Supreme Court Review Sought in Telephone Excise Tax Case

Whether, having invalidated the only mechanism the IRS had developed for pursuing refunds of the unlawfully exacted excise taxes, the District Court was nevertheless precluded by this Court's decision in Norton v. SUWA, 542 U.S. 55 (2004), from directing the IRS to provide by properly adopted regulation for a workable refund protocol applicable to those taxes?

                           TABLE OF CONTENTS

The IRC has for decades imposed an excise tax on charges for long-distance calls, defined as calls for which charges were assessed on the basis of the distance covered by the call and the time consumed by the call. The evolution of mobile phone technology in the 1990's made this provision obsolete, as long-distance carriers rapidly moved to charges based on time alone, without regard to distance.

Despite its recognition of this shift, "the IRS continued to collect taxes on all long-distance communications." Cohen I, 650 F.3d at 720. For the period from February 28, 2003 through August 1, 2006 alone,¹ illegal collections from American phone-users amounted to an estimated $13 billion. The IRS defended this expropriation by contending that statutory authorization to tax calls charged for by distance and time allowed taxation of calls charged for by distance or time.

After five Circuit Courts of Appeals had rejected this contention,² and under the pressure of putative class actions filed by petitioners (taxpayers who have paid unlawfully exacted taxes), the IRS abandoned its position. It simultaneously undertook to provide for partial refunds through an improvised administrative "notice" that the courts below found did not comply with the Administrative Procedure Act.

Legal Challenges to the IRS Position

Except for a single district judge and a dissent in the Sixth Circuit, every trial and appellate judge to whom the IRS presented its "and"-means-"or" argument rejected it. In American Bankers Insurance Group v. United States, 408 F.3d 1328 (11th Cir. 2005), rev'g 308 F. Supp. 2d 1360 (S.D. Fla. 2004), the Eleventh Circuit became the first of five Courts of Appeals to repudiate the argument. The IRS reacted to American Bankers by directing long-distance phone carriers -- specifically including those within the Eleventh Circuit -- to continue billing users for the tax. See Notice 2005-79, 2005-46 I.R.B. 952

In late 2005 and early 2006, petitioners filed separate putative class actions challenging the IRS's continued collection of the tax, particularly from users who, unlike the large corporate parties involved in cases such as American Bankers, suffered individual exactions amounting to a few hundred dollars or less.³ In May, 2006, the IRS issued Notice 2006-50, formally abandoning its position and revoking Notice 2005-79. See Notice 2006-50, 2006-25 I.R.B. 1141. That Notice directed long-distance carriers to stop collecting the challenged excise tax. It also set up an ad hoc refund scheme premised on a defined refund period starting on February 28, 2003 and running through the date collections were supposed to stop. The Notice contemplated a one-time refund request using annual income tax returns, or a special return for users who would not normally file an income tax return.

Notice 2006-50 was a formal rule promulgated without notice or opportunity for comment under the Administrative Procedure Act and thus, as the courts below found, in violation of that statute. As a result, neither petitioners nor taxpayers in general had any chance for input during the rule-making process. They were thus unable to address such topics as the correct length of the refund period, the appropriate level of "safe-harbor" amounts for refund claims, reasonable documentation requirements, a constructive role for carriers in the refund process, and the use of refund mechanisms reasonably calculated to reach the large number of victims who would not have genuine access to refunds under Notice 2006-50's ad hoc procedures. Petitioners promptly amended their complaints to add APA challenges to the notice.

Refunds Under Notice 2006-50 and Supplemental Notices

The IRS has acknowledged that it expected to refund $10 billion in illegally collected taxes to individuals and $5 billion to entities. As of April 26, 2012, not quite six years after promulgation of Notice 2006-50, only $4.5 billion had been requested by individuals, and only $1.5 billion dollars by businesses. No more than 4% of the money the IRS expected to return to non-filers -- primarily low-income phone users -- has actually been refunded. Only 1.7% of the small businesses entitled to refunds requested one.

Litigation Over the IRS's Notice Approach

On March 25, 2008, the district court dismissed the consolidated challenges to Notice 2006-50 on the grounds that (1) petitioners had not exhausted the administrative remedy established by the Notice procedure, and (2) the Notice itself was an internal IRS guideline not subject to APA requirements or to challenge under that statute. In re Long-Distance Tel. Serv. Fed. Excise Tax Refund Litig., 539 F. Supp. 2d 281 (D.D.C. 2008). A divided D.C. Circuit panel reversed this conclusion, determining that the Notice refund procedure was in fact agency action subject to APA review. Cohen I, 578 F.2d 1, 3-4. The panel majority characterized the IRS's approach in the following terms:

The IRS successfully petitioned for en banc rehearing. See Cohen v. United States, 599 F.3d 652 (D.C. Cir. 2010). The en banc court, however, affirmed the panel decision and remanded the case to the District Court to consider the merits of petitioners' APA claims. Cohen II, 650 F.3d 717. The en banc majority echoed the panel majority:

On remand, the District Court held that the IRS had violated the APA's rulemaking requirements when it issued Notice 2006-50, finding that the "failure to comply with the APA's notice-and-comment requirements is unquestionably a 'serious' deficiency." In re Long-Distance Tel. Serv. Fed. Excise Tax Refund Litig., 853 F. Supp. 2d 138, 144 (D.D.C. 2012) (quoting AFL-CIO v. Chao, 496 F. Supp. 2d 76, 91 (D.D.C. 2007)). The IRS urged the District Court, however, to send the matter back to the agency without specific direction or requirement that it remedy any of the substantive APA challenges to the offending notice because "concerns underlying plaintiffs' substantive APA claims may be addressed by the IRS upon remand." United States' Motion for Determination of Mandate's Scope, at page 9, No. 1:07-mc-00014-RCL (D.D.C), D.E. # 74. The District Court accepted the IRS's representation and agreed with this approach.

The IRS in fact did not have the slightest intention of addressing petitioners' substantive claims; nor of engaging in APA-compliant rule-making that would correct the procedural deficiencies infecting Notice 2006-50; nor of making any further effort whatever to refund payments to the phone-users from whom it had unlawfully taken money under a tissue-thin pretext that evoked withering scorn from almost every judge who looked at it. The IRS has taken no action since the District Court's decision more than two years ago, and in oral argument in Cohen II sheepishly admitted to the D.C. Circuit that it does not intend to take any action. Transcript of Oral Argument at 22-24, In re Long-Distance Tel. Serv. Fed. Excise Tax Refund Litigation, No. 12-5380, 751 F.3d 629 (D.C. Cir. Feb. 21, 2014)

The District Court based its naked remand order on its understanding of this Court's decision in Norton v. SUWA, 542 U.S. 55 (2004). In Norton, this Court rejected a demand that the Bureau of Land management be ordered to adopt a regulatory regime to control use of off-road vehicles in certain wilderness study areas. In doing so, this Court held that an APA remedy for agency failure to act will lie only for "a discrete action" that is "legally required." Norton, 542 U.S. at 63 (emphasis in original). The District Court found that the "legally required" criterion was not satisfied here, noting that "no statute or regulation . . . requires the IRS to execute" the detailed refund program that petitioners have called for.⁴ The appellate court agreed that petitioners' contention foundered on the "legally required" prong of that test, because (once again) no statute or regulation called for the specific remedial measures petitioners sought.

Under the appellate court's misunderstanding of Norton's "legally required" element, the more lawlessly and cynically an agency behaves, the less subject to effective judicial review its actions become. The courts can correct an agency that has overlooked a particular statutory requirement; where the IRS has nakedly flouted an express and unambiguous limitation in the IRC, however, and then in violation of the APA has set up a jury-rigged remedy confronting the victims of its wrongdoing with "a virtual house of mirrors" if they want a refund, the very scale and complexity of the mess it has made put it beyond the reach of any court's correction.

That seriously misreads Norton. The plaintiffs in Norton sought to compel BLM compliance with a statutory mandate that the agency manage wilderness study areas in such a way as not to impair the suitability of such areas for use as wilderness -- entailing, in the plaintiffs' view, exclusion of off-road vehicles from such areas. See Norton, 542 U.S. at 60. This Court rejected plaintiffs' demand for a court order directing compliance with that mandate because the mandate's breadth meant that compliance was not "a discrete agency action, as we have discussed above." Id. at 66 (emphasis in original). Enjoining compliance with such a generalized prescription, this Court said, would inevitably entangle the courts in "abstract policy disagreements which courts lack both expertise and information to resolve." Id.

This Court sharply contrasted such broad, programmatic, policy-oriented mandates with "a specific statutory command requiring an agency to promulgate regulations by a certain date. . . ." Id. at 71. Agency noncompliance with a mandate of the latter kind, this Court said, would "support[ ] a judicial decree under the APA requiring the prompt issuance of regulations," albeit "not a judicial decree setting forth the content of those regulations." Id.

As discussed below, a specific statutory command requiring the IRS to promulgate regulations is precisely what is at issue here. In this case, the statute does not set a date-specific time-limit, but a de facto time limit is necessarily implied: the IRS cannot coherently insist that telephone excise tax refund requests are time-barred -- as it did in Notice 2006-50 and as it has repeatedly done in this litigation -- until it has in place a statutorily compliant and practicably workable mechanism for seeking such refunds. This is illustrated by one of the cases Norton cited as an example of statutory requirements on agencies that are judicially enforceable, Safeway Stores, Inc. v. Brown, 138 F.2d 278, 280 (Emer. Ct. App. 1943) (". . . the statute is silent as to a further time limit upon final action. . . . But we think that by clear implication the act requires such action within a reasonable time."). In other words, the IRS missed the relevant "deadline" when it collected the first dollar in unauthorized taxes without having any refund mechanism in place to recover that unlawful exaction. Norton thus shows rather clearly that the absence of a statutory requirement for a specific remedy sought in a case does not bar a court from directing compliance with a statutory mandate that does exist if that mandate is for a discrete agency action rather than a broad-ranging foray into policy-making. As (once again) discussed below, that is the case here.

In constraining its analysis as it did, in short, the appellate court asked the wrong question. Norton's "legally required" elements asks whether some discrete and pertinent agency action is required by law. This is a simple and straightforward inquiry. The answer is either yes or no. If the answer is yes, then -- and only then -- does the analysis proceed to the substantive merits of the particular challenges raised in a given case, and the availability and advisability of the remedies sought (or of some other remedy). While the remedy in many such cases may be a simple remand with directions to develop the required regulation and a deadline for compliance, other cases -- and petitioners believe that this is one of them -- may call for more detailed judicial direction, at least on issues of law. See, e.g., Am. Petroleum Inst. v. Johnson, 541 F. Supp. 2d 165, 182-89 (D.D.C. 2008) (where EPA's re-definition of "navigable waters" under the Clean Water Act was found both procedurally deficient and substantively dubious, court not only vacated re-definition on procedural grounds but discussed substantive issue in detail and remanded "for further proceedings consistent with this Opinion . . .") The issue at this stage is not what the ultimate scope of the district court's direction should be, but whether, as the appellate court concluded, Norton simply stops the entire process in its tracks.

Norton plainly did not assume the existence of statutes so eerily prescient as to anticipate the issues arising and remedies appropriate in particular future cases and in particular circumstances (such as the eight years of agency stonewalling shown by the record here). The approach below artificially narrowed the Norton analysis to the point of turning it into a de facto excuse for judicial acquiescence in shockingly abusive agency behavior.

Having arrogated to itself the right to take money that Congress has not authorized it to take, and to keep much of that money simply because it thinks it can, the IRS was permitted below to brush off courts that were asked to redress its wrongdoing with an empty promise of substantive action that never occurred and was never intended to occur. The IRS interpreted the District Court's naked remand order not as meaning "adopt a regulation within the limits of your discretion" but as "do anything you want -- including nothing." Reviewing the decision below will enable this Court to rescue Norton from a misinterpretation whose practical effect is to create a de facto administrative exemption from the rule of law.

B. The IRS is Legally Required to Provide a Procedurally Compliant and Substantively Workable Method for Seeking Refunds of Taxes it has Unlawfully Exacted.

If you take something that doesn't belong to you, you should give it back -- especially if you get caught. The truth of that proposition would be obvious to virtually all Americans except sociopaths, from first-graders on up. See, e.g., Bull v. United States, 295 U.S. 247, 260 (1935) ("In a proceeding for the collection of estate tax, the United States through a palpable mistake took more than it was entitled to. Retention of the money was against morality and conscience."). Its rejection by the IRS is the single most stunning aspect of what the courts below have aptly characterized as the IRS's "startling" litigation strategy in this dispute.

There is, in fact, no difficulty in identifying a statutory embodiment of that obligation under the facts here. IRC § 7422 provides it. Even if there were not a line, sentence, or comma in statutory law requiring in haec verba that the IRS return money it has taken in frank defiance of congressionally prescribed limitations, moreover, the limitations themselves -- indeed, the very existence of a comprehensive tax code -- would entail such a requirement, as would the Constitution. See Cohen II, 751 F.3d at 639 (Brown, J., dissenting) ("If the structure of the Constitution . . . compels an agency to provide a workable refund scheme, that should suffice for the APA. After all, the Constitution is law, and a supreme one at that."); see also Carriso v. United States, 106 F.2d 707, 712 (9th Cir. 1939) (claim to recover fees exacted under a statute that had been repealed held to be "founded upon a law of Congress").

Indeed, IRC § 7422(a) presents an even stronger case for this conclusion than Pittway did. Section 7422, as the IRS has strenuously insisted throughout this litigation, is a jurisdictional statute. It limits the right to refunds by requiring taxpayers to jump through certain hoops and respect specified restrictions when seeking them. Those hoops and those restrictions -- the roadmap that taxpayers must follow and the square corners they must turn in order to obtain a refund -- are what the "regulations promulgated by the Secretary" are supposed to define. Absent IRS compliance with that statutory duty, there is no path and there are no corners. If providing the regulations the statute calls for were optional or discretionary, as the IRS has suggested, the IRS could take money from taxpayers without a colorable whisper of congressional authorization and simply keep it. No court would have jurisdiction to address any taxpayer complaint about refusal to return the expropriated funds. Any remedy would be a matter of administrative grace that the IRS in its unfettered discretion could bestow or deny -- and in the case of denial, no one could do anything about it.

The offense to property and due process rights fatally implicit in that view strongly reinforces the conclusion that promulgating the regulations contemplated by § 7422(a) is a duty, not an option. The statutory words mean what they say. In a government of laws, § 7422 may not preclude behavior that it compels. It may not condition recognition of basic rights -- the right to return of property lawlessly taken -- on compliance with conditions to be prescribed and then make prescription of those conditions optional, thereby rendering compliance with them potentially impossible.

Whether sovereign immunity might in a given case prevent enforcement of that duty in the courts is a separate question. The only issue for Norton purposes is whether that legal duty exists. If it does, then Norton does not bar the way to pursuit under the APA of substantive claims bearing on that duty.

Because of the importance of revenue collection and the grave difficulty that would be entailed by disrupting it or interfering with it, Congress has sharply limited the ways in which refund requests may be pursued. It has delegated to the IRS substantial discretion with respect to the nuts and bolts of the process. Petitioners do not controvert those limitations. The critical point here is that Congress has conditioned those limitations on the IRS actually providing nuts and bolts that, with reasonable patience and attention to detail, will fit together coherently. The IRS cannot logically invoke its own failure to do so to shield itself from the very remedy for such failure that Congress has chosen to provide.

The conclusion is inescapable: provision by properly adopted regulation for pursuit by taxpayers of refunds of lawlessly exacted federal telephone excise taxes is a duty imposed upon the IRS by law. In Norton terms, it is "legally required."

C. The IRS has not complied with this legal duty.

It is easy to imagine the reaction that the discussion thus far must provoke: Surely the IRS has complied in some broad sense with this duty; surely it has adopted regulations that, perhaps imperfectly and with some gaps and anomalies, define a way for mobile-phone users to try to get refunds of tax payments that they did not legally owe.

Unfortunately, and remarkably, the IRS has not done so. This litigation is before this Court because the IRS has not done so. The IRS promulgated Notice 2006-50 (without compliance with the APA) precisely because it had not done so. In Cohen I, the D.C. Circuit explained this astonishing agency default in detail, and in the process repudiated the IRS's position that it actually had, in fact, sort of, somehow provided taxpayers with a refund route:

The court flatly rejected the IRS's suggestion that it would have had to accept a refund request on Form 843 or Form 8849, and that such requests would have been jurisdictionally sufficient. It noted sharply that "these assertions directly conflict with the cautionary instructions printed in bold typeface on the front of both forms and the explicit directions given in IRS Publication 510." Id. at p. 16. The court concluded that, outside the provisions of the improperly promulgated Notice 2006-50, "taxpayers . . . run into nothing but dead ends. The 'usual statutory procedures for claiming a refund of tax,' . . . provide no avenue by which individual taxpayers can fulfill their obligations in order to seek judicial review." Id. Cf. Beverly Hospital v. Bowen, 872 F.2d 483, 486 (D.C. Cir. 1989) (per curiam) ("We cannot fathom the sense of the Secretary's position on this point. The Secretary twice told the hospitals . . . to photocopy 'without cost.' Thus, under the Secretary's own pronouncements, photocopying for peer reviews was not a proper charge; the item had no place on a cost report, and to put it there would have blatantly defied the Secretary's instruction.").

The IRS, in short, has emphatically not complied with either the directive in IRC § 7422 or the duty implicit in the statute under color of which it lawlessly acted (or, for that matter, the due process clause of the Constitution itself). The IRS promulgated Notice 2006-50 in a transparent effort to finesse the difficulty arising from its own default in this regard. That circumvention effort blew up in its face because in promulgating the Notice the IRS failed to give the APA's notice-and-comment requirements even a pro forma nod. The IRS stood before the courts below, and it stands before this Court, as an agency claiming that Norton insulates it from the consequences of its systematic disregard of its legal duties. That gets things backwards. It is the IRS's systematic disregard of duties required by law that deprive it of any help Norton might otherwise provide to it.

D. Requiring the IRS to Obey the Law Will not Impair Revenue Collection or Otherwise Prejudice the Public Interest.

A key point bears emphasis here. Petitioners are not suggesting that some path around the jurisdictional requirements for refund requests must be crafted by the courts in the interests of equity and natural justice. Nor are they seeking a judge-made loophole in the doctrine of sovereign immunity. The requirements in the jurisdictional statute are rather plain, and it is the IRS that has not complied with them. Petitioners are not asking that they be circumvented but that they be enforced.

Petitioners seek recognition of the fact that a pertinent legal obligation has been imposed by statute on the IRS, and that doing what the statute orders the IRS to do is therefore a duty imposed by law. From that premise it follows that Norton does not preclude appropriate judicial direction to comply with the law and to do so in an accountable fashion -- e.g., under a deadline that takes appropriately into account the IRS's long record of foot-dragging, stone-walling, legal defiance, and general recalcitrance.

If the IRS wishes to maintain in the review process that it may preclude any refund for a particular tax by the expedient of not providing a regulatory mechanism for seeking such refunds, it is free to do so. If it wishes to contend that § 7422 is compulsory for taxpayers but optional for the IRS, it is free to submit pleadings to that effect. Petitioners would welcome the opportunity to join issue on the obvious constitutional problem that such positions would create. What the IRS is not free to do is expropriate money in the teeth of congressional limitations on its authority and then shelter itself from judicial review of its conduct by claiming the sovereignty not of a republic of laws but of a divine right monarch.

The latter is what has happened in this case. The IRS has put itself about the law, above Congress and above the courts. It is up to this Court to bring the agency back down to Earth.⁵

Petitioners here complain that the IRS has acted; has acted wrongly and with baleful effect; has illegally implemented a "house of mirrors" return program consisting of false hopes and dead ends; and as a result has taken and kept billions of dollars that don't belong to it. Petitioners here are not asking the courts to write on a blank slate but to erase and correct erroneous scribbling already appearing there. By analyzing petitioners' claims solely under Norton and disregarding their efforts to obtain appropriate remedies for past actions that the IRS had in fact taken, the appellate court overlooked the core error-correcting role of the judiciary in administrative law.

Norton has nothing to do with efforts under the APA to correct allegedly harmful effects of affirmative agency action that has already occurred -- cases where the problem is not agency inaction but agency action (such as the lawless exaction of taxes and the establishment of a "house of mirrors" with an array of dead ends to thwart taxpayers who want to get their money back). By shoehorning Norton into a context disengaged from the facts and logic of that decision, the appellate court brought the Norton analysis into unnecessary tension with the core, error-correcting function of judicial review of administrative decisions -- the judiciary's single most important job in the field of administrative law. Rectification of that error by this Court will prevent Norton from being improperly used as a restraint on judicial review of lawless agency behavior.

Beverly Hospital v. Bowen, 872 F.2d 483 (D.C. Cir. 1989) (per curiam), illustrates the importance of this distinction. The plaintiffs in Beverly Hospital were hospitals and health service associations that were being required by an HFCA regulation to make photocopies of medical records for peer review bodies at their own expense. See Beverly, 872 F.2d at 484. That regulation violated a statute (just as Notice 2006-50 did), and the district court in that case held that it was "null and void ab initio.'" Id. (quoting district court's opinion).

Like the District Court here, however, the district court in Beverly Hospital

The Beverly Hospital court's conclusion was emphatic -- and quite instructive for present purposes:

Notice 2006-50 was vacated prospectively rather than ab initio. Petitioners alleged, however, that it had had prejudicial impact during the period it was in force. For example, petitioners claimed, it erroneously shortened the appropriate refund period -- a pure question of law that a court could and should answer without entangling itself in the details of agency policy judgments, and that it would be much more efficient to have answered before the IRS goes to work on a regulation rather than afterward. See, e.g., Am. Petroleum Inst. v. Johnson, 541 F. Supp. 2d 165, 182-89 (D.D.C. 2008) (court accompanies remand on procedural grounds of EPA re-definition of "navigable waters" under the Clean Water Act with extensive discussion of substantive legal merit of the re-definition, and remands for agency action "consistent with this opinion."). These were among the substantive challenges that the IRS falsely promised the District Court it might address if its request for naked remand were granted. That the District Court here believed that the IRS was telling the truth and had made this promise in good faith is perhaps not surprising. As in Beverly Hospital, however, the understandable but mistaken belief of the District Court that rulemaking to address the Notice's deficiencies was in immediate prospect did not deprive the court under Norton of authority to provide a remedy for the baleful past effects of the IRS's violations of the law during the Notice's short and unhappy life.

This is a case about relatively small amounts of money for each of scores of millions of American citizens. But it is also about something even more important than that. It is about a tax system that depends to a very large degree on voluntary compliance and that therefore assumes a reasonable degree of civic virtue on the part of the vast majority of taxpayers. It is one thing to complain about exaction of taxes -- something Americans were doing long before the Stamp Act, never mind the Internal Revenue Code. It is something else entirely for a corrosive cynicism to pervade that body of taxpayers -- a cynicism born of the sense that a rogue agency steeped in a culture of lawlessness operates serenely above the checks and balances lying at the heart of the American idea of governance. If that cynicism ultimately has the effect of spreading passive-aggressive tax resistance from a tiny fringe of extremists to the broad base of taxpayers, the consequences will be grave indeed.

The present case provides this Court with an opportunity not just to re-focus the perspective of lower courts on the meaning and substance of Norton, but to reaffirm the critical principle that the Executive Branch is subject to, and not above, the laws made by the elected representatives of the people.

Petitioners here are not seeking a broad, programmatic policy regulating future behavior. They are trying to obtain a reasonable, lawful, procedurally compliant, and non-arbitrary refund protocol for a discrete and clearly identified fund of unlawfully collected and unrefunded proceeds of a specific tax. The degree and specificity of judicial direction called for are matters to be determined in addressing petitioners' substantive claims -- not excuses for failing to address them. (Necessarily informing consideration of that issue on remand, of course, will be the IRS's subsequent admission that its assurance to the District Court that it might address petitioners' substantive concerns was eyewash.) Provision of a refund protocol in substantive compliance with IRC § 7422 and in procedural compliance with the APA is a discrete agency action, not a broad, programmatic policy measure.

Norton, as noted above, arose from efforts to force the Bureau of Land Management to adopt a regulatory scheme to control use of off-road vehicles in certain wilderness study areas -- an issue implicating '"multiple use management'" and thus an "enormously complicated task", in this Court's judgment. See Norton, 542 U.S. at 58. See also Sierra Club v. Thomas, 828 F.2d 783 (D.C. Cir. 1987) (attempt to force the EPA to regulate strip mines). These are subjects of vast scope and challenging complexity. The array of potential regulatory approaches in both areas is sweeping, with each approach featuring a daunting assortment of ramifications. The relief demanded in those cases was the epitome of broad, programmatic change.

There is simply no comparison between the epochal quests in Norton and Sierra Club and the modest, sharply focused relief sought in the case at bar. Petitioners here challenge a substantively and procedurally deficient refund protocol relating to one specific and clearly delimited abuse by the IRS of its own authority. They are trying to get it fixed. There are no endlessly ramifying or intricately interacting policy implications potentially stretching far into the future. Petitioners are not asking for re-examination of the entire array of tax refund regulations that are in place, or for development of an ambitious tax credit regimen for eco-friendly industries, or for rationalization of corporate deductions relating to off-shore business activity. Their focus is on a quantified bundle of dollars exacted during a legally definable (albeit disputed) time-period under a particular provision of the IRC. They are simply trying to remedy a specific flawed IRS approach -- and to get money back from the IRS to the millions of people it belongs to.

The IRS is jealous of the broad discretion it enjoys in prescribing the rules that must be followed in seeking tax refunds. It does not, however, have discretion to establish those rules in violation of the APA's procedural requirements, as it did when it promulgated Notice 2006-50. The essential question raised by this petition is even more important: Does the IRS have discretion to do what it has done here -- nothing? Does it have discretion to close off any lawful path to request refunds of taxes that concededly were exacted unlawfully, and any judicial review of refusal to make those refunds, by the simple expedient of ignoring the statutory mandate to put jurisdictionally required regulations in place? Or, to ask the same question more concisely -- does Norton put the IRS literally above the law?

²See Fortis, Inc. v. United States, 447 F.3d 190 (2d Cir. 2006) (per curiam); Reese Bros., Inc. v. United States, 447 F.3d 229 (3d Cir. 2006); American Bankers Ins. Grp. v. United States, 408 F.3d 1328 (11th Cir. 2005); Nat'l R.R. Passenger Corp. v. United States, 431 F.3d 374 (D.C. Cir. 2005); and Office Max, Inc. v. United States, 428 F.3d 583 (6th Cir. 2005).

³ These suits were later consolidated for pretrial purposes in the United States District Court for the District of Columbia by the Judicial Panel on Multi-District Litigation.

⁴In re Long-Distance Tel. Serv. Fed. Excise Tax Refund Litig., 853 F. Supp. 2d at 145. The district court also suggested that the "discrete action" criterion could not be satisfied, expressing doubt about its authority to mandate "wholesale improvement of [a] program by court decree." Id. at 146 (quoting Long Term Care Pharm. Alliance v. Leavitt, 530 F. Supp. 2d 173, 185-87 (D.D.C. 2008)). The Court of Appeals did not address the discrete-action issue. Petitioners discuss it, below, however, both in anticipation of the Government citing that criterion as an alternative basis for denying review and because there is some interrelationship between the criteria.

⁵ It is readily apparent from the IRS' actions over the course of this case that its conduct is not "substantially justified" within the meaning of the Equal Access to Justice Act. The decisions below to the contrary are erroneous and should also be reversed. See Gurrola v. United States (In re Long-Distance Tel. Serv. Fed. Excise Tax Refund Litigation-MDL 1798), 751 F.3d 629, 641 (D.C. Cir. 2014) (noting that "the Government's lack of justification is plainly obvious.") (Brown, J., dissenting).