United States Court of Appeals Fifth Circuit F I L E D Revised July 7, 2003 June 11, 2003 UNITED STATES COURT OF APPEALS For the Fifth Circuit Charles R. Fulbruge III Clerk
No. 02-30493
AMERICAN CIVIL LIBERTIES UNION FOUNDATION OF LOUISIANA
Plaintiff-Appellee,
VERSUS
CYNTHIA BRIDGES, SECRETARY OF THE LOUISIANA DEPARTMENT OF REVENUE
Defendant-Appellant.
Appeal from the United States District Court for the Eastern District of Louisiana
Before DeMOSS and STEWART, Circuit Judges, and LITTLE,1 District Judge.
DeMoss, Circuit Judge:
Plaintiff-Appellee American Civil Liberties Union Foundation
of Louisiana (the AACLU@) commenced this action in the United
States District Court for the Eastern District of Louisiana
against Brett Crawford, predecessor of Defendant-Appellant 1 District Judge for the United States District Court for the Western District of Louisiana sitting by designation. Cynthia Bridges, as Secretary of the Louisiana Department of
Revenue (the AState@), seeking to have several Louisiana tax
statutes declared unconstitutional and to enjoin the State=s
enforcement of these statutes. Following an interlocutory appeal
on questions of standing and abstention that was dismissed as
improvidently granted, the district court signed a judgment
stipulated to by the parties making permanent, and therefore
appealable, the court=s earlier preliminary injunction and
declaratory relief which found that the State=s statutes violated
the Establishment Clause of the First Amendment. The State
appeals, contesting the rulings of the district court on issues
implicating the Tax Injunction Act, the ACLU=s standing, and
abstention as well as comity. Because we find as a threshold
matter, that jurisdiction was inappropriate, we make no judgment
concerning the issues of standing, abstention, comity, or the
substantive merits of the constitutional challenge.
BACKGROUND
In 1998, the Louisiana legislature amended and reenacted LA.
REV. STAT. ' 47:301(6) and ' 33:4574.1(A)(1)(b) and enacted LA.
REV. STAT. ' 47:301(8)(d) and (e), and (14)(b)(iv), to exclude
specified property owned by nonprofit religious organizations
from the definition of Ahotel@ and Aplaces of amusement,@ to
except churches and synagogues from paying sales and use taxes
2 when purchasing bibles, or literature used for religious
instruction classes, and to define Aperson@ to exclude the Little
Sisters of the Poor relative to particular purchases. The intent
of the Legislature was to exempt those establishments from paying
state and local sales and use taxes, provided that revenue
generated from the exempted property, or publications acquired,
be used for religious purposes.
The statutes thus enacted and amended, or enacted anew,
currently read, in pertinent part, as follows:
LA. REV. STAT. ' 47:301(6)(b)
For purposes of the sales and use taxes of all tax authorities in this state, the term Ahotel@ as defined herein shall not include camp and retreat facilities owned and operated for religious purposes by nonprofit religious organizations, which includes recognized domestic nonprofit corporations organized for religious purposes, provided that the net revenue derived from the organization=s property is devoted wholly to religious purposes. For purposes of this Paragraph, the term Ahotel@ shall include camp and retreat facilities, which sell rooms or other accommodations to transient guests. However, Atransient guest@ for purposes of this Paragraph shall not include guests who participate in organized religious activities, which take place at such camp or retreat facilities. It is the intention of the legislature to tax the furnishing of rooms to those who merely purchase lodging at such facilities.
LA. REV. STAT. ' 47:301(8)(d)
(i) For purposes of the payment of the state sales and use tax and the sales and use tax levied by any political subdivision, the term Aperson@ shall not include a church or synagogue that is recognized by the United States Internal Revenue Service as entitled to 3 exemption under Section 501(c)(3) of the United States Internal Revenue Service Code.
(ii) The secretary of the Department of Revenue shall promulgate rules and regulations defining the terms Achurch@ and Asynagogue@ for purposes of this exclusion. The definitions shall be consistent with the criteria established by the U.S. Internal Revenue Service in identifying organizations that qualify for church status for federal income tax purposes.
(iii) No church or synagogue shall claim exemption or exclusion from the state sales and use tax or the sales and use tax levied by any political subdivision before having obtained a certificate of authorization from the secretary of the Department of Revenue. The secretary shall develop applications for such certificates. The certificates shall be issued without charge to the institutions that qualify.
(iv) The exclusion from the sales and use tax authorized by this Subparagraph shall apply only to purchases of bibles, song books, or literature used for religious instruction classes.
LA. REV. STAT. ' 47:301(8)(e)
(i) For purposes of the payment of the state sales and use tax and the sales and use tax levied by any political subdivision, the term Aperson@ shall not include the Society of the Little Sisters of the Poor.
(ii) The secretary of the Department of Revenue shall promulgate rules and regulations for purposes of this exclusion. The definitions shall be consistent with the criteria established by the U.S. Internal Revenue Service in identifying tax-exempt status for federal income tax purposes.
(iii) No member of the Society of the Little Sisters of the Poor shall claim exemption or exclusion from the state sales and use tax or the sales and use tax levied by any political subdivision before having obtained a certificate of authorization from the secretary of the Department of Revenue. The secretary shall develop applications for such certificates. The certificates 4 shall be issued without charge to the entities which qualify.
LA. REV. STAT. ' 47:301(14)(b)(iv)
For purposes of the sales and use taxes of all tax authorities in the state, the term Aplaces of amusement@ as used herein shall not include camp and retreat facilities owned and operated for religious purposes by nonprofit religious organizations, which includes recognized domestic nonprofit corporations organized for religious purposes, provided that the net revenue derived from the organization=s property is devoted wholly to religious purposes.
LA. REV. STAT. ' 33:4574.1(A)(1)(b)
The word Ahotel@ as used herein shall not include camp
and retreat facilities owned and operated for religious
purposes by nonprofit religious organizations, which
includes recognized domestic nonprofit corporations
organized for religious purposes, provided that the net
revenue derived from the organization=s property is
devoted wholly to religious purposes.
In 2000, the ACLU filed this suit seeking to have these
enforcement of these statutes through preliminary and,
eventually, permanent injunctions. The Secretary of the
Louisiana Department of Revenue was named defendant, and
thereafter his successor was substituted.
The State filed a motion to dismiss under Rule 12(b) of the
Federal Rules of Civil Procedure arguing that the Tax Injunction 5 Act prevented the court from hearing the case and the ACLU filed
an opposition. Following argument, the district court denied the
State=s motion and ordered the State to file a memorandum
addressing abstention and the sufficiency of state court
remedies; after which the ACLU filed a response. Later, the
district court ordered the parties to submit memoranda on the
issue of standing.
The district court eventually denied both the State=s
challenge to the ACLU=s standing and the State=s request that the
district court abstain from hearing this case. The district
court nevertheless certified both the abstention and standing
issues for interlocutory appeal under ' 1292(b).
A panel of this Court granted the State=s petition for
permission to appeal those interlocutory orders. Thereafter,
however, the panel dismissed without prejudice the State=s
interlocutory appeal as improvidently granted.
Then the district court granted the ACLU=s motion for
preliminary injunction and declaratory relief. The court found
that the statutes violated the Establishment Clause of the First
Amendment. The parties then entered into a stipulated judgment,
which was signed by the district court, granting a permanent
injunction against the State, with reservation of the right to
6 appeal by both parties on any and all issues stemming from the
court=s ruling on the preliminary injunction.
The State now appeals, contesting the rulings of the
district court on whether the court was barred by the Tax
Injunction Act from exercising jurisdiction, whether the ACLU has
standing, and whether the district court should have abstained or
whether principles of comity prevent the federal court from
deciding the case. Because, we find that the Tax Injunction Act
of 1937, 28 U.S.C. ' 1341, prevents the federal district court
from hearing this challenge to the State=s tax scheme, we reverse
the district court=s denial of the State=s Rule 12(b) motion to
dismiss and remand the case with instructions for the court to
dismiss for lack of jurisdiction. Because the district court
lacked jurisdiction, we do not address on appeal any of the other
issues.
DISCUSSION
Whether the district court was prevented from exercising
jurisdiction over the case because of the Tax Injunction Act is a
question of subject matter jurisdiction subject to de novo
review. Home Builders Ass'n of Miss., Inc. v. City of Madison,
Miss., 143 F.3d 1006, 1010 (5th Cir. 1998) (citation omitted).
The Tax Injunction Act states: "The district courts shall not
enjoin, suspend or restrain the assessment, levy or collection of
7 any tax under State law where a plain, speedy and efficient
remedy may be had in the courts of such State." 28 U.S.C. '
1341. According to the Supreme Court, this statutory text should
be interpreted to advance its purpose of "confin[ing] federal
court intervention in state government . . . ." Ark. v. Farm
Credit Servs. of Cent. Ark., 520 U.S. 821, 826-827 (1997)
(citations omitted). We have stated that the statute Ais meant
to be a broad jurisdictional impediment to federal court
interference with the administration of state tax systems.@
United Gas Pipe Line Co. v. Whitman, 595 F.2d 323, 326 (5th Cir.
1979) (emphasis added).
ABy its terms, the Act bars anticipatory relief, suits to
stop (>enjoin, suspend or restrain=) the collection of taxes@ and
also suits seeking to have state tax laws declared
unconstitutional. Jefferson County, Ala. v. Acker, 527 U.S. 423,
433 (1999); Cal. v. Grace Brethren Church, 457 U.S. 393, 408
(1982). ABut a suit to collect a tax is surely not brought to
restrain state action, and therefore does not fit the Act=s
description of suits barred from federal district court
adjudication.@ Jefferson County, Ala., 527 U.S. at 433-34
(citation omitted).
There has never been any dispute among the present parties
concerning whether Louisiana provides a Aplain, speedy and
8 efficient remedy,@ but rather the entire dispute has focused on
whether the Tax Injunction Act prevents the federal district
court from deciding a case in which the plaintiff seeks to have
tax Aexemptions,@ which are not specifically enumerated as an
area outside of federal jurisdiction in the language of the Act,
declared unconstitutional. According to the district court, this
suit involves the collection of a state tax and therefore the
district court found that the Tax Injunction Act did not require
dismissal of the action. The ACLU argues that this dispute
concerns tax exemptions and not the Aassessment, levy, or
collection@ of a tax and therefore the Tax Injunction Act does
not apply. The State argued in its Rule 12(b) motion to dismiss
and again on appeal that the Tax Injunction Act prevents the
federal district court from exercising jurisdiction over this
case because this case does not involve the State suing to
collect taxes but rather a challenge to the assessment of state
taxes through the State=s exemption process and any challenge can
be brought in state court.
We conclude that this case involves a putative taxpayer
seeking to prevent the State from carrying out the current tax
system by having a portion of that tax system declared
unconstitutional; a case that because of the Tax Injunction Act,
cannot be heard in federal district court. Our holding is based
9 on three determinations. First, this is not a suit by the State
to collect a tax. Second, assessment of exemptions is
encompassed by the Act. Third, this Circuit=s precedent and the
purpose of the Act indicate that the federal district court
should not have exercised jurisdiction over this case.
First, the district court erred in holding that this case
involved the collection of a tax and therefore the Tax Injunction
Act did not bar jurisdiction. Supreme Court and Fifth Circuit
cases where the Tax Injunction Act has been held inapplicable
involved a state, a state subdivision or an agent of a state
seeking to collect a tax from an individual taxpayer or a group
of individual taxpayers, not a plaintiff seeking to have a state
tax law declared unconstitutional. Jefferson County, Ala., 527
U.S. at 427-28 (involving a county=s attempt to collect taxes
from a group of taxpayers); Appling County v. Mun. Elec. Auth. of
Ga., 621 F.2d 1301, 1303 (5th Cir. 1980) (involving a county
suing a group of taxpayers to collect taxes); Louisiana Land and
Exploration Co. v. Pilot Petroleum Corp., 900 F.2d 816, 818 (5th
Cir. 1990) (involving someone Aacting merely as an agent of the
state for the collection and payment of the tax to the state@
suing to collect a tax). Further, it is not necessarily true
that declaring the exemptions to be unconstitutional will result
in the State collecting more taxes and therefore this suit is not
10 a de facto suit to collect taxes. In fact even as the ACLU
argues, just the opposite could occur, the State may resolve any
putative constitutional problems created by the challenged
statutes by exempting more entities and therefore collecting less
taxes.
Second, although the ACLU claims that this dispute
involves tax exemptions and not the Aassessment, levy or
collection of any tax,@ a dictionary definition of Aassessment@
indicates exemptions are also within the Act=s jurisdictional
bar. As ordinarily defined, assessment means Athe entire plan or
scheme fixed upon for charging or taxing.@ Webster=s Third New
International Dictionary 131 (1981). The challenged exemptions
in this case are part of Athe entire plan or scheme fixed upon
for charging or taxing@ in the State of Louisiana. Even a more
precise definition of assessment, such as Adetermining the share
of a tax to be paid by each of many persons@ or Athe process of
ascertaining and adjusting the shares respectively to be
contributed by several persons@ would include within it
exemptions that are granted, like the challenged exemptions, to
organizations so that these organizations do not have to pay the
taxes they would have had to pay but for the exemptions. Black=s
Law Dictionary 116-17 (6th Ed. 1990). In fact, as the State
points out in its brief, part of the Aassessment@ process is
11 determining whether an individual or organization qualifies for
an exemption. Based on our review of the definition of
assessment, we conclude that this present challenge to exemptions
is within the Act=s jurisdictional bar.
We realize that our conclusion concerning exemptions as an
area encompassed in the assessment process and therefore within
the Tax Injunction Act=s jurisdictional bar is both consistent
and inconsistent with what other circuit courts have held
concerning challenges to state tax schemes. Our holding is
consistent with In re Gillis, a decision of the Sixth Circuit
holding that the principles underlining the Tax Injunction Act
prevented the federal district court from addressing an action
brought by taxpayers claiming that Kentucky was assessing
property taxes at a rate lower than the state should have, even
though the result sought by the plaintiffs would have forced
Kentucky to collect more in taxes. 836 F.2d 1001, 1005-06 (6th
Cir. 1988). Our holding is inconsistent with Winn v. Killian, a
decision of the Ninth Circuit holding that the Tax Injunction Act
did not prevent the federal district court from hearing a case
challenging the constitutionality of tax credits granted to
private schools in Arizona. 307 F.3d 1011, 1020 (9th Cir. 2002).
In Winn, the Ninth Circuit cited several cases as supporting
its holding that can be distinguished from the present case. Two
12 circuit court cases were cited by the Ninth Circuit. The often
cited Fifth Circuit case of Hargrave v. McKinney, which delved
into the legislative history of the Tax Injunction Act, was cited
to in Winn. 413 F.2d 320, 325-26 (5th Cir. 1969). Hargrave,
however, is inapposite to the present case because, as the
Hargrave Court noted in its Aexceedingly narrow@ holding, it was
only reversing a district court decision refusing to request that
a three-judge court be convened to address a suit seeking to
compel the full collection and disbursement of county taxes. Id.
at 326. The statutory law applicable in Hargrave is not present
in this case. Likewise, the Seventh Circuit case of Dunn v.
Carey was cited in Winn but is inapplicable to the present case
because Dunn only supports the proposition that taxpayers can use
the federal courts to assert a claim for the collection of taxes
imposed by a federal consent decree and the Tax Injunction Act
does not prevent jurisdiction over such a suit. 808 F.2d 555,
558-59 (7th Cir. 1986). There is not a federal consent decree at
issue in the present case.2 2 Two district court cases were also cited by the Winn court as supportive of their decision but are equally unpersuasive to us. Winn cited Moton v. Lambert, in which a district court found that the Tax Injunction Act did not bar the court from hearing a civil rights action brought by parents of black children challenging the constitutionality of certain tax exemptions that applied to only racially segregated schools. 508 F. Supp. 367, 368 (N.D. Miss. 1981). In the Moton decision, however, there is very little discussion of the Tax Injunction Act and the case was not appealed. Id. Winn also cited Rojas v. Fitch, a case in which a district court allowed jurisdiction in a suit challenging 13 Third, this Circuit has always interpreted the Act broadly.
We have stated: AThe concept that section 1341 is not a narrow
statute aimed only at injunctive interference with tax
collection, but is rather a broad restriction on federal
jurisdiction in suits that impede state tax administration, has
continued to gain credence in the federal courts.@ United Gas
Pipe Line Co., 595 F.2d at 326. Moreover, this Circuit has held
that federal district courts were prohibited from deciding
disputes involving tax related concepts or functions similar to
exemptions due to the jurisdictional limitations imposed by the
Tax Injunction Act. Dawson v. Childs, 665 F.2d 705, 710 (5th
Cir. 1982) (involving the dissolution of tax liens); United Gas
Pipe Line Co., 595 F.2d at 323 (involving the application of tax
refunds); Daytona Beach Racing and Recreational Facilities Dist.
v. Volusia County, 579 F.2d 367, 368 (5th Cir. 1978),(involving
the repealing of tax exemptions).
In Dawson, this Court held that A[i]n dissolving a lien on
property, a federal court interferes with the state's fiscal
the constitutionality of exempting religious organizations from unemployment tax. 928 F. Supp. 155, 159-60 (D. R.I. 1996), affirmed on other grounds, 127 F.3d 184 (1st Cir. 1997). The Rojas court ultimately upheld the exemption as constitutional. Id. at 167. However, the First Circuit has since indicated, in Hardemon v. City of Boston, that the merits should not have been reached without further inquiry into the jurisdictional question. 144 F.3d 24, 25-26 (1st Cir. 1998).
14 program just as surely as if it enjoined collection or assessment
of the tax itself@ and therefore jurisdiction was inappropriate.
665 F.2d at 710. In United Gas, this Circuit held that a suit
concerning a tax refund was within the scope of the Act and
therefore could not be heard in federal district court. 595 F.2d
at 326. In Daytona Beach, this Circuit held that the Tax
Injunction Act prevented the federal court from exercising
jurisdiction over a case where a taxpayer was challenging the
actions of a state legislature in repealing a previously granted
tax exemption. 579 F.2d at 369. Although our analysis focused
on whether a state remedy was available, we assumed the Tax
Injunction Act was a jurisdictional bar to hearing a challenge to
the repealing of state tax exemptions. Id. Therefore, the
precedent of this Circuit, which is in accordance with the
purpose of the Act, dictates that the Tax Injunction Act
prohibits the district court from hearing this case.
However, this does not mean the ACLU is left with no other
recourse. For example, after a review of the history of the Act
we noted in Bland v. McHann that, AWe are convinced that both
long standing policy and congressional restriction of federal
jurisdiction in cases involving state tax administration make it
the duty of federal courts to withhold relief when a state
legislature has provided an adequate scheme whereby a taxpayer
15 may maintain a suit to challenge a state tax. The taxpayer may
assert his federal rights in the state courts and secure a review
by the Supreme Court.@ 463 F.2d 21, 24 (5th Cir. 1972). That is
precisely what the Tax Injunction Act requires the ACLU to do,
i.e., first challenge the Louisiana statutes in Louisiana and if
need be secure review by the Supreme Court.
CONCLUSION
Having carefully reviewed the record of this case, the parties=
respective briefing and arguments, and for the reasons set forth
above, we reverse the decision of the district court and remand
the case with instructions for the district court to dismiss for
lack of jurisdiction under the Tax Injunction Act.
REVERSED AND REMANDED