Amicus Curiae Brief — Hibbs v. Winn

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No. 02-1809

In the Supreme Court of the Gnited States

J. ELLIOT HIBBS, DIRECTOR,

ARIZONA DEPARTMENT OF REVENUE, PETITIONER

- v.

KATHLEEN M. WINN, ET AL.

ON WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

BRIEF FOR THE UNITED STATES

AS AMICUS CURIAE SUPPORTING PETITIONER

THEODORE B. OLSON

Solicitor General

Counsel of Record

EILEEN J. O’CONNOR

Assistant Attorney General

THOMAS G. HUNGAR

Deputy Solicitor General

KENT L. JONES

Assistant to the Solicitor

General

KENNETH L. GREENE

RANDOLPH L. HUTTER

Attorneys

Department of Justice

Washington, D.C. 20530-0001

(202) 514-2217

QUESTION PRESENTED

Whether the Tax Injunction Act, 28 U.S.C. 1341, bars

an action in federal district court that seeks to enjoin a

State from applying a state tax credit in determining

and assessing state tax liabilities.

(I)

TABLE OF CONTENTS

Interest of the United States

Statutory provisions involved

Statement

Summary of argument

Argument:

The Tax Injunction Act, 28 U.S.C. 1341, bars chis

suit in federal district court to enjoin application

of a state tax credit in the assessment of state income

taxes

I. The plain text of the Tax Injunction Act bars

the injunction sought by respondents in this

II. The Tax Injunction Act is to be interpreted

broadly in light of the clear intention of

Congress to limit the inference of federal

district courts in the state’s administration

of its fiscal policies

Conclusion

TABLE OF AUTHORITIES

Cases”

ACLU Louisiana v. Bridges, 334 F.3d 416 (5th Cir.

2003)

Anderson v. United States, 15 F. Supp. 216 (Ct.

Cl. 1936), cert. denied, 300 U.S. 675 (1937)

Arkansas v. Farm Credit Servs., 520 U.S. 821

(1997)

Bob Jones Univ. v. Simon, 416 U.S. 725 (1974) ...............

California v. Grace Brethren Church, 457 U.S. 393

(1982)

Colonial Pipeline Co. v. Collins, 921 F.2d 1237

(11th Cir. 1991)

(IID)

www’

Cases—Continued: Page

Comenout v. Washington, 722 F.2d 574 (9th Cir.

1983) 18

Davis v. Michiven Dep't of Treasury, 489 U.S. 803 ~

(1989) 15

Dillion v. Montana, 634 F.2d 463 (9th Cir. 1980) ............ 18

Doremus v. Board of Educ., 342 U.S. 429

(1952) 3

Enochs v. Williams Packing & Navigation Co., 370

U.S. 1 (1962) 2

Flast v. Cohen, 392 U.S. 83 (1968) 3

Gillis, In re, 836 F.2d 1001 (6th Cir. 1988) 14, 15

Haring v. Blumenthal, 471 F. Supp. 1172 (D.D.C.

1979) 19

Jefferson County v. Acker, 527 U.S. 423 (1999) .......... 2, 10-11

Jerron West, Inc. v. California State Bd. of

Equalization, 129 F.3d 1334 (9th Cir. 1998) 17

Bob Jones Univ. v. Simon, 416 U.S. 724

(1974) , 18

Laing v. United States, 423 U.S. 161 (1976) 12

King v. St. Vincent’s Hosp., 501 U.S. 215 (1991) .............. 13

Kotterman v. Killian, 972 P.2d 606 (Ariz.), cert. denied,

528 U.S. 921 (1999) 5

National Private Truck Council, Inc. v. Oklahoma

Tax Comm'n, 515 U.S. 5823 (1995) 16, 17

NLRB v. Federbush Co., 121 F.2d 954 (2d Cir.

1941) 13

Marvin F. Poer & Co. v. Counties of Alameda,

725 F.2d 1234 (9th Cir. 1984) 17

Rosewell v. LaSalle Nat'l Bank, 450 U.S. 503

(19 81 17

Schlesinger v. Reservists Comm. to Stop the War,

418 U.S. 208 (1974) 3

Smith v. Rich, 667 F.2d 1228 (5th Cir. 1982) ...........-.... 18

South Carolina v. Regan, 465 U.S. 367 (1984) ......... 9, 18, 19

Tully v. Griffir, Inc., 429 U.S. 68 (1976) 9, 16

Cases—Continued: Page

United Gas Pipe Line Co. v. Whitman, 595 F 2d 323

(5th Cir. 1979) 18

United States Brewers Ass'n v. Perez, 592 F.2d

1212 (1st Cir. 1979) 15

Valley Forge Christian Coll. v. Americans United

for Separation of Church & State, Inc., 454 U.S.

464 (1982) 3

Yamaha Motor Corp., U.S.A. v. United States,

77 9 F. Supp. 610 (D.D.C. 1991) 18-19

U.S. Const.:

Art. III 3

Amend. I (Establishment Clause) 3

Amend. XI 5

Act of Mar. 2, 1867, ch. 169, § 10, 14 Stat. 475 11

Internal Revenue Code (26 U.S.C.):

§ 501(c)(3) 3

§ 503(¢)(3)(iii) 3

§ 6203 11

§ 6322 12

§ 6501(a) . 12

§ 7421(a) 2, 10, 18

Tax Injunction Act, 28 U.S.C. 1341. 1, 4, 8, 10, 12, 13, 14, 15, 19

Ariz. Rev. Stat. § 43-1089 (2002) 3

26 C.F.R. 301.6203.1 12

Miscellaneous:

Funk & Wagnall’s New Standard Dictionary of the

English Language (1946) 11

Michael I. Saltzman, JRS Practice & Procedure

(2d ed. 1991) 12

Webdster’s New International Dictionary (1917) 7,11

Jn the Supreme Court of the Gnited States

No. 02-1809

J. ELLIOT HIBBS, DIRECTOR,

ARIZONA DEPARTMENT OF REVENUE, PETITIONER

KATHLEEN M. WINN, ET AL.

ON WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

BRIEF FOR THE UNITED STATES

AS AMICUS CURIAE SUPPORTING PETITIONER

INTEREST OF THE UNITED STATES

This case presents the question whether the Tax

Injunction Act, 28 U.S.C. 1341, bars an action in federal

district court that seeks to enjoin a State from applying

a state tax credit in determining and assessing state

taxes. The Tax Injunction Act generally deprives the

federal district courts of jurisdiction over any action to

“enjoin, suspend or restrain the assessment, levy or

collection of any tax under State law” (28 U.S.C. 1341).

The Act was expressly modeled by Congress on the

text of the similar federal statute that, since 1867, has

barred courts from exercising jurisdiction to enjoin,

suspend or restrain the assessment or collection of any

federal tax. 26 U.S.C. 7421(a). Because of the close

(1)

similarity of the text and purpose of these two pro-

visions, this Court has expressly linked their inter-

pretation on at least two prior occasions. See Jefferson

County v. Acker, 527 U.S. 423, 434 (1999); Enochs v.

Williams Packing & Navigation Co., 370 U.S. 1, 6

(1962). The United States has a substantial interest in

the proper interpretation and application of these

parallel statutory provisions. For the reasons set forth

below, the United States submits that the court of

appeals erred in holding that the Tax Injunction Act is

inapplicable to suits challenging the validity of state tax

credit provisions.

STATUTORY PROVISIONS INVOLVED

1. The Tax Injunction Act, 28 U.S.C. 1341, provides:

The district courts shall not enjoin, suspend or

restrain the assessment, levy or collection of any

tax under State law where a plain, speedy and

efficient remedy may be had in the courts of such

State.

2. 26 U.S.C. 7421(a) provides, in relevant part:

Except as [otherwise] provided [in the Internal

Revenue Code], no suit for the purpose of restrain-

ing 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.

STATEMENT

1. Respondents are Arizona taxpayers. They

brought this suit in federal district court against J.

Elliot Hibbs, in his official capacity as the Director of

the Arizona Department of Revenue. In their suit,

respondents claim that an Arizona state income tax

credit violates the Establishment Clause of the First

Amendment to the United States Constitution.’

Under Ariz. Rev. Stat. § 43-1089 (2002), Arizona tax-

payers are permitted to claim a dollar-for-dollar credit

against their state income tax liability for contributions

that they make to a “school tuition organization.” This

credit is limited to $500 for an individual taxpayer and

to $625 for married taxpayers who file a joint state in-

come tax return. For the credit to apply, the “school

tuition organization” to which the contribution is made

(i) must be exempt from federal income taxes under 26

U.S.C. 501(c)(3) and (ii) must spend at least 90% of its

revenues on education scholarships or tuition grants for

children to attend private primary or secondary

schools. Pet. App. 12-13.

Respondents allege that these “school tuition organi-

zations” are primarily “religious organizations that

restrict their donations to religious non-public schools

which in turn, use these funds to promote religious

1 Neither the parties nor the courts below addressed whether

respondents have “Article III standing” to bring this action in

federal court. See Valley Forge Christian College v. Americans

United for Separation of Church & State, Inc., 454 U.S. 464, 475

(1982). This Court has held that a person who is not subject to a

federal tax may have standing to bring a challenge to the tax based

on a “specific limitation on the power to tax and spend.” Id. at 479.

A complaint that arises under the Establishment Clause satisfies

that standard, for that Clause “operates as a specific constitutional

limitation upon the exercise by Congress of the taxing and

spending power * * * .” Flast v. Cohen, 392 U.S. 83, 104 (1968);

see Valley Forge Christian College v. Americans United for

Separation of Church & State, Inc., 454 U.S. at 479. Whether the

challenge to the state tax credit in this case falls within the scope

of those decisions, or otherwise satisfies the Article III standing

requirement (see Doremus v. Board of Education, 342 U.S. 429,

434-435 (1952)), was not raised or addressed below.

education and worship.” Pet. App. 28. Respondents

sought a declaration that “the tax credit authorized by

§ 43-1089 allows state revenues to fund education in a

religiously-preferential manner,” in violation of the Es-

tablishment Clause of the First Amendment to the

Constitution. Jd. at 29. They also sought a preliminary

and permanent injunction against any future

application of the state tax credit and an order

requiring all monies distributed to, but not yet ex-

pended by, recipient “school tuition organizations” to be

“return[ed] to the state’s general fund.” Jd. at 13-14,

29.

2. The district court dismissed respondents’ suit.

Pet. App: 27-36. The court noted that the Tax Injunc-

tion Act, 28 U.S.C. 1341, expressly bars federal district

courts from enjoining, suspending or restraining “the

assessment, levy or collection of any tax under [S]tate

law where a plain, speedy and efficient remedy may be

had in the courts of such state.” Pet. App. 29-30

(quoting 28 U.S.C. 1341). The court held that respon-

dents’ request to enjoin the future application of this

state tax credit in making assessments of state income

taxes is expressly proscribed by the plain text of this

statute. Pet. App. 30-31. “By preventing restraints on

both the assessment and collection of taxes, Congress

indicated that the [Tax Injunction Act] is not limited to

collection only but was intended to encompass the

process that the state uses in its determination of tax

liability.” Jd. at 31. The court emphasized that, “when

the state offers tax credits to reduce tax liability, the

credits become an integral part of the State’s assess-

ment of each taxpayer’s liability.” Ibid. The Tax

Injunction Act prohibits the court from exercising jur-

isdiction because “any determination that A.R.S.

§ 43-1089 is unconstitutional would restrain the State’s

ability to assess taxes in accordance with its state tax

system.” Ibid.

The district court noted that respondents had not

claimed that they lacked “a plain, speedy and efficient

remedy” to challenge the Arizona tax credit in the

Arizona state courts. Indeed, “an identical challenge to

the constitutionality [of] § 43-1089” was made, and

rejected, in the state courts in Kotterman v. Killian,

972 P.2d 606, cert. denied, 528 U.S. 921 (1999). Pet.

App. 30 n.1. Because the State has provided adequate

procedures for respondents’ claims to be raised in state

courts, the district court concluded that the Tax Injunc-

tion Act deprives the federal courts of jurisdiction over

respondents’ claims in this case. Pet. App. 34.”

3. The court of appeals reversed. Pet. App. 11-26.

The court concluded that the district court had inter-

preted the term “assessment” in the Tax Injunction Act

too broadly. Pet. App. 21. The court stated (Pet. App.

16) that

[t]he term “assessment” has two definitions relevant

to the question presented in this case: (1) “to esti-

mate officially the value of (property, income, etc.)

as a basis for taxation,” and (2) “to impose a tax or

other charge on.” RANDOM HOUSE DICTIONARY

OF THE ENGLISH LANGUAGE 90 (1979).

2 In addition, the district court held that, even if “tax credits

are not covered by the specific language of the TIA, the underlying

principles of comity and equitable restraint that are embodied in

the Act prevent this Court from exercising jurisdiction over the

action.” Pet. App. 34. The district court did not address peti-

tioner’s contention that the Eleventh Amendment precludes this

suit in federal court, and that contention was not raised in the

petition in this case.

The court concluded that neither of these dictionary

“definition[s] of the term describes the role of the

* * * tax credit in the Arizona tax system.” Pet. App.

16. The court statee that the tax credit was “applied to

the calculation of taxes after a taxpayer’s gross income

has been determined and therefore plays no part in the

‘assessment’ of property or income as a basis for the

imposition of taxes.” Jbid. The court further stated

that the challenged state tax credit “is not the

imposition of a tax” but is instead “the grant of a

benefit.” Jd. at 17. Moreover, the court reasoned that

the purposes of the Tax Injunction Act would not be

furthered by applying it in these circumstances be-

cause, if the state tax credit “were to be struck down on

Establishment Clause grounds, Arizona’s ability to

raise revenue would not be diminished; on the contrary,

it would be enhanced.” Jd. at 20.

For these reasons, the court concluded that the Tax

Injunction Act does not bar federal courts from enjoin-

ing application of a state tax credit in the determination

of state tax liabilities.° Pet. App. 20. The court

remanded the case for the district court to address the

merits of respondents’ constitutional claims. Jd. at 26.

4. When the decision of the court of appeals was

announced, one judge of the Ninth Circuit requested a

vote on whether the case should be heard en banc.

Following that vote, the court denied the request for

rehearing en banc.

Judge Kleinfeld, joined by one other judge, dissented

from the denial of en banc review. Pet. App. 1-10.

3 For this same reason, the court of appeals also rejected peti-

tioner’s claim that general principles of comity preclude the federal

courts from addressing the validity of the state tax in this case.

Pet. App. 25-26.

Judge Kleinfeld stated that “(t]he panel’s narrowing

construction of the Tax Injunction Act ought to have

been rejected.” Jd. at 3. He explained that the term

“assessment” in the Tax Injunction Act has a much

broader meaning than that contained in the single

dictionary source cited by the panel. Judge Kleinfeld

noted that other dictionaries define the term “assess-

ment” more broadly as “the entire plan or scheme fixed

upon for charging or taxing.” Jd. at 4 (quoting, e.g.,

Webster’s Third New International Dictionary 131

(1981)). He further emphasized that the term “assess-

ment” has a well-established broader meaning in

federal tax statutes and, in particular, in the provisions

of the Internal Revenue Code. Under that well-

established meaning, the statutory term “assessment”

(Pet. App. 4-5 (emphasis added)):

refers to the bottom line, how much money the tax-

payer owes to the government in taxes, after con-

sideration of any credits as well as deductions.

Judge Kleinfeld emphasized that “(t]here is no reason

to think that Congress meant something narrower in

the Tax Injunction Act than it did in the Internal Reve-

nue Code.” Jd. at 5. Under this accepted meaning of

the statutory term, Judge Kleinfeld concluded that the

plain text of the Tax Injunction Act deprives the

federal courts of jurisdiction to enjoin the State from

applying state tax credits in making “assessments” of

state income taxes. /bid.

SUMMARY OF ARGUMENT

1. The court of appeals erred in its narrow inter-

pretation of the Tax Injunction Act. That Act generally

prohibits federal courts from enjoining or restraining

“the assessment, levy or collection of any tax under

State law.” 28 U.S.C. 1341 (emphasis added). The court

below manifestly erred in concluding that the term

“assessment” in this statute refers merely to the pro-

cess by which the tax collector determines the amount

of gross income to which the tax applies. The “assess-

ment * * * of * * * tax under State law” to which

this Act refers is the entire process by which the

ultimate amount of the tax liability is determined by

the state taxing authority.

In making a tax “assessment * * * under State

law,” the taxing authority must do more than merely

calculate the gross income to which the tax applies. It

must also give effect to state-law provisions that

establish deductions and tax credits. As the dissenting

judges in the court below concisely and correctly

explained, the statutory term “assessment * * * of

* * * tax” (28 U.S.C. 1341) “refers to the bottom line,

how much money the taxpayer owes to the government

in taxes, after consideration of any credits as well as

deductions.” Pet. App. 4-5 (emphasis added). An

injunction that prohibits the State from applying state

tax credit or tax deduction provisions to individual

taxpayers thus directly restrains the State from

making an “assessment * * * of * * * tax under

State law” (28 U.S.C. 1341). Because respondents seek

precisely such an injunction, their action is barred by

the plain text of the Tax Injunction Act.

2. This conclusion is compelled by the broad pur-

poses of the Tax Injunction Act as well as by its plain

text. The Tax Injunction Act “has its roots in equity

practice, in principles of federalism, and in recognition

of the imperative need of a State to administer its own

fiscal operations.” Tully v. Griffin, Inc., 429 U.S. 68, 73

(1976). This Court has emphasized that the Act is to be

interpreted broadly and that federal courts are to

“guard against interpretations of the Tax Injunction

Act which might defeat its purpose and text.” Arkan-

sas v. Farm Credit Services, 520 U.S. 821, 827 (1997).

The essential purpose of this Act is “to prohibit

courts from restraining any aspect of the tax laws’

administration.” South Carolina v. Regan, 465 U.S.

367, 399 (1984) (O’Connor, J., concurring). In particular,

the Act expressly precludes “injunctions [based] upon

the alleged legality or character of a particular assess-

ment.” Jbid. Since respondents seek an injunction

precisely because of the alleged illegality of the State’s

assessment of taxes, and since it is not disputed that

the state courts provide an adequate forum for

challenging the state tax, this suit may not proceed in

federal court under the Tax Injunction Act.

ARGUMENT

THE TAX INJUNCTION ACT, 28 U.S.C. 1341, BARS

THIS SUIT IN FEDERAL DISTRICT COURT TO EN-

JOIN APPLICATION OF A STATE TAX CREDIT IN

THE ASSESSMENT OF STATE INCOME TAXES

I. THE PLAIN TEXT OF THE TAX INJUNCTION

ACT BARS THE INJUNCTION SOUGHT BY RE-

SPONDENTS IN THIS CASE

The court of appeals erred in concluding that the Tax

Injunction Act does not apply to this case. The plain

text of the Act precludes the federal district courts

from restraining or enjoining a State from applying

state tax credits in the assessment of state taxes.

1. The Tax Injunction Act generally provides that

federal courts may not enjoin, suspend or restrain “the

assessment, levy or collection of any tax under State

law.” 28 U.S.C. 1341. The court below erred in con-

cluding (Pet. App. 16) thatthe term “assessment” in

this statute refers merely to the process by which the

tax collector determines the amount of income to which

the tax applies. The “assessment * * * of * * * tax”

to which the Act refers is the entire process by which

the ultimate amount of the tax liability is determined

by the state taxing authority.

In making a tax “assessment * * * under State law”

(28 U.S.C. 1341), the taxing authority must do more

than merely calculate the gross income to which the tax

applies. It must also give effect to the state-law pro-

visions that establish deductions and tax credits “under

State law.” As the dissenting judges concisely and

correctly explained below, the statutory term “assess-

ment * * * of tax under State law” “refers to the

bottom line, how much money the taxpayer owes to the

government in taxes, after consideration of any credits

as well as deductions.” Pet. App. 4-5 (emphasis added).*

2. The parallel provisions of federal tax law, on

which the Tax Injunction Act was modeled, similarly

specify that courts are not to restrain or enjoin the

“assessment or collection of any [federal] tax.” 26

U.S.C. 7421(a); see Jefferson County v. Acker, 527 U.S.

4 The district court similarly explained that, “when the state

offers tax credits to reduce tax liability, the credits become an inte-

gral part of the State’s assessment of each taxpayer’s liability.”

Pet. App. 31.

at 434.° In incorporating this same terminology into the

Tax Injunction Act, Congress presumably meant the

term “assessment” to have the same meaning in both

provisions. And, the meaning of the term “assessment”

in federal tax law unquestionably encompasses not

merely the determination of the amount of gross income

to which the tax applies but also the application of all

federal tax deduction and tax credit provisions.

The “assessment * * * of tax” described in the text

of 26 U.S.C. 7421(a) is plainly not the limited, dictionary

definition of an “assessment” selected by the court of

appeals.° Under the Internal Revenue Code, an assess-

ment of a tax is the formal administrative record of “the

liability of the taxpayer.” 26 U.S.C. 6203 (emphasis

added). The “assessment” is made through a “summary

record of assessment,” which, with supporting records,

5 The Tax Injunction Act was enacted in 1937. The federal tax

analogue on which it was modeled was first enacted as Section 10

of Chapter 169 of the Act of Mar. 2, 1867, 14 Stat. 475, and is now

codified at 26 U.S.C. 7421(a). In language that Congress also em-

ployed in the text of the Tax Injunction Act, this venerable statute

has specified since 1867 that “no suit for the purpose of restraining

the assessment or collection of any tax shall be maintained in any

court.” § 10, 14 Stat. 475.

6 To the extent that the dictionary definition of “assessment” is

relevant in determining the meaning of that statutory term of

art, contemporaneous dictionaries reflect a considerably broader

understanding of the term than the meaning selected by the court

of appeals. See, e.g., Funk & Wagnall’s New Standard Dictionary

of the English Language 171 (1946) (“(t)he official apportionment

of taxes” or “(t]he amount so fixed”); Webster’s New International

Dictionary 139 (1917) (“act of apportioning or determining an

amount or amounts to be paid; as, an assessment of damages, or of

taxes”; “(t]he entire plan or scheme fixed upon for charging or

taxes; also, the valuation, or a specific charge or tax, determined

upon”).

identifies the taxpayer, the period of tax involved, “and

the amount of the assessment.” 26 C.F.R. 301.6203-1.

The “assessment” is thus “essentially a bookkeeping

notation” that serves as a formal record of the total

amount of the tax liability determined by the taxing

authority. Laing v. United States, 423 U.S. 161, 170

n.13 (1976). In short, by the time that the Tax Injunc-

tion Act was enacted in 1937, it was well established

that the “assessment” of a federal tax is the administra-

tive process by which the taxing authority determines

and records “the total tax” owed. Anderson v. United

States, 15 F. Supp. 216, 225 (Ct. Cl. 1936), cert. denied,

300 U.S. 675 (1937).

This fundamental characteristic of an “assessment

* * * of * * * tax” (28 U.S.C. 1341) is reflected in

numerous provisions of the Internal Revenue Code.

For example, the federal tax lien arises in property of

the taxpayer “at the time the assessment is made and

* * * continue(s] until the liability for the amount so

assessed * * * is satisfied * * * .” 26 U.S.C. 6322

(emphasis added). As this statute reflects, the “assess-

ment” is the formal record of the “amount” of the tax

“liability” of the taxpayer. See M. Saltzman, JRS

Practice & Procedure ¥ 10.02 , at 10-4 to 10-7 (2d ed.

1991) (the “assessment” is the record of “the total tax

liability” and sets out the “specific amount of tax”

owed). Similarly, the Internal Revenue Code further

specifies that “the amount of any tax imposed by this

title shall be assessed within 3 years after the return

was filed.” 26 U.S.C. 6501(a) (emphasis added). It is

thus the amount of the tax, not merely the amount of

the taxpayer’s “income,” that is assessed.

3. Contrary to the reasoning of the court below, the

term “assessment” as used in these statutes thus does

not refer simply to the process by which gross income is

determined. Instead, the allowance of a tax credit is as

much a part of the “assessment” as is the determination

of the income and the deductions of the taxpayer. As

the Fifth Circuit recently concluded in ACLU Founda-

- tion v. Bridges, 334 F.3d 416, 421 (5th Cir. 2003), the

term “assessment” in the Tax Injunction Act neces-

sarily encompasses “‘the entire plan or scheme fixed

upon for charging or taxing.’ Webster’s Third New

International Dictionary 131 (1981).”

The reasoning of the court of appeals failed to ad-

dress the entire relevant text of the statute. In looking

for a dictionary definition of the word “assessment” in

isolation from the balance of the statutory text, the

court neglected to consider that this word draws

meaning from its context.’ The statutory phrase of

relevance to this case is that federal courts are barred

from enjoining the “assessment * * * of * * * tax

under State law.” 28 U.S.C. 1341 (emphasis added). It

is the assessment of tax that may not be restrained;

and, in particular, the State may not be restrained from

applying “State law” in making such an assessment.

Since the precise relief sought by respondents in this

case is an order restraining the State from applying its

state tax credit law in making assessments of state tax,

respondents’ action is barred by the plain text of the

Tax Injunction Act.

7 “The meaning of statutory language, plain or not, depends

on context.” King v. St. Vincent’s Hospital, 502 U.S. 215, 221

(1991). “Words are not pebbles in alien juxtaposition; they have

only a communal existence; and not only does the meaning of each

interpenetrate the other, but all in their aggregrate take their

purport from the setting in which they are used . . . .” Ibid.

(quoting NLRB v. Federbush Co., 121 F.2d 954, 957 (2d Cir. 1941)

(L. Hand, J.)).

4. The court of appeals also erred in suggesting that

the Tax Injunction Act should not apply whenever the

requested relief would increase, rather than diminish,

the ultimate amount of taxes collected. Pet. App. 21-22.

As the Sixth Circuit explained in Jn re Gillis, 836 F.2d

1001, 1005 (1988), “[wJhile admittedly the great major-

ity of cases present plaintiffs seeking to enjoin the

collection of taxes, and certainly the most direct threat

to the state fisc is presented when the collection of

taxes is enjoined, still the Act is not, by its own langu-

age, limited to the collection of taxes.” Instead, the Act

broadly prohibits federal courts from restraining any

“assessment * * * of * * * tax under State law.” 28

U.S.C. 1341.

A federal suit to enjoin a state tax credit is, in any

event, as significant an intervention in a State’s tax

administration as is a suit to enjoin an increase in the

State’s taxes. In rejecting the suggestion that a suit

that could result in an increase in state tax collections

should be treated as outside the scope of the Tax

Injunction Act, the Eleventh Circuit pointed out in

Colonial Pipeline Co. v. Collins, 921 F.2d 1237, 1242

(1991), that:

In making these overly literal and technical

attempts to distinguish its claim from the scope of

section 1341, Colonial ignores the basic fact that its

requested relief, if granted, would require a massive

federal judicial intervention into virtually all phases

of Georgia’s ad valorem tax system. Such an in-

trusion would clearly conflict with the principle

underlying the Tax Injunction Act that the federal

courts should generally avoid interfering with the

sensitive and peculiarly local concerns surrounding

state taxation schemes.

See also Jn re Gillis, 836 F.2d at 1008 (“the interference

by the federal courts into the state tax system is the

same in degree and kind as a suit seeking to enjoin a

state tax; and the expense to the state in defending the

action is identical”); United States Brewers Ass’n v.

Perez, 592 F.2d 1212, 1214 (1st Cir. 1979) (even litiga-

tion that might increase the amount of taxes collected

would impermissibly “disrupt the orderly collection and

administration of state taxes”).*

It is, in any event, far from certain that a victory by

persons who challenge a tax credit will necessarily

result in the collection of more taxes by the State. As

the court emphasized in ACLU Foundation v. Bridges,

334 F.3d at 421, a State “may resolve any putative

constitutional problems created by the challenged

statutes by exempting more entities and therefore

collecting less taxes.” The ultimate effect of invali-

dating a tax credit thus cannot be foretold with cer-

ainty. See Davis v. Michigan Department of Treasury,

489 U.S. 803, 818 (1989) (the invalidity of a state tax

exemption may be remedied by the State “either by

extending the tax exemption” to a broader class of

recipients “or by eliminating the exemption”). Such

speculation, in any event, has no bearing on the proper

application of the express prohibition of the Tax

Injunction Act against restraints on the “assessment

* * * of * * * tax under state law.” 28 U.S.C. 1341.

8 The court of appeals thus erred in concluding that the Act is

inapplicable because “the challenged practice is not the imposition

of a tax.” Pet. App. 17. The relevant question under the Act

is whether the plaintiff seeks to interfere with the “assessment

* * * ofa tax under State law.” The fact that a state tax credit is

not itself the “imposition of a tax” is beside the point, because a

State tax credit is an integral part of the process of assessing a tax.

Il. THE TAX INJUNCTION ACT IS TO BE INTER-

PRETED BROADLY IN LIGHT OF THE CLEAR

INTENTION OF CONGRESS TO LIMIT THE INTER-

FERENCE OF FEDERAL DISTRICT COURTS IN THE

STATE’S ADMINISTRATION OF ITS FISCAL

POLICIES

1. The Tax Injunction Act “has its roots in equity

practice, in principles of federalism, and in recognition

of the imperative need of a State to administer its own

fiscal operations.” Tully v. Griffin, Inc., 429 U.S. 68, 73

(1976). See Arkansas v. Farm Credit Services, 520

U.S. 821, 832 (1997). Both “Congress and this Court

repeatedly have shown an aversion to federal inter-

ference with state tax administration.” National

Private Truck Council, Inc. v. Oklahoma Tax Com-

mission, 515 U.S. 582, 586 (1995). This Court has

emphasized that “(t]he States’ interest in the integrity

of their own processes is of particular moment

respecting questions of state taxation,” and “[t]Jhe

federal balance is well served when the several States

define and elaborate their own laws through their own

courts and administrative processes and without undue

interference from the Federal Judiciary.” Arkansas v.

Farm Credit Services, 520 U.S. at 826. The Court has

_ therefore instructed “federal courts [to] guard against

interpretations of the Tax Injunction Act which might

defeat its purpose and text.” Jd. at 827.

The Court has thus made clear that the provisions of

this Act are to be broadly interpreted to achieve the

legislative goal of minimizing federal interference in

state tax matters. Arkansas v. Farm Credit Services,

520 U.S. at 827. Although the history of the Act

® Indeed, in various contexts, the Court has concluded that the

prohibitions of the Tax Injunction Act reach beyond its literal

addressed a particular congressional concern that out-

of-state corporations were improperly using federal

litigation to delay the payment of state taxes, the Court

has emphasized that “the expansive language of the

statute belies the notion that Congress was concerned

exclusively with this problem.” Rosewell v. LaSalle

National Bank, 450 U.S. 503, 522 n.29 (1981). Instead,

the enactment of “the Tax Injunction Act demonstrates

that Congress worried not so much about the form of

relief available in the federal courts, as about divesting

the federal courts of jurisdiction to interfere with state

tax administration.” California v. Grace Brethren

Church, 457 U.S. at 409 n.22.

2. Consistent with this Court’s admonition, the

courts of appeals have routinely given a broad interpre-

tation to the provisions of this Act. They have, for

example, held that “the Act prohibits relief where it

would result in a restraint on tax assessment even

though achieved indirectly” (Jerron West, Inc. v.

California State Bd. of Equalization, 129 F.3d 1334,

1338 (9th Cir. 1998)), and have further concluded that

the Act bars federal jurisdiction in actions for refund or

damages “lest the Tax Injunction Act be deprived of its

full effect.” Marvin F. Poer & Co. v. Counties of

Alameda, 725 F.2d 1234, 1236 (9th Cir. 1984). The

courts have also ruled that the Act “deprives the

district court of jurisdiction over the claims of unlawful

scope. For example, in National Private Truck Council, Inc. v.

Oklahoma Tax Commission, 515 U.S. at 588, the Court held that

federal courts should not “award damages or declaratory or

injunctive relief in state tax cases when an adequate state remedy

exists.” See also California v. Grace Brethren Church, 457 U.S.

393, 408-409 (1982) (applying the Tax Injunction Act to prohibit a

district court from issuing a declaratory judgment holding state

tax laws unconstitutional).

arrest and assault” in an action against State officials

involving state taxes, because such a suit “would in-

trude on the enforcement of the state [tax] scheme.”

Comenout v. Washington, 722 F.2d 574, 578 (9th Cir.

1983). See also Dillon v. Montana, 634 F.2d 463, 465

(9th Cir. 1980) (“this court has recognized that any

effort to obtain tax exemption or adjustment in federal

court interferes with the fiscal operations of the state”);

United Gas Pipe Line Co. v. Whitman, 595 F.2d 323,

326 (5th Cir. 1979) (stating that the Tax Injunction Act

“is meant to be a broad jurisdictional impediment to

federal court interference with the administration of

state tax systems”).

That broad view of the scope of the Act is paralleled

by the broad interpretation given to 26 U.S.C. 7421(a),

on which the Tax Injunction Act was modeled. See

_ note 5, supra. The history of 26 U.S.C. 7421(a) “reflects

the congressional desire that all injunctive suits against

the tax collector be prohibited.” Sowth Carolina v.

Regan, 465 U.S. 367, 387 (1984) (O’Connor, J., concur-

ring). “The Court has interpreted the principal purpose

[of 26 U.S.C. 7421(a)] to be the protection of the

Government’s need to assess and collect taxes as

expeditiously as possible with a minimum of preen-

forcement judicial interference.” Bob Jones University

v. Simon, 416 U.S. 725, 736 (1974). And, under 26

U.S.C. 7421(a), as under the Tax Injunction Act, the

“ban against judicial interference * * * is equally

applicable to activities which are intended to or may

culminate in the assessment or collection of taxes.”

Smith v. Rich, 667 F.2d 1228, 1230 (5th Cir. 1982).

These parallel statutory prohibitions against judicial

restraints on the assessment of taxes do not become

inapplicable merely because the “legality of the

agency’s action is in question.” Yamaha Motor Corp.,

U.S.A. v. United States, 779 F. Supp. 610, 613 (D.D.C.

1991).° As Justice O’Connor emphasized in a

concurring opinion in South Carolina v. Regan, 465

U.S. at 399, the broad purpose of the tax anti-injunction

provisions is “to prohibit courts from restraining any

aspect of the tax laws’ administration.” To further that

goal, these statutes expressly preclude “injunctions

[based] upon the alleged legality or character of a

particular assessment.” Jbid. In the present case,

respondents seek an injunction against the “assessment

* * * of * * * tax under state law” (28 U.S.C. 1341)

that is based precisely upon the claim that such

assessments would be unlawful. That claim for relief is

barred in federal district court by the clear text and

broad purposes of the Tax Injunction Act.

10 The prohibition in 26 U.S.C. 7421(a) against an action to re-

strain the assessment of federal taxes has been applied in circum-

stances similar to those of the present case. In Haring v.

Blumenthal, 471 F. Supp. 1172, 1177-78 (D.D.C. 1979), for example,

the court held that 26 U.S.C. 7421(a) “prevents the institution of

injunction actions to challenge tax exemption rulings in favor of

other taxpayers.”

CONCLUSION

The judgment of the court of appeals should be

reversed.

Respectfully submitted.