Stenson Tamaddon LLC v. United States Internal Revenue Service
2:24-cv-01123
D. Ariz.Jul 30, 2024Background
- Stenson Tamaddon, LLC (Plaintiff), a tax advisory firm, sued the IRS (Defendant) for instituting an “indefinite moratorium” on processing new Employee Retention Tax Credit (ERC) claims, a program created under the CARES Act for COVID-19 relief.
- The IRS implemented the moratorium in September 2023, initially to last until December 2023, now extended indefinitely, citing concerns over fraudulent and ineligible claims.
- Plaintiff derives profits from helping clients recover ERC refunds; the moratorium, they allege, disrupts their business model and client agreements, resulting in economic harm.
- Plaintiff sought a nationwide preliminary injunction to lift the moratorium, compel IRS processing, retract certain IRS public statements, and require status updates.
- The IRS opposes, arguing the moratorium is within its discretion to manage fraud, that Plaintiff lacks standing, and that the action is not subject to the APA's judicial review.
- The court considered Plaintiff’s motion under the Winter v. NRDC preliminary injunction standards, ultimately focusing on standing, the propriety of APA review, the merits, and equitable factors.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Article III Standing | Plaintiff suffered concrete, particularized economic harm traceable to the IRS’s moratorium and redressable by an injunction. | Plaintiff’s injury is only delayed payment, not actual harm; no standing. | Plaintiff has standing; injury, traceability & redressability satisfied. |
| APA Reviewability & Discretion | IRS’s moratorium is ultra vires and not committed to discretion by law; IRS has a statutory duty to process claims. | Agency discretion permits the moratorium; process is not reviewable. | Judicial review not barred; IRS lacks discretion to indefinitely deny claims; APA review proper. |
| Final Agency Action | Moratorium is final agency action with direct legal/economic consequences. | Moratorium and IRS statements are not final agency action; only advisories. | Moratorium is final agency action; public statements are not. |
| Likelihood of Success / Injunction Factors | IRS’s moratorium violates statutory mandates; Plaintiff faces irreparable harm and equities favor injunction. | IRS is attempting to manage fraud; public harm if forced to process fraudulent claims; equities don’t favor Plaintiff. | Plaintiff raises serious legal questions and shows irreparable harm, but equities/public interest do not tip sharply in Plaintiff’s favor; injunction denied. |
Key Cases Cited
- Winter v. Nat. Res. Def. Council, Inc., 555 U.S. 7 (2008) (establishes four-part test for preliminary injunctions)
- Lujan v. Defenders of Wildlife, 504 U.S. 555 (1992) (sets out standing requirements)
- Citizens to Preserve Overton Park, Inc. v. Volpe, 401 U.S. 402 (1971) (judicial review of agency action; discretion exceptions are narrow)
- Bennett v. Spear, 520 U.S. 154 (1997) (defines final agency action for APA review)
- Sierra Forest Legacy v. Rey, 577 F.3d 1015 (9th Cir. 2009) (status quo in injunction context)
- Arizona Dream Act Coalition v. Brewer, 757 F.3d 1053 (9th Cir. 2014) (irreparable harm and APA injuries)
- United States v. Monsanto, 491 U.S. 600 (1989) ("shall" is mandatory statutory language)