Dileng v. Commissioner
157 F. Supp. 3d 1336
N.D. Ga.2016Background
- Plaintiff, a Danish citizen residing in the U.S., faces a Danish tax assessment of about $2.5 million by SKAT and is contesting it in Danish courts.
- Denmark certified under the U.S.-Denmark Income Tax Treaty that the tax claim was "finally determined" and requested U.S. assistance; the United States accepted and informed the IRS could levy U.S. assets.
- Plaintiff filed a complaint in federal court seeking a declaratory judgment and an injunction preventing U.S. collection until Danish proceedings conclude; he also filed a Collection Appeal Request with the IRS which was denied.
- The United States moved to dismiss, asserting sovereign immunity and that the Declaratory Judgment Act (DJA) and Anti-Injunction Act (AIA) bar Plaintiff’s claims; it argued the Treaty requires the U.S. to treat the certified claim as a U.S. assessment for collection purposes.
- Plaintiff invoked two judicial exceptions to the AIA (Williams Packing and Regan) and a due process argument; he sought leave to amend his complaint.
- The Court held a factual jurisdictional hearing, concluded it lacked subject-matter jurisdiction, denied leave to amend as futile, granted the Motion to Dismiss, and denied the preliminary injunction as moot.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether U.S. courts have jurisdiction despite sovereign immunity | Treaty certification is not "finally determined" because Plaintiff's Danish challenge and request for "henstand" precludes collection; Due Process requires U.S. review | Sovereign immunity bars suit; Treaty treats accepted foreign claims as finally determined and requires U.S. collection; DJA and AIA bar relief | Dismissal for lack of jurisdiction: sovereign immunity plus AIA/DJA apply; no jurisdiction |
| Whether Williams Packing exception to AIA applies (no circumstances govt could prevail) | The U.S. cannot prevail because Denmark’s certification is wrong and pre-collection relief is needed | Williams Packing does not apply; Plaintiff cannot show claim is "without foundation" and Treaty forbids U.S. review of Denmark’s certification | Exception not met: Plaintiff failed to show U.S. could never prevail; Williams Packing inapplicable |
| Whether Regan exception to AIA applies (no alternative forum) | Regan permits suit because Congress did not provide an alternative to challenge a foreign-assessed tax in U.S. courts | Regan is narrow and for third parties without alternative; here Plaintiff (taxpayer) has Danish forum to challenge the tax; Treaty contemplates challenge in applicant State | Regan inapplicable: Plaintiff has alternative remedy in Denmark; AIA bars suit |
| Whether leave to amend should be granted | Plaintiff sought to add factual allegations from his response to overcome jurisdictional defects | United States argued amendments would be futile because sovereign immunity/AIA/DJA defects remain | Leave denied as futile; proposed amendments would not cure jurisdictional defects |
Key Cases Cited
- Christian Coalition of Florida, Inc. v. United States, 662 F.3d 1182 (11th Cir. 2011) (sovereign immunity and strict construction of waivers of the United States' consent to suit)
- Enochs v. Williams Packing & Nav. Co., 370 U.S. 1 (1962) (judicial exception to AIA when government cannot prevail and equity otherwise exists)
- South Carolina v. Regan, 465 U.S. 367 (1984) (narrow AIA exception where no alternative means exists to challenge tax)
- Flora v. United States, 362 U.S. 145 (1960) (limitation that refund actions are primary federal remedy for challenging tax collection)
- United States v. Dalm, 494 U.S. 596 (1990) (United States is immune from suit absent its consent)
- United States v. Sherwood, 312 U.S. 584 (1941) (statutory terms of consent to suit define federal courts' jurisdiction)
- C.I.R. v. Shapiro, 424 U.S. 614 (1976) (no Due Process violation where taxpayer has chance to ultimately prevail and post-collection refund remedy exists)