LINCHPINS OF LIBERTY, et al., Plaintiffs, v. UNITED STATES, et al., Defendants.
Civil Action No. 13-777 (RBW)
United States District Court, District of Columbia.
Signed October 23, 2014
REGGIE B. WALTON, United States District Judge
The plaintiffs, forty-one organizations that sought or are still seeking tax-exempt status from the Internal Revenue Service (IRS), filed this civil action against the United States of America, the IRS, and several known and unknown IRS officials in both their official and individual capacities,1 alleging violations of the First Amendment, the Fifth Amendment, the Administrative Procedure Act (APA),
The plaintiffs assert that they are all organizations that applied for [
The plaintiffs allege that [a]s early as February 2010, the IRS began identifying [tax-exempt] applications for additional scrutiny, which includ[ed] the issuance of letter requests for additional information from organizations with conservative-sounding names. Id. ¶ 92 (citing Am. Compl., Exhibit (Ex.) 1 (May 14, 2013 Report from the Treasury Inspector General for Tax Administration (the Report)) at 5-6, 30); see also id. ¶¶ 94-95, 280. The plaintiffs further allege that in August 2010, IRS employees distributed a list entitled Be On The Lookout—otherwise known as the BOLO list. Id. ¶ 124. The BOLO list allegedly contained terms that would identify organizations with conservative-sounding names that had applied for tax-exempt status under [Sections] 501(c)(3) or 501(c)(4), but no terms that would identify progressive or liberal groups. Id. The plaintiffs assert that as of July 2011, the BOLO list continued to focus on organizations associated with ... conservative philosophies. Id. ¶ 170. The BOLO list remained in place for another eighteen (18) months.5 Id.; see also id. ¶¶ 276-77.
In support of their allegations, the plaintiffs note that on May 10, 2013, one of the named individual defendants apologized in a speech before the American Bar Association for a pattern of misconduct whereby the IRS intentionally and systematically targeted for additional and unconstitutional scrutiny[,] conservative organizations applying for tax-exemption.6 Id. ¶ 1; see also id. ¶¶ 309-10. The plaintiffs also cite the May 14, 2013 Report released by the Treasury Inspector General for Tax Administration, which stated,
(a) targeting of tax-exempt applications for additional scrutiny and inquiry based on inappropriate criteria—including organizational names and policy positions;
(b) significantly delaying the processing of these applications, keeping them open over twice the length of time typically required to process tax-exempt applications; and
(c) requesting additional information from these applicants that was entirely unnecessary and irrelevant to the IRS‘s determination regarding the organizations’ respective tax-exempt statuses.
Id. ¶ 275 (citing Ex. 1 (The Report) at 5-20).
Under this alleged IRS scheme, IRS officials across the country purportedly pulled applications from conservative organizations, delayed processing those applications for sometimes well over a year, [and] then made harassing, probing, and unconstitutional requests for additional information. Id. ¶ 2; see also id. ¶¶ 288-92. According to the plaintiffs, [t]he IRS scheme had a dramatic impact on targeted groups, causing many to curtail lawful activities, expend considerable unnecessary funds, lose donor support, and devote countless hours of time to responding to onerous and targeted IRS information requests that were outside the scope of legitimate inquiry. Id. ¶ 3. As a result of the aforementioned allegations, the plaintiffs seek[] damages for the implementation of the alleged IRS scheme, as well as declaratory[ ] and injunctive relief to halt IRS targeting and strike down all unconstitutional rules, regulations, practices, and procedures that empowered the IRS‘s unlawful acts. Id. ¶ 5; see also id. ¶¶ 311-16.
The plaintiffs filed suit on May 29, 2013, ECF No. 1, and have since amended their complaint twice, once on June 25, 2013, ECF No. 27, and again on October 18, 2013, Am. Compl. at 81. Counts one through three seek monetary damages against certain defendants in their individual capacities for carrying out the alleged IRS scheme in violation of the First and Fifth Amendments. See Am. Compl. at 61-65. Counts four through seven generally accuse the defendants of violating the APA and seek declaratory and injunctive relief. See id. at 66-75. Count eight seeks declaratory relief under
After the plaintiffs instituted this action, the IRS publicly released a memorandum on its website stating that the challenged IRS scheme had been suspended as of June 20, 2013. Daniel Werfel, Charting a Path Forward at the IRS: Initial Assessment and Plan of Action, at 7 (June 24, 2013), www.irs.gov/PUP/newsroom/Initial%20Assessment%20and%20Plan%20of%20Action.pdf) (IRS Action Plan) (We have suspended the use of ‘be-on-the-lookout,’ or BOLO, lists in the application process for tax exempt status.); id. at 14 (Specifically, the IRS has[] suspended the use of BOLO lists in the application process for tax[-]exempt status .... ); id. at Appendix (App.) C (Memo Suspending [U]se of BOLO Lists (June 20, 2013)); id. (Effective immediately, the use of watch lists to identify cases or issues requiring
II. STANDARDS OF REVIEW
A. Rule 12(b)(1) Motion to Dismiss
B. Rule 12(b)(6) Motion to Dismiss
A
III. ANALYSIS
A. Counts One Through Three of the Plaintiffs’ Complaint
The plaintiffs seek a monetary remedy, also commonly known as a Bivens remedy,8 against the individual IRS defendants in their individual capacities for their alleged violations of the First and Fifth Amendments in counts one through three of the amended complaint. Am. Compl. at 61-65; see also Pls.’ Resp. at 5-42. In response, the individual IRS defendants generally have two bases for dismissal of these counts: (1) no Bivens claims can be asserted against the individual IRS defendants; and (2) to the extent any Bivens claims are allowed, the individual IRS defendants are entitled to qualified immunity. See, e.g., Mgmt. Mot. at 4-17; Hull Mot. at 9-41. As explained below, contrary to the plaintiffs’ contention that the District of Columbia Circuit has long recognized the availability of a Bivens action for constitutional claims similar to those raised by the [p]laintiffs, Pls.’ Resp. at 9, this Circuit does not permit the Court to create a Bivens remedy against the individual IRS defendants, and thus the Court need not address whether qualified immunity bars the relief sought in counts one through three.
In Kim v. United States, 632 F.3d 713 (D.C.Cir.2011), the Circuit dealt with aggrieved taxpayers who alleged IRS wrongdoing, including unconstitutional conduct by individual IRS employees, and sought Bivens relief as a result of the alleged harm. Id. at 714-15. The Circuit affirmed the district court‘s dismissal of the Bivens claims against the [defendants in their official capacities pursuant to
The plaintiffs attempt to distinguish Kim on the basis that the alleged injuries in Kim bear no resemblance to the injuries at issue here.9 Pls.’ Resp. at 13. The distinction is without merit when the Circuit‘s opinion is read in context with the district court‘s opinion. In the district court, the aggrieved taxpayers accused the defendants of due process violations in connection with an alleged ongoing campaign of harassment by correspondence and sought a Bivens remedy for those violations. Kim v. United States, 618 F.Supp.2d 31, 33, 34 (D.D.C.2009) (internal quotations omitted), aff‘d in part, rev‘d in part and remanded, 632 F.3d 713 (D.C.Cir.2011). Refusing to create a Bivens remedy for the alleged constitutional violations, the district court recognized that the existence of the Internal Revenue Code, a comprehensive remedial scheme enacted by Congress, precluded it from doing so. Id. at 38-39. On appeal, the Circuit agree[d] with the district court‘s reasoning that no Bivens remedy was available in light of the comprehensive remedial scheme set forth by the Internal Revenue Code. Kim, 632 F.3d at 718; see also NorCal Tea Party Patriots v. IRS, No. 1:13-cv-341, 2014 WL 3547369, at *5-8 (S.D.Ohio July 17, 2014); Church By Mail, Inc. v. United States, No. 87-cv-0754-LFO, 1988 WL 8271, at *3 (D.D.C. Jan. 22, 1988) (explaining that declaratory relief for applicants seeking tax-exempt status under
Here, as in Kim, the alleged injuries in the plaintiffs’ Bivens claims against the individual IRS defendants are also constitutional violations. See Am. Compl. ¶¶ 61-65. The plaintiffs have not meaningfully distinguished—by case authority or otherwise—between the due process violations in Kim and the First and Fifth Amendment violations alleged in this case.10 In light of the district court‘s dismissal of the aggrieved taxpayers’ Bivens claims and the Circuit‘s unequivocal endorsement of the district court‘s Bivens analysis in doing so, the Court can find no compelling reason to depart from Kim.11
Moreover, a former member of this Court was confronted with a nearly identical case to the one before the Court here and refrained from fashioning a Bivens remedy as well. In Church By Mail, the plaintiff, a non-profit church seeking tax-exempt status, filed suit against the defendants, the IRS and various individual IRS agents, for the denial of its tax-exempt status application. 1988 WL 8271, at *1. The plaintiff claimed, inter alia, that the defendants violated the Constitution, in-
B. Counts Four Through Seven of the Plaintiffs’ Complaint
In counts four through seven of the amended complaint, the plaintiffs, either collectively or a subset of them, seek declaratory and injunctive relief for the defendants’ violations of the APA. Am. Compl. at 66-75, 79-80. The [p]laintiffs’ statutory and constitutional claims in [c]ounts [four] through [seven] are all based upon the adoption and implementation of the IRS [t]argeting [s]cheme’ or ‘BOLO [p]olicy.’ Pls.’ Resp. at 44 n.18; see also id. at 57 ( Counts [four] through [seven] seek to enjoin the IRS from applying criteria and demanding confidential information .... ). But unless an actual, ongoing controversy exists, this Court is without power to decide it. See Clarke v. United States, 915 F.2d 699, 700-01 (D.C.Cir.1990). Even where a case once posed a live controversy when filed, the [mootness] doctrine requires the Court to refrain from deciding it if ‘events have so transpired that the decision will neither presently affect the parties’ rights nor have a more-than-speculative chance of affecting them in the future.’ Id. (quoting Transwestern Pipeline Co. v. FERC, 897 F.2d 570, 575 (D.C.Cir.1990)). If the [C]ourt can provide no effective remedy because a party has already ‘obtained all the relief that [it] sought,’ then the case is moot. Schmidt v. United States, 749 F.3d 1064, 1068 (D.C.Cir.2014) (second alteration in original) (quoting Conservation Force, Inc. v. Jewell, 733 F.3d 1200, 1204 (D.C.Cir.2013)); see also Burlington N.R.R. Co. v. Surface Transp. Bd., 75 F.3d 685, 688 (D.C.Cir.1996) (explaining that cases are moot if intervening events make it impossible to grant the prevailing party with effective relief ).
Here, after the plaintiffs commenced this case, the defendants allegedly admitted their wrongful conduct. See,
The Court is aware, however, that the voluntary cessation of challenged governmental conduct does not necessarily moot a case unless ‘(1) there is no reasonable expectation that the conduct will recur and (2) interim relief or events have completely and irrevocably eradicated the effects of the alleged violation.’ Qassim v. Bush, 466 F.3d 1073, 1075 (D.C.Cir.2006) (quoting Motor & Equip. Mfrs. Ass‘n v. Nichols, 142 F.3d 449, 459 (D.C.Cir.1998)). The defendants bear a heavy burden of showing that these criteria have been met. See Am. Bar Ass‘n v. FTC, 636 F.3d 641, 648 (D.C.Cir.2011). And where the defendant is a government actor—and not a private litigant—there is less concern about the recurrence of objectionable behavior. Citizens for Responsibility & Ethics in Wash. v. SEC, 858 F.Supp.2d 51, 61, 62 (D.D.C.2012); D.C. Prof‘l Taxicab Drivers Ass‘n v. District of Columbia, 880 F.Supp.2d 67, 75 (D.D.C.2012) (same).
Here, the Court is satisfied that there is no reasonable expectation that the alleged conduct will recur, as the defendants have not only suspended the conduct, but have also taken remedial measures to ensure that the conduct is not repeated. See IRS Action Plan at 7, 14, App. C; IRS Path Forward; see also Initiative & Referendum Inst. v. U.S. Postal Serv., 685 F.3d 1066, 1074 (D.C.Cir.2012), cert. denied, --- U.S. ---, 133 S.Ct. 1802, 185 L.Ed.2d 811 (2013) ( It is implausible that the [defendant] would have gone through the cumbersome process of amending its regulation ... only to [unconstitutionally] re-amend the regulation after this case is resolved.... ); Coal. of Airline Pilots Ass‘ns v. FAA, 370 F.3d 1184, 1191 (D.C.Cir.2004) (mooting case
Newdow v. Roberts, 603 F.3d 1002, 1008 (D.C.Cir.2010) (holding that while the constitutionality of certain governmental conduct may be an important question to [the] plaintiffs, ... it is not a live controversy that can avail itself of the judicial powers of the federal courts[, and the question] is therefore moot ). The Court will, therefore, dismiss counts four through seven for want of subject-matter jurisdiction pursuant to
In count nine of the amended complaint, the plaintiffs seek monetary judgments against the defendants due to their allegedly illegal[] obtain[ment], inspection], handling], and disclos[ure] by the IRS [defendants] of the plaintiffs’ tax return information. Am. Compl. ¶ 419; see also id. ¶¶ 412-18. According to the plaintiffs, [e]ach inspection and disclosure by any employee or officer of the IRS of the tax return information produced by [the] [p]laintiffs in response to the IRS‘s unconstitutional and discriminatory requests for additional information constitutes a separate violation of [
a taxpayer‘s identity, the nature, source, or amount of his income, payments, re-
ceipts, deductions, exemptions, credits, assets, liabilities, net worth, tax liability, tax withheld, deficiencies, overassessments, or tax payments, whether the taxpayer‘s return was, is, being, or will be examined or subject to other investigation or processing, or any other data, received by, recorded by, prepared by, furnished to, or collected by the Secretary with respect to a return or with respect to the determination of the existence, or possible existence, of liability (or the amount thereof) of any person under this title for any tax, penalty, interest, fine, forfeiture, or other imposition, or offense[.]
Id. § 6103(b)(2)(A); see also id. § 6103(b)(2)(B)-(D). Section 6103 contains numerous exceptions to the general prohibition against disclosure or inspection of tax returns and tax return information, including that:
Returns and return information shall, without written request, be open to inspection17 by or disclosure to officers and employees of the Department of the Treasury whose official duties require such inspection or disclosure for tax administration purposes.
Id. § 6103(h)(1). And [t]he term tax administration :
(A) means—
(i) the administration, management, conduct, direction, and supervision of the execution and application of the internal revenue laws or related statutes (or equivalent laws and statutes of a State) and tax conventions to which the United States is a party, and
(ii) the development and formulation of Federal tax policy relating to existing or proposed internal revenue laws, related statutes, and tax conventions, and
(B) includes assessment, collection, enforcement, litigation, publication, and statistical gathering functions under such laws, statutes, or conventions.
Id. § 6103(b)(4). In short, Section 6103 addresses improper disclosure of tax return information. Mann v. United States, 204 F.3d 1012, 1020 (10th Cir.2000); see also Venen v. United States, 38 F.3d 100, 105 (3d Cir.1994) ( The history of [S]ection 6103 indicates that Congress enacted the provision to regulate a discrete sphere of IRS activity—information handling ).
Section 6103 does not provide a means for the plaintiffs to avoid dismissal of count nine of their complaint. As just noted, Section 6103 concerns the disclosure or inspection, i.e., the handling, of tax return information. Venen, 38 F.3d at 105. To the extent the plaintiffs take issue with the defendants’ handling of its tax return information, those allegations, see Pls.’ Resp. at 75 n.31 (citing Am. Compl. ¶¶ 296, 419-24), are insufficiently pleaded in their amended complaint,18 see Iqbal, 556 U.S. at 679 (conclusory allegations are not entitled to the assumption of truth ).19
The plaintiffs’ real bone of contention is that the defendants allegedly demanded information that was not necessary for determining [their tax-]exempt status, and then inspected, handled, and disclosed it. Pls.’ Resp. at 77-78 (internal quotations omitted). Thus, although the plaintiffs challenge the defendants’ inspection of their tax return information, it is actually the defendants’ alleged unconstitutional conduct in acquiring that information that forms the basis for count nine of the complaint. See id. at 80 ( [T]he IRS inspected return information that was unnecessary to the determination of [the] [p]laintiffs’ tax-exempt status. ); id. at 82 ( The IRS does not ... explain how information unnecessary to the [tax-exempt] determination[ ] process can be used for lawful purpose of ‘tax administration.’ ). But, unfortunately for the plaintiffs, Section 6103 is silent as to how tax return information can be acquired. And even assuming that the defendants improperly acquired the plaintiffs’ tax return information, that does not compel a finding that such information was improperly inspected.20 In the Court‘s view, there is a clear dichotomy between the means by which tax return information is acquired and the disclosure or inspection of that information thereafter. The plaintiffs, however, attempt to have the Court disregard this dichotomy, which conflicts with cases finding that the propriety of certain conduct separate and apart from the actual han-
Supporting the Court‘s adherence to the dichotomy between the IRS‘s acquisition of tax return information for assessing tax-exempt status and the IRS‘s inspection of that information thereafter, is the availability of judicial review and a separate and distinct remedy for an applicant aggrieved during the tax-exempt application process. Cf. Wilkerson, 67 F.3d at 116 ( Congress enacted separate and distinct provisions concerning collection activities and information handling. ); Venen, 38 F.3d at 105 ( In a claim such as the present one based on an improper levy, the concern is not improper information handling but rather improper collection activity. Collection activity is a separate sphere of IRS activity governed by a separate body of law. ). Under
D. Count Eight of the Plaintiffs’ Complaint
Count eight of the amended complaint is brought on behalf of the four plaintiffs that were still awaiting a determination as to whether they qualify as a Section 501(c)(3) tax-exempt organization and seeking a declaratory judgment regarding their Section 501(c)(3) tax-exempt statuses when the complaint was filed. See Am. Compl. ¶¶ 405-11. Since the filing of the complaint, however, two of the four plaintiffs that were awaiting such a determination—Linchpins of Liberty and Abortion Must End Now—have been granted Section 501(c)(3) tax-exempt status. Pls.’ Resp. at 67 ( IRS has ... issued [favorable] [determination [l]etters to Linchpins of Liberty and Abortion Must End Now); see also Defs.’ Reply at 5, 6 n.4. Thus, the defendants contend that count eight is moot as it relates to Linchpins of Liberty and Abortion Must End Now. See Defs.’ Mot. at 2. The plaintiffs do not contest this point, see Pls.’ Resp. at 67, and the Court will accordingly treat it as conceded.24 See Lewis, 2011 WL 321711, at *1. Therefore, count eight, with respect to Linchpins of Liberty and Abortion Must End Now, will be dismissed with prejudice under
IV. CONCLUSION
For the foregoing reasons, the Court grants the defendants’ motions to dismiss.25 SO ORDERED this 23rd day of October, 2014.
REGGIE B. WALTON
United States District Judge