Lead Opinion
Opinion for the Court filed by Circuit Judge BROWN.
Dissenting opinion filed by Circuit Judge KAVANAUGH, with whom Chief Judge SENTELLE and Circuit Judge HENDERSON join.
After illegally collecting a three percent excise tax, the Internal Revenue Service (“IRS” or “the Service”) created a refund procedure for taxpayers to recoup their money. That procedure, Appellants argue, is unlawful. We have no occasion to visit the merits of Appellants’ claims, as we granted rehearing en banc only to determine whether we have the authority to hear the case. We do.
I
The Internal Revenue Code imposes a three percent excise tax on phone calls. 26 U.S.C. § 4251. Telephone service providers collect the tax and pay it over to the IRS. See id. § 4291. Individual taxpayers
Multiple corporate taxpayers brought refund suits claiming the excise tax was illegal and several circuits, including this one, concluded time-only rate structures render calls nontaxable under the Code. Nat’l R.R. Passenger,
The IRS lost in each of the five circuits that considered its application of § 4251. All held the tax inapplicable to long-distance rates calculated without reference to distance. Reese Bros., Inc. v. United States,
Notice 2006-50 provided a one-time exclusive mechanism for taxpayers to obtain a refund for excise taxes erroneously collected between February 28, 2003, and August 1, 2006.
Various lawsuits challenged the lawfulness and adequacy of the refund process. See In re Long-Distance Tel. Serv. Fed. Excise Tax Refund Litig.,
The district court dismissed the cases after concluding Appellants failed to exhaust the administrative remedies for their refund claims and failed to state valid claims under federal law. In re Long-Distance Tel. Serv. Fed. Excise Tax Refund Litig.,
A divided panel of this court reversed, holding Notice 2006-50 constituted final agency action reviewable under the APA. Cohen,
The panel dissent, on the other hand, argued the DJA barred Appellants’ APA claims. In the dissent’s view, our precedent required the AIA and DJA to be read coterminously, but permitted us to select the broader of the two provisions as the baseline. As between the two, the dissent argued “reading the two statutes to coterminously bar declaratory and injunctive relief with respect to federal taxes is consistent with precedent, adheres to the plain text of the later-enacted [DJA], and corresponds to the well-established principle that challenges to tax regulations should be brought in refund suits.” Id. at 18 (Kavanaugh, J., dissenting). The dissent also argued Appellants’ claims were not ripe because Appellants had not filed refund requests under Notice 2006-50. Id. at 20 (citing Stephenson v. Brady,
On September 21, 2009, the IRS petitioned the court for rehearing en banc. We granted the petition, limiting our en banc review to four questions, all concerning (1) whether we have jurisdiction and (2) whether Appellants state a valid claim upon which relief may be granted. Our review is de novo. Kassem v. Wash. Hosp. Ctr.,
II
We address jurisdiction first. See Steel Co. v. Citizens for a Better Env’t,
Our jurisdiction extends generally to cases and controversies involving questions of federal law. 28 U.S.C. § 1331. The APA- — a federal law — provides a “generic cause of action in favor of persons aggrieved by agency action,” though it is not an independent source of jurisdiction. Md. Dep’t of Human Res. v. Dep’t of Health & Human Servs.,
In contrast, “[sjovereign immunity is jurisdictional” and “[ajbsent a waiver, ... shields the Federal Government and its agencies from suit.” FDIC v. Meyer,
An action in a court of the United States seeking relief other than money damages and stating a claim that an agency ... acted or failed to act ... shall not be dismissed nor relief therein be denied on the ground that it is against the United States or that the United States is an indispensable party.
5 U.S.C. § 702. We agree. Even construing § 702 “strictly,” as the Service requests, see Dep’t of the Army v. Blue Fox, Inc.,
The IRS insists § 702’s waiver of sovereign immunity does not apply here because it does not encompass review of actions “committed to agency discretion.” 5 U.S.C. § 701(a)(2). We previously rejected this argument when the Service couched it in terms of a want of “final agency action” under § 704, see Cohen,
Even though § 702 waives the Government’s immunity, it preserves “other limitations on judicial review” and does not “confer[] authority to grant relief if any other statute ... expressly or impliedly forbids the relief which is sought.” 5 U.S.C. § 702; see Schnapper v. Foley,
The dissent suggests these questions of statutory interpretation are academic. Diss. Op. at 745 n. 12. But this statement is puzzling. These questions are the same ones the dissent raised at the panel stage, the same questions the court granted en banc review to consider, and the same questions the court asked the litigants to address. The court did not grant en banc review to reconsider whether this case was ripe, or whether Appellants failed to exhaust their administrative remedies.
1
Enacted in 1867, the AIA “apparently has no recorded legislative history, but its language could scarcely be more explicit.” Bob Jones Univ. v. Simon,
[N]o suit for the purpose of restraining the assessment or collection of any tax shall be maintained in any court by any person, whether or not such person is the person against whom such tax was assessed.
26 U.S.C. § 7421(a). “The manifest purpose of § 7421(a) is to permit the United States to assess and collect taxes alleged to be due without judicial intervention, and to require that the legal right to the disputed sums be determined in a suit for refund.” Enochs v. Williams Packing & Nav. Co.,
The AIA has “almost literal effect”: It prohibits only those suits seeking to restrain the assessment or collection of taxes. Bob Jones,
This suit does not seek to restrain the assessment or collection of any tax. The IRS previously assessed and collected the excise tax at issue. The money is in the U.S. treasury; the legal right to it has been previously determined. As a result, this suit is similar to Hibbs. Hearing it— whatever its merit — will not obstruct the collection of revenue as in Snyder, alter Appellants’ future tax liabilities as in Bob Jones,
But the IRS thinks otherwise. The Service argues the Court has construed the AIA to preclude suit in similar circumstances. In support, the Service points to United States v. Clintwood Elkhom Mining Co.,
The IRS envisions a world in which no challenge to its actions is ever outside the closed loop of its taxing authority. It argues assessment and collection are part of a “single mechanism” that ultimately determines the amount of revenue the Treasury retains. Because this suit will ultimately affect the money Treasury retains, the IRS argues, it involves “assessment and collection.”
The IRS has a third theory — this one structural rather than textual. The IRS argues, as did the dissent at the panel stage, that the AIA bars Appellants’ APA claims because a complex regulatory scheme requires that “challenges to tax laws, regulations, decisions, or actions ordinarily be brought in refund suits after plaintiffs have sought a refund from, and exhausted their administrative remedies with, the IRS.” Cohen,
Similarly, this court has allowed constitutional claims against the IRS to go
2
Having established our authority to hear Appellants’ claim for injunctive relief, we pause to consider whether it is necessary, or prudent, to wander further. Appellants claim not to care about the declaratory relief they seek, as it may become academic if they succeed in enjoining the IRS. Even so, Appellants refuse to waive the argument. Admittedly, it is odd “to think that a court with authority to issue [an injunction] is without power to declare the rights of the parties in connection therewith.” Tomlinson v. Smith,
As before, our inquiry begins with the statutory text. Unlike the AIA, the DJA seems to carve out of its ambit any suit “with respect to Federal taxes.” 28 U.S.C. § 2201(a). But precedent interprets the DJA and AIA as coterminous. See E. Kentucky Welfare Rights Org. v. Simon,
The panel dissent read things differently. While acknowledging our prior interpretation of the AIA and DJA as coterminous, the dissent questioned such cases’ precedential value, and wondered why a coterminous reading of the two statutes narrowed the scope of the DJA rather than broadening the scope of the AIA. Cohen
So is Appellants’ APA challenge properly characterized as a suit “with respect to Federal taxes”? It is in the sense the action is against the IRS, the agency charged with administering our federal tax system, and concerns refund procedures for a previously collected federal tax. This suit eludes that characterization in the sense its result — regardless of who wins— will not directly affect the disposition of any federal tax. Even if Appellants win, it does not follow that they are entitled to a tax refund. Whatever Appellants ultimately hope to achieve, this is not a refund suit. The IRS may still adopt a new version of the same notice after fixing any substantive and procedural defects. Which scope of “with respect to Federal taxes” is correct then — the broad one or the narrow one?
Despite our obligation to begin with the statutory text, discerning our jurisdiction to hear Appellants’ request for declaratory relief must come not from staring hard at the phrase “with respect to Federal taxes,” but from its context — linguistic, historical, and functional. A fuller consideration of the phrase reveals that both “actions brought under section 7428 of the Internal Revenue Code of 1986, [and] a proceeding under section 505 or 1146 of title 11,” are outside the tax exception. 28 U.S.C. § 2201(a). To oust the courts of jurisdiction, it is not enough that claims relate in the loose sense to “Federal taxes”; they must also not pertain to the status and classification of section 501(c)(3) organizations (ie., 26 U.S.C. § 7428 proceedings), unpaid tax liability of the debtor in a Chapter 11 reorganization (ie., 11 U.S.C. § 505 proceedings), or the tax effects of a Chapter 11 reorganization plan if not obtained from the IRS within 270 days (ie., 11 U.S.C. § 1146 proceedings). These carve outs are notable: first, because they cabin the phrase “with respect to Federal taxes,” thus implying an all-encompassing reading is inappropriate, and second, because each relates to tax assessment or collection, thus suggesting the term “Federal taxes” similarly pertains to assessment or collection.
The earliest cases construing the DJA’s tax exception also rejected a broad construction of the statute. In Tomlinson v. Smith,
It is unreasonable to think that a court with authority to issue a restraining order is without power to declare the rights of the parties in connection therewith. In other words, it is our view that the language which excepts federal taxes from the Declaratory Judgment Act is co-extensive with that which precludes the maintenance of a suit for the purpose of restraining the assessment or collection of a tax.
Id. (emphasis added).
The Second Circuit relied on Tomlinson in a 1962 decision involving similar facts. Bullock v. Latham,
Congress did not intend to provide declaratory relief for litigants when the AIA barred injunctive relief. Holding to the contrary, as the IRS urges, would vitiate the structural design of the DJA. The legislative history speaks directly to this point. A year after passing the DJA, in § 405 of the Revenue Act of 1935, Congress amended the statute to expressly except disputes “with respect to Federal taxes.” The Senate Finance Committee Report explained the animating purpose of the amendment, noting “[t]he application of the Declaratory Judgments Act to taxes would constitute a radical departure from the long-continued policy of Congress (as expressed in [the AIA] and other provisions) with respect to the determination, assessment, and collection of Federal taxes.” S.Rep. No. 74-1240, at 11 (1935) (emphasis added).
When reading the legislative history, the Supreme Court declared: “[i]t is clear enough that one ‘radical departure’ which was averted by the amendment was the potential circumvention of the ‘pay first and litigate later’ rule by way of suits for declaratory judgments in tax cases.” Flora v. United States,
Of course, “it is the enacted text rather than the unenacted legislative history that prevails.” Owner-Operator Indep. Drivers Ass’n, Inc. v. Mayflower Transit, LLC,
Finally, a functional concern exists with construing the DJA’s exception to bar relief otherwise allowed under the AIA. The court would have jurisdiction to enjoin the parties appearing before it, but not to declare their rights. This defies common sense, however, “since an injunction of a tax and a judicial declaration that a tax is illegal have the same prohibitory effect on the federal government’s ability to assess and collect taxes.” Wyoming Trucking Ass’n, Inc. v. Bentsen,
The Supreme Court suggested an answer to this riddle in Hibbs. Recall, Arizona taxpayers challenged the constitutionality of an Arizona statute permitting tax credits for contributions to Arizona parochial schools.
A coterminous reading of the DJA and the AIA makes sense in light of Hibbs, which construed the relief Appellants seek in the singular, as equitable relief, and not separately, as an injunction and declaratory judgment. In this light, the case is greatly simplified. The DJA falls out of
But what to make of the bugle sounding the textualist battle cry? It is true, the AIA and DJA use different words. But this observation does not beget a certain interpretive result. A baker who receives an order for “six” donuts and another for “half-a-dozen” does not assume the terms are requests for different quantities of donuts. Similarly, a man does not receive different directions to Dupont Circle if he is told by one person to “take the Metro” and by another to “catch the Red Line.” What the AIA accomplishes by denying its application to “any suit for the purpose of restraining the assessment or collection of any tax” the DJA accomplishes by an exception “with respect to Federal taxes.” By nature, language is simultaneously robust and precise. Different verbal formulations can, and sometimes do, mean the same thing.
In sum, we hold that APA § 702’s waiver of sovereign immunity permits Appellants’ APA cause of action and neither the AIA nor DJA otherwise limits our review.
Ill
We now consider whether Appellants state a valid cause of action. Under § 704, “[a]gency action made reviewable by statute and final agency action for which there is no other adequate remedy in a court are subject to judicial review.”
The IRS and the dissenting opinion contend § 7422(a) of the Internal Revenue Code, the refund suit mechanism, provides Appellants the relief they seek.
At first blush, § 7422(a) does not apply. This is not a suit “for the recovery of any internal revenue tax alleged to have been erroneously or illegally assessed or collected.” Id. Even if Appellants are entirely successful, they cannot recover the wrongfully assessed tax unless they follow whatever new administrative procedures the IRS decides to implement.
The dissent assumes a refund suit provides an adequate remedy at law. If this were the case, it is undisputed Appellants would have to proceed through Notice 2006-50. If adequate, Notice 2006-50 would render Appellants’ claims unripe before they filed them refund actions. See Full Value Advisors, LLC v. SEC,
But the adequacy of Notice 2006-50 is the gravamen of Appellants’ suit. Appellants claim Notice 2006-50 is unlawful, and therefore inadequate, because it was not subject to notice and comment rulemaking and is substantively unreasonable. As a result, Appellants argue they do not have to comply with Notice 2006-50 to challenge it. In support they cite McCarthy v. Madigan, a case where the Supreme Court cites several cases in which circumstances weighed against requiring administrative exhaustion.
In sum, this suit is mi generis. Allowing Appellants to proceed without first filing a refund claim will not open the courthouse door to those wishing to avoid administrative exhaustion procedures in other cases. In the tax context, the only APA suits subject to review would be those cases pertaining to final agency action unrelated to tax assessment and collection. More broadly, litigants could not avoid exhaustion when challenging agency decisionmaking, because McCarthy and its progeny apply only when litigants challenge the exhaustion scheme itself. And once litigated, precedent would preclude later litigants challenging exhaustion procedures from relying on McCarthy in a court that had previously rejected the same argument.
The dissent argues Appellants fail to exhaust their claims under either § 703 or § 704 of the APA because a tax refund suit is an otherwise adequate procedure “for a taxpayer to wrangle with the IRS over taxes, refunds, or the legality of IRS tax collection or refund practices.” Diss. Op. at 739. But this argument conflates the existence of an alternative remedy with an “adequate remedy.” Even if equitable relief were possible in a § 7422 proceeding, it would be cold comfort to direct Appellants to proceed in a series of individual suits, submitting themselves one by one to the very refund procedures that they claim to be unlawful. The dissent suggests Appellants could avoid this inefficiency by winning a single case that would have preclusive effect across the nation. But the IRS has already shown itself unwilling to accept the binding effect of judicial opinions from one circuit to another, and the Supreme Court is highly unlikely to provide a nationwide decree because it rarely grants certiorari in an individual tax refund dispute. Another obstacle to Supreme Court review arises where, as here, the taxpayer wins at the appellate stage and is left with no avenue for seeking certiorari. See Electr. Fittings Corp. v. Thomas & Betts Co.,
Finally, the dissent concocts an extravagant scenario in an effort to show that a refund suit would be an adequate alternative remedy. In the dissent’s view, Appellants should have “skip[ped] the administrative process altogether and directly file[d] tax refund suits under 28 U.S.C. § 1346(a)(1).” Diss. Op. at 741. Then, in order to rebuff the IRS’s inevitable motion to dismiss for failure to exhaust administrative remedies, the Appellants could assert that, under McCarthy, their lack of exhaustion is excusable because the IRS’s administrative remedies are unreasonable and unlawful. Id.
The first problem is, as explained above, this is not a refund suit — Appellants are seeking equitable relief rather than “recovery of any internal revenue tax.” 26 U.S.C. § 7422(a). Therefore allowing Appellants’ APA suit to proceed does not “duplicate existing procedures for review of agency action.” Bowen v. Mass.,
The dissent’s defense of the IRS’s prerogatives is ironic. The IRS promulgated Notice 2006-50 as a way to avoid thousands of successful corporate refund suits and to spare individuals, who — unlike their corporate counterparts — had no incentive to pursue costly litigation against the IRS. By promulgating the 2006 rule, the IRS effectively conceded a case-by-case resolution would be both inefficient and unfair. The moral of the dissent’s story is that such remedies are now perfectly adequate.
IV
The IRS argues this suit is not ripe because it is a “pre-enforcement” action. The aim of the ripeness doctrine is to “prevent the courts, through avoidance of premature adjudication, from entangling themselves in abstract disagreements over administrative policies, and also to protect the agencies from judicial interference until an administrative decision has been formalized and its effects felt in a concrete way by the challenging parties.” Abbott Labs. v. Gardner,
We rejected the Service’s pre-enforcement argument at the panel stage and did not grant en banc review to reconsider it. The panel held this case was a post-enforcement action, and therefore fit for review, because Notice 2006-50 constituted final and reviewable agency action barring Appellants “from pursuing their refunds in court by virtue of the fact that they did not exhaust their administrative remedies under the only available avenue — Notice 2006-50.” Cohen,
The dissent tweaks this argument by describing this case as a “pre-application” challenge, rather than a “pre-enforcement” challenge. Diss. Op. at 745. Thus, the dissent shifts focus from the fitness of Notice 2006-50, which the dissent concedes, Diss. Op. at 742-43, to the alleged “benefit” Appellants seek, i.e. the hardship inquiry. Diss. Op. at 744. But again, conceiving of Appellants as taxpayers looking for a handout is flawed. The APA does not offer any monetary award. Nor is the money the IRS wrongfully took a benefit the Service may choose (or not choose) to bestow upon Appellants, such as amnesty for undocumented immigrants, see Reno v. Catholic Social Services,
The dissent argues any delay caused by filing individual refund claims would not “constitute [a] sufficient hardship.” Diss. Op. at 743. But, in the context of APA challenges, we have previously said “[lack of] hardship cannot tip the balance against judicial review,” Nat’l Ass’n of Home Builders v. U.S. Army Corps of Eng’rs,
The practical consequence of the dissent’s ripeness argument is a judicially created exemption for the IRS from suit under the APA. There may be good policy reasons to exempt IRS action from judicial review. Revenue protection is one. See Hibbs,
V
The litigation position of the IRS throughout the history of the excise tax has been startling. But the taxpayers’ response to Notice 2006-50 is not so shocking. After conceding the excise tax was collected illegally, the Service set up a virtual obstacle course for taxpayers to get their money back.
This suit is not about the excise tax, its assessment, or its illegal collection. Nor is it about the money owed the taxpayers. This suit is about the obstacle course, and the decisions made by the IRS while setting it up. As a result, we have federal question jurisdiction, and neither the AIA nor the DJA provide a limitation on our exercise of it. Because Appellants have no other adequate remedy at law, the district court should consider the merits of their APA claim on remand.
So ordered.
Notes
. The panel decision, Cohen v. United States,
. The IRS modified Notice 2006-50 on January 29, 2007. See I.R.S. Notice 2007-11, 2007-
. The IRS promulgated a different procedure for business entities (as opposed to individuals) seeking an excise tax refund. See Notice 2007-11. Entities could use the "Business and Nonprofit Estimation Method” formula to calculate their refund, or gather all their phone records during the refund period instead. See id. § 12.
. Notice 2006-50 ultimately proved an ineffective means of refunding the excise tax. According to a report issued by the Treasury Inspector General for Tax Administration, the IRS illegally collected approximately $8 billion between February 28, 2003, and August 1, 2006. Treasury Inspector General for Tax Administration, Report No. 2007-30-178, Although Strong Efforts Were Made, a Significant Amount of the Telephone Excise Tax Over-collected From Individual Taxpayers May Never Be Refunded 6 (Sept. 26, 2007). But the IRS only refunded "just over half” that amount, id. at 5 n. 3, as only 1.7 percent of the 10 to 30 million eligible individuals without income tax filling obligations actually sought a refund. U.S. Government Accountability Office, GAO-07-695, Tax Administration: Telephone Excise Tax Refund Requests Are Fewer Than Projected And Have Had Minimal Impact On IRS Services 10 (2007).
. The three suits differ in one important respect. The Cohen plaintiffs separately filed a refund claim with the Service, which the district court dismissed as premature. Our panel decision affirmed the dismissal, Cohen,
. In Williams Packing, the Supreme Court recognized a narrow judicially created exception to the AIA’s prohibition on injunctive relief: when "it is clear that [1] under no circumstances could the Government ultimately prevail, the central purpose of the Act is inapplicable and ... [2] the attempted collection may be enjoined if equity jurisdiction otherwise exists.” Williams Packing,
. The IRS argues Bob Jones, and its companion case Alexander v. “Americans United” Inc., support reading the AIA to preclude Appellants’ claims because neither “directly involved] assessment or collection.” This misconstrues the holding of Bob Jones and "Americans United." In both cases, the judicial relief requested would have impacted the litigants’ future tax liability because only 501(c)(3) organizations are exempt from FICA and FUTA taxes. Bob Jones,
. Furthermore, because the AIA strips the court of its authority to issue injunctive relief, the IRS's proposed reading of "assessment and collection” would also preclude equitable relief in § 7422(a) proceedings (i.e. refund suits), since a refund claim may ultimately alter the amount of revenue the Treasury retains. This result, however, is at odds with the Service's subsequent argument that Appellants could obtain the relief they sought in a refund suit. Oral Arg. 41.
. Congress subsequently amended the AIA to preclude suits by third-party property holders. Federal Tax Lien Act of 1966, Pub.L. No. 89-719, § 110, 80 Stat. 1125, 1144.
. Section 704 "is not a jurisdiction-conferring statute." Trudeau,
. To clarify, although 28 U.S.C. § 1346(a)(1) grants concurrent jurisdiction to district courts and the Court of Federal Claims, the Code speaks of refund suits as those filed "under section 7422(a),” 26 U.S.C. § 6532, and "filed with the Secretary," id. § 7422(a).
. The dissent argues Appellants' "objectives” are monetary: “billions of dollars in additional refunds” and a "class-wide jackpot.” Diss. Op. at 737, 737-38. But this framing is misleading. Although Appellants may ultimately seek additional refunds if IRS Notice 2006-50 is invalidated and they succeed in substituting a more "effective” (and perhaps more fruitful) refund mechanism in its stead, Appellants' APA suit is a distinct part of their bifurcated litigation strategy. It offers no monetary relief, tax refund or otherwise. Furthermore, the IRS is no victim. And Appellants are not raiders in pursuit of an unwarranted windfall; they are aggrieved citizens in search of accountability.
Dissenting Opinion
with whom Chief Judge SENTELLE and Circuit Judge HENDERSON join, dissenting:
From 2003 to 2006, millions of Americans paid excessive taxes on long-distance telephone calls. In 2006, the Government announced that it would refund the overpaid taxes. In IRS Notice 2006-50 (in what we will refer to as the 2006 “refund rules”), the Government established a simple process for obtaining refunds. Taxpayers who wanted to claim a standard refund amount — ranging from $30 to $60— could simply check a box on their 2006 income tax returns. Those who wished to claim an amount greater than the standard amount could file a Form 8913 with their 2006 income tax returns and itemize the refund due. And those who would not otherwise file a tax return for 2006 could file a newly created Form 1040EZ-T to claim the standard amount, and attach
Approximately 90 million Americans followed those simple instructions and promptly received their refunds. As remedial government programs go, this one worked reasonably well.
The ten individual plaintiffs in this case were aware of the 2006 refund rules. But so far as the record reveals, none of them chose any of the readily available alternatives for obtaining a refund. None checked the standard refund box on their 2006 tax returns. Nor did any file a Form 8913 with their 2006 tax returns to claim a refund amount greater than the standard refund. Nor did any file a Form 1040EZ-T. Nor did any file a tax refund suit to complain about the amount available from the IRS or the refund rules.
Instead, plaintiffs decided to up the ante. They filed a purported class-action lawsuit in U.S. District Court. Plaintiffs sued under the Administrative Procedure Act, claiming that the IRS’s 2006 refund rules were promulgated without proper notice and that the refund scheme would not fully compensate them for their overpaid taxes. Plaintiffs seek declaratory and injunctive relief. They want a judicial declaration that the refund scheme is unlawful and an injunction ordering the Government to devise a new refund process so as to correct the alleged flaws.
The reader may wonder why plaintiffs didn’t simply file the relevant forms with the IRS to get refunds, and if dissatisfied with the amounts they received or with the IRS’s refund rules, bring individual tax refund suits. After all, each plaintiff could have raised complaints about the refund rules in such a case, and each plaintiffs litigation would have long since concluded by now. The answer seems to be that plaintiffs are litigating primarily on behalf of others, not themselves. Plaintiffs’ ultimate objectives are class certification and a court order that the U.S. Government pay billions of dollars in additional refunds to millions of as-yet-unnamed individuals who never sought refunds from the IRS or filed tax refund suits. It seems that plaintiffs have deliberately avoided filing individual refund claims with the IRS and filing tax refund suits because they think they have a better chance of obtaining class certification if they don’t take those steps. And class certification is a necessary prerequisite to the class-wide jackpot plaintiffs are seeking here.
In any event, regardless of this case’s unusual background and its potentially large effect on the U.S. Treasury, the present appeal raises only a straightforward legal question.
The issue, boiled down to its essentials, is whether plaintiffs can raise their objections to the 2006 refund rules in this APA suit — or instead must raise their claims in tax refund suits after first filing refund claims with the IRS. It is important to underscore that the fundamental issue here is timing: It concerns when plaintiffs
For two alternative reasons, plaintiffs cannot maintain this APA suit. First, the APA itself bars this suit because plaintiffs have an adequate alternative judicial remedy, namely tax refund suits. Second, under the ripeness doctrine, plaintiffs must file refund claims with the IRS before bringing suit to challenge the 2006 refund rules. We will address each point in turn.
I
The Government contends that the Administrative Procedure Act itself bars plaintiffs from maintaining this APA suit. See Gov’t Br. at 63. We agree. Under §§ 703 and 704 of the APA, plaintiffs cannot maintain this APA suit because they have an alternative congressionally specified judicial forum in which to pursue their complaints about the 2006 refund rules- — • namely, a tax refund suit.
The APA provides for judicial review of agency action. But the APA may not be invoked when Congress has specified other judicial review procedures. Section 703 of the APA states: “The form of proceeding for judicial review is the special statutory review proceeding relevant to the subject matter in a court specified by statute,” provided that the statutorily specified review proceeding is not “inadequa[te].” 5 U.S.C. § 703 (emphasis added). Relatedly, § 704 of the APA provides: “Agency action made reviewable by statute and final agency action for which there is no other adequate remedy in a court are subject to judicial review.” 5 U.S.C. § 704 (emphasis added).
For our purposes, both provisions make the same point: A party cannot bring a freestanding APA suit when Congress has specified a different judicial review procedure “relevant to the subject matter,” so long as that congressionally specified review procedure is “adequate.” See, e.g., Attorney General’s Manual on the Administrative Procedure Act 101 (1947) (describing adequate remedy under § 704 by cross-reference to § 703).
As the Supreme Court has explained, the APA “does not provide additional judicial remedies in situations where the Congress has provided special and adequate review procedures.” Bowen v. Massachusetts,
Here, Congress has established a judicial procedure that, to use the terms of § 703, is “relevant to the subject matter” — namely, a tax refund suit. Section 1346(a)(1) of Title 28 provides:
The district courts shall have original jurisdiction, concurrent with the United States Court of Federal Claims, of ... [a]ny civil action against the United States for the recovery of any internal-revenue tax alleged to have been erroneously or illegally assessed or collected, or any penalty claimed to have been collected without authority or any sum alleged to have been excessive or in any manner wrongfully collected under the internal-revenue laws....
As the Supreme Court and this Court have explained on many occasions, the tax refund suit is a statutorily designed judicial procedure for a taxpayer to wrangle with the IRS over taxes, refunds, or the legality of IRS tax collection or refund practices. See generally United States v. Clintwood Elkhom Mining Co.,
The only remaining question is whether the tax refund suit is “adequate” here. It plainly is. In tax refund suits, plaintiffs and others similarly situated could obtain judicial review of their complaints about the 2006 refund rules. In such suits, plaintiffs could obtain the larger refunds
Because plaintiffs can raise their objections to the 2006 refund rules and obtain tax refunds and appropriate equitable relief in a tax refund suit, the tax refund suit is an adequate alternative judicial procedure.
The majority opinion seems to think that, in invoking §§ 703 and 704, we are advancing an exhaustion argument. See Maj. Op. at 731-33. We are not. There is a difference between (i) the doctrine requiring exhaustion of administrative remedies and (ii) the §§ 703/704 principle that applies when, as here, Congress has provided alternative judicial procedures. Bowen,
In response to this point, the majority opinion relies heavily on McCarthy v. Madigan,
In sum, the tax refund suit is the proper judicial forum for plaintiffs to raise their complaints about the 2006 refund rules. Because the tax refund suit is a special statutory judicial review proceeding relevant to the subject matter and because it is an adequate forum, plaintiffs cannot maintain this APA challenge to the 2006 refund rules.
II
The Government alternatively raises a mix of administrative exhaustion, finality, and ripeness principles in arguing that plaintiffs must file refund claims with the IRS before suing. See Gov’t Br. at 54-69. Those three doctrines are notoriously intermingled. See 2 Richard J. Pierce, Jr., Administrative Law Treatise § 15.17 (5th ed.2010) (exhaustion, finality, and ripeness “overlap significantly, and ... are sometimes indistinguishable”); Ticor Title Ins. Co. v. FTC,
We conclude that the ripeness doctrine precludes consideration of plaintiffs’ claims at this time and requires plaintiffs to file refund claims with the IRS before suing. (The ripeness bar is separate from and in addition to the APA §§ 703/704 bar that we discussed above.)
“Ripeness is a justiciability doctrine” that is “drawn both from Article III limitations on judicial power and from prudential reasons for refusing to exercise jurisdiction.” Nat’l Park Hospitality Ass’n v. Dep’t of Interior,
The principal issue here concerns the second prong of the ripeness doctrine: hardship. Do the 2006 refund rules require, in the words of Abbott Laboratories,
To borrow the words of a recent Supreme Court ripeness decision, the 2006 tax refund procedure “does not command anyone to do anything or to refrain from doing anything; it does not grant, withhold, or modify any formal legal license, power, or authority; it does not subject anyone to any civil or criminal liability; and it creates no legal rights or obligations.” Natl Park Hospitality Ass’n,
Moreover, it is well settled that the mere “burden of participating in further administrative and judicial proceedings does not constitute sufficient hardship” for purposes of the ripeness analysis. AT&T Corp. v. FCC,
Plaintiffs and the majority opinion suggest that it would be easier to mount one APA challenge rather than a series of
Put simply, the general ripeness principle that emerges from the case law and that governs here is this: When an agency rule prohibits conduct backed by sanctions or imposes an obligation backed by sanctions, an aggrieved party often may challenge the rule immediately and need not wait to challenge it in its defense to an enforcement action after violating the rule. The rationale is that a party should not be forced into the “dilemma” of violating an allegedly unlawful rule and risking a heavy sanction “if they’ve guessed wrong and the rule is upheld in the penalty proceeding.” Abbs v. Sullivan,
Allowing this APA suit to go forward at this time is flatly inconsistent with the ripeness principles articulated in cases such as Abbott Laboratories, Reno v. Catholic Social Services, and National Park Hospitality Association. Plaintiffs must file a refund claim with the IRS before bringing suit.
It is true that our Court — albeit not the Supreme Court — has sometimes permitted judicial review when an issue was fit for resolution, notwithstanding a lack of hardship to the plaintiffs from waiting, so long as there were “no significant agency or judicial interests militating in favor of delay.” Nat’l Ass’n of Home Builders v. U.S. Army Corps of Eng’rs,
But here, there are “significant agency or judicial interests militating in favor of delay.” Nat’l Ass’n of Home Builders,
In any event and perhaps more to the point, we don’t need to guess how the Abbott Laboratories test applies to the kind of agency rule at issue here. The Supreme Court has told us how — in cases such as Reno v. Catholic Social Services and National Park Hospitality Association. Those cases stand for the proposition that pre-application challenges to rules that set forth criteria for government payments or benefits are not ripe.
Under the APA, plaintiffs must file tax refund suits to raise their complaints about the 2006 refund rules. Alternatively, the ripeness doctrine precludes plaintiffs from suing until after they file refund claims with the IRS. For either of those two alternative and independent reasons, plaintiffs’ APA suit should be dismissed.
. The majority opinion suggests that the IRS's refund program didn’t work well because the Government did not give refunds to people who did not request refunds. See Maj. Op. at 721 n. 4. We find that an odd criticism. The IRS aggressively publicized the refund procedure so that people who were due refunds would know how to request them. Ninety million taxpayers managed to do so.
. Those § 703 and § 704 requirements are related to a bedrock principle of the American legal system: Equitable relief is not available when there is an adequate remedy at law. See Judiciary Act of 1789, § 16, 1 Stat. 73, 82; Bob Jones Univ. v. Simon,
. Numerous cases have applied that principle. See ICC v. Brotherhood, of Locomotive Engineers,
. Plaintiffs acknowledge that they ultimately want additional refunds of the taxes wrongly collected, in addition to equitable relief. Indeed, they would not have standing to challenge the 2006 refund rules unless they wanted additional refunds.
. In challenging the adequacy of tax refund suits, plaintiffs hint that declaratory and injunctive relief might be available only in APA suits, and not in tax refund suits. That is wrong; indeed, the Supreme Court has indicated just the opposite.
To begin with, the Declaratory Judgment Act bars declaratory relief "with respect to Federal taxes,” 28 U.S.C. § 2201(a), and the Anti-Injunction Act bars injunctions "for the purpose of restraining the assessment or collection of any tax,” 26 U.S.C. § 7421(a). By their terms, those statutory bars apply in APA suits as well as in tax refund suits. See 5 U.S.C. § 702 (preserving "other limitations on judicial review”). Therefore, if a taxpayer could obtain equitable relief in an APA suit, as plaintiffs here argue, the taxpayer could also obtain such relief in a tax refund suit. That point alone suffices to show that the tax refund suit is an adequate forum for plaintiffs to seek appropriate declaratory and injunctive relief.
In addition, precedent demonstrates that declaratory relief and injunctive relief are available in tax refund suits. The Supreme Court has indicated that injunctive relief is available in the tax context, despite the terms of the Anti-Injunction Act. See South Carolina v. Regan,465 U.S. at 373-81 & 377-78 n. 16,104 S.Ct. 1107 ; Bob Jones,416 U.S. at 748 n. 22,94 S.Ct. 2038 . Moreover, the Supreme Court has suggested that injunctive relief would be available only in tax refund suits— and not in APA suits — where, as here, Congress has provided tax refund suits as "an alternative avenue for an aggrieved party to litigate its claims.” South Carolina v. Regan,465 U.S. at 381 ,104 S.Ct. 1107 ; compare id. at 373-81 & 377-78 n. 16,104 S.Ct. 1107 (injunction available in nontax-refund suit only because plaintiffs could not pursue tax refund suit) with Bob Jones,416 U.S. at 748 & n. 22,94 S.Ct. 2038 (injunction not available in APA suit because plaintiffs could pursue tax refund suit); see also Americans United,416 U.S. at 761-62 ,94 S.Ct. 2053 . The Supreme Court has not had occasion to expressly state that it would allow claims for declaratory relief in tax refund suits, although that presumably also would be permitted under the South Carolina v. Regan/Americans United/Bob Jones reasoning. After all, injunctive relief typically entails a declaration plus an order to do or refrain from doing something, meaning that declaratory relief is, in essence, a lesser-included version of injunctive relief. As plaintiffs rightly say, it would be "logically incoherent” and “nonsensical” to allow injunctive relief but forbid declaratory relief. See Cohen Br. at 22, 37; see also California v. Grace Brethren Church,457 U.S. 393 , 408,102 S.Ct. 2498 ,73 L.Ed.2d 93 (1982) ("there is little practical difference between injunctive and declaratory relief”).
Finally, it bears mention that the Government has acknowledged that plaintiffs could obtain appropriate declaratory and injunctive relief in tax refund suits. See Tr. of Oral Arg. at 39-41.
.Even if there were somewhat greater equitable relief available in this APA suit than in a tax refund suit (which there isn’t), we have said that “the alternative remedy need not provide relief identical to relief under the APA, so long as it offers relief of the 'same genre.’ " Garcia,
. The majority opinion cites one case from 1987 in which this Court allowed a suit that might have been brought as a refund suit to proceed under the APA. See Foodservice & Lodging Inst., Inc. v. Regan,
. APA §§ 703 and 704 require plaintiffs to bring their claims in tax refund suits; in those tax refund suits, plaintiffs in turn would be statutorily required — absent some legitimate exception to the exhaustion requirement — to first exhaust their administrative remedies. See 26 U.S.C. § 7422(a) ("No suit or proceeding shall be maintained in any court for the recovery of any internal revenue tax alleged to have been erroneously or illegally assessed or collected, or of any penalty claimed to have been collected without authority, or of any sum alleged to have been excessive or in any manner wrongfully collected, until a claim for refund or credit has been duly filed with the Secretary, according to the provisions of law in that regard, and the regulations of the Secretary established in pursuance thereof.”).
Contrary to what the Government argues, the § 7422(a) exhaustion requirement would apply not because § 7422(a) itself requires that this APA suit be deemed a tax refund suit preceded by exhaustion of administrative remedies. Rather, the § 7422(a) exhaustion requirement would apply because §§ 703 and 704 of the APA, in conjunction with 28 U.S.C. § 1346(a)(1), require plaintiffs to bring their claims in tax refund suits, and § 7422(a) in turn requires exhaustion in those tax refund suits.
. In the two cases McCarthy cited in describing this exception, the plaintiffs had argued that the exhaustion requirement was unconstitutional. See
. See also Reno v. Catholic Social Services, Inc.,
. Professor Pierce has described the Court’s ripeness jurisprudence as precluding “pre-application judicial review of any rule that purports to describe criteria for obtaining any form of government benefit, e.g., social security, veterans benefits, any license, or exemption from any regulatory obligation.” 2 Richard J. Pierce, Jr., Administrative Law Treatise § 15.14 (5th ed.2010).
. In arguing that we should not entertain plaintiffs’ APA claim now, the Government also raises yet another alternative argument: that the Declaratory Judgment Act and the Anti-Injunction Act together bar APA suits challenging IRS refund rules. That argument raises extremely difficult issues of statutory interpretation, as the panel opinions in this case explored. But that statutory question ultimately is not necessary to our resolution of the case because §§ 703/704 of the APA and the ripeness doctrine each independently bar this suit. The majority opinion chides us for not addressing the additional statutory issue regarding the Declaratory Judgment and Anti-Injunction Acts. See Maj. Op. at 723-24. Having found two separate and independent bars to plaintiffs' suit, we see no need to consider the several other objections raised by the Government. Of course, in order to allow this suit to go forward, the majority opinion by contrast must consider and reject each of the Government's objections. That's why the majority opinion needs to address the statutory issue regarding the Declaratory Judgment and Anti-Injunction Acts, and we do not.