees (gross income) paid to Kersting’s corporations during the period September 4, 1982, through July 17, 1984 and 20 percent of the amounts paid to Kersting’s corpora- tions during the period July 18, 1984 through De- cember 31, 1988. In determining the amount of the Section 6701 penalty to be assessed in this case, I reviewed the interest statements sent to the investors and arrived at a penalty equal to $1,000 for each investor in the programs for each year... .” Tahara then attested to a yearly breakdown of the penalties under both Sections 6700 and 6701 for each year from 1982 through 1988. Tahara conjectured what Petitioner might have made based on a percentage of the corporations’ gross income; but he assessed Petitioner individually the Section 6700 penalty based on the total gross income of the corporations! 7 Respondents never contested Petitioner’s claim that he did not have the nearly $600,000, that he could not raise such a sum, and that he has never earned or received the gross income necessary to arrive at the penalty assessed by the I.R.S. against him. Again, this Court should remember that Petitioner’s affidavit of irreparable injury was uncontroverted by Respondents. The District Court, sua sponte, dismissed the entire case for lack of subject matter jurisdiction, without afford- ing Petitioner an evidentiary hearing. (Appendix B) In so acting, the Court didn’t address the return of Peti- tioner’s records from the I.R.S., or the attorney’s fees incurred in briging the suit to obtain the return of Peti- tioner’s records and property. On appeal to the Court of Appeals for the Ninth Cir- cuit, the appeals court determined that the Petitioner was required to pay 15% of $1,545,201 or $231,780.15, under Section 6700 and 15% of $1,000 ($150) for a single 6701 penalty.” The Ninth Circuit concluded that Petitioner’s claim for return of documents was moot. The Court of Appeals also determined that Petitioner provided “no evidence irreparable injury would result” and there- fore he had not met the requirements for avoiding the strictures of the Anti-Injunction Act. 3. The Ninth Circuit’s determination that Petitioner need pay only $150 of a single Section 6701 penalty to obtain judicial review and (impliedly) a stay of collection of the rest of the Section 6701 penalties, completely ignores the absence of any legal authority for this position. (See infra pages 9-10, n.4, and Substantive Due Process) The Ninth Circuit cannot create a remedy not authorized by Congress nor envisioned by a plain reading of Section 6703. The only way for Petitioner to obtain judicial review of all of the penalties while staying collection activities of all of the penalties is by payment of 15% of the entire penalty assessments within 30 days. 8 The Ninth Circuit affirmed the District Court’s dis- missal of Petitioner’s suit without addressing whether assessments under 26 U.S.C. Sections 6700 and 6701 are penalties to which the Anti-Injunction Act does not apply. Kersting petitioned this Court for a writ of certiorari to resolve the important constitutional issues raised by this case. The jurisdiction of the District Court was predicated upon Title 28 U.S.C. Section 1331; Title 28 U.S.C. Sec- tions 2201, 2202—the Declaratory Judgment Act; Title 5 U.S.C. Sections 701-706, the Administrative Proce- dure Act; the First and Fifth Amendments to the United States Constitution; Title 26 U.S.C. Sections 6700 - 6703 and 7609, et seq.; and, Title 28 U.S.C. Section 2412— the Equal Access to Justice Act. ARGUMENT A. Reasons For Granting The Writ. This case is ripe for Supreme Court review to resolve the interpretation of an important Federal statute relating to the Due Process safeguards inherent in the purported “appeal rights” afforded after assessment of penalties by by the I.R.S. This case is also ripe for Supreme Court review to resolve a failure of the Ninth Circuit Court of Appeals to follow binding precedents of this Court. This case is also ripe for Supreme Court review to interpret the procedure to be used in assessing penalties by the I.R.S. in certain circumstances. This case is also ripe for Supreme Court review to determine whether Congress intended to except Sections 6700 and 6701 of the Code 9 from the statute of limitations. The statutory framework in question has a substantial impact on power of the I.R.S. to assess penalties and preclude taxpayers from obtaining pre- and/or post-deprivation hearings on these assessments. The statutory framework and the interpreta- tion to be given thereto impact directly on First and Fifth Amendment rights. This Court has yet to rule on issues presented by this case and its guidance is required to resolve an admittedly difficult question on the itnerpreta- tion of a statute which has a direct and meaningful impact on a significant segment of the public. B. Statutory Framework. The Internal Revenue Code, 26 U.S.C. Section 6700 authorizes the I.R.S. to impose penalties against persons who “promote abusive tax shelters.” From 1982 to 1984 the penalty was the greater of $1,000 or 10% of the gross income derived or to be derived by such person from such activity. (Appendix D) Section 6701 authorizes the I.R.S. to impose penalties against persons who “aid and abet the understatement of tax liability.” The penalty is $1,000 with respect to any document relating to any taxpayer for any taxable period. (Appendix D) The term “taxable period” is not defined. To obtain judicial review of the penalties, Section 6703 requires Petitioner to pay 15% of the amount of the penalties and file a claim for refund of the amount so paid within 30 days of the notice and demand of any penalty under Section 6700 or 6701. Failure to pay 15% of the penalties and the filing of a claim for refund within 30 days, bars Petitioner from obtaining judicial review of 10 the I.R.S. action until the full penalties and interest are paid. (Appendix D)* C. Constitutional Deprivations. 1. Due Process Requirements. “The right to be heard before being condemned to suffer grievous loss of any kind,” whether loss of liberty, property or reputation, “is a principle basic to our soci- ety.” Mathews v. Eldridge, 424 U.S. 319 (1976). “The Supreme Court consistently has held that some form of hearing is required before an individual is finally deprived of a property interest.” Wolff v. McDonnell. 418 U.S. 539, 557-558 (1974). “[{I]n order that they may enjoy that right (to a hearing) they must first be notified.” Fuentes, infra. “Procedural Due Process imposes constraints on gov- ernmental decisions which deprive individuals of “liberty” or “property” interests within the meaning of the Due Process Clause of the Fifth or Fourteenth Amendment. . . . The fundamental requirement of Due Process is the opportunity to be heard at a mean- ingful time and in a meaningful manner. Eldridge, supra, at pp. 332-33 (1976) [Italic Emphasis Supplied]; Boddie v. Connecticut, 401 U.S. 371 (1971); Fuentes v. Shevin, 407 U.S. 67 (1972). 4. Sections 6700, 6701 and 6703 lack any hearing requirement commensurate with Fifth Amendment Due Process. The only way to obtain judicial review and stay collection activities is to pay fifteen (15%) percent of the entire assessment within 30 days of the penalty notice and seek a refund. The only alternatives for judicial review without a stay are to pay the entire assessment, plus interest and sue for a refund, or file bankruptcy. 1] The I.R.S. penalty assessment of almost $3.8 Million is a significant property interest. Due Process requires that Petitioner receive notice and a hearing before he must pay the penalty. The I.R.S. notices required the payment of nearly $600,000 before Petitioner could file a claim for refund and obtain a hearing on the penalties. There is no law, rule, regulation or court case which allows Petitioner to stay collection activities and obtain judicial review of the assessments with ut payment of 15% of the entire penalty assessment against him. See, Note 3 and 4, supra. Petitioner was thus forced to sue for a hearing and to enjoin collection activity pending such a hearing under the principles shown below. 2. Right To Pre-deprivation Process. Under the Constitution, Petitioner’s claim to a pre- deprivation process must be determined considering three factors: “First, the private interest that will be affected by the official action; second, the risk of an erroneous deprivation of such interest through the procedures used, and the probable value, if any, of additional or substitute procedural safeguards; and finally, the Government’s interest, including the function in- volved and the fiscal and administrative burdens that the additional or substitute procedural requirements would entail.” Mathews v. Eldridge, 424 U.S. 319, 335 (1976). The issue of whether Sections 6700, 6701 and 6703 provide adequate Due Process protection and/or requires Eldridge pre-deprivation hearing protection are matters of first impression for this Court. The Ninth Circuit has 12 previously applied Eldridge to these statutes, as noted below, but refused to apply their own precedent herein. The Ninth Circuit’s legal precedents for upholding a taxpayer's right to Due Process and a pre-deprivation hearing arise from fact situations very similar to the instant case. Jolly v. United States, 764 F.2d 642 (9th Cir. 1985); Bond v. United States, 872 F.2d 898, 900 (9th Cir. 1989). In Jolly, supra, at p. 645, the Ninth Circuit considered Jolly’s claim to pre-deprivation process in the context of penalties assessed against him for filing a frivolous tax return and found that such a claim must be examined considering the Eldridge three-part test noted above.” Jolly demonstrated no financial or other hardship from having to pay $75 (15% of $500) before obtaining judicial review of the I.R.S. assessments (while Petitioner here raises a Due Process challenge to the administrative and judicial procedures that would require him to pay nearly $600,000 before a meaningful opportunity to be heard could be had). In applying the Eldridge test, the Ninth Circuit stated: “If the individual bringing a procedural Due Process challenge demonstrates “a likelihood of irreparable harm resulting from the lack of a pre-deprivation hearing,” it is unlikely that the government will be able to demonstrate any public interest that will overcome the individual’s interest, and some addi- 5. Unlike Petitioner, Jolly could turn to a long line of cases to know that his conduct constituted the filing of a “frivolous return” for purposes of Section 6702 before he filed same. The merits and validity of the investments promoted by Petitioner, however, have no explicit statutory or case law prohibition and remain at issue before the Tax Court. 13 tional form of pre-deprivation process will probably be required. Jn the absence of such a showing, how- ever, Eldridge requires courts to “balance the govern- mental interest in [retaining] the existing process against the private interest that will be affected and the probability of erroneous deprivation associated with that process.” Jolly at page 645 [Italic Emphasis Supplied], quoting Kahn v. United States, 753 F.2d 1208, 1219-20 (3rd Cir. 1985). In simple terms, Eldridge and Jolly require that if the taxpayer demonstrates a likelihood of irreparable injury from the lack of a pre-deprivation hearing, “some addi- tional form of pre-deprivation process will probably be required.” Jolly at 641 [Italic Emphasis Supplied] But the Ninth Circuit went further and explained “that Eld- ridge’s three-part test must be applied in evaluating pro- cedural Due Process challenges to Section 6703 regardless of any favorable finding as to irreparable injury.” Jolly, at 645, citing Kahn, supra. Even if the taxpayer fails to demonstrate irreparable injury, the Court must still apply the three-part Eldridge test and “balance the governmental interest in retaining the existing process against the private interest” affected by the process, and the “probability of erroneous depriva- tion associated with that process.” /d. Thus, Jolly required the District Court and the Ninth Circuit in this case to apply the Eldridge balancing test to Petitioner’s claim even after finding that he did not show irreparable injury. Had they done so, they would have found the govern- ment’s interest in the existing administrative procedure (i.e., questionable notice, no hearing, and no showing of the government’s evidence against him) outweighed by l4 Petitioner’s private interest in obtaining review of the penalties without first paying the nearly $600,000 re- quired in this case and the clear risk of erroneous depriva- tion associated with the process. Obviously, the District Court and the Ninth Circuit misunderstood the import of Jolly. The distinctions between Jolly and the instant case are obvious. The critical difference is the disparity in the size of the payment required ($75 versus $600,000) before obtaining judicial review of the assessments. This em- phasizes the reasons to apply these authorities to the I.R.S.’s actions herein and grant the relief sought by Petitioner. Finally, the Government’s interest in retaining the exist- ing procedures involved herein do not merit abrogating Due Process. The I.R.S. has not shown any public interest that overcomes Petitioner’s individual interest herein, and some additional form of pre-deprivation process is there- fore required. Eldridge, supra, requires courts to balance the governmental interest in [retaining] the existing pro- cess against the private interest that will be affected and the probability of erroneous deprivation associated with that process. The District Court was therefore bound to hold a hearing and apply the Eldridge test to Petitioner’s claim. 3. Due Process Denials By A Cost Requirement. This Court has— “{e|stablished that a statute or a rule may be held constitutionally invalid as applied when is operates to deprive an individual of a protected right . . . [jJust as a generally valid notice procedure may fail to 15 satisfy Due Process because of the circumstances of the defendant, so too a cost requirement, valid on its face, may offend Due Process because it operates to foreclose a particular party's opportunity to be heard.” Boddie v. Connecticut, 401 U.S. 371, 379-380 (1971) {Italic Emphasis Supplied]. Further, the right of access to the courts springs from the First Amendment. Ryland v. Shapiro, 708 F.2d 967, 971-972 (Sth Cir. 1983). “".. [t]he right to petition extends to all departments of the Government. The right of access to the courts is indeed but one aspect of the right of petition.” California Motor Transport Co. v. Trucking Unlimited, 404 U.S. 508, 510 (1972). Respondents’ conduct in assessing the penalties denied Petitioner the opportunity for judicial review of the assess- ments without forcing him into bankruptcy. This is an unparalleled interference with, and an abridgement of, Petitioner’s First and Fifth Amendment rights, to petition for the redress of grievances, to Due Process and to Equal Protection. By illegally lumping penalties attributable to seven separate years into the “tax period ended 12/31/88,” Respondents set the amount that Petitioner must have paid within 30 days so high as to deny him access to a judicial review as contemplated under Section 6703. Peti- tioner is thus to suffer the “slings and arrows” of the I.R.S.’s collection activities without ever being able to obtain judicial review of the penalties unless he files bank- 16 ruptcy—while losing all his assets. Thus, without this Court’s intervention he will also suffer constitutional de- privations unequaled in enormity at the hands of the I.R.S. 4. Substantive Due Process: Void for Vagueness. Due Process requires that statutes give persons reason- able notice that their conduct is at risk, otherwise the statutes will fail for vagueness. Maynard v. Cartwright, 486 U.S. 356 (1988); United States v. Powell, 423 U.S. 87 (1975); United States v. Mazurie, 419 U.S. 544 (1975); United States v. National Dairy Corp., 372 USS. 29 (1963). Petitioner can only be punished for violation of known standards of conduct. United States v. Dahl- strom, 713 F.2d 1423 (9th Cir. 1983), cert. denied, 466 U.S. 980. Here, the Internal Revenue Code fails to define the term “abusive tax shelter,” but penalizes Petitioner for its promotion. The Due Process Clause requires this Court to examine Sections 6700 and 6701 to see if they gave Petitioner reasonable notice that he was engaging in prohibited con- duct (especially when the merits of the alleged shelters have yet to be decided by the United States Tax Court); and whether the statutes afforded Petitioner a “meaningful hearing at a meaningful time.” This Court should be mindful that nowhere contained in the Code is a defini- tion of an “abusive tax shelter.” 5. Irreparable Injury Through Constitutional Deprivation. Petitioner has properly alleged a deprivation of Con- stitutional rights, which case authority holds constitutes irreparable injury as a matter of law. 17 As stated by the Ninth Circuit: “{[w]hen an alleged deprivation of a constitutional right is involved, most courts hold that no further showing of irreparable injury is necessary.” Gutierrez v. Municipal Ct. of the S.E. Judicial District, 838 F.2d 1031 (9th Cir. 1988); See also Elrod v. Burns, 427 U.S. 347, 373 (1976); Ross v. Meese, 818 F.2d 1132 (4th Cir. 1987); and /nternational Association of Firefighters, Local 2069 v. City of Sylacauga, 436 F. Supp. 482 (N.D. Ala., E.D. 1977). Having been afforded no pre-deprivation hearing on the penalties and upon failure to pay the 15% required by Section 6703, the denial of a post-deprivation hearing was assured. Thus, the District Court and the Ninth Cir- cuit should have held, as this Court should hold, that the constitutional deprivations suffered by Petitioner consti- tute irreparable injury as a matter of law. 6. Lack of Adequate Due Process Safeguards. The risk of erroneous deprivation in this case is great. When the I.R.S. issues these penalties, the merits of the underlying “shelter” often remain to be determined. This is not a question of a taxpayer’s self-assessment for pur- poses of a frivolous return penalty. Jolly, supra. Here the I.R.S. must determine not only Petitioner’s gross income from the activity, but also the number of documents allegedly prepared by him. The facts of the assessments are complicated, involving over seven years, thirty-five corpora- tions, thousands of other taxpayers, and allegedly millions of dollars in gross revenues. But the I.R.S. afforded Peti- tioner no meaningful opportunity to be heard before or 18 after assessing the nearly $4,000,000 in panalties against him. The Internal Revenue Code, its rules and regulations fail to provide any other procedure for obtaining judicial review and a stay of collection activities, other than pay- ment of 15% of the entire assessment within 30 days and the filing of a claim for refund. Even if you concede that Petitioner could pay $150 of one Section 6701 penalty and thereby obtain a stay of collection activities and judicial review of that one penalty assessment, it ignores Petitioner’s inability to thereby stay collection activities and obtain judicial review of the other 2,329 Section 6701 penalties assessed against him. See, Notes 3 and 4 supra. There is no procedure to allow a taxpayer to require the I.R.S. to hold a pre-assessment hearing. The only procedure to stay collection of the entire assessment and obtain judicial review of the I.R.S. assessments under Sections 6700 and 6701 is through payment of 15% of the entire assessment within thirty (30) days. Failing that, the only other statutory remedies available to the taxpayer are to pay the entire assessment plus interest and sue for a refund, or to file bankruptcy.° Unlike Bob Jones University v. Simon, 416 U.S. 725 (1974), the Section 6703 procedures complained of here- in do not— 6. This is obviously no remedy since if the taxpayer can pay almost $4,000,000 after 30 days, the taxpayer should be able to pay $600,000 within 30 days of assessment. The problem arises when the taxpayer cannot pay the nearly $600,000 within 30 days because then the taxpayer can only obtain judicial review by filing of bankruptcy. Otherwise, the I.R.S. can levy upon and sell all of the taxpayer’s assets and he will never be able to raise the entire assessment amount, much less obtain judicial review. 19 “offer petitioner a full, albeit delayed, opportunity to litigate the legality of the Service’s [penalty assess- ments] .. .” In contrast, these procedures assure Petitioner will be afforded no opportunity to litigate their legality at all. B. The Anti-Injunction Act Does Not Bar This Action. The Anti-Injunction Act, 26 U.S.C. Section 7421, (the “Act”) does not apply and an injunction may issue where the tax sought to be enjoined is in reality a penalty or special and extraordinary circumstances are present. Schenley Distillers, Inc. v. Bingler, 145 F.Supp. 517, 520- 21 (W.D. Penn., 1956), aff'd 353 U.S. 933. The Act preceded Schenley, supra. The Act does not prevent the granting of relief by way of injunction where an assessment, in the form of a tax, is in reality a penalty in the nature of punishment. Lipke v. Lederer, 259 U.S. 557 (1922); Regal Drug Corp. v. War- dell, 260 U.S. 386 (1922). These cases, while of narrow scope, are still good law, as noted in Bob Jones University v. Simon, 416 U.S. 725, 743 (1974) [relying upon Graham v. Dupont, 262 U.S. 234 (1923)]. The District Court and the Ninth Circuit held that the Anti-Injunction Act barred Petitioner’s suit. Petitioner disagrees. The I.R.S. assessed a penalty against him, not a tax. There is no basis in law or fact for the lower Courts’ determination that the amounts assessed were taxes, not penalties, thereby allowing the Anti-Injunction Act to bar this suit. Petitioner also can find no authority that applies the Act to preclude Due Process, and to deny notice and a 20 hearing on the merits of the tax or penalty. Petitioner sought to enjoin collection of the statutorily required 15% until he received a pre-deprivation hearing, or a full hearing on the merits of the assessment. The District Court and the Ninth Circuit, however, applied the Act to deny the injunction, thereby enforcing the assessments and requiring the 15% payments before allowing a hear- ing on the merits. Congress never intended to use the Act to deny Due Process or Equal Protection. But it hap- pened here. 7. Sections 6700 and 6701 Assess Penalties— Not Taxes. The clear reading of Sections 6700 and 6701, with the legislative history of these statutes, shows that these statutes deal with penalties—not taxes. “When by its very nature the imposition is a penalty, it must be so regarded. . . . It lacks all of the ordin- ary characteristics of a tax, whose primary function “is to provide for the support of the government” and clearly involves the idea of punishment for in- fraction of the law—the definite function of a penalty.” Lipke, supra, at pages 562. Title 26 U.S.C. Section 6671 (Appendix D), does not make the Section 6700 and 6701 penalties taxes, it states instead that they “. . . shall be assessed and collected in the same manner as taxes.” This is exceedingly different from Chapter 68, Subchapter A (Title U.S.C. §§ 6651, et seq.), wherein the “penalty” is added to and becomes part of the tax. 21 Title 26 U.S.C. Section 6672 (Appendix D) is also not dispositive of the issue before the Court, since that sanc- tion, although denominated a penalty, is merely a tax collection device. Botta v. Scanlon, 314 F.2d 392 (2nd Cir. 1963); United States v. Abrahams, 312 F.Supp. 1035 (S.D. N.Y. 1970); United States v. Pridgen, 403 F.Supp. 1109 (S.D. N.Y. 1975). 8. Petitioner’s Suit Falls Within Anti-Injunc- tion Act Exceptions. The District Court and the Ninth Circuit adopted the government’s arguments that penalties assessed pursuant to Sections 6700 and 6701 of the Code are deemed to be taxes, and thereby applied the Anti-Injunction Act to dismiss Petitioner’s entire case. Assuming, arguendo, that the Anti-Injunction Act does apply to said penalties, the Courts hereunder erred by failing to find that Petitioner’s claims fit within judicial exceptions to the Act. The standards for exception to the Anti-Injunction Act are set out in Bob Jones University v. Simon, 416 U.S. 725, 736-37 (1974) (plaintiff must show irreparable in- jury and “certainty of success on the merits.”) and in Enochs v. William Packing & Navigation Co., 370 US. 1, 7 (1962) (A preliminary injunction should issue only “if it is clear under the circumstances that under no cir- cumstances could the Government prevail”). The courts erred in failing to find that Petitioner’s claims met said standards, for as shown herein, Petitioner showed both irre- parable injury and his certainty of success on the merits. Under an exception to the Anti-Injunction Act one must show that “equity jurisdiction otherwise exists.” Re- spondents have argued that Petitioner “clearly has an adequate remedy available in the form of a refund suit.” 22 As stated above, Petitioner was required to pay nearly $600,000 within 30 days in order to obtain this supposed remedy (which he was not able and is still not able to pay). It requires a great “leap of faith” to pretend that this could ever be considered an adequate remedy. Surely the term “adequate” must imply some practical ability by a plaintiff to access the proposed remedy. Neither Peti- tioner, nor anyone else, could reasonably be asked to meet such a financial burden in such a short time in search of redress by the courts and yet realistically be said to have been afforded an “adequate” remedy. Petitioner is simply unable to pay such an exorbitant amount. This Court should remember that this exorbitant amount was assessed in clear derogation of statute and controlling case law. Bond, supra. Now the Respondents would use this improper and constitutionally invalid assessment to msure Petitioner’s inability ever to challenge the assessments’ unconstitutionality. Again, as this honorable Court has stated— “[a] cost requirement, valid on its face, may offend Due Process because it operates to foreclose a parti- cular party’s opportunity to be heard.” Boddie, supra, at p. 380. Clearly, a requirement that so effectively forecloses one’s opportunity to be heard negates any argument of “adequate” remedy. a. Likelihood of Irreparable Injury to Peti- tioner. Irreparable injury is the essential prerequisite for in- junctive relief in any case. This Court has stated: 23 “(t]he basis of injunctive relief in the federal courts has always been irreparable harm and inadequacy of legal remedies.” Beacon Theatres, Inc. v. Westover, 359 U.S. 500, 506- 507 (1959). The denial of Due Process, whether a full hearing on the merits or a pre-deprivation hearing, for Petitioner, coupled with the imminent denial of subsequent recourse in the courts clearly results in irreparable injury to Peti- tioner. Petitioner was arbitrarily and capriciously assessed penalties by the I.R.S., then required to pay a percentage amounting to almost $600,000 (which he and clearly very few people could be expected to be able to raise in the (30) thirty days allotted under Section 6703). Upon his failure to pay this exorbitant amount, Petitioner was auto- matically required to pay $3,878,463 in total penalties plus interest without any further recourse. Clearly, this is effectively a deprivation of Due Process and Equal Pro- tection amounting to injury of an irreparable nature where Petitioner is required to pay such an exorbitant amount without any further redress in the courts. This is particu- larly so, when the I.R.S. made no challenge to Petitioner’s verified assertion of his inability to pay the penalty assess- ment percentage or his being forced into bankruptcy if he is denied a pre-deprivation hearing. b. Financial Injury May Constitute Irrepar- able Harm. While the Due Process deprivations suffered by Peti- tioner sufficiently evidence irreparable injury, case author- ity makes it clear that irreparable injury may also be shown in the form of financial harm. Doran v. Salem Inn, 24 Inc., 422 U.S. 922, 932 (1975). Contrary to the Ninth Circuit’s determination that such harm will not constitute irreparable injury, this Court, as well as other Circuit Courts, have clearly determined otherwise. The District Court and Ninth Circuit’s cite this Court’s decision in Sampson v. Murray, 415 U.S. 61 (1974) to support their decisions. The reliance on this decision is misguided in that the facts of Sampson v. Murray differ significantly from those presented here by Petitioner. In Sampson, the Respondent’s unverified complaint alleged merely that “she might be deprived of her income for an indefinite period of time.” This alleged temporary depriva- tion of income in Sampson cannot be equated with the imminent threat of bankruptcy and financial ruin faced by Petitioner herein, especially in light of the continued col- lection activities which have occurred durng the last two years. Indeed this Court has ruled in Doran v. Salem, Inc., supra, that where— “ . respondents alleged (and petitioner did not deny) that absent preliminary relief they would suffer a substantial loss of business and perhaps even bankruptcy, ... this type of injury sufficiently meets the standards for granting injunctive relief. Several Circuit Courts have recognized this form of irreparable harm as well. The Fifth Circuit in Atwood Turnkey Drilling v. Petroleo Brasiliero, 875 F.2d 1174 (Sth Cir. 1989) found injunctive relief appropriate where no evidence was submitted to contradict the claim that respondent would be forced into bankruptcy. The Fifth Circuit stated that while it is the general rule that injunc- tive relief is inappropriate where harm is strictly financial, 25 “an exception exists where the potential economic loss is so great as to threaten the existence of the movant’s business.” Id. at 1179. [Citations Omitted] See generally, Milsen Co. v. Southland Corp., 454 F.2d 363 (7th 1971); Tri- State Generation v. Shoshone River Power, Inc., 805 F.2d 351 (10th Cir. 1986). As for the District Court’s and Ninth Circuit’s conclu- sion that some additional form of documentation is re- quired for Petitioner’s assertion of financial injury, there is no basis in law for such a requirement. This is particularly so in light of Respondents’ failure to contradict Peti- tioner’s assertion of financial injury. See Doran v. Salem Inn, Inc., supra, at 2568; and Atwood Turnkey Drilling v. Petroleo Brisiliero, supra, at 1179. Thus, Petitioner’s allegations of imminent financial ruin clearly refute the lower Courts’ finding of no irreparable injury here. c. Success On The Merits. The second requirement for exception under Anti-In- junction Act analysis is the certainty of success on the merits. Pre-enforcement injunction may be granted only “Tijf it is clear that under no circumstances could the Government ultimately prevail.” Enochs, supra, at p. 7. On the merits, clearly even the Respondents cannot estab- lish their claim of a proper penalty assessment against Petitioner. There are several fatal defects in the Government’s case. According to Tahara, the penalties were assessed against Petitioner based on the income to corporations with which Petitioner is associated. The assessment was therefore made in contravention of the statutes and rele- 26 vant case law. Jolly, supra, and Bond, infra. Sections 6700 and 6701 require penalties to be assessed upon the gross income to the promoter, not upon the income to corpora- tions with which the promoter is associated. Bond v. United States, 872 F.2d 898, 900 (9th Cir. 1989). Re- spondents’ previous admission that they have no idea what income Petitioner has derived from the alleged promotion is further evidence of the arbitrary and capricious nature of the assessment in this case. Respondents have jv Jicially admitted that the penalties against Petitioner unuer Section 6700 were assessed by attributing the involved corporations’ entire income to Petitioner, thereby ignoring the corporate form. It is im- portant for this Court to note that of the corporations ostensibly involved, Petitioner owns no shares therein and all are widely held. Under Section 6700, a penalty for organizing or pro- moting abusive tax shelter is assessed as “the greater of $1,000 or 20% of the gross income derived or to be de- rived by such person from such activity.” 26 U.S.C. 6700(a) [Emphasis Supplied]. (Appendix D) See Gates v. U.S., 874 F.2d 584 (8th Cir. 1989); also Spriggs v. U.S., 660 F.Supp. 789 (E.D. Va. 1987). “The statute does not provide an alternative in the amount of $1000 for each sale of an investment, much less for another alternative .. . invented by the I.R.S. for Appellant’s case.” Weir v. U.S., 716 F.Supp. 574 (N.D. Ala. 1989). There is also no provision in the statutes for “lumping” all the penalties (covering a seven year period) into the “tax period ended 12/31/88, as was done in this case. 27 The assessments have thus clearly been made illegally and cannot stand upon judicial review. d. Applicable Statute of Limitations. If the assessments against Petitioner are in fact for the years set forth in Tahara’s declaration (supra), then part of the assessments are void, ab initio, as having been assessed after the running of the applicable statute of limitations, 26 U.S.C. Section 6501 (three year statute of limitations) or 28 U.S.C. Section 2462 (general five year statute of limitations). (Appendix D) This Court must determine the proper statute of limitations to be applied in this case. In relevant part, 28 U.S.C. Section 2462 reads: “Except as otherwise provided by Act of Congress, an action, suit or proceeding for the enforcement of any civil fine, penalty, or forfeiture, pecuniary or otherwise, shall not be entertained unless commenced within five years from the date when the claim first accrued... Respondents argue that without a specific statute of limitations, none should be implied of imposed. Although Sections 6700 and 6701 were enacted with no express statute of limitations provided, in 26 U.S.C. Section 6671(a), it states that penalties “shall be assessed and collected in the same manner as taxes,” and Section 650] (a) provides that “any tax imposed by this title shall be assessed within 3 years after the return was filed .. .” Thus, an evident argument is that the statute of limita- tions for Section 6700 penalties should be 3 years. While Petitioner does contend that this is the appropriate limita- 28 tion to be applied, an alternative is recognized and man- dated by law. As 28 U.S.C. Section 2462 makes plain, suit for en- forcement of any penalty must be commenced within five (5) years from the date when claim first accrued, except as otherwise provided. While failure to provide a specific limit might suggest no limit of time, as stated in H.P. Lambert Co. v. Secretary of Treasury, 354 F.2d 819 (C.A. 1, 1965)— “the general policy of statutes of limitations is so deeply ingrained in our legal system that a period of limitations made generally applicable to such pro- ceedings, as is Section 2462, is not to be avoided unless that purpose is made manifestly clear.” There is no indication that Congress intended to exclude Section 6700 and 6701 penalties from the operative effect of either the general statute of limitations embodied in 28 U.S.C. Section 2462 or the three year statute of limita- tions relating to the assessment and collection of taxes, 26 U.S.C. Section 6501. Section 6501(a) depends on the filing of a tax return. Section 6700 assessments clearly do not depend on the filing of a tax return. Rather, assessment of Section 6700 penalties occur after alleged abusive conduct prohibited by Section 6700 occurs. The I.R.S. has been aware of the alleged activities of Petitioner since before the effective date of the penalty statutes involved herein, yet as attested to by Tahara, penalties have been assessed against Peti- tioner under both Sections 6700 and 6701 for each year from 1982 through 1988. 29 Whether this Court should accept the view that a 3 year or the general 5 year period of limitations apply, clearly the assessments made by Respondents are in derogation of the statutes of limitation.’ Each of the aforesaid defects is singularly fatal to the Respondents’ case. There is no acceptable rationale for the purportec penalty assessments made by Respondents. Any arbitrary and capricious tax assessment, without any statutory basis, is void ab initio. See Weir v. U.S., 716 F.Supp. 574 (N.D. Ala. 1989). The I.R.S. cannot justify the unjustifiable. Thus, even under the most liberal view of the law and facts, “under no circumstances could the Government ultimately prevail” in the imposition of the penalties assessed against Petitioner. D. Return of Seized Materials. Irrespective of whether Petitioner’s attempt to enjoin collection of the penalties assessed against him was barred by the Anti-Injunction Act, Petitioner’s claim for the re- turn of the items subpoenaed from him by the I.R.S. plus his claim for attorney’s fees for having to bring the suit, were not barred and the District Court had jurisdiction to entertain same. Von der Ahe v. Howland, 508 F.2d 364 (9th Cir. 1974). After the hearing on November 13, 1989, the I.R.S. returned to the Petitioner what they represented to be the items subpoenaed from the Petitioner and which were the subject of Petitioner’s claim for mandatory injunctive 7. This Court should note that the Respondents are advancing inconsistent positions with respect to the statute of limitations for the I.R.S. cannot treat the penalties as taxes for the purposes of refund and the application of the Anti-Injunction Act while treating the penalties as penalties for the purposes of the statute of limitations. 30 relief for their return. Petitioner disputes that all items were returned to him by the I.R.S. The District Court, however, must retain continuing jurisdiction to completely resolve the claim, and ensure that all Petitioner’s records are returned. Thereafter, the Court has jurisdiction to assess attorneys fees and costs in Petitioner’s favor for bringing the claim for return of his records under the Equal Access to Justice Act, 28 U.S.C. Section 2412 (Appendix D). CONCLUSION For all the reasons stated herein, this petition should be granted and a writ of certiorari should issue to review the decision below. Respectfully submitted, L. T. “BUTCH” BRADT (Counsel of Record) 6303 Feldspar Houston, Texas 77092-4716 (713) 681-2696 MATTHEW K. CHUNG Suite 1501 220 South King Street Honolulu, Hawaii 96813 (808) 545-2060 TERRENCE B. ROBINSON (Of Counsel to Petitioner) One West Loop South, Suite 100 Houston, Texas 77027 la APPENDIX A IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF HAWAII CIVIL NO. 89-00860 ACK HENRY F.K. KERSTING, Plaintiff, V. UNITED STATES OF AMERICA AND COMMISSIONER OF INTERNAL REVENUE, Defendants. Filed Nov. 15, 1989 JUDGMENT This court denied Plaintiff's Motion for Preliminary Injunction. This court, sua sponte, dismissed the action for lack of subject matter jurisdiction. Accordingly, JUDG- MENT IS HEREBY ENTERED FOR DEFENDANTS. IT IS SO ORDERED. /s/ SPENCER WILLIAMS United States District Court 2a APPENDIX B IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF HAWAII CIVIL NO. 89-00860 ACK HENRY F.K. KERSTING, Plaintiff, Ve UNITED STATES OF AMERICA, ET AL., Defendants. Filed Nov. 15, 1989 ORDER DENYING PRELIMINARY INJUNCTION This action came before this court on the Plaintiff's Motion for Preliminary Injunction. The Internal Revenue Service (“IRS”) has assessed penalties against plaintiff under sections 6700 and 6701 of the Internal Revenue Code (the “Code”). Plaintiff seeks a preliminary in- junction against the IRS to enjoin the IRS from assessing and/or collecting any part of the penalties assessed against him under sections 6700 and 6701 of the Code. Plaintiff argues that the denial of a pre-assessment review violates his rights to due process, equal protection, and first amendment rights. Having considered the pleadings and arguments, this court HEREBY DENIES the motion and DISMISSES the suit for lack of subject matter juris- diction. 3a DISCUSSION: The Anti-Injunction Act, section 7421(a) of the Code States that “[n]lo suit for the purpose of restraining the assessment or collection of any tax shall be main- tained in any court by any person whether or not such person is the person against whom such tax was as- sessed.” Penalties are treated as taxes for these purposes. Section 6171(a) of the Code. An exception to the Anti-Injunction Act exists in which the plaintiff can show irreparable injury and “certainty of success on the merits.” Bob Jones University v. Simon, 416 U.S. 725, 736-37 (1974). A preliminary injunction should issue only “if it is clear under the circumstances that under no circumstances could the Government prevail.” Enoch vy. Williams Packing & Navigation Co., 370 U.S. 1, 7 (1962). Plaintiff has failed to show irreparable injury if the penalties are assessed. Plaintiff claims only that the penalties will cause “financial ruin forever,” but he has submitted no supporting documentation to prove his financial status. Plaintiff also cannot prove that the government has no chance of winning. Currently, the tax court in a related case, Dixon v. Commissioner, Docket No. 9382- 83, has been deliberating for a few months after a lengthy trial of the investors in plaintiffs investment plans. The government withstood summary judgment motions in the Dixon case. It is clear that although there is a slight chance that plaintiff's investment plans might be proven valid, there is no “certainty” that the govern- ment will fail to show that plaintiff's tax schemes are illegal. 4a Therefore, the plaintiff cannot meet Anti-Injunction Act applies, and this court must dismiss for lack of subject matter jurisdiction. Enoch v. Williams, 370 U.S. at 7. Accordingly, this court HEREBY DISMISSES the case for lack of subject matter jurisdiction. IT IS SO ORDERED. /s/ SPENCER WILLIAMS United States District Court 5a APPENDIX C NOT FOR PUBLICATION UNITED STATES COURT OF APPEALS FOR THE NINTH CIRCUIT NO. 89-16459 D.C. NO. CV-89-0860-ACK HENRY KERSTING, Plaintiff-Appellant, Vv. UNITED STATES OF AMERICA and COMMISSIONER INTERNAL REVENUE SERVICE, Defendants-Appellees. Filed August 2, 1991 MEMORANDUM* Appeal from the United States District Court for the District of Hawaii Alan C. Kay, District Judge, Presiding Argued and Submitted October 5, 1990 San Francisco, California BEFORE: SCHROEDER, BRUNETTI, Circuit Judges, and BREWSTER**, District Judge Henry Kersting appeals from an order of the District Court for the District of Hawaii dismissing sua sponte, * This disposition is not appropriate for publication and may not be cited to or by the courts of this circuit except as provided by Circuit Rule 36-3. ** Honorable Rudi M. Brewster, United States District Judge for the Southern District of California, sitting by designation. 6a for lack of subject matter jurisdiction, his action against the Internal Revenue Service and the United States. We have jurisdiction under 28 U.S.C. § 1291 and affirm. I. Background In October 1989 the Internal Revenue Service (“IRS”) assessed penalties against Kersting for promoting abusive tax shelters. Appellant was assessed $1,545,201 under 26 U.S.C. § 6700 and $2,330,000 under 26 U.S.C. § 6701. The procedures in the Internal Revenue Code allowing a taxpayer to contest income or estate assessments in tax court without first paying the tax, §§ 6211-6213, do not apply to $6700 and 6701 penalties. Under § 6703, a taxpayer’s sole remedy in the case of $$ 6700 and 6701 assessments is to pay fifteen percent of the penalty within thirty days and then to file a claim for refund with the IRS. and upon disallowance of that claim, to bring a iefund action in district court. For § 6700 penalties, the taxpayer is required to pay fifteen percent of the entire penalty to reach federal court. For § 6701 penal- ties, the taxpayer may pay fifteen percent of a single assessment (i.e., $150) and then file a refund action to determine the legality of all the § 6701 penalties.’ Instead of complying with the procedures set out in $ 6703, Kersting filed suit in federal district court. His complaint alleged (a) that the § 6703 procedural re- quirements violate due process and equal protection, and (b) that §§$ 6700 and 6701 violate due process and 1. In this case, Kersting was required to pay fifteen percent of $1,545,201 ($231,780.15) under $6700, and fifteen percent of $1,000 ($150) for a single § 6701 penalty. Kersting was assessed a total of $2,330,000 under § 6701. Ta equa! protection. Kersting asked the court to declare the Code provisions unconstitutional and to issue an injunction enjoining the IRS from collecting the assess- ments.” The district court denied Kersting’s motion for pre- liminary injunction and dismissed sua sponte the action in its entirety for lack of subject matter jurisdiction. Under the provisions of the Anti-Injunction Act, 26 U.S.C. § 7421, the court held that Kersting could not maintain a suit to restrain the assessment or collection of the section 6700 or 6701 penalties. Therefore, the court found that it was without jurisdiction to consider the case. The court rejected Kersting’s argument that it should hear the case under a judicially created exception to the Anti-Injunction Act. That exception permits an action to restrain the assessment or collection of a tax when a taxpayer demonstrates a certamnty of success on the merits and that irreparable injury will result if the action is precluded. Enoch v. Williams Packing & Navigation Co., 370 U.S. 1, 6-7 (1962); Elias v. Connett, 908 F.2d 521, 526 (9th Cir. 1990). The court found Kersting made no showing the assessment would cause him irreparable injury. The court also held Kersting failed to demonstrate a certainty of success on the merits. II. Standard of Review We review the district court decision to dismiss for lack of subject matter jurisdiction de novo. Kruso v. 2. Kersting also sought return of various documents from the government. As these documents were returned before the matter was considered by the district court, we hold Kersting’s claim on appeal with regard to these documents is moot. 8a International Tel. and Tel., 872 F.2d 1416, 1421 (9th Cir. 1989). Ill. Discussion We need not reach the question whether Kersting was certain to succeed on the merits because we agree with the district court he provided no evidence irreparable injury would result. To demonstrate irreparable harm for the purpose of avoiding the strictures of the Anti- Injunction Act, it is necessary to demonstrate some- thing more than “mere monetary harm or financial hard- ship. . . .” Elias, 908 F.2d at 526. Indeed, to satisfy this prong of the Enochs exception, it is necessary to demonstrate that the harm resulting from forcing Kers- ting to protest the assessments in accordance with the procedure set out in 26 U.S.C. § 6706 is not capable of redress. As the Supreme Court has observed: The key word in this consideration is irreparable. Mere injuries, however substantial, in terms of money, time and energy necessarily expended in the absence of a stay, are not enough. The pos- sibility that adequate compensatory or other cor- rective relief will be available at a later date, in the ordinary course of litigation, weighs heavily against a claim of irreparable harm. Sampson v. Murray, 415 U.S. 61, 90 (1974) (quoting Virginia Petroleum Jobbers Ass'n. v. FPC, 259 F.2d 921, 925 (1958)) (emphasis original in Virginia Jobbers). In this case, the district court stated, “Plaintiff has failed to show irreparable injury if the penalties are assessed. Plaintiff claims only that the penalties will cause ‘financial ruin forever,’ but he has submitted no support- ing documentation to prove his financial status.” Order 9a Denying Preliminary Injunction at 2. Our independent review of the record has revealed no evidence of harm beyond “mere financial hardship.” Indeed, at trial, Kersting alleged that he did not have, and was unable to raise sufficient funds to comply with § 6703. Affidavit of Henry Kersting, Excerpts of Records at B, 4 13-14. We therefore conclude the Anti-Injunction Act properly was applied in this case, and thus the district court was without jurisdiction to consider the matter. AFFIRMED. 10a APPENDIX D AMENDMENT -I—FREEDOM OF RELIGION, SPEECH AND PRESS; PEACEFUL ASSEMBLAGE; PETITION OF GRIEVANCES Congress shall make no law respecting an establish- ment of religion, or prohibiting the free exercise thereof; or abridging the freedom of speech, or of the press; or the right of the people peaceably to assemble, and to petition the Government for a redress of grievances. AMENDMENT V—GRAND JURY INDICT- MENT FOR CAPITAL CRIMES; DOUBLE JEOPARDY; SELF-INCRIMINATION; DUE PROCESS OF LAW; JUST COM- PENSATION FOR PROPERTY No person shall be held to answer for a capital, or otherwise infamous crime, unless on a presentment or indictment of a Grand Jury, except in cases arising in the land or naval forces, or in the Militia, when in actual service in time of War or public danger; nor shall any person be subject for the same offense to be twice put in jeopardy of life or limb; nor shall be compelled in any criminal case to be a witness against himself, nor be deprived of life, liberty, or property, without due process of law; nor shall private property be taken for public use, without just compensation. 26 U.S.C. § 6501. LIMITATIONS ON ASSESSMENTS AND COLLECTION (a) General rule-—Except as otherwise provided in this section, the amount of any tax imposed by this title shall lla be assessed within 3 years after the return was filed (whether or not such return was filed on or after the date prescribed) or, if the tax is payable by stamp, at any time after such tax became due and before the expiration of 3 years after the date on which any part of such tax was paid, and no proceeding in court without assessment for the collection of such tax shall be begun after the expira- tion of such period. 26 U.S.C. § 6671. RULES FOR APPLICATION OF ASSESSABLE PENALTIES (a) Penalty assessed as tax.—The penalties and liabili- ties provided by this subchapter shall be paid upon notice and demand by the Secretary, and shall be assessed and collected in the same manner as taxes. Except as ” otherwise provided, any reference in this title to “tax imposed by this title shall -be deemed also to refer to the penalties and liabilities provided by this subchapter. (b) Person defined.—The term “person”, as used in this subchapter, includes an officer or employee of a corporation, or a member or employee of a partnership, who as such officer, employee, or member is under a duty to perform the act in respect of which the violation occurs. 26 U.S.C. § 6672. FAILURE TO COLLECT AND PAY OVER TAX, OR ATTEMPT TO EVADE OR DEFEAT TAX (a) General rule-—Any person required to collect, truthfully account for, and pay over any tax imposed by this title who willfully fails to collect such tax, or truthfully accounts for and pay over such tax or will- 12a fully attempts in any manner to evade or defeat any such tax or the payment thereof, shall, in addition to other penalties provided by law, be liable to a penalty equal to the total amount of the tax evaded, or not collected, or not accounted for and paid over. No penalty shall be imposed under section 6653 for any offense to which this section is applicable. (b) Extension of period of collection where bond is filed.— (1) In general.—If, within 30 days after the day on which notice and demand of any penalty , under subsection (a) is made against any person, such person— (A) pays an amount which is not less than the minimum amount required to commence a proceeding in court with respect to his tiability for such penalty. (B) files a claim for refund of the amount so paid, and (C) furnishes a bond which meets the require- ments of paragraph (3), no levy or proceeding in court for the collection of the remainder of such penalty shall be made, be- gun, or prosecuted until a final resolution of a proceeding begun as provided in paragraph (2). Notwithstanding the provisions of section 7421(a), the beginning of such proceeding or levy during the time such prohibition is in force may be enjoined by a proceeding in the proper court. (2) Suit must be brought to determine liability for penalty.—If, within 30 days after the day on on which his claim for refund with respect to any penalty under subsection (a) is denied, the person described in paragraph (1) fails to begin a pro- 13a ceeding in the appropriate United States district court (or in the Court of Claims) for the deter- mination of his liability for such penalty, paragraph (1) shall cease to apply with respect to such penalty, effective on the day following the close of the 30- day period referred to in this paragraph. (3) Bond—The bond referred to in paragraph (1) shall be in such form and with such sureties as the Secretary may by regulations prescribe and shall be in an amount equal to 1% times the amount of excess of the penalty assessed over the payment described in paragraph (1). (4) Suspension of running of period of limitations on collection—The running of the period of limi- tations provided in section 6502 on the collection by levy or by a proceeding in court in respect of any penalty described in paragraph (1) shall be suspended for the period during which the Secretary hibited from collecting by levy or a proceeding in court. (5) Jeopardy collection —\f the Secretary makes a finding that the collection of the penalty is in jeopardy, nothing in this subsection shall prevent the immediate collection of such penalty. 26 U.S.C. § 6700. PROMOTING ABUSIVE TAX SHELTERS, ETC. (a) Imposition of penalty—Any person who— (1)(A) organizes (or assists in the organization of )— (i) a partnership or other entity, (ii) any investment plan or arrangement, or (iii) any other plan or arrangement, or (B) participates in the sale of any interest in an entity or plan or arrangement referred to in sub- paragraph (A), and Aili taniiaatan asin cian ceaiiemeeeiaiaaiadliii 14a (2) makes or furnishes (in connection with such organization or sale)— (A) a statement with respect to the allow- ability of any deduction or credit, the exclud- ability of any income, or the securing of any other tax benefit by reason of holding an interest in the entity or participating in the plan or ar- rangement which the person knows or has reason to know is false or fraudulent as to any material matter, or (B) a gross valuation overstatement as to any material matter, shall pay a penalty equal to the greater of $1,000 or 20 percent of the gross income derived or to be derived by such person from such activity. (b) Rules relating to penalty for gross valuation over- statements.— (1) Gross valuation overstatement defined.— For purposes of this section, the term “gross valua- tion overstatement” means any statement as to the value of any property or services if— (A) the value so stated exceeds 200 percent of the amount determined to be the correct valu- ation, and (B) the value of such property or services is directly related too the amount of any deduction or credit allowable under chapter 1 to any par- ticipant. (2) Authority to waive-—The Secretary may waive all or any part of the penalty provided by subsection (a) with respect to any gross valuation overstatement on a showing that there was a reason- able basis for the valuation and that such valuation was made in good faith. 15a (c) Penalty in addition to other penalties —The pen- alty imposed by this section shall be in addition to any other penalty provided by law. 26 U.S.C. § 6701. PENALTIES FOR AIDING AND ABETTING UNDERSTATEMENT OF TAX LIABILITY (a) Imposition of penalty—Any person— (1) who aids or assists in, procures, or advises with respect to, the preparation or presentation of any portion of a return, affidavit, claim, or other docu- ment in connection with any matter arising under the internal revenue laws, (2) who knows that such portion will be used in connection with any material matter arising under the internal revenue laws, and (3) who knows that such portion (if so used) will result in an understatement of the liability for tax of another person, shail pay a penalty with respect to each such document in the amount determined under subsection (b). (b) Amount of penalty.— (1) In general.—Except as provided in paragraph (2), the amount of the penalty imposed by subsec- tion (a) shall be $1,000. (2) Corporations.—lf the return, affidavit, claim, or other document relates to the tax liability of a corporation, the amount of the penalty imposed by subsection (a) shall be $10,000. (3) Only I penalty per person per period.—If any person is subject to a penalty under subsection (a) with respect to any document relating to any tax- payer for any taxable period (or where there is no l6a taxable period, any taxable event), such person shall not be subject to a penalty under subsection (a) with respect to any other document relating to such taxpayer for such taxable period (or event). (c) Activities of subordinates.— (1) In general.—For purposes of subsection (a), the term “procures” includes— (A) ordering (or otherwise causing) a subor- dinate to do an act, and (B) knowing of, and not attempting to prevent, participation by a subordinate in an act. (2) Subordinate.—for purposes of paragraph (1), the term “subordinate” means any other person (whether or not a director, officer, employee, or agent of the taxpayer involved) over whose activities the person has direction, supervision, or control. (d) Taxpayer not required to have knowledge.—Sub- section (a) shall apply whether or not the understatement is with the knowledge or consent of the persons author- ized or required to present the return, affidavit, claim, or other document. (e) Certain actions not treated as aid or assistance.— For purposes of subsection (a)(1), a person furnishing typing, reproducing, or other mechanical assistance with respect to a document shall not be treated as having aided or assisted in the preparation of such document by reason of such assistance. (f) Penalty in addition to other penalties.— (1) In general.—Except as provided by paragraph (2), the penalty imposed by this section shall be in addition to any other penalty provided by law. 17a (2) Coordination with return preparer penalties. —No penalty shall be assessed under subsection (a) or (b) of section 6694 on any person with respect to any document for which a penalty is assessed on such person under subsection (a). 26 U.S.C. § 6703. RULES APPLICABLE TO PEN- ALTIES UNDER SECTIONS 6700, 6701, AND 6702 (a) Burden of proof.—In any proceeding involving the issue of whether or not any person is liable for a penalty under section 6700, 6701, or 6702, the burden of proof with respect to such issue shall be on the Secretary. (b) Deficiency procedures not to apply.—Subchapter B of chapter 63 (relating to deficiency procedures) shall not apply with respect to the assessment or collection of the penalties provided by sections 6700, 6701, and 6702. (c) Extension of period of collection where person pays ‘IS percent of penalty.— (1) In general.—lf, within 30 days after the day on which notice and demand of any penalty under section 6700, 6701, or 6702 is made against any person, such person pays an amount which is not less than 15 percent of the amount of such penalty and files a claim for refund of the amount so paid, no levy or proceeding in court for the collection of the remainder of such penalty shall be made, begun, or prosecuted until the final resolution of a proceed- ing begun as provided in paragraph (2). Notwithstanding the provisions of section 7421(a), the beginning of such proceeding or levy during the time such prohibition is in force may be enjoined by a proceeding in the proper court. (2) Person must bring suit in district court to determine his liability for penalty.—Ilf, within 30 18a days after the day on which his claim for refund of any partial payment of any penalty under section 6700, 6701, or 6702 is denied (or, if earlier, within 30 days after the expiration of 6 months after the day on which he filed the claim for refund), the person fails to begin a proceeding in the appropriate United States district court for the determination of his liability for such penalty, paragraph (1) shall cease to apply with respect to such penalty, effec- tive on the day following the close of the applicable 30-day period referred to in this paragraph. (3) Suspension of running of period of limitations on collection.—The running of the period of limita- tions provided in section 6502 on the collection by levy or by a proceeding in court in respect of any penalty described in paragraph (1) shall be sus- pended for the period during which the Secretary is prohibited from collecting by levy or a proceeding in court. 26 U.S.C. § 7421. PROHIBITION OF SUITS TO RE- STRAIN ASSESSMENT OR COL- LECTION (a) Tax.—Except as provided in sections 6212(a) and (c), 6213(a), 6672(b), 6694(c), and 7426(a) and and (b)(1), and 7429(b), 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 person is the person against whom such tax was assessed. (b) Liability of transferee or fiduciary.—No suit shall be maintained in any court for the purpose of restraining the assessment or collection (pursuant to the provisions of chapter 71) of— 19a (1) the amount of the liability, at law or in equity, of a transferee of property of a taxpayer in respect of any internal revenue tax, or (2) the amount of the liability of a fiduciary under section 3713(b) of title 31, United States Code’ in respect of any such tax. 28 U.S.C. § 2412. COSTS AND FEES (a) Except as otherwise specifically provided by statute, a judgment for costs, as enumerated in section 1920 of this title, but not including the fees and expenses of attorneys, may be awarded to the prevailing party in any civil action brought by or against the United States or any agency or any official of the United States acting in his or her official capacity in any court having jurisdiction of such action. A judgment for costs when taxed against the United States shall, in an amount estab- lished by statute, court rule, or order, be limited to re- imbursing in whole or in part the prevailing party for the costs incurred by such party in the litigation. (b) Unless expressly prohibited by statute, a court may award reasonable fees and expenses of attorneys, in addition to the costs which may be awarded pursuant to subsection (a), to the prevailing party in any civil action brought by or against the United States or any agency or any official of the United States acting in his or her official capacity in any court having juris- diction of such action. The United States shall be liable for such fees and expenses to the same extent that any other party would be liable under the common law or under the terms of any statute which specifically provides for such an award. 1. So in original. A comma probably should appear here. 20a (c)(1) Any judgment against the United States or any agency and any official of the United States acting in his or her official capacity for costs pursuant to subsection (a) shall be paid as provided in sections 2414 and 2517 of this title and shall be in addition to any relief pro- vided in the judgment. (2) Any judgment against the United States or any agency and any official of the United States acting in his or her official capacity for fees and expenses of attorneys pursuant to subsection (b) shall be paid as provided in sections 2414 and 2517 of this title, except that if the basis for the award is a finding that the United States acted in bad faith, then the award shall be paid by any agency found to have acted in bad faith and shall be in addition to any relief provided in the judgment. (d)(1)(A) Except as otherwise specifically provided by Statute, a court shall award to a prevailing party other than the United States fees and other expenses, in ad- dition to any costs awarded pursuant to subsection (a), incurred by that party in any civil action (other than cases sounding in tort), including proceedings for judicial review of agency action, brought by or against the United States in any court having jurisdiction of that action, unless the court finds that the position of the United States was substantially justified or that special circum- stances make an award unjust. (B) A party seeking an award of fees and other ex- penses shall, within thirty days of final judgment in the action, submit to the court an application for fees and other expenses which shows that the party is a prevailing party and is eligible to receive an award under this subsection, and the amount sought, including an itemized 2la statement from any attorney or expert witnesses repre- senting or appearing in behalf of the party stating the actual time expended and the rate at which fees and other expenses are computed. The party shall also allege that the position of the United States was not substantially justified. Whether or not the position of the United States was substantially justified shall be determined on the basis of the record (including the record with respect to the action or failure to act by the agency upon which the civil action is based) which is made in the civil action for which fees and other expenses are sought. (C) The court, in its discretion, may reduce the amount to be awarded pursuant to this subsection, or deny an award, to the extent that the prevailing party during the course of the proceedings engaged in conduct which un- duly and unreasonably protracted the final resolution of the matter in controversy. (2) For the purposes of this subsection— (A) “fees and other expenses” includes the reason- able expenses of expert witnesses, the reasonable cost of any study, analysis, engineering report, test, or project which is found by the court to be necessary for the preparation of the party’s case, and reason- able attorney fees (The amount of fees awarded under this subsection shall be based upon prevailing market rates for the kind and quality of the services furnished, except that (i) no expert witness shall be compensated at a rate in excess of the highest rate of compensataion for expert witnesses paid by the United States; and (ii) attorney fees shall not be awarded in excess of $75 per hour unless the court determines that an increase in the cost of living or a special factor, such as the limited availability 22a of qualified attorneys for the proceedings involved, justifies a higher fee.); (B) “party” means (i) an individual whose net worth did not exceed $2,000,000 at the time the civil action was filed, or (ii) any owner of an un- incorporated business, or any partnership, corpora- tion, association, unit of local government, or or- ganization, the net worth of which did not exceed $7,000,000 at the time the civil action was filed, and which had not more than 500 employees at the time the civil action was filed; except that an or- ganization described in section 501(c)(3) of the Internal Revenue Code of 1954 (26 U.S.C. 501 (c)(3)) exempt from taxation under section 501 (a) of such Code, or a cooperative association as de- fined in section 15(a) of the Agricultural Marketing Act (12 U.S.C. 1141j(a)), may be a party regard- less of the net worth of such oraginzation or co- cooperative association; (C) “United States” includes any agency and any official of the United States acting in his or her official capacity; (D) “position of the United States” means, in addition to the position taken by the United States in the civil action, the action or failure to act by the agency upon which the civil action is based; except that fees and expenses may not be awarded to a party for any portion of the litigation in which the party has unreasonably protracted the proceed- ings; (E) “civil action brought by or against the United States” includes an appeal by a party, other than the United States, from a decision of a contracting officer rendered pursuant to a disputes clause in a contract with the Government or pursuant to the Contract Disputes Act of 1978; (F) “court” includes the United States Claims Court; 23a (G) “final judgment” means a judgment that is final and not appealable, and includes an order of settlement; and (H) “prevailing party”, in the case of eminent domain proceedings, means a party who obtains a final judgment (other than by settlement), ex- clusive of interest, the amount of which is at least as close to the highest valuation of the property involved that is attested to at trial on behalf of the property owner as it is to the highest valuation of the property involved that is attested to at trial on behalf of the Government. (3) In awarding fees and other expenses under this subsection to a prevailing party in any action for judicial review of an adversary adjudication, as defined in sub- section (b)(1)(C) of section 504 of title 5, United States Code, or an adversary adjudication subject to the Con- tract Disputes Act of 1978, the court shall include in that award fees and other expenses to the same extent authorized in subsection (a) of such section, unless the court finds that during such adversary adjudication the position of the United States was substantially justified, or that special circumstances make an award unjust. (4) Fees and other expenses awarded under this sub- section to a party shall be paid by any agency over which the party prevails from any funds made available to the agency by appropriation or otherwise. (5) The Director of the Administrative Office of the United States Courts shall include in the annual report prepared pursuant to section 604 of this title, the amount of fees and other expenses awarded during the preceding fiscal year pursuant to this subsection. The report shall describe the- number, nature, and amount of the awards, 24a the claims involved in the controversy, and any other relevant information which may aid the Congress in evalu- ating the scope and impact of such awards. (e) The provisions of this section shall not apply to any costs, fees, and other expenses in connection with any proceeding to which section 7430 of the Internal Revenue Code of 1954 applies (determined without regard to sub- sections (b) and (f) of such section). Nothing in the preceding sentence shall prevent the awarding under sub- section (a) of section 2412 of title 28, United States Code, of costs enumerated in section 1920 of such title (as in effect on October 1, 1981). (f) If the United States appeals an award of costs or fees and other expenses made against the United States under this section and the award is affirmed in whole or in part, interest shall be paid on the amount of the award as affirmed. Such interest shall be computed at the rate determined under section 1961(a) of this title, and shall run from the date of the award through the day before the date of the mandate of affirmance. 28 U.S.C. § 2462. TIME FOR COMMENCING PRO- CEEDINGS Except as otherwise provided by Act of Congress, an action, suit or proceeding for the enforcement of any civil fine, penalty, or forfeiture, pecuniary or otherwise, shall not be entertained unless commenced within five years from the date when the claim first accrued if, within the same period, the offender or the property is found within the United States in order that proper service may be _ made thereon. --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385009_2960%3A1. Public record. Not legal advice.