Alexander v. "Americans United," Inc., 416 U.S. 752 (1974)

Alexander v. "Americans United," Inc.

No. 72-1371

Argued January 7, 1974
Decided May 15, 1974
416 U.S. 752

CERTIORARI TO THE UNITED STATES COURT OF APPEALS

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Syllabus

Respondent, a nonprofit corporation, had a ruling letter assuring it of tax-exempt status under § 501(c)(3) of the Internal Revenue Code of 1954 (Code). The Internal Revenue Service (IRS) revoked the ruling letter on the ground that respondent had violated the lobbying proscriptions of §§ 501(c)(3) and 170 of the Code, the effect of which was to render it liable for federal unemployment taxes and to terminate its eligibility for tax-deductible contributions. Respondent and two of its benefactors brought this action seeking a declaratory judgment that the IRS’ administration of the lobbying provisions of §§ 501(c)(3) and 170 was erroneous or unconstitutional and injunctive relief requiring reinstatement of its § 501(c)(3) tax-exempt status. The District Court dismissed the complaint on the ground, inter alia, that the action was barred by the prohibition in § 7421(a) of the Code against suits "for the purpose of restraining the assessment or collection of any tax." The Court of Appeals agreed that the action could not be maintained by the benefactors, but held that respondent’s suit was not barred on the grounds that respondent raised constitutional allegations; that the primary design of the suit was not to enjoin the assessment or collection of respondent’s own taxes; that restraining the assessment or collection of the taxes of respondent’s contributors was only a "collateral effect" of this suit; and that, in the absence of injunctive relief, respondent would sustain irreparable injury for which there was no adequate legal remedy. The court consequently affirmed the dismissal as to the benefactors but reversed as to respondent.

Held: The action is barred by § 7421(a). Enochs v. Williams Packing & Navigation Co., 370 U.S. 1; Bob Jones University v. Simon, ante, p. 725. Pp. 758-763.

(a) The constitutional nature of a taxpayer’s claim, as distinct from its probability of success, is of no consequence under § 7421(a). Pp. 759-760.

(b) That respondent was not seeking to enjoin the assessment or collection of its own taxes is irrelevant, for § 7421(a) bars a suit to enjoin the assessment or collection of anyone’s taxes. P. 760.

(c) Under any reasonable construction of the statutory term "purpose," the objective of this action was to restrain the assessment and collection of taxes from respondent’s contributors, the purpose being to restore advance assurance that donations to respondent would qualify as charitable deductions for respondent’s donors. Pp. 760-761.

(d) An action for refund of unemployment taxes, even if successful, will not lead to the recovery of contributions lost in the interim between withdrawal of a § 501(c)(3) ruling letter and the final adjudication of entitlement to § 501(c)(3) status. This is, however, merely a form of irreparable injury, which, in itself, is insufficient to avoid the bar of § 7421(a). Pp. 761-762.

(e) An action for refund of unemployment taxes will afford respondent a full opportunity to litigate the legality of the IRS’ withdrawal of its § 501(c)(3) ruling letter, since respondent’s liability for such taxes hinges on precisely the same legal issue as does its eligibility for tax-deductible contributions under § 170, i.e., its entitlement to § 501(c)(3) status. P. 762.

155 U.S.App.D.C. 284, 477 F.2d 1169, reversed.

POWELL, J., delivered the opinion of the Court, in which BURGER, C.J., and BRENNAN, STEWART, WHITE, MARSHALL, and REHNQUIST, JJ., joined. BLACKMUN, J., filed a dissenting opinion, post, p. 763. DOUGLAS, J., took no part in the decision of the case.