Estate of Mansy Y. Michael, by David Michael v. M.J. Lullo, District Director of Internal Revenue Service

173 F.3d 503, 83 A.F.T.R.2d (RIA) 1759, 1999 U.S. App. LEXIS 5956, 1999 WL 181571
CourtCourt of Appeals for the Fourth Circuit
DecidedApril 2, 1999
Docket98-1196
StatusPublished
Cited by40 cases

This text of 173 F.3d 503 (Estate of Mansy Y. Michael, by David Michael v. M.J. Lullo, District Director of Internal Revenue Service) is published on Counsel Stack Legal Research, covering Court of Appeals for the Fourth Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Estate of Mansy Y. Michael, by David Michael v. M.J. Lullo, District Director of Internal Revenue Service, 173 F.3d 503, 83 A.F.T.R.2d (RIA) 1759, 1999 U.S. App. LEXIS 5956, 1999 WL 181571 (4th Cir. 1999).

Opinions

Reversed and remanded by published opinion. Judge KING wrote the majority opinion, in which Judge HAMILTON joined. Judge LUTTIG wrote a dissenting opinion.

OPINION

KING, Circuit Judge:

We are presented with the question of whether the district court had jurisdiction to entertain a taxpayer’s mandamus action against the District Director of the Internal Revenue Service (IRS) and, if it did, whether it should have granted the writ compelling the District Director to allow a federal death tax credit that the IRS had previously agreed was accurate and allowable. On the narrow facts before us in this appeal, we conclude that the district court had jurisdiction and that the writ should be granted. Accordingly, we reverse the district court’s dismissal for lack of jurisdiction, and remand for further proceedings.

I.

Mansy Y. Michael died on May 30, 1988, and his estate (the Estate) filed a federal estate tax return on August 30, 1989, reporting taxes in the amount of $175,487.1 The IRS audited the return and assessed the estate an additional amount. The Estate originally objected to the additional assessment, but after negotiating extensively with the IRS, it consented to increase its estate taxes by $85,775.99.

On July 31, 1992, the IRS sent the Estate an Estate Tax Closing Letter (the Closing Letter) which confirmed, pursuant to the parties’ negotiations, that the total estate tax had been assessed at $261,-262.99. On its face, the letter purported not to be a “formal closing agreement un[505]*505der section 7121 of the Internal Revenue Code,” but represented that the IRS would not “reopen this case, however, unless Revenue Procedure 85-13, reproduced on the back of this letter, applies.”

A substantial portion of the Estate was located in the United Kingdom and was administered there. Following the receipt of the closing letter, the Estate submitted to the IRS a timely “proof of credit” verifying that the Estate had paid taxes in the United Kingdom in the amount of $228,-939.50 with respect to property situated there. The IRS credited this amount as a foreign death tax credit against the estate tax that had been assessed.2 The IRS then sent the Estate an Estate Tax Computation Form indicating a balance due of $67,976. The Estate paid the balance on September 17, 1993, thus fully satisfying the estate tax burden as negotiated by the parties and assessed by the IRS.

On June 21, 1994 — over nine months later — the IRS reopened the case. The District Director’s office sent a letter to the Estate notifying it of a newly discovered error in the estate tax return. Namely, the IRS claimed that it had miscalculated the amount of the gross estate by simply failing to include the assets listed on Schedules B, D, and F of the return. As the IRS asserted, “This error resulted in the estate’s not being assessed the tax on these assets in [the] first audit.” As a result, the IRS concluded that its initial assessment had been $139,134 too low.

The District Director was aware that it could not assess additional taxes against the estate because, as he acknowledged and explained in his June 21, 1994 letter, “the normal statute of limitations has expired.” The District Director then took the extraordinary action that spawned this lawsuit, which the IRS now explains in its. brief with surprising candor:

The IRS ... could not assess this additional amount against the taxpayer because the statute - of limitations for assessing additional estate tax already had expired. Instead, the IRS reduced the amount of the claimed foreign death tax credit by the amount of the addition.al tax it determined to be due. The reduction of the claimed foreign death tax credit caused taxpayer to have an unpaid balance in its assessed tax liability-

The Estate responded with an administrative appeal, asking the District Director to reinstate the full amount initially allowed as a foreign death tax credit. When the administrative appeal was denied, the Estate filed this mandamus action in the district court, again seeking to compel the District Director to acknowledge the full amount of the foreign death tax credit. The IRS moved to dismiss, arguing that the district court was deprived of jurisdiction by the Anti-Injunction Act, I.R.C. § 7421, and that the Estate’s mandamus petition should be denied on the merits. The district court granted the IRS’s motion, finding that the plaintiff was not entitled to mandamus relief.3

[506]*506II.

Initially, we must determine whether the district court properly dismissed this action for lack of jurisdiction. We review that decision de novo. Flood v. New Hanover County, 125 F.3d 249, 251 (4th Cir.1997).

A.

Two competing statutes mark the jurisdictional boundary at issue here. The positive grant of jurisdiction is found in the Mandamus and Venue Act (the Mandamus Act): “The district court shall have original jurisdiction of any action in the nature of mandamus to compel an officer or employee of the United States or any agency thereof to perform a duty owed to the plaintiff.” 28 U.S.C. § 1361. Though the Mandamus Act grants district courts jurisdiction over any suit seeking mandamus, it does not override the Anti-Injunction Act, I.R.C. § 7421. The Anti-Injunction Act withdraws all courts’ jurisdiction over suits filed “for the purposes of restraining the assessment or collection of any tax.”

To prevail, therefore, the Estate must show either that its claim does not implicate the Anti-Injunction Act or that it fits within the narrow exception to that act. For purposes of this opinion, and although we harbor serious doubts on this point, we will nevertheless assume that the Estate’s mandamus action—which seeks to require the IRS to allow the full amount of its foreign death tax credit—would have the effect of “restraining the assessment or collection” of its taxes.

B.

Thus the district court lacked jurisdiction unless this action fits within the narrow but well-established exception to the Anti-Injunction Act. Because we hold that this case does come within the exception, the Anti-Injunction Act did not destroy the jurisdiction conferred on the district court by the Mandamus Act.

As explained above, the plain text of the Anti-Injunction Act deprives all courts of jurisdiction over any suit “for the purpose of restraining the assessment or collection of any tax.” I.R.C. § 7421(a). But the Supreme Court has recognized an exception to this otherwise absolute language: “Only upon proof of the presence of two factors could the literal terms of § 7421(a) be avoided: first, irreparable injury, the essential prerequisite for injunctive relief in any case; and second, certainty of success on the merits.” Bob Jones Univ. v. Simon, 416 U.S. 725, 737, 94 S.Ct. 2038, 40 L.Ed.2d 496 (1974) (citing Enochs v. Williams Packing & Nav. Co., 370 U.S. 1, 6-7, 82 S.Ct. 1125, 8 L.Ed.2d 292 (1962)).4 The Estate’s action is precisely the rare type of suit for which this exception was crafted.

1.

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173 F.3d 503, 83 A.F.T.R.2d (RIA) 1759, 1999 U.S. App. LEXIS 5956, 1999 WL 181571, Counsel Stack Legal Research, https://law.counselstack.com/opinion/estate-of-mansy-y-michael-by-david-michael-v-mj-lullo-district-ca4-1999.