Starr International Co. v. United States
139 F. Supp. 3d 214
D.D.C.2015Background
- Starr International, a Swiss-domiciled company and former large AIG shareholder, paid 30% U.S. withholding on AIG dividends and sought a reduced treaty rate under the U.S.-Swiss tax convention for 2007.
- Article XXII(6) of the U.S.-Swiss Convention permits the U.S. Competent Authority (the Treasury/IRS) to grant treaty benefits in its discretion after consultation with the Swiss Competent Authority.
- Starr requested discretionary treaty benefits for 2007; the U.S. Competent Authority denied the request in October 2010 but granted a refund for 2008. Starr sued in 2014 seeking a refund for 2007 taxes under 26 U.S.C. § 7422 and 28 U.S.C. § 1346(a)(1).
- The Government moved to dismiss, arguing the denial is nonreviewable as (1) committed to agency discretion (per the APA’s nonreviewability principle) and (2) a political question; it also pleaded related defenses and a counterclaim to recover the 2008 refund.
- Starr moved to strike the justiciability defenses and opposed dismissal, arguing the committed-to-agency-discretion exception cannot bar tax-refund suits and that no political-question barrier exists.
- The Treasury’s Technical Explanation states the discretionary provision targets treaty-shopping and sets a "principal purpose" test (whether obtaining treaty benefits was one of the principal purposes of establishment/operations), which the IRS applied when denying Starr.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the committed-to-agency-discretion exception to judicial review applies outside the APA (to a tax-refund suit) | Starr: Exception is tied to APA and cannot be invoked to defeat refund claims | U.S.: Exception reflects broader common-law nonreviewability and can be invoked in non-APA suits | Court: Exception is not limited to APA suits and can be raised in tax-refund litigation |
| Whether the discretionary denial under Article XXII(6) is committed to agency discretion (no ‘‘law to apply’’) | Starr: Treaty plus Technical Explanation provides judicially manageable standard (principal-purpose test); presumption favors review | U.S.: Treaty’s permissive language and foreign-relations context commit the decision to agency discretion and preclude review | Court: Government failed to show clear and convincing intent to preclude review; Technical Explanation supplies a meaningful standard (principal-purpose) so review is available |
| Whether judicial review would lack manageable standards (i.e., whether the Technical Explanation’s "principal purpose" test is too vague) | Starr: Principal-purpose and analogous tests are routinely judicially manageable | U.S.: “Principal purpose” is too amorphous to permit meaningful review | Court: The principal-purpose test and agency materials furnish manageable standards; courts can review for abuse of discretion |
| Whether the political-question doctrine bars review of the Competent Authority’s denial | Starr: No; review involves applying legal standards, not foreign-policy second-guessing | U.S.: Denial implicates foreign relations and consultation with a foreign sovereign, raising political-question concerns | Court: Political-question doctrine does not bar review here; consultation requirement is not implicated in a denial and no textually demonstrable commitment or lack of judicially manageable standards exists |
Key Cases Cited
- Heckler v. Chaney, 470 U.S. 821 (agency action is unreviewable where no meaningful judicial standard exists)
- Citizens to Preserve Overton Park v. Volpe, 401 U.S. 402 (courts lack jurisdiction where there is no law to apply; narrow nonreviewability exception)
- Abbott Labs. v. Gardner, 387 U.S. 136 (presumption in favor of judicial review; burden to show preclusion)
- Zivotofsky ex rel. Zivotofsky v. Clinton, 576 U.S. 1 (2015) (political-question doctrine requires textually demonstrable commitment or lack of judicially manageable standards)
- Nixon v. United States, 506 U.S. 224 (political-question doctrine and textually demonstrable commitment)
- Baker v. Carr, 369 U.S. 186 (political-question doctrine factors)
- Clifford v. Peña, 77 F.3d 1414 (D.C. Cir.) (agency policies can supply standards making discretionary action reviewable)
- City of Columbus v. Comm’r, 112 F.3d 1201 (D.C. Cir.) (application of principal-purpose type standards is judicially manageable)