Commissioner v. Shapiro, 424 U.S. 614 (1976)

Commissioner of Internal Revenue v. Shapiro

No. 74-744

Argued November 5, 1975
Decided March 8, 1976
424 U.S. 614

CERTIORARI TO THE UNITED STATES COURT OF APPEALS

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Syllabus

Finding that the imminent departure of respondent taxpayer Samuel Shapiro (hereinafter respondent) for Israel under an extradition order to stand trial there on criminal charges jeopardized the collection of income taxes claimed owed by respondent for 1970 and 1971, petitioner Commissioner of Internal Revenue made a jeopardy assessment, filed liens against respondent, and served notices of levy on various banks in which respondent had accounts or safe deposit boxes. Respondent then brought suit, claiming that he owed no taxes, that he could not litigate the issue while jailed in Israel, and that he would be in jail there unless he could use the levied bank accounts as bail money, and seeking an order enjoining his extradition until he could litigate whether he owed taxes or directing the Internal Revenue Service to lift the levy notices. After the Commissioner, in response to interrogatories, furnished deficiency notices disclosing that the claimed bases for the assessments were for 1970 unexplained cash bank deposits and for 1971 income derived from alleged narcotics sales, the District Court dismissed the complaint on the ground, inter alia, that the Anti-Injunction Act (Act), § 7421(a) of the Internal Revenue Code, which prohibits suits for the purpose of restraining the assessment or collection of taxes, withdrew its jurisdiction to order levies lifted. The Court of Appeals disagreed, and remanded for further proceedings, holding that an unresolved fact issue existed as to whether the case fell within the exception to the Act formulated in Enochs v. Williams Packing Co., 370 U.S. 1, 7, whereby an injunction may be obtained against the collection of any tax if (1) it is "clear that, under no circumstances could the Government ultimately prevail" and (2) "equity jurisdiction" otherwise exists in that the taxpayer shows that he would otherwise suffer irreparable injury. The court found that respondent had satisfied the second test because he would be incarcerated until his bank accounts could be used for bail money, and that, as to the first test, the District Court should not have dismissed the complaint without a further inquiry into whether, upon viewing the law and the facts most favorably to the Commissioner, there was no "factual foundation" for his claim that respondent was a tax-delinquent narcotics dealer during 1971, and thus no basis for the assessment.

Held: The Act did not require dismissal of respondent’s complaint. Pp. 624-633.

(a) Whether the Commissioner has a chance of ultimately prevailing for purposes of the Williams Packing exception is a question to be resolved on the basis of the information available to the Commissioner at the time of the suit. Hence, the Court of Appeals did not err in declining to specify the precise manner in which the relevant facts would be revealed on remand, since whether the Commissioner discloses such facts because he has the technical burden of proof or discloses them in response to a discovery motion or interrogatories, under Williams Packing, the relevant facts are those in the Commissioner’s possession, and must somehow be obtained from him. Pp. 624-628.

(b) The Act’s primary purpose is not interfered with by not requiring the taxpayer to plead specific facts which, if true, would establish that the Commissioner cannot ultimately prevail, since the collection of taxes will not be restrained unless the District Court is persuaded from the evidence eventually adduced that the Commissioner will under no circumstances prevail. Moreover, the Act’s "collateral objective" to protect the collector from tax litigation outside the statutory scheme is not undercut, since the taxpayer himself must still plead and prove facts establishing that his remedy in the Tax Court or in a refund suit is inadequate to repair any injury caused by an erroneous assessment or collection, in which case, the Commissioner is required simply to litigate the question whether his assessment has a basis in fact. Pp. 628-629.

(c) While to permit the Commissioner to seize and hold property on the mere good faith allegation of an unpaid tax would raise serious due process problems in cases like this one, where it is asserted that seizure of assets pursuant to a jeopardy assessment is causing irreparable injury, the case may be resolved, under the Williams Packing exception, solely by reference to the Act, whose required standard as to affording the taxpayer an opportunity for a hearing and as to the evidence necessary to show that an assessment has a basis, in fact, is at least as favorable to the taxpayer as that required by the Constitution. Pp. 629-633.

162 U.S.App.D.C. 391, 499 F.2d 527, affirmed.

WHITE, J., delivered the opinion of the Court, in which BURGER, C.J., and BRENNAN, STEWART, MARSHALL, and POWELL, JJ., joined. BLACKMUN, J., filed a dissenting opinion, in which REHNQUIST, J., joined, post, p. 634. STEVENS, J., took no part in the consideration or decision of the case.