Partnership Responds to DOJ Brief in Access to Appeals Case

HANCOCK COUNTY LAND ACQUISTIONS, LLC, et al.,
Plaintiffs,
v.
UNITED STATE OF AMERICA, et al.,
Defendants.

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF GEORGIA
ATLANTA DIVISION

PLAINTIFFS' RESPONSE TO DEFENDANTS' SUPPLEMENTAL BRIEF IN SUPPORT OF DEFENDANT'S MOTION TO DISMISS FIRST AMENDED COMPLAINT

Plaintiffs respectfully submit this response to the Government's supplemental brief in support of its motion to dismiss. Contrary to the Government's contentions, CIC Services, LLC v. Internal Revenue Services, 593 U.S. __, 2021 WL 1951782 (May 17, 2021) illustrates why the Anti-Injunction Act (“AIA”) does not bar Plaintiffs' suit.

In CIC Services, the Supreme Court outlined three factors that, taken in combination, cause a suit to fall outside the ambit of the AIA. All three are present here. First, the Government's violations of the law impose substantial costs on Plaintiffs that are unconnected to any potential tax. Second, the causal chain between Government's violations and any potential tax is attenuated. Third, the Government's violations necessitate a pre-enforcement suit, because it is the only way to provide the requested relief — that the Defendants comply with the law. Accordingly, the AIA cannot bar this suit. Moreover, even if the AIA did apply to Plaintiffs' suit, the suit falls squarely within the exception outlined in Enochs v. Williams Packing & Navigation Co., 370 U.S. 1, 6-7 (1962).

To determine the purpose of the suit at issue, courts should look to “the face of the taxpayer's complaint.” CIC Services 2021 WL 1951782 at *7. In CIC Services, the Supreme Court stated that “[i]n considering a 'suits['s] purpose,' [courts] inquire not into a taxpayer's subjective motive, but into the action's objective aim — essentially, the relief the suit requests.” Id. Here, Plaintiffs' objective aim is to prevent the Internal Revenue Service (the “IRS”) from breaking the law by denying Plaintiffs' due process rights guaranteed by Congress.

In the Amended Complaint, Plaintiffs' requested relief asks the Court to declare that: (1) Plaintiffs have a statutory right to the independent review of their case; (2) Defendant's refusal to grant that review was a violation of Plaintiffs' rights; and (3) Defendants are required to comply with legal requirements imposed by Internal Revenue Code (“Code”) § 7803(e). (ECF No. 30 at 29.) The Plaintiffs also asked the Court to compel Defendants to (1) countersign the Form 872-P; (2) provide Plaintiffs review by the Independent Office of Appeals; (3) cease abusing Plaintiffs' due process rights; and (4) temporarily refrain from issuing an FPAA until Plaintiffs have been provided independent review. (ECF No. 19 at 29-30.)

In short, Plaintiffs' suit requests that the Court enforce the laws provided by Congress by enjoining the Government's attempts to avoid and circumvent the effects of those laws. Based on CIC Services, the requested relief does not seek to restrain the assessment or collection of a tax; rather, the suit merely asks that the Defendants follow the statutorily mandated process for assessing and collecting any potential tax. Therefore, Plaintiffs' suit should move forward.

Under the first factor, the IRS's denial of Plaintiffs' taxpayer rights imposes burdens that inflict costs separate from any tax. Congress established the Independent Office of Appeals in part to avoid costly litigation. By violating the law and denying Plaintiffs an opportunity to resolve their case with the Independent Office of Appeals, the Government is subjecting Plaintiffs to the additional, burdensome costs of litigating both this case and the Tax Court case challenging the FPAA. Plaintiffs' suit seeks relief from the burdens resulting from the Government's violations of the law, not any potential tax. Any impact on the assessment or collection of tax is an “after-effect, not its substance.” CIC Services, 2021 WL 1951782 at *10.

Second, Plaintiffs' requested relief is several steps removed from the assessment or collection of any tax. Plaintiffs do not seek to permanently enjoin the assessment of any tax; they simply seek to avail themselves of the administrative appeals rights that the IRS is legally obligated to provide. The request to enjoin the issuance of a FPAA requests such relief be temporary — only until such time as the IRS has complied with its statutory obligation to provide an independent review. Thus, the requested relief does not “stop[ ] dead the process for assessing taxes,” instead it seeks to compel the IRS to engage in a “process for assessing taxes” that is compliant with Code § 7803(e). (ECF No. 30 at 5.)

By the Government's logic, it is the IRS's own actions which have derailed the “process of assessment.” If, as the Government claims, the “process of assessment” began “when the IRS examined HCLA's 2016 tax year” and “continued with the issuance of the FPAA,” then the review by the Independent Appeals Office, a statutorily mandated step, is necessarily part and parcel of the “process of assessment.” (ECF No. 30 at 4.) The “process of assessment” begins with the examination, continues with the review by Independent Office of Appeals as mandated by Code § 7803(e), and if unresolved by the Independent Office of Appeals, continues with the issuance of the FPAA. Thus, the IRS's denial of the independent review is the act that curtails the “process of assessment.”

Finally, while Plaintiffs are not forced to break the law and subject themselves to criminal liability as in CIC Services, the IRS's violations of the law “practically necessitate a pre-enforcement, rather than a refund, suit–if there is to be a suit at all.” 2021 WL 1951782 at *12. Here as in CIC Services “only an injunction against” the IRS's violations “gives the taxpayer . . . what it wants:” relief from those violations in the form of review by the Independent Office of Appeals. Id. A refund suit cannot right this wrong, because the Independent Office of Appeals would not review this case. Instead Plaintiffs would be forced to incur litigation costs to resolve the dispute, in direct contradiction of Congress's aim in creating a right to review by the Independent Office of Appeals. Just as in CIC Services, the requested relief can only be effectuated by this suit.

Plaintiffs' suit targets the upstream requirement for independent review and the IRS's violations of the law, not the downstream tax. See CIC Services, 2021 WL 1951782 at *13. The objective aim of Plaintiffs' suit is to enjoin the IRS from continuing to violate the law, denying Plaintiffs their rights under Code § 7803(e). The three factors from CIC Services taken together show exactly why the AIA does not bar this suit. Here “the tax appears on the scene” only because the IRS has violated and continues to violate the law by refusing to provide review by the Independent Office of Appeals. If the IRS had followed the “process of assessment” and provided review required by Code § 7803(e), the tax would not currently be at issue, because the Independent Office of Appeals would be considering the case.

This is the 3^rd day of June 2021.

Respectfully submitted,

S. Fenn Little, Jr.
Attorney for Plaintiffs
GA Bar Number: 454360

FENN LITTLE, ESQ.
CONSERVATION DEFENSE GROUP, INC.
3522 Ashford Dunwoody Rd. PMB 402
Brookhaven, GA 30319
Atlanta, GA 30309
Ph: 404-815-3100
Fax: 404-521-4029
fennlaw@fennlittle.com

Matthew T. Journy
Attorney for Plaintiffs
Not Licensed in GA

LAW OFFICES OF JAMES WINGFIELD
210 Park Avenue, Suite 313
Worcester, MA 01609
Ph: 774-312-7857
Fax: 508-797-0201
mjourny@yahoo.com