West v. Secretary US Treasury 05-CV-389-SM 07/11/06 UNITED STATES DISTRICT COURT
DISTRICT OF NEW HAMPSHIRE
David West, Plaintiff
v. Civil N o .05-CV-389-SM Opinion No. 2006 DNH 080 Secretary of the U.S. Treasury. Defendant
O R D E R
David West has sued the Secretary of the Treasury, under the
Administrative Procedure Act ("APA") and the Revenue
Restructuring Act of 1998. He seeks various forms of injunctive
relief for alleged abuses of discretion committed by the Internal
Revenue Service ("IRS") in rejecting his offer in compromise
relating to an income tax deficiency. Before the court is the
government's motion to dismiss. West objects. For the reasons
given, the motion to dismiss is granted.
In 1999, West suffered losses in the stock market. Under
the tax code, he was unable to "match" those losses against
corresponding gains during the same time period, leaving him with
an income tax liability for that year in excess of $90,000. In
2003, the IRS made an assessment against West and later began the
process of levying against his bank account. Subsequently, West made an offer in compromise to the Secretary of the Treasury,
pursuant to 26 U.S.C. § 7122. His offer was based upon the
following regulation:
If there are no grounds for compromise under paragraphs (b)(1) [doubt as to liability], (2) [doubt as to collectibility], or (3)(I) of this section [economic hardship], the IRS may compromise to promote effective tax administration where compelling public policy or equity considerations identified by the taxpayer provide a sufficient basis for compromising the liability. Compromise will be justified only where, due to exceptional circumstances, collection of the full liability would undermine public confidence that the tax laws are being administered in a fair and equitable manner. A taxpayer proposing compromise under this paragraph (b)(3)(ii) will be expected to demonstrate circumstances that justify compromise even though a similarly situated taxpayer may have paid his liability in full.
26 C.F.R. § 301.7122-1(b)(3)(ii ) (emphasis added). West argued
that his tax liability was inequitable because it resulted from
an "arbitrary administrative technicality" that worked
"essentially the same [way] as a tax loophole, except that the
unfair benefit operate[d] in reverse" and "not in the best
interests of anybody." In other words. West conceded liability
under the tax code, but argued that he was entitled to
consideration because of the "inequity" of tax code provisions
that operated to his disadvantage. West's offer in compromise
2 was rejected in the first instance, and on appeal. He requested
an administrative hearing but was not granted one.
After West's appeal was rejected, the IRS filed a Notice of
Federal Tax Lien. West then requested a Collection Due Process
("CDP") hearing, which has yet to be held.
West also filed this action, asserting jurisdiction under
both the Administrative Procedure Act1 and the Revenue
Restructuring Act of 1988. He asks the court to order the IRS
to: (1) accept his offer in compromise; (2) waive payment of the
amount he offered, $8974, in consideration of the expenses he
incurred in fighting the IRS's denial of his right to due
process; (3) remove the lien on his home; (4) provide a letter,
addressed "to whom it may concern," stating that the lien against
his home and the levy against him was the result of an
administrative mistake; and (5) suspend any and all collection
activities until this action is settled.
1 The APA is not a proper basis for jurisdiction in this case. See Am. Ass'n of Commodity Traders v. Dep't of Treasury. 598 F.2d 1233, 1235 (1st Cir. 1979) (citing Califano v. Sanders. 430 U.S. 99, 107 (1977)).
3 The United States moves to dismiss on grounds that West's
suit is barred by 26 U.S.C. § 7421, the Anti-Injunction Act.
That statute provides:
Except as provided in sections 6015(e), 6212(a) and (c), 6213(a), 6225(b), 6246(b), 6330(e)(1), 6331(1), 6672(c), 6694(c), 7426(a) and (b)(1), 7429(b), and 7436 [none of which is applicable here], no suit for the purpose of restraining the assessment or collection of any tax shall be maintained in any court by any person, whether or not such person is the person against whom such tax was assessed.
26 U.S.C. § 7421(a). Moreover, "[t]he prohibition against
restraint on the assessment and collection of taxes 'is
applicable not only to the assessment or collection itself, but
. . . to activities which are intended to or may culminate in the
assessment or collection of taxes.'" Colangelo v. United States.
575 F.2d 994, 996 (1st Cir. 1978) (quoting United States v. Dema,
544 F .2d 1373, 1376 (7th Cir. 1976)) (holding that "[t]he
prohibition of § 7421(a) is broad enough to proscribe judicial
interference with federal tax liens absent exceptional
circumstances"). In addition, "[t]he Anti-Injunction Act is in
the nature of a jurisdictional bar." Ross v. United States. 861
F. Supp. 406, 407 (E.D.N.C. 1994) (citing Enochs v. Williams
Packing & Navigation Co.. 370 U.S. 1 (1962); Bennett v. United
States Director of Internal Revenue. 469 F.2d 584 (4th Cir.
4 1972); Johnson v. Wall, 329 F.2d 149 (4th Cir. 1964)); see also
McCarthy v. Marshall. 723 F.2d 1034, 1037 (1st Cir. 1983) ("The
jurisdictional boundaries in tax cases are drawn by the Anti-
Injunction Act . . ."). However,
[a] judicially-created exception to this clear statutory bar to injunctive relief in tax cases was announced in Enochs v. Williams Packing & Navigation C o ., 370 U.S. 1 (1962). Under that exception, "if it is clear that under no circumstances could the Government ultimately prevail, . . . and . . . if equity jurisdiction otherwise exists," i d . at 7, then the bar of section 7421(a) is inapplicable.
Lane v. United States. 727 F.2d 18, 20 (1st Cir. 1984) (emphasis
added, parallel citations omitted).
Here, all the relief West seeks falls within the scope of
the Anti-Injunction Act. See Colangelo. 575 F.2d at 996
(citation omitted). Thus, the only question is whether the facts
of this case, as alleged by West, bring his claims within the
exception described in Enochs. They do not.
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West v. Secretary US Treasury 05-CV-389-SM 07/11/06 UNITED STATES DISTRICT COURT
DISTRICT OF NEW HAMPSHIRE
David West, Plaintiff
v. Civil N o .05-CV-389-SM Opinion No. 2006 DNH 080 Secretary of the U.S. Treasury. Defendant
O R D E R
David West has sued the Secretary of the Treasury, under the
Administrative Procedure Act ("APA") and the Revenue
Restructuring Act of 1998. He seeks various forms of injunctive
relief for alleged abuses of discretion committed by the Internal
Revenue Service ("IRS") in rejecting his offer in compromise
relating to an income tax deficiency. Before the court is the
government's motion to dismiss. West objects. For the reasons
given, the motion to dismiss is granted.
In 1999, West suffered losses in the stock market. Under
the tax code, he was unable to "match" those losses against
corresponding gains during the same time period, leaving him with
an income tax liability for that year in excess of $90,000. In
2003, the IRS made an assessment against West and later began the
process of levying against his bank account. Subsequently, West made an offer in compromise to the Secretary of the Treasury,
pursuant to 26 U.S.C. § 7122. His offer was based upon the
following regulation:
If there are no grounds for compromise under paragraphs (b)(1) [doubt as to liability], (2) [doubt as to collectibility], or (3)(I) of this section [economic hardship], the IRS may compromise to promote effective tax administration where compelling public policy or equity considerations identified by the taxpayer provide a sufficient basis for compromising the liability. Compromise will be justified only where, due to exceptional circumstances, collection of the full liability would undermine public confidence that the tax laws are being administered in a fair and equitable manner. A taxpayer proposing compromise under this paragraph (b)(3)(ii) will be expected to demonstrate circumstances that justify compromise even though a similarly situated taxpayer may have paid his liability in full.
26 C.F.R. § 301.7122-1(b)(3)(ii ) (emphasis added). West argued
that his tax liability was inequitable because it resulted from
an "arbitrary administrative technicality" that worked
"essentially the same [way] as a tax loophole, except that the
unfair benefit operate[d] in reverse" and "not in the best
interests of anybody." In other words. West conceded liability
under the tax code, but argued that he was entitled to
consideration because of the "inequity" of tax code provisions
that operated to his disadvantage. West's offer in compromise
2 was rejected in the first instance, and on appeal. He requested
an administrative hearing but was not granted one.
After West's appeal was rejected, the IRS filed a Notice of
Federal Tax Lien. West then requested a Collection Due Process
("CDP") hearing, which has yet to be held.
West also filed this action, asserting jurisdiction under
both the Administrative Procedure Act1 and the Revenue
Restructuring Act of 1988. He asks the court to order the IRS
to: (1) accept his offer in compromise; (2) waive payment of the
amount he offered, $8974, in consideration of the expenses he
incurred in fighting the IRS's denial of his right to due
process; (3) remove the lien on his home; (4) provide a letter,
addressed "to whom it may concern," stating that the lien against
his home and the levy against him was the result of an
administrative mistake; and (5) suspend any and all collection
activities until this action is settled.
1 The APA is not a proper basis for jurisdiction in this case. See Am. Ass'n of Commodity Traders v. Dep't of Treasury. 598 F.2d 1233, 1235 (1st Cir. 1979) (citing Califano v. Sanders. 430 U.S. 99, 107 (1977)).
3 The United States moves to dismiss on grounds that West's
suit is barred by 26 U.S.C. § 7421, the Anti-Injunction Act.
That statute provides:
Except as provided in sections 6015(e), 6212(a) and (c), 6213(a), 6225(b), 6246(b), 6330(e)(1), 6331(1), 6672(c), 6694(c), 7426(a) and (b)(1), 7429(b), and 7436 [none of which is applicable here], no suit for the purpose of restraining the assessment or collection of any tax shall be maintained in any court by any person, whether or not such person is the person against whom such tax was assessed.
26 U.S.C. § 7421(a). Moreover, "[t]he prohibition against
restraint on the assessment and collection of taxes 'is
applicable not only to the assessment or collection itself, but
. . . to activities which are intended to or may culminate in the
assessment or collection of taxes.'" Colangelo v. United States.
575 F.2d 994, 996 (1st Cir. 1978) (quoting United States v. Dema,
544 F .2d 1373, 1376 (7th Cir. 1976)) (holding that "[t]he
prohibition of § 7421(a) is broad enough to proscribe judicial
interference with federal tax liens absent exceptional
circumstances"). In addition, "[t]he Anti-Injunction Act is in
the nature of a jurisdictional bar." Ross v. United States. 861
F. Supp. 406, 407 (E.D.N.C. 1994) (citing Enochs v. Williams
Packing & Navigation Co.. 370 U.S. 1 (1962); Bennett v. United
States Director of Internal Revenue. 469 F.2d 584 (4th Cir.
4 1972); Johnson v. Wall, 329 F.2d 149 (4th Cir. 1964)); see also
McCarthy v. Marshall. 723 F.2d 1034, 1037 (1st Cir. 1983) ("The
jurisdictional boundaries in tax cases are drawn by the Anti-
Injunction Act . . ."). However,
[a] judicially-created exception to this clear statutory bar to injunctive relief in tax cases was announced in Enochs v. Williams Packing & Navigation C o ., 370 U.S. 1 (1962). Under that exception, "if it is clear that under no circumstances could the Government ultimately prevail, . . . and . . . if equity jurisdiction otherwise exists," i d . at 7, then the bar of section 7421(a) is inapplicable.
Lane v. United States. 727 F.2d 18, 20 (1st Cir. 1984) (emphasis
added, parallel citations omitted).
Here, all the relief West seeks falls within the scope of
the Anti-Injunction Act. See Colangelo. 575 F.2d at 996
(citation omitted). Thus, the only question is whether the facts
of this case, as alleged by West, bring his claims within the
exception described in Enochs. They do not.
West does not meet the first prong of the Enochs test; it is
hardly clear that there are no circumstances under which the
government could prevail in West's action against it. Rather,
the opposite conclusion would appear to be correct; it is
5 difficult to conceive of any circumstances under which West could
prevail against the government.
The statute governing offers in compromise provides that
"[t]he Secretary may compromise any civil or criminal case
arising under the internal revenue laws . . 26 U.S.C.
§ 7122(a) (emphasis added). The Code of Federal Regulations
further explains: "If the Secretary determines that there are
grounds for compromise under this section, the Secretary may, at
the Secretary's discretion, compromise any civil or criminal
liability arising under the internal revenue laws . . . " 26
C.F.R. § 301.7122-1(a)(1) (emphasis added). Given the permissive
language of the statute, "[t]he decision to accept or reject a
compromise offer is discretionary and cannot be compelled by any
action." Addington v. United States. 75 F. Supp. 2d 520, 524
(S.D. W. Va. 1999) (citing Carroll v. IRS. 14 AFTR2d 5564
(E.D.N.Y. 1964)). As the court of appeals for this circuit has
explained, "the handling and processing of an offer in compromise
not submitted in conjunction with a CDP [collection due process]
hearing is not subject to judicial review at all." Olsen v.
United States. 414 F.3d 144, 156 (1st Cir. 2005). Because West's
offer in compromise was not submitted in conjunction with a CDP
hearing, it is not subject to judicial review, and because West
6 is not entitled to judicial review, he does not qualify for the
Enochs exception to the Anti-Injunction Act. Because West cannot
meet the first part of the Enochs test, there is no need to
consider the second part. Several matters raised in plaintiff's
complaint warrant some comment. West relies heavily on the
concepts of "abuse of discretion" and "due process," but under
the circumstances and applicable law, his reliance on those
concepts is misplaced. At least one court has held that
" [a]negations of irreparable injury and abuse of discretion are
simply not enough to negate the anti-injunction provisions of 26
U.S.C. § 7421(a)." P.K. Family Rest, v. IRS. 535 F. Supp. 1223,
1224 (N.D. Ohio 1982). Moreover, because 26 U.S.C. § 7122 "only
provides that the Secretary [of the Treasury] may consider an
offer [in compromise]" but "does not afford taxpayers the right
to have their offers considered," it is not at all clear - and in
fact it is highly unlikely - that the Secretary is constrained by
the principles of due process in considering offers in
compromise. See Christopher Cross. Inc. v. United States. 363 F.
Supp. 2d 855, 858 (E.D. La. 2004). Thus, West appears to be
mistaken in his belief that he was entitled to a hearing on his
offer in compromise, a form of process that is contemplated in
neither the relevant statute nor its implementing regulations.
Because there is no constitutional, statutory, or regulatory
7 requirement that the IRS grant hearings to taxpayers extending
offers in compromise, the IRS did not act unlawfully in denying
West the hearing he requested.
For the reasons given. West's action is barred by the Anti-
Injunction Act. Accordingly, his complaint is dismissed for lack
of subject matter jurisdiction.
SO ORDERED.
Steven J./McAuliffe Chief Judge
July 11, 2006
cc: David West, pro se Thomas P. Cole, Esq.