# Respondents Brief — United States v. Clintwood Elkhorn Mining Co.

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## Record

- **Collection:** Supreme Court brief
- **Document type:** Respondents Brief
- **Published:** January 1, 2008
- **Citation:** 553 U.S. 1

## Text

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3. Tax Legislation Cannot Alter the Export .
Clause’s Money-Mandating Character .......... 20

B. The Tucker Act Remedy Has Not Been
Withdrawn And Is The Remedial Scheme

That Best Enforces The Export Clause............... 25
1. The Tucker Act Remedy Has Not Been
CRI PIN hciccdaccccidicsnesececcscoccsseseees 25

2. Congress’s Power to Impose Its
Administrative Tax Scheme on Export
Clause Claims Is Constitutionally
RASA NEEAS SE ea 28

3. The Design of the Administrative Tax
Scheme Does Not Cover Export Clause
CI ala deiteinttcieherhincinistieiedbicieisdesntsdscasaeiccees 36

a. An individualized refund scheme
does not preclude separate litigation
of broad constitutional questions.............. 36

b. Congress has not intended revenue-
protective procedural constraints to
apply to taxes that are, on their face,
IE a ccbilsdssiicccenscsncccnscscesiccancsoice 39

c. The statutory text is ambiguous............... 43

d. The Export Clause exception to the
administrative refund scheme is

narrow and tightly cabined....................... 45

C. The Export Clause Claim Falls Within
The Plain Terms Of The Interest Statute........... 49
SI UNUUUNA iiiritdesaistiesicasicp bitienicscamieeictadeinesskaniceatinaibigidie 54

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TABLE OF AUTHORITIES
Cases:
A.G. Spalding & Bros. v. Edwards,
Be ae I child bccibiebtctndiccensdsncnsioscos 10, 34
Alabama v. King & Boozer, 314 U.S. 1 (1941).....20
Alexander v. “Americans United” Inc.,
nc cecnislienetindenecncsenmn 37
Alexander v. Sandoval, .
Oe MR IIIED pevcccsnssccdossctesdscodnceessideccebeces 23
Ali v. Federal Bureau of Prisons, 128 S. Ct.
ie, sccspaccensinicinieben 50
3 Amell v. United States,
ji | eee 26
q Ashwander v. Tennessee Valley Auth.,
Be is PIII coeciichnctccgisanciissncbossecensccces weve 27
Baltimore & Ohio R.R. v. United States,
ee BIE Seriistinniidéenisoicnitrpscinticdineacnscess 21

Bivens v. Six Unknown Named Agents of Fed.
_ Bureau of Narcotics,

I iaivecckcccccecctateniscesstionseseneion 22
Block v. North Dakota,

A I a... sesnsosiconseseccsansenvabunings 34
Bob Jones Univ. v. Simon,

I cidade 39, 40
Bonwit Teller & Co. v. United States,

tt REARS SSSR ee ae OP 44
Boston Sand & Gravel Co. v. United States,

I i i cacslieiaaentiendl 53
Bowen v. City of New York,

GS a RE ED tivinsstetscestccrmemnsessvinnsitisiialii 23

Cases — Continued:

Bowen v. Massachusetts,

I I sin nccscccssadoccasencscnseccccsseosesses 18
Bowen v. Michigan Academy of Family

Physicians,

8
Brennan v. Southwest Airlines Co.,

134 F.3d 1405 (9th Cir.), as amended, 140

i ccswennennntdbains 28
Brown Shoe Co. v. United States,

ER RC 16
Brown v. Maryland,

25 U.S. (12 Wheat.) 419 (1827) 0... 48
Bush v. Lucas,

I ws scansccsneveuseneen 23, 24
Canton R.R. v. Rogan,

i a oss csnsenenanaeons 44
Cary v. Curtis,

44 US. (3 How.) 236 (1845)...........cccccceeeesseeees 29
Chicago, B. & Q. R.R. v. City of Chicago,

a castenssended 18
City of Boerne v. Flores, |

La 21
Close v. Glenwood Cemetery,

107 U.S. 466 (18883) ......... Lciiieinbilopadacepiindicadaibiel 48
Commissioner v. Shapiro,

EI a 40
Cornell v. Coyne, :

ESE TET IO 33
Correctional Servs. Corp. v. Malesko,

I cadena 22

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Cases — Continued:

Cyprus Amax Coal Co. v. United States,
205 F.3d 1369 (2000), cert. denied, 532 U.S.

ESS SSSA RAI Se ROTO EER 2, 43
Dooley v. United States,
Pe I IE IED scccnscesoccsccccoceccsncedcccoccsesecests 44
Eastern Enters. v. Apfel, |
i cccncucenntcosesccscsecoesenss 16
EC Term of Years Trust v. United States,
ee ITED eins detaccdacissteisnisscsnscinvceseses 26
Enochs v. Williams Packing & Navigation Co.,
I a i iu crenccsdenicneconiensens passim
Fairbank v. United States,
Be er tinct vsencsscsassansserccctseveces passim
_ First English Evangelical Lutheran Church v.
County of Los Angeles,
rs eaccensonsiinaaens 21
Flora v. United States,
362 U.S. 145 (1960) ............. ieiibbediin biiilakapdoncliaa 37
Grosjean v. American Press Co.,
Re I nin ci cecersnsccesvendoosces 40, 42
Grutka v. Barbour, :
Ee 549 F.2d 5 (7th Cir.), cert. denied, 431 U.S.
: si seasiabolinni 41
7 Hatter v. United States,
a alae 16
Hatter v. United States,
953 F.2d 626 (Fed. Cir. 1992)............... 16, 17, 18
Hibbs v. Winn,
RE RETR lanier tn ee 28

Cases — Continued:
Hinck v. United States,

| __: | TOT Dee 26, 50
Humane Soc’y v. Clinton,

236 F.3d 1320 (Fed. Cir. 2001)................cccc00e 15
Hylton v. United States,

3 U.S. (3 Dall.) 171 (1796)...........cccsseseees 11,13
INS v. St. Cyr,

IN ID icv cccnscecsescccnseoseusotecdooubenes 35
Jacobs v. United States,

Be I PR oc, cccccsecscceccoscsesctéceotos 21, 52
Jones v. Liberty Glass Co.,

Re As 51
Leedom v. Kyne, ,

SF SF BOGE icicssccsesvecccscoscncsccccenesees 41, 49
M’Culloch v. Maryland,

17 U.S. (4 Wheat.) 316 (1819) ..............000.. 20, 29
Marbury v. Madison,

5 U.S. (1 Cranch) 137 (1803)................ 20, 21, 23
McKesson Corp. v. Division of Alcoholic

Beverages & Tobacco,

I HE Sc ciccticcivescencrscscnscwscensesess 17, 47
McNary v. Haitian Refugee Ctr., Inc.,

yD siceicccsecsctsencsicnssescnsessoncessons 38
Minneapolis Star & Tribune Co. v. Minnesota

Comm’r of Revenue,

RT an 42
Mobile County v. Kimball,

_ TEAR a 46

Near v. Minnesota,
Be I IID cits cccctccecivcssnbnmemnedtbeitedabits 42

1x
Cases — Continued:

Nixon v. Missouri Mun. League,

I Soin scciiscsitaccscccnsecossbsiniovesens 45
OPM v. Richmond,

I 38
Pace v. Burgess,

LETTE ES AA UOTE 11
Panhandle Oil Co. v. Mississippi,

etait teinicrcnsnscinoceceedooneees 20
Phillips v. Washington Legal Found.,

i. ic cniseusebnnspebenini 53

' Preseault v. ICC,

ac cadiomeaionll 25
Procter & Gamble Distributing Co. v.

Sherman, |

Be ee re NO ivivsnccsccccccoccocecccesessee 53 -
Quackenbush v. Allstate Ins. Co.,

Re a PI Gitateiccitdiccdssccccosesescossccccosess 23
Ranger Fuel Corp. v. United States,

33 F. Supp. 2d 466 (E.D. Va. 1998)........1, 33, 42
Regional Rail Reorganizaton Act-Cases,

BO i, BOD httitinicinticonscccinscecceesese 27, 46, 49
Rondeau v. Mosinee Paper Corp.,

i ceaasisinenioationii 40
Ruckelshaus v. Monsanto Co.,

ee aon ccecccesccsstecnsenes 25, 49
Schenck v. Pro-Choice Network,

I nic osinirscicéonvescsonenesesoiostieiiiid 52
Schweiker v. Chilicky,

IE Cite TER CIE ccveccccscosscececsccovanscone 23, 24, 48

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Like the Judicial Compensation Clause and the
Takings Clause, the Export Clause protects a purely
pecuniary and economic interest in “mandatory and
unconditional terms.” Hatter, 953 F.2d at 628.5 A
critical function of the Export Clause, moreover, is to
“disallow[] any attempt to raise federal revenue from
exports,” IBM, 517 U.S. at 859 (emphasis added), a
purpose unique to the Export Clause. That categori-

cal excision of the government’s power to exact funds’

and to use a particular activity as a source of revenue
can only be meaningfully enforced if monetary com-
pensation — removal of the unconstitutional tax reve-
nues from the Treasury — is provided for a violation
of the Clause.'6 Liability for monetary compensation
thus “naturally follows” from the Export Clause’s
protection against financial diminution by taxation
and “furthers the purpose[] of’ the Export Clause to
wall off exports as a source of revenue. Mitchell, 463
US. at 226, 227.17

16 This Court has long held that the Takings Clause provides
a substantive cause of action against the United States under
the Tucker Act. See Regional Rail Reorganization Act Cases,
419 U.S. 102, 126 (1974); cf. Jacobs v. United States, 290 U.S.
13, 16 (1933) (“[The Tucker Act claim] rested upon the Fifth
Amendment. Statutory recognition was not necessary.”).

16 Cf. McKesson Corp. v. Division of Alcoholic Beverages &
Tobacco, 496 U.S. 18, 39 (1990) (if a tax were “beyond the
State’s power to impose” or “taxpayers were absolutely immune
from tax, * * * [t]he State would have had no choice but to ‘undo’
the unlawful deprivation by refunding the tax previously paid
under duress”); Ward v. Love County, 253 U.S. 17, 24 (1920) (“no
statutory authority was essential to enable or require the county
to refund the money” when a tax was unconstitutionally col-
lected in contravention of controlling Supreme Court precedent).

17 The government stresses (Br. 33) that the Fifth Amend-
ment’s Takings Clause and the Judicial Compensation Clause

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rection, to infer a Bivens remedy that would have
conflicted with a pre-existing statutory remedy. See
Schweiker, 487 U.S. at 423-425 (social security
claims); Lucas, 462 U.S. at 388-388 (federal employee
grievances). Here, by contrast, the court of appeals
simply followed Congress’s statutory command and
undertook the question of constitutional interpreta-
tion statutorily assigned to it, attaching to its deter-
mination that the Export Clause is money-mandating
only the jurisdictional consequences that Congress it-
self specifically prescribed in 28 U.S.C. 1491(a).

Chilicky and Lucas are particularly inapt for a
second reason. Those cases each found “special fac-
tors counseling hesitation” in the creation of a Bivens
remedy, Chilicky, 487 U.S. at 423; Lucas, 462 U.S. at
377, due to Congress’s unique competence and exper-
tise in crafting a remedial scheme for the particular
claims at issue. But when it comes to claims enforc-
ing the Export Clause — particularly claims where the
unconstitutionality of Congress’s action is so patent
that the government makes no effort to defend it —
Congress lacks any relevant expertise or competence
and, in fact, has proven its disinclination, and per-
haps even its institutional inability, to police cate-
gorical prohibitions on its own power. Instead,
throughout the Nation’s history, it has been this
Court that “has strictly enforced the Export Clause’s
prohibition against federal taxation of goods in ex-
port,” IBM, 517 U.S. at 849, against congressional in-
cursion. See U.S. Shoe; IBM; Thames & Mersey;
Hvoslef; Fairbank. Where, as here, the Constitution
specifically and comprehensively disarms Congress
from acting, “special factors counsel[] hesitation,” Lu-

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cluding unpublished procedures, that result in denials of re-
funds to diligent taxpayers); see id. at 152 (in one context,
“courts are finding that the only option available to the taxpayer
to maintain their right to a refund was to follow a procedure
that does not exist in the Internal Revenue Code or in its regu-
lations”).

21 See Snyder, 109 U.S. at 194 (tax recovery scheme was “en-
acted under the right belonging to the government to prescribe
the conditions on which it would subject itself” to suit “in the
collection of its revenues”); Cary v. Curtis, 44 U.S. (3 How.) 236,
245 (1845) (the constitutional power to impose and collect reve-
nue includes the power to identify procedures for presenting
“any conflict which might arise” and “to prescribe the manner of
trial” for its resolution).

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has twice explained that, just as affirmative grants of
power to Congress should be “construed as to give full
efficacy to those powers,” the Export Clause’s explicit
restriction on congressional power should “in like
manner * * * be enforced in accordance with its letter
and spirit, and no legislation can be tolerated which,
although it may not conflict with the letter, destroys
the spirit and purpose of the restriction imposed.”
Hvoslef, 237 U.S. at 15; Fairbank, 181 U.S. at 290.
Indeed, “[iJt would be a strange rule of construction
that language granting powers is to be liberally con-
strued and that language of restriction is to be nar-
rowly and technically construed.” Fairbank, 181 U.S.
at 289. Accordingly, the specificity of the Export
Clause overrides any authority otherwise granted by
the general words of the other taxing clauses or the
Necessary and Proper Clause, and limits Congress to
the enactment of measures that give effect to, rather
than undermine or nullify, the Export Clause’s “sim-
ple, direct, [and] unqualified prohibition.” U.S. Shoe,
523 U.S. at 368. 22

History confirms that the Export Clause sweeps
broadly and proscribes regulating exports and ex-
porters through the tax system. See JBM, 517 U.S. at
859 (Export Clause “specifically prohibits Congress
from regulating” exports through exercises of the tax
power). The Framers specifically considered and re-

22 Congress, accordingly, can provide an administrative re-
fund scheme as an optional means for exporters to vindicate
their Export Clause claims without having to initiate judicial
action, and the Companies in this case, in fact, availed them-
selves of that opportunity with respect to the latest three years
the export taxes were imposed. Pet. 4; Pet. App. 3a.

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jected an amendment that would have limited the
Export Clause’s prohibition to taxes imposed “for the
purpose of revenue.” 2 Convention Records, supra,
359 (Aug. 21, 1787). As this Court explained in Fair- —
bank, that reveals that the Export Clause excludes
exports “not merely * * * [as] a source of revenue,”
but from subjection to Congress’s regulatory tax
power in any manner and for any purpose. 181 U.S.
at 292; see id. at 293 (history of the Clause requires
that the “national government should put nothing in
the way of burden upon such exports”).

While the Tucker Act would give the Export
Clause the same full and fair opportunity for vindica-
tion that other constitutional damages claims against
the United States receive, the administrative tax re-
‘fund scheme would obstruct and substantially un-
dermine, rather than carry into effect, the Export
Clause’s comprehensive withdrawal of congressional
tax power.

First, and at the most elemental level, the refund

scheme’s revenue-protective model stands in diamet-

: rical opposition to the Export Clause’s simple and
E straightforward command “disallow[ing] any attempt
to raise federal revenue from exports.” JBM, 517 U.S.
at 848, 859 (emphasis added). While the financial
impact of proceeding under a revenue-protective
scheme, with its built-in time lag for the govern-
; ment’s interest (see Pet. Br. 24) and risks of proce-
dural bar, see 26 C.F.R. 301.6402-2, may or may not
be significant in any given case, “[t]he question of
power is not to be determined by the amount of the
burden attempted to be cast.” Fairbank, 181 U.S. at
291. If Congress has the power to impose minor, tax-

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specific constraints on the vindication of Export
Clause claims, it equally has the power to impose
disabling limitations. Indeed, “[t]he question is never
one of amount but one of power,” ibid., and the Ex-
port Clause leaves no room for Congress to treat ex-
port taxes like ordinary taxes, or to use its tax power
to regulate exports or exporters.

Second, the refund scheme limits exporters to re-
covering only the measure of funds that were uncon-
stitutionally exacted. There is no provision for recov-
ering the type of economic damages to business that
the Framers were so concerned could result from the
taxation of exports. Consequently, exporters would
be forced to proceed simultaneously on two different
tracks to recover all of their damages for a single con-
stitutional violation. In addition, exporters must
wait at least half a year before even initiating suit to

vindicate their constitutional rights, limit their dam-

ages, and recover their funds, 26 U.S.C. 6532(a)(1),
with the government enjoying all the revenue bene-
fits of the prohibited funds and perhaps collecting
even more in the interim. Indeed, in the Ranger Fuel
case, in which the coal export tax was held to be un-
constitutional, the IRS failed to act at all on the ad-
ministrative refund claim, and the government de-
layed for months after the filing of the complaint, be-
fore “tak[ing] no position on the constitutionality of
the coal excise tax” and requesting further postpone-
ment of the question while the government continued
to try and “determine whether to defend the constitu-
tionality of the coal excise tax,” U.S. Opp. to Pltfs.
Mot. for S. J’ment. at 2, Ranger Fuel Corp. v. United
States, No. 3:98cv370 (E.D. Va.), and, incidentally,

33

retained and collected more export taxes. To be sure,
some provision is made for interest, but its terms
(like the administrative refund scheme itself) are
sharply skewed in the government’s favor.?°

There is, moreover, no justification for imposing
such limitations on recovery — the net effect of which
is to retain export taxes in the federal revenue — or
administrative hurdles to relief in Export Clause
cases. An agency has no expertise either in questions
of constitutional law or in the resolution of the rele-
vant constitutional facts (such as whether the item
taxed was in the stream of export commerce or quali-
fies as a user fee, see, e.g., U.S. Shoe, 523 U.S. at 367-
69; Cornell v. Coyne, 192 U.S. 418, 428 (1904)). In
addition, when, as here, Congress made explicit its
intent to tax coal exports, see 26 U.S.C. 4221(a), an
administrative agency has no authority to declare the
law unconstitutional.”4

In short, rather than help to “enforce[] [the Export
Clause] in its spirit and to its entirety, Fairbank, 181
U.S. at 289, as the Tucker Act does, the administra-
tive refund scheme would ensure that the govern-
ment will enjoy some (constitutionally proscribed)

23 See 28 U.S.C. 2411 (interest ceases 30 days before refund
check is issued); 26 C.F.R. 301.6611-1(g); 26 U.S.C. 6621(a) (ty-
ing interest rate to federal short-term rate plus specified per-
centage points, while sharply lowering the applicable interest
rate for corporations).

2% Cf. U.S. Shoe, 523 U.S. at 364 (when constitutionality of
tax was challenged, the agency responded “with a form letter”
asserting that the tax was a user fee); Ranger Fuel, 33 F. Supp.
2d at 467-468 (when presented with Export Clause challenge to
the coal tax, the IRS simply took no action for 15 months).

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revenue benefits no matter how patently unlawful
and indefensible the export tax is.

Third, and to be sure, the Export Clause does not
preclude Congress from subjecting exporters’ claims
to the same general, tax-neutral and revenue-neutral
limitations on recovery as other constitutional provi-
sions, such as the Tucker Act’s six-year statute of
limitations. See 28 U.S.C. 2501. See Block v. North
Dakota, 461 U.S. 273, 292 (1983) (“A constitutional
claim can become time-barred just as any other claim
can.”). But the question here is quite different:
whether, having established a tax-neutral procedure
for the litigation of damages claims arising under the
Constitution, Congress may carve the Export Clause
out for “less liberal[]” treatment (Pet. Br. 27), impos-
ing singularly pro-revenue and _ government-
protective burdens and limitations on that Clause’s
constitutional enforcement, thereby treating that
prohibitory Clause as though it were as amenable tv
regulation through the general tax scheme as claims
under constitutional provisions that grant Congress
taxing power. See Spalding, 262 U.S. at 70 (Export
Clause gives exports “liberal protection”).

Congress cannot. “[DJjoing what the Constitution
permits gives no license to do what it prohibits.” Ev-
ans uv. Gore, 253 U.S. 245, 255 (1920), overruled on
other grounds, Hatter, 532 U.S. at 567-571. Con-
gress’s general power to control constitutional litiga-
tion against the United States must be exercised con-
sistently with Article I’s specific constraints on con-
gressional power, and it cannot impose procedural
constraints on judicial review that, in operation,
weaken or negate the strict prohibitions of the Export

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Clause, any more than it could use its affirmative leg-
islative powers to circumvent the constitutionally
prescribed limitations on suspension of the writ of
habeas corpus, Art. I, § 9, cl. 2. See INS v. St. Cyr,
533 U.S. 289 (2001).

In short, the deliberate design of the administra-
tive tax refund scheme is to protect the government’s
retention of revenue, to put claims on a timeframe
that is comfortable for the government (see Pet. Br.
24), to limit the claims permitted, to restrict the
available remedies, and to force individuals to protest
tax payments one at a time, return-by-return. While
Congress’s hands were supposed to be “absolutely
tied” by the Export Clause, JBM, 517 U.S. at 860
(quoting 2 Convention Records, supra, at 220), forcing
all Export Clause claims through that administrative
process would untie Congress’s hands and transform
a comprehensive preclusion of congressional power
into little more than a borrowing program. The gov-
ernment could take all the revenue it wants from ex-

. port taxes and obtain “all the beneficial use of the

fund[s],” subject only to the obligation to pay back
those funds — but no damages and limited interest —
months or years later, as refund claims are processed
piecemeal, year by year, within whatever framework
of restrictions, stringent limitations, and constraints
Congress might choose to impose. Webb’s Fabulous
Pharmacies, Inc. v. Beckwith, 449 U.S. 155, 163-164
(1980).25 At the same time, the failure of the exporter

25 See also Webb’s, 449 U.S. at 162 (“[I]f the [government]
were entitled to the interest, its officials would feel an inherent
pressure and possess a natural inclination to defer distribution,
for that interest return would be greater the longer the fund is

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to comply with any of the “procedural requirements
on postdeprivation relief’ that Congress has broad
“freedom to impose” (Pet. Br. 40) could leave all the
revenue from that constitutionally unauthorized ex-
action in the government’s hands. It is doubtful that
the Framers intended that Congress’s general powers
under the Constitution would permit such ready cir-
cumvention of the Export Clause. “[W]hat cannot be
done: directly because of constitutional restriction
cannot be accomplished indirectly by legislation
which accomplishes the same result.” Fairbank, 181
US. at 294.

3. The Design of the Administrative Tax
Scheme Does Not Cover Export Clause
Claims

This Court, however, need not resolve the substan-
tial constitutional question of whether Congress may
impose special, governmentally favorable tax proce-
dures in areas where the Constitution specifically
and completely debars Congress from exercising any
tax power. That is because the relevant statutory
provisions can fairly be read to preserve and prefer
the Tucker Act remedy over the Companies’ Export
Clause claim.

a. An individualized refund scheme
does not preclude separate litiga-
tion of broad constitutional ques-
tions

The administrative refund procedure is designed
to handle individualized, as-applied, return-specific

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distributing the principal to those entitled to it.”).

37

challenges to tax assessments and to determine, on a
case-by-case basis whether money should be re-
funded. See 26 U.S.C. 6511(a) (referring to claims for
refund for “an” overpayment); 26 U.S.C. 6511(b)(1)
(referencing the filing of “a” claim); 26 U.S.C. 7422(a)
(same); 26 U.S.C. 6532(a)(1) (“the claim”). Refund
decisions govern only the particular tax return at is-

sue, and may not control the disposition of a return

for the same tax filed the next year. Flora v. United
States, 362 U.S. 145, 193 & n.16 (1960); Alexander v.
“Americans United” Inc., 416 U.S. 752, 778, 780-781
(1974) (Blackmun, J., dissenting). Nor do such indi-
vidualized administrative refund procedures have the
capacity to establish broadly applicable rulings about
the scope of congressional taxing power. Instead, the
IRS administrative scheme is designed to address
factual and technical compliance issues, resolved by
auditors in local district offices, who generally lack
the authority or legal training needed to resolve such
constitutional questions.2° (Br. 24 (noting that the

26 See generally 26 C.F.R. 601.105(e). The original review of
excise claims “is a primary function of examiners in the Exami-
nation Division of the office of each district director.” 26 C.F.R.
601.105(b)(1). “[S]ubstantially the same procedure is followed
*** as when taxpayers’ returns are originally examined.” 26
C.F.R. 601.105(e)(2). The review generally focuses on highly
technical matters. See Audit Technique Guide for “v9 Coal Tex
(May, 2005), avai'able at, http://wwy sses/s
/article/0,,id=139335,00. html. Technical cites can wy x cbtained
from the National Office on “technical or procedural” subjects,
but it is given only for specific cases and never to a general class
of cases. 26 C.F.R. 601.105(b)(5)(i)(a), (21)(b) & (viii)(a). Appeal
to a regional office is available, but “the appeal procedures do
not extend to cases involving solely the failure or refusal to
comply with the tax laws because of * * * constitutional * * *
grounds.” 26 C.F.R. 601.106(b).

VENT a Ee Ne LS ORT ED OE PP POR, TOT MRT AS Te aE eS Te eT he a See

38

purpose of the administrative scheme is to provide
“specific facts” that allow the IRS to conduct “an ad-
ministrative investigation” of a taxpayer’s claim))
Beyond that, even if the IRS agreed that Congress
had exceeded its power, the most it could do is grant
refunds one at a time as a matter of enforcement dis-
cretion — and the authority to do even that in advance
of judicial invalidation of the tax is debatable when,
as here, Congress specifically directed that coal ex-
ports be taxed and the money is already in the Treas-
ury. Cf. U.S. Const. Art. I, §-9, cl. 7 (“No Money shall
be drawn from the Treasury, but in Consequence of
Appropriations made by Law.”); OPM v. Richmond,
496 U.S. 414, 428 (1990). In any event, any such ad-
ministrative decisions would offer no protection
against the continuing legal obligation to pay the

taxes, the need to expend time and resources repeat-

edly paying them and then pursuing the refund proc-
ess, the lost time-value of the money, or the risk of a
change in agency position.

In an analogous context, this Court unanimously
held in Bowen v. Michigan Academy of Family Physi-
cians, 476 U.S. 667 (1986), that the need to ensure
judicial review of “substantial statutory and constitu-
tional challenges” to an agency program, id. at 680,
strongly counseled against interpreting a “reticulated
statutory scheme” for review of individual social se-
curity benefit determinations as foreclosing federal
court jurisdiction over a challenge to the legality of
an agency regulation itself, id. at 675. See also
McNary v. Haitian Refugee Ctr., Inc., 498 U.S. 479,
491-94 (1991) Gurisdictional limitation on review of
“a determination respecting an application” for im-

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migration status does not bar review under general
federal question jurisdiction statute, 28 U.S.C. 1331,

of a constitutional challenge to “a group of decisions

or a practice or procedure employed in making deci-
sions’). Likewise here, it is doubtful that Congress
intended the individualized administrative refund
procedure either to decide or to preclude definitive
judicial resolution of facial and far-reaching chal-
lenges going to the core of Congress’s constitutional
taxing power. Indeed, “there would be a serious
question about the reasonableness of a system that
forced a [taxpayer] to bring a series of backward-
looking refund suits to establish repeatedly the legal-
ity of [a] claim.” Bob Jones Univ. v. Simon, 416 U.S.
725, 748 n.22 (1974).

b. Congress has not intended reve-
nue-protective procedural con-
straints to apply to taxes that are,
on their face, unconstitutional

Even with respect to exercises of recognized taxing
authority, this Court had repeatedly held that
broadly worded statutory restrictions on taxpayers’
prosecution of such claims do not apply when the
challenged tax unquestionably falls beyond Con-
gress’s authority. In Enochs v. Williams Packing &
Navigation Company, 370 U. S. 1 (1962), this Court
addressed the Tax Injunction Act’s sweeping com-
mand that “no suit for the purpose of restraining the
assessment or collection of any tax shall be main-
tained in any court,” 26 U.S.C. 7421(a). Although the
Act’s “language could scarcely be more explicit,” Bob
Jones, 416 U.S. at 736, this Court held that the Act
does not apply to taxes that are so wholly without

es —

40
foundation that “it is clear that under no circum-
stances could the Government ultimately prevail.”
Enochs, 370 U.S. at 7; see South Carolina v. Regan,
465 U.S. 367, 374 (1984).

Accordingly, when, “under the most liberal view of
the law and facts, the United States cannot establish
its claim,” and the government itself does not “claim
that [the tax] is valid,” Enochs, 370 U.S. at 7-8, the
Court has concluded that permitting a taxpayer suit
to go forward outside traditional limitations on tax-
payer litigation cannot affect any legitimate govern-
mental interest in tax collection, Commissioner v.
Shapiro, 424 U.S. 614, 628 (1976). Cf. United States
uv. Janis, 428 U.S. 433, 441-442 (1976) (holding that
“the usual rule with respect to the burden of proof in
tax cases” does not apply “where the assessment is
shown to be naked and without any foundation”).
Rather, when the tax is, on its face, in excess of the
power granted to the Congress by the Constitution,
the assessment is, in the eyes of the law, only “in the
guise of a tax,” Grosjean v. American Press Co., 297
U.S. 233, 250 (1936), and may be procedurally
treated as such.??

By the same token, statutorily satan exhaus-
tion requirements generally do not apply when a

27 The question whether the government has any chance of
ultimately prevailing “is to be determined on the basis of the in-
formation available to it at the time of the suit.” Shapiro, 424
U.S. at 627. This type of injunction was not an available rem-
edy for the Companies here, however, because the plaintiff still
must establish irreparable harm, ibid., which an ongoing obliga-
tion to pay money generally does not establish. See, e.g., Ron-
deau v. Mosinee Paper Corp., 422 U.S. 49, 60 (1975); Bob Jones,
416 U.S. at 745.

41

party seeks to enjoin agency action that is “in excess
of its delegated powers and contrary to a specific pro-
hibition” in the law, where that prohibition is “clear
and mandatory.” Leedom v. Kyne, 358 U.S. 184, 188
(1958). That is so because, when government officials
act in plain and undisputed violation of direct and
unqualified prohibitions on their authority — whether
those directives are rooted in statute or the Constitu-

tion — the central rationale for exhaustion collapses.

The agency can claim neither expertise nor efficiency
when it acts wholly outside its lawful bounds, and, by
definition, factfinding has little relevance to halting
violations of the law that are plain on their face.28 At
the same time, when the Political Branches are heed-
less of or defy a “simple, direct, unqualified [constitu-
tional] prohibition” on their authority, U.S. Shoe, 523
U.S. at 368, the need for direct judicial intervention
reaches its apex.?9

Accordingly, before forcing the Companies to liti-
gate within the administrative tax refund framework,
with its revenue-protective procedures, Congress
likely intended that that the tax at issue would have

28 See Thetford Properties IV Ltd. v. Department of Housing
and Urban Dev., 907 F.2d 445, 448-449 (4th Cir. 1990) (“Of
course, in the rare case when a statute is patently unconstitu-
tional or an agency has taken a clearly unconstitutional posi-
tion, exhaustion may not be required.”); Grutka v. Barbour, 549
F.2d 5, 8 (7th Cir.) (“the raison d'etre of the exhaustion doc-
trine[] fis) simply irrelevant when the Board has clearly
breached the bounds of its proper authority as a matter of law,”
and the violation is plain because the statute is unconstitutional
on its face), cert. denied, 431 U.S. 908 (1977).

29 See Black Lung Benefits Revenue Act of 1977, H.R. Rep.
No. 438, 95th Cong., Ist Sess. 73 (1977) (explaining that the
usual exemption for “exports” will not “apply to this coal tax”).

42

at least a colorable claim to validity and thus could,
with some legitimacy, be defended as a “tax” as Con-
gress employed that term in the statutory refund
provisions. In this case, however, the government
was unable, even after a year of study, to muster any
constitutional defense for the export tax, and the dis-
trict court was unable to discern any justification for
it either. Ranger Fuel, 33 F. Supp. 2d at 469. There
is no question that a tax used to impose a prior re-
straint on speech may be enjoined as foreclosed by
the Constitution, see Minneapolis Star & Tribune Co.
uv. Minnesota Comm’r of Revenue, 460 U.S. 575
(1983); Grosjean, 297 U.S. at 250, without imposition
or exhaustion of six-month-long, revenue-protective
procedures, cf. Near v. Minnesota, 283. U.S. 697
(1931). So likewise may a facially unconstitutional
export tax — a tax that was also of substantial con-
cern to the Founders — be challenged through the or-
dinary mechanism for constitutional litigation, with-
out any procedural thumb on the government’s side
of the scale. At a minimum, the Court should require
a clear statement of congressional intent to insulate
such facially unconstitutiona]) measures from ordi-
nary judicial review.*°

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30 The Government’s reliance (Br. 16) on the requirement of a
pre-payment protest in United States v. New York & Cuba Mail
Steamship Co., 200 U.S. 488 (1906), is misplaced for three rea- |
sons. First, that case involved a Tucker Act claim “founded” %
upon a statute, not (as the Government asserts (Br. 16)) “an Ex-
port Clause claim under the Tucker Act.” See No. 116, Resp. Br. |
15, Cuba Mail, supra (“This action [is] based upon the act of
May 12, 1900.”); id. at 18 (“[T]he petitioner may therefore en-
force by an action under the Tucker Act the right given it by the
Act of May 12, 1900.”); Hvoslef, 237 U.S. at 7 (the claims in both

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c. The statutory text is ambiguous

The administrative refund statutes, by their
terms, do not naturally embrace Export Clause chal-
lenges to Congress’s foundational taxing authority.
To begin with, given the straightforward and un-
qualified constitutional prohibition on export taxes
and the fact that, by definition, the ad valorem tax at
issue here was imposed on exported coal when it was
alread; _n the stream of international commerce, it is
far from clear that the coal tax constitutes an “inter-
nal” revenue tax, within the meaning of 26 U.S.C.

Hvoslef and Cuba Mail, see id: at 9, were “based upon” refund
statutes). The plaintiffs in both cases raised the Export Clause
simply to satisfy the statutory element of proof of an “erroneous
or illegal assessment and collection.” Hvoslef, 237 U.S. at 7;
Cuba Mail, 200 U.S. at 494-495; No. 116 Resp. Br. 18, Cuba
Mail, supra. Thus, at most, Cuba Mail “stands for the unre-
markable proposition that a taxpayer suing to recover under a
refund statute must satisfy all the requirements attendant to
that statute.” Cyprus Amax, 205 F.3d at 1375. Second, Cuba
Mail did not address any jurisdictional questions under the re-
cently enacted Tucker Act and, indeed, this Court later ex-
plained that jurisdiction was assumed in that case. See United
States v. Emery, Bird, Thayer Realty Co., 237 U.S. 28, 32 (1915).
Tellingly, the Court gave no indication that, if a pre-payment
protest were not an element of the cause of action, there would
have been any jurisdictional problem with proceeding under the
Tucker Act, notwithstanding the existence of the separate, post
hoc administrative refund provisions. Third, no question of
Congress’s authority to impose procedural constraints on Export
Clause challenges was involved. The long-since abandoned re-
quirement of a protest at the time of payment, see Revenue Act
of 1924, ch. 234, § 1014, 43 Stat. 253, 343, was the product of
judge-made common law, not statute, defining the elements of a
common-law tort claim for recovery against a collector in his
personal capacity. See United States v. Kales, 314 U.S. 186, 198
(1941).

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6532(a)(1) and 7422(a). Compare Black’s Law Dic-
tionary 732 (5th ed. 1979) (defining “internal reve-
nue” as “revenues from internal sources by way of
taxes as contrasted with revenues from customs and
foreign sources”), with U.S. Shoe, 523 U.S. at 365-366
(explaining how an export tax could be understood to
fall under a statutory reference to “imports” and thus

‘ could be considered a “customs duty”); see also 28

U.S.C. 1340 (establishing district court jurisdiction
over claims arising under any Act of Congress “pro-
viding for internal revenue” or “revenue from im-
ports”); Canton R.R. Co. v. Rogan, 340 U.S. 511, 515
(1951) (export “acts begin and end at water’s edge”);
Dooley v. United States, 183 U.S. 151, 153-155 (1901)
(discussing the foreign commerce aspect of exports).*!

In addition, Congress’s use of the terms “credit” or
“refund” in defining the type of claims that are sub-
ject to its tax refund scheme, 26 U.S.C. 6511(a) & (b),
7422(a), can naturally be read to presuppose some
colorable claim of authority to have collected the
money in the first instance. Where, by contrast,
money is taken in the complete absence of any lawful
authority — for example, if an IRS agent picks a tax-
payer’s pocket during an audit — the monetary relief
sought would not commonly be described as a “tax re-
fund.”32

31 The fact that the underlying tax provision is codified in Ti-
tle 26, by itself, does not make it an “internal revenue tax,” as
the government itself argued in U.S. Shoe. See 523 U.S. at 367.

32 See United States v. State Bank, 96 U.S. (6 Otto) 30, 36
(1877) (recognizing “implied contract” claim “where the money
or property of an innocent person has gone into the coffers of the
nation by means of a fraud” by a Treasury official); see also

Bonwit Teller & Co. v. United States, 283 U.S. 258, 265 (1931)

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Congress’s reference to “any” recovery of internal
revenue taxes does not help the government. This
Court has held that, in the absence of clearer con-
gressional direction, the word “any” should not be
read to sweep in questionable and legally sensitive
applications “that Congress likely did not consider.”
Small v. United States, 544 U.S. 385, 390 (2005). In-
stead, “general words” like “any” must “be limited”
in their application “to those objects to which the leg-
islature intended to apply them.” United States v.
Palmer, 16 U.S. (3 Wheat.) 610, 631 (1818) (Marshall,
C.J.).33

d. The Export Clause exception to the
administrative refund scheme is
narrow and tightly cabined

The government argues (Pet. 25; Br. 28 n.7) that
permitting Export Clause claims to proceed under the
Tucker Act will permit taxpayers to circumvent the
administrative tax refund scheme by alleging any
constitutional defect in a tax. The short answer is
that this Court — speaking unanimously — had no
trouble understanding that the sui generis nature of
the Export Clause’s “simple, direct, unqualified pro-
hibition * * * distinguishes it from o!r constitu-
tional limitations on governmental taxing authority.”

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(recovery of overpayment of taxes allowed by the Commissioner
through an “accounts stated” action is not barred by refund pro-
cedure’s limitations period).

33 See also Nixon v. Missouri Mun. League, 541 U.S. 125, 132
(2004) (“any” means “different things depending upon the set-
- ting”); United States v. Alvarez-Sanchez, 511 U.S. 350, 357
(1994) (“[Rjespondent errs in placing dispositive weight on the
bread statutory reference to ‘any’ law enforcement officer * * *
without considering the rest of the statute.”).

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U.S. Shoe, 523 U.S. at 368. Moreover, Congress’s
general ban on the imposition of manufacturers’ ex-
cise taxes on exports, see 26 U.S.C. 4221(a), should
ensure that few Export Clause challenges will arise
in the future.

Beyond that, only those constitutional provisions
that are independently deemed to be money-
mandating will support Tucker Act jurisdiction. Tes-
tan, 424 U.S. at 398. While that class includes export

taxes, this Court’s recent confirmation that the Ex- —

port Clause means what it says, see U.S. Shoe, supra,
and IBM, supra — and the fact that only a small
handful of Export Clause cases have arisen since
1787 anyhow — strongly suggests that Tucker Act ju-
risdiction over Export Clause claims will have no dis-
cernible impact on the administrative tax refund
process. The Tekings Clause is also money-
mandating, Regional Rail, 419 U.S. at 126, but that
has no relevance here because “taxation for a public
purpose, however great,” is not a “taking of private
property.” Mobile County v. Kimball, 102 U.S. (12
Otto) 691, 703 (1880). Finally, following this Court’s
decision in Hatter, the Judicial Compensation Clause
will only give rise to a constitutional claim if Con-
gress imposes a discriminatory tax on judges’ com-
pensation, see 532 U.S. at 567, 571, which would pre-
sumably be a rare event.*4

34 Nor has the narrow exception to the Tax Injunction Act
recognized in Enochs for challenges to taxes that lack any color-
able legal defense, 370 U.S. at 7-8, led to artful evasion of gen-
eral limitations on the adjudication of tax claims, presumably
because Congress is not in the habit of enacting such measures.

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Contrary to the government’s argument (Pet. 25),
no court has held that either the Direct Tax or Uni-
formity Clause, U.S. Const. Art. I, § 8, cl. 1 & § 9, cl.
4, is money-mandating, nor would such a decision fol-
low from this case. Those provisions simply regulate
how federal taxes that Congress has the power to
adopt are to be designed. Neither is the type of abso-
lute preclusion of congressional taxing authority or
explicit exclusion of a particular activity from the
federal revenue stream that the Export Clause is.

Accordingly, a violation of either provision would
not imply that the government had obtained funds
that are constitutionally excluded from federal reve-
nue or wholly beyond Congress’s authority to collect
at all. Instead, such violations may be remedied —
and the same money still collected — by adjusting and
increasing the coverage of the tax to make it “propor-
tional” or “uniform.” In other words, the essence of a

taxpayer's claim under the Direct or Uniform Taxa- ©

tion Clauses is not that its funds are completely im-
munized from taxation and should be disgorged as an
illegitimate source of revenue per se (as the claim
would be under the Export Clause), but that the bur-
den of legitimate tax collection should have been allo-
cated more widely or proportionately. Cf. McKesson,
496 U.S. at 39-40 (where a State imposes an uncon-
stitutionally discriminatory tax, it “retains flexibility
in responding to this determination,” and “may re-
formulate and enforce the Liquor Tax during the con-
tested tax period,” by “assess[ing] and collect[ing]
back taxes from petitioner's competitors” or otherwise
“calibrating the retroactive assessment to create in
hindsight a nondiscriminatory scheme’).

48

Moreover, “logic sometimes must defer to history ~

and experience,” United States v. Watson, 423 U.S.
411, 429 (1976) (Powell, J., concurring), and the fact
that the government’s predicted impact on the tax
scheme has failed to materialize at all in the eight
years since the Federal Circuit first held that an Ex-
port Clause challenge could proceed under the Tucker
Act belies the suggestion that courts are incapable of
distinguishing between constitutional limitations on
authority granted to Congress and complete and un-
qualified denials of congressional power to intermed-
dle with a particular economic activity. Indeed, the
government's argument ignores Chief Justice Mar-
shall’s admonition in an early tax case not to “treat/]
a prohibition which is general, as if it were confined
to a particular mode of doing the forbidden thing.”
Brown v. Maryland, 25 U.S. (12 Wheat.) 419, 444
(1827); see also Washington Dep't of Rev. v. Associa-
tion of Washington Stevedoring Cos., 435 U.S. 734,
749 (1978) (distinguishing between constitutional
provisions that “state a prohibition” and those that
“merely grant[{] specific power to Congress”); Fair-
bank, 181 U.S. at 296 (same as Brown).

According distinct status to challenges based on an
absolute and unqualified preclusion of congressional
power makes sense, moreover. Where Congress has
the constitutional power to act, its actions are pre-
sumptively constitutional, Close v. Glenwood Ceme-
tery, 107 U.S. 466, 475 (1883), and it has the con-
comitant power to establish reasonable rules and
procedures for the review of governmental action, see
Chilicky, 487 U.S. at 423 (where Congress creates a
“Government program,” it can “provide[] what it con-

49

siders adequate remedial mechanisms for constitu-
tional violations that may occur in the course of its
administration”). When, however, Congress has no
power to act and its authority has been specifically
withdrawn by the Constitution, measures adopted in
express defiance of that prohibition necessarily dispel
any such presumption, and there is no apparent
source of authority for Congress to erect specific pro-
cedural obstacles to judicial review of that action.

Finally, and in any event, nothing in this case re-
quires the Court to go any further than the exception
to ordinary tax litigation and exhaustion principles
that this Court already recognized in Enochs, supra,
and Leedom, supra, for facially unconstitutional and
indefensible tax laws. Presumably the government
does not contend that constitutionally indefensible
laws arise with any frequency or that taxpayers can
easily meet that exacting standard for review. Giv-
ing the Tucker Act that narrow scope, “it is entirely
possible for the Tucker Act and [the tax refund
scheme] to co-exist.” Monsanto Co., 467 U.S. at 1018.
Indeed, “it is the duty of the courts” to give effect to
both statutes where, ‘as here, it is possible to do so.
Regional Rail, 419 U.S. at 133.

C. The Export Clause Claim Falls Within
The Plain Terms Of The Interest Stat-
ute

The court of appea!s’ holding that the Companies
are entitled to interest is compelled by the plain
terms of the interest statute, 28 U.S.C. 2411. As
relevant here, Section 2411 provides that “interest
shall be allowed” on “any judgment of any court * * *
for any overpayment in respect of any internal-

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revenue tax.” (Emphases added.). As enamored as
the government is with the sweep of the word “any”
in the tax provisions (see Br. 15), its argument ig-
nores that word here, even though in this setting all
of the surrounding contextual indicia confirm that
Congress meant “any” to signal broad coverage. See
Ali v. Federal Bureau of Prisons, No. 06-9130, slip op.
5 & n.4 (Jan. 22, 2008) (“any” has expansive meaning
where there is “no basis in the text for limiting the
phrase” and no “other circumstances * * * counteract
the effect of expansive modifiers”).

Contrary to the government’s argument (Br. 44),
Section 2411 is not “an integral part” of the adminis-
trative tax scheme. Unlike the provision at issue in
Hinck — which inextricably combined a “shorter stat-
ute of limitations” with “a standard of review” “in the
same statute,” 127 S. Ct. at 2016 — Section 2411 is
not even housed in the Internal Revenue Code. In-
stead, it is located in Title 28, which governs judicial
procedure broadly, and is part of a chapter entitled
“United States As Party Generally,” 28 U.S.C. ch. 161
(emphasis added). Moreover, because Section 2411’s
textually general interest provision was crafted by
Congress decades after Congress created the admin-
istrative tax refund procedure in 1866, see Revenue
Act of 1921, ch. 136, § 13824(b), 42 Stat. 227, 316,
Congress plainly did not view that interest provision
as part of a single “refund-remedy package” (Pet. Br.
44 n.12).%

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The government’s effort (Br. 43) to limit “over-
payment” to the recovery of taxes “erroneously or il-
legally assessed,” as those terms are used: in 26
U.S.C. 7422(a), also fails. The government’s argu-
ment might have fared better in 1921, when the
original version of Section 2241 allowed interest only
“for any internal-revenue tax erroneously or illegally
assessed,” see § 1324(b), 42 Stat. at 316 — language
that paralleled the contemporaneously passed prede-
cessor to Section 7422(a), see § 1318, 42 Stat. at 314-
15. But, in 1928, Congress replaced that narrow lan-
guage with the modern interest provision, which
. permits interest more broadly “for any overpayment
in respect of any internal-revenue tax.” Revenue Act

of 1928, Pub. L. No. 70-562, § 615. 45 Stat. 791, 877..

“When Congress acts to amend a statute, we presume
it intends its amendment to have real and substan-
tial effect.” Stone v. INS, 514 U.S. 386, 397 (1995).

This Court, moreover, has stressed that “overpay-
ment” should not be construed as “a word of art,”
Jones v. Liberty Glass Co., 332 U.S. 524, 532 (1947).
This Court’s decision in United States v. Dalm, 494
U.S. 596 (1990), undercuts, rather than aids, the gov-
ernment’s position (see Pet. Br. 43). Putting aside
that the Court was not interpreting Section 2411 in
that case, the Court gave “overpayment” in 26 U.S.C.
6511 the same “commonsense interpretation” that
the court of appeals here gave “overpayment” in Sec-
tion 2411, explaining that it applies “when a taxpayer
pays more than is owed, for whatever reason or no
reason at all.” Dalm, 494 U.S. at 609 n.6. While the
Court noted in Dalm that “overpayment” “encom-
passes” erroneously, illegally, or wrongfully collected

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385015_0012%3A06. Public record. Not legal advice.