MEMORANDUM OPINION AND ORDER RE: BANKRUPTCY APPEAL AND MOTION FOR STAY PENDING APPEAL
I. INTRODUCTION
Universal Life Church (“ULC”) appeals the November 19, 1993 order of the bankruptcy court denying ULC’s motion for damages for the Internal Revenue Service’s (“IRS”) alleged violation of the automatic stay of 11 U.S.C. § 362. 1 The bankruptcy court held that the IRS did not violate the automatic stay provisions of 11 U.S.C. § 362(a) when it revoked ULC’s tax-exempt status, but even if it did violate § 362(a), the revocation was authorized under the § 362(b)(4) exception to the automatic stay.
ULC also moves for a stay pending appeal of the August 31, 1993 bankruptcy court order to file corporate income tax returns for the fiscal years 1982-1985. The bankruptcy court has previously denied ULC’s request for a stay. The United States has requested a briefing schedule for the appeal of the August 31,1993 order.
II. BACKGROUND
ULC filed a Chapter 11 bankruptcy petition on November 29, 1989. By a letter dated January 8, 1991, the IRS revoked ULC’s tax-exempt status under 26 U.S.C. § 501(c)(3) for the fiscal years ending April 30, 1982 through April 30, 1985. (Appellant’s Excerpt of Record at 40-41 [hereinafter Appellant’s Excerpt].) The revocation letter also informed ULC that it was required to file federal income tax returns for those years. (Appellant’s Excerpt at 41.)
An amended proof of claim for accrued but unassessed federal employment income taxes was filed in the bankruptcy court on October 21, 1992. No post bankruptcy petition claim for any taxes or assessments has been made. Nor has any notice of federal tax lien been filed. Thе government claim for income, employment, and unemployment taxes is an unsecured priority tax claim.
ULC filed a motion in the bankruptcy court on July 20, 1993, requesting both an order that the revocation of tax-exempt status was void as a violation of the automatic stay provisions of 11 U.S.C. § 362(a), and damages for such violation under 11 U.S.C. § 362(h). 2 (Appellant’s Excerpt at 13-23.) The bankruptcy court orally denied the motion on August 30,1993, (Appellant’s Excerpt at 257-58), and issued its first amended written order denying the motion on November 19, 1993 (Appellant’s Excerpt at 274-75). ULC appealed the order on November 22, *437 1993. By an order dated November 8, 1994, this court determined that the bankruptcy court’s order was final for purposes of appeal to the district court under 28 U.S.C. § 158(a).
On June 1, 1993, the United States moved to compel ULC to file corporate income tax returns for the 1982-1985 fiscal years. (Report and Recommendation to United States District Court Concerning Finality of Appealed Order, dated April 6, 1995, at ¶3 [hereinafter Rep. & Rec.].) On August 31, 1993, the bankruptcy court ordered ULC to file such tax returns. (Appellant’s Excerpt at 269-71.) The bankruptcy court refused to reconsider its decision and denied ULC’s request for a stay pending appeal to the district court on November 9, 1993. ULC then filed a notice of appeal and a motion for stay pending appeal with the district court. By order of January 31, 1994, the district court remanded the matter to the bankruptcy court to determinе whether the August 31, 1993 decision was final or interlocutory. On April 6, 1995, the bankruptcy court recommended that the August 31, 1993 decision be considered final for purposes of appeal. On June 8, 1995, ULC again moved the district court to stay the order to file tax returns pending its appeal of that order in the district court. In its motion, ULC asserts that the bankruptcy court reaffirmed its denial of the stay on May 24,1995.
III. STANDARD OF REVIEW
A district court reviews
de novo
a bankruptcy court’s conclusions of law, including matters of jurisdiction.
Matter of Lockard,
When a bankruptcy court has ruled on the issue of a stay of its order pending appeal, the district court, sitting as an appellate court, reviews that decision for abusе of discretion.
In re Wymer,
IV. DISCUSSION
A. Procedural Requirements
The Bankruptcy Rules dictate the length of briefs submitted on appeal from the bankruptcy court, unless the court or local rules issue orders to the contrary. Fed. R.Bank.P. 8010(e). This court has a standing order limiting opening briefs and memoranda to 25 pages each and reply briefs to 10 pages, unless prior leave of court seven days before the filing date is obtained. It is unclear whether counsel in this action received notice of the standing order before filing their briefs. Giving counsel the benefit of the doubt, Bankruptcy Rule 8010(c) will apply here, which limits opening briefs to 50 pages and reply briefs to 25 pages.
ULC’s reply brief on the violation of the automatic stay appeal is 43 pages long. ULC has inсluded 11 pages of additional argument in Appendix G. ULC did not obtain leave to file a brief in excess of the page limits.
ULC has also submitted an excessively long and untimely reply on the motion to stay the order to file tax returns pending appeal. Though the Bankruptcy Rules make no specific provision regarding the length of motions for stay pending appeal, the court believes that an eight page opposition does not warrant a 32 page reply. Finally, Local Rule 230 requires parties to file replies to motions “[n]ot less than five (5) court days preceding the date of hearing.” ULC’s reply was filed on October 18, 1995, only three court days before the hearing date of October 23, 1995. Because the government does not object, the replies will be accepted.
B. Anti-Injunction Act
ULC raises the issue of whether the Anti-Injunction Act deprives the court of subject matter jurisdiction to determine if the revocation of tax-exempt status was a violation of the automatic stay. ULC argued against application of the Anti-Injunction Act in its opening brief because it anticipated that the United States would raise the issue in its opposition brief. (Appellant’s Opening Brief at 32.) The United States did not discuss the Anti-Injunction Act in its opposition brief. Because any federal court must determine whether it has jurisdiction to hear a case, applicability of the Anti-Injunction Act must be considered.
*438 The issue was argued by both parties to the bankruptcy court, (see Appellant’s Excerpt at 137-38, 152-66, 194-98, 214-20, 242-43), after the United States raised the Anti-Injunction Act in its opposition to ULC’s motion in the bankruptcy court, claiming the Anti-Injunction Act prohibited an injunction against the IRS’ revocation of tax-exempt status. (Appellant’s Excerpt at 138.) ULC replied that it does not seek an injunction against revocation of its tax-exempt status, but rather damages for the alleged violation of the automatic stay caused by the revocation. (Appellant’s Excerpt at 198.) The bankruptcy court emphasized in its oral decision on August 30, 1993, “All that’s being decided today is whether or not the effort of the Internal Revenue Service by sending out its notice or letter of revocation violated the аutomatic stay of Section 362.” (Appellant’s Excerpt at 257.)
The Anti-Injunction Act prohibits suits in any court “for the purpose of restraining the assessment or collection of any tax.” 26 U.S.C. § 7421(a). The purpose of this language is “to protect the Government’s need to assess and collect taxes as expeditiously as possible with a minimum of preen-forcement judicial interference, ‘and to require that the legal right to the disputed sums be determined in a suit for refund.’ ”
Bob Jones University v. Simon,
Bob Jones and Alexander did not involve taxpayers in bankruptcy, and do not illuminate the interplay between the bankruptcy automatic stay and the Anti-Injunction Act. However, Bob Jones extensively analyzed the potential adverse economiс effect on a tax-exempt organization which results from revocation of tax-exempt status. Two Courts of Appeals that have considered the interplay of the two Acts reach different results.
In
Bostwick v. United States,
In re Heritage Church and Missionary Fellowship,
Other courts have considered
Bostwick,
but limited it to its specific facts, rather than rejecting its reasoning outright. For example, the lower court in
Heritage,
which was affirmed by the Fourth Circuit, offered a detailed discussion distinguishing its case from the facts in
Bostwick.
Here, it is not apparent that the distinction between Heritage and Bostwick is applicable. One crucial difference lies in the time period of the revocation. In Heritage, the revocation was effective immediately, affecting the current tax returns of contributors to the debtor. Here, the revocation applies only to fiscal years 1982-1985. Because the IRS is prohibited from assessing taxes more than three years after the filing of a tax return for any particular year, 26 U.S.C. § 6501(a), it is unlikely that the revocation will affect the tax liability for 1982-1985 of any contributor to ULC. Accordingly, the revocation might have no effect on the assessment of taxes while the automatic stay is in place, and the Anti-Injunction Aсt would simply not come into play.
The Bankruptcy Court for the Southern District of California has applied
Bostwick
on at least two occasions. That court has found that it has “jurisdiction to enjoin the IRS from the assessment and collection of taxes despite the anti-injunction statute
if such activity interferes with the orderly administration of the estate or the rehabilitation of the debtor.” In re Major Dynamics, Inc.,
Both the district court and the court of appeals in
Heritage
recognized that the automatic stay prohibits the actual assessment and collection of taxes under § 362(a)(6). Thus, the specific rehabilitation purpose of the Bankruptcy Code takes precedence over the Anti-Injunction Act at least in the specific instances of tax assessment and collection. Under a parity of reasoning, the Bankruptcy Code should also take precedence over the Anti-Injunction Act in this case, because the revocation of tax-exempt status is recognized as a prerequisite to the assessment of taxes.
See Bob Jones,
C. Automatic Stay Violation
The filing of a bankruptcy petition under Chapter 11 of the United States Code operates as a stay against any of the activities enumerated under 11 U.S.C. § 362(a) and not exceрted under 11 U.S.C. § 362(b).
1. Violation of § 362(a)
Though ULC argues that § 362 “as a whole” applies to prohibit the revocation of tax-exempt status, both ULC and the United States focus their arguments specifically on §§ 362(a)(1), (4), and (6). At oral argument, ULC also raised specifically §§ 362(a)(3), and (6). The government contends it has not violated the purpose of the automatic stay provision to halt collection activities outside the bankruptcy proceeding, because it has properly filed its claims in the bankruptcy proceeding and has not sought to create or perfect any tax lien.
Section 362(a)(6) prohibits “any act to collect, assess, or recover a claim against the debtor that arose before the commencement of the case under [Title 11].” Revocation of tax-exempt status is a prerequisite act of assessment of a tax.
See Bob Jones,
Section 362(a)(4) prohibits “any act to create, perfect, or enforce a lien against property of the estate.” A tax lien upon property arises only after the IRS assesses a tax deficiency and makes a demand for payment. 26 U.S.C. § 6321. The lien is created immediately upon assessment. 26 U.S.C. § 6322. Enforcement of a tax lien would require a levy or judicial foreclosure. See 26 U.S.C. § 6331(a); 26 U.S.C. § 7403. There has been no action to create or enforce a tax lien because there has been no assessment of taxes nor any levy or judicial foreclosure proceedings instituted. Though the court has held that revocation of tax-exempt status is a prerequisite act of assessment, it is unсlear whether it is also a prerequisite act to create a lien. Section 362(a)(4) stays lien creation against property of the estate. The United States has disclaimed that it sought the status revocation to create a lien and does not contend it is entitled to secured creditor status for pre-petition tax claims arising from the revocation. Under these facts, § 362(a)(4) does not stay the revocation.
Section 362(a)(5) stays “any act to create, perfect, or enforce against property of the debtor any lien to the extent that such lien secures a claim that arose before the commencement of the case under this title.” Under the facts here, the interpretation of § 362(a)(5) is essentially the same as under § 362(a)(4). The IRS has not sought a lien or secured priority based on a claim arising before the filing of the petition. The stay of § 362(a)(5) does not bar the revocation.
Section § 362(a)(3) stays “any act to obtain possession of property of the estate or of property from the estate or to exercise control over property of the estate.” “The purpose of this provision is to prevent dismemberment of the estate.” S.Rep. No. 989, 95th Cong., 2d Sess. 50 (1978),
reprinted in
U.S.C.C.A.N. 5787, 5836. Tax-exempt status is not a property right.
Heritage Village,
Some courts have disagreed with
Braniff,
concluding that government regulation of the use of property through licenses or permits does not negate the existence of a property right in the debtor.
See, e.g., In re Horizon Air, Inc.,
Finally, § 362(a)(1) provides a prohibition against:
“the commencement or continuation, including the issuance or employment of process, of a judicial, administrative, or other action or proceeding against the debtor that was or could have been commenced before the commencement of the case under this title, or to recover a claim against the debtor that arose before the commencement of the case under this title.”
The Ninth Circuit has interpreted this provision broadly, holding that the entire assessment procedure is an administrative proceeding that is stayed by § 362(a)(1).
Delpit v. Commissioner Internal Revenue Service,
2. Exceptions to the Automatic Stay a. § 862(b)(ti
Section 362(b)(4) excepts from the automatic stay of § 362(a)(1) “the commencement or continuation of an action or proceeding by a governmental unit to enforce such governmental unit’s police or regulatory power.” 11 U.S.C. § 362(b)(4). Examples of such actions are “suing a debtor to prevent or stop violation of fraud, environmental protection, consumer protection, safety, or similar police or regulatory laws, or attempting to fix damages for violation of such lаw.” H.R.Rep. 595, 95th Cong., 1st Sess. 342-43 (1977); S.Rep. No. 989, 95th Cong., 2d Sess. 51-52 (1978),
reprinted in
U.S.C.C.A.N. 5787, 5837, 5838, 5963, 6299. Actions which conflict directly “with the control of the res or property of the bankruptcy court” are not excepted from the stay.
Heritage Village,
The district court in
Heritage Village
concluded that revocation of tax-exempt status
*442
was excepted from the automatic stay because it served a police or regulatory function.
Here, the IRS revoked tax-exempt status for ULC because, inter alia, the church’s earnings had inured to the benefit of privatе individuals. Though admittedly the revocation of tax-exempt status inevitably affects the pecuniary interests of United States citizens, all fraud prevention activities are linked to such pecuniary concerns. This does not deny their police function. Revocation of tax-exempt status implements a police power function regulating the government’s interest in advancing the policies underlying the charitable purposes exemptions provided by Congress.
ULC argues that § 362(b)(4) cannot be applicable in this case because it is indistinguishable from the situations in
In re Golden Plan of California,
Finally, ULC argues that § 362(b)(4) is only applicable when the action violates the automatic stay provision of § 362(a)(1) and no other provisions of § 362(a). Thus, ULC asserts, if the court finds that the revocation violated any other provision, such as §§ 362(a)(3), (4), (5), or (6), the exception under § 362(b)(4) does not apply. While it is true that § 362(b)(4) limits its application to violations “under subsection (a)(1),” ULC’s position is untenable. As the Ninth Circuit has held, and as ULC urges, the provisions of § 362(a) overlap.
Delpit,
b. § 362(b)(9)
Section 362(b)(9) excepts from the automatic stay “the issuance to the debtor by a governmental unit of a notice of tax deficiency.”
3
As the Ninth Circuit has ob
*443
served, § 862(b)(9) simply “preserves the [IRS] Commissioner’s claim against the debt- or.”
Delpit,
There is little case law construing § 362(b)(9) more broadly than its plain language. The United States first cites
H & H Beverage Distributors, Inc. v. Dep’t of Revenue,
At least one other court has also refused to extend the application of § 362(b)(9) beyond the discrete act of issuance of a notice of tax deficiency or its functional equivalent. In
In re Apex Oil Co.,
The government offers
In re Hardy,
In Hardy, the form letters were necessary prerequisites, under IRS procedures, to the issuance of the final notice of deficiency. Here, the revocation of tax-exempt status is not a legal precondition to the issuance of a notice of deficiency, nor is it the functional equivalent of such notice. As a practical matter, the IRS must revoke an organization’s tax-exempt status in order to issue it a notice of tax deficiency, but the two actions are not part of an integrated procedure as were the letters and notice in Hardy. In the absence of authority interpreting § 362(b)(9) to include all necessary acts preliminary to the issuance of a notice of tax deficiency, the provision must be construed to be limited by its express language.
The effect of such a holding will limit the application of (b)(9) to cases where the prerequisite acts to the issuance of a notice of tax deficiency have been made before the debtor files its bankruptcy petition. In those cases, the IRS will be in a position to simply issue a post-petition notice of deficiency, an act expressly excepted from the automatic stay by § 362(b)(9). Perhaps to avoid such a *444 narrow application of (b)(9), Congress amended the provision in 1994 to expand its application to audits and assessments of tax liability. The amendment to (b)(9) supports the inference that the scope of the pre-1994 law was limited to its express terms. In this case, where the pre-1994 statute applies, there is no authority to expand the interpretation of § 362(b)(9) and the exception does not operate to avoid the automatic stay.
The revocation is excepted from the automatic stay under § 362(b)(4). The bankruptcy court’s judgment is AFFIRMED.
D. Stay of Order Pending Appeal
The bankruptcy judge’s decision is reviewed for abuse of discretion. The bankruptcy judge (Judge Eisen) denied the request for a stay pending appeal in his order of November 9, 1993. The order does not state the reasons for denial, nor does the transcript of the hearing at which the judge orally denied the stay reveal any findings or explanation for the ruling. ULC asserts that the bankruptcy court again addressed the issue of a stay on May 24, 1995 when the bankruptcy judge was unwilling to revisit the bankruptcy court’s previous decision. It is Judge Eisen’s decision of November 9, 1993 that must be reviewed. Judge Eisen did not articulate the basis for denial of the stay pending appeal. Denial of a motion to stay enforcement of an order pending appeal is reviewed for abuse of discretion.
In re Wymer,
An appellant seeking a discretionary stay pending appeal under Bankruptcy Rule 8005 must prove:
(1) appellant is likely to succeed on the merits of the appeal;
(2) appellant will suffer irreparable injury;
(3) no substantial harm will come to appel-lee;
(4) the stay will do no harm to the public interest.
In re Byrd,
It is unclear that ULC is likely to succeed on the mеrits of its appeal. The decision of the bankruptcy court regarding the revocation of tax-exempt status is a separate action from the order to file income tax returns.
ULC argues that the IRS had no authority to revoke its tax-exempt status and to demand the filing of tax returns because the district court, not the IRS, granted ULC its tax-exempt status in the first place. Therefore, ULC asserts, the separation of powers doctrine requires the IRS to seek approval from the district court before revoking ULC’s tax-exempt status in this ease. ULC argues that collateral estoppel and res judicata bind the IRS to the district court’s earlier decision to grant tax-exempt status until the district court makes a new dеtermination that changed circumstances warrant revocation of such status. As ULC correctly argues, collateral estoppel is applicable even where some facts differ in the two cases at issue, if “the differing facts were not ‘essential to the judgment’ or ‘of controlling significance’ in the first case.”
Starker v. United States,
The district court ordered that ULC was entitled to tax-exempt status in
Universal Life Church, Inc. v. United States,
Nor is the initial forum for determination of tax-exempt status the district court. The district court gained jurisdiction over the matter in 1974 when ULC challenged payment of taxes in a refund suit, claiming that the IRS had erroneously denied tax-exempt status.
Universal Life Church,
Second, ULC has not shown that it will suffer irreparable harm. ULC continues to assert that the filing of tax returns will be an admission of tax liability. ULC’s citations to
United States v. Dinnell,
ULC has also failed to show that the revocation will cause irreparable harm to the level of contributions ULC receives to support itself. The revocation concerns only three past years. It does not concern present tax status and thus should not affect current contributions to ULC.
ULC has failed to make the requisite showing on the first two elements. Accordingly, the bankruptcy court’s order is affirmed and the motion to stay pending appeal is DENIED.
E. Request for Briefing Schedule
This reqilest appears to be moot.
CONCLUSION
For the reasons specified above, the orders of the bankruptcy court finding no violation of the automatic stay and denying a stay pending appeal are AFFIRMED.
SO ORDERED.
Notes
. 11 U.S.C. § 362 was amended by Congress on October 22, 1994. This case commenced on July 20, 1993 when ULC filed the instant motion with the Bankruptcy Court. Because the 1994 amendments are inapplicable to cases commenced prior to October 22, 1994, Act of October 22, 1994, P.L. 103-394, Title VII, § 702(b), 108 Stat. 4150, this action is governed by 11 U.S.C. § 362 as it stood before the 1994 amendments.
. Section 362(h) states in relevant part, ''[a]n individual injured by any willful violation of a stay provided by this section shall recover actual damages....” A corporation may not recover damages undеr § 362(h).
In re Goodman,
. This is the text of the statute as it stood on July 20, 1993, when this action commenced. The current § 362(b)(9) is more comprehensive, excepting from the automatic stay:
*443 “(A) an audit by a governmental unit to determine tax liability;
(B) the issuance to the debtor by a governmental unit of a notice of tax deficiency;
(C) a demand for tax returns; or
(D) the making of an assessment for any tax and issuance of a notice and demand for payment of such an assessment (but, any tax lien that would otherwise attach to property of the estate by reason of such an assessment shall not take effect unless such tax is a debt of the debtor that will not be discharged in the case and such property or its proceeds are transferred out of the estate to, or otherwise revest-ed in, the debtor).”
The legislative history to the 1994 amendment of section (b)(9) notes that "it expands the tax exception to the automatic stay.... This section will lift the automatic stay as it applies to a ... demand for tax returns ... or the making of certain assessments of tax and issuance of a notice and demand for payment for such assessment.” H.R.Rep. No. 835, 103rd Cong., 2d Sess. 43 (1994), reprinted in 1994 U.S.C.C.A.N. 3340, 3352. The analysis in this opinion would be different if the new provisions were applicable to this case.
. The court acknowledges that ULC has elected to pursue its remedy under 11 U.S.C. § 505 in the bankruptcy court rather than seek a refund under Title 26. However, this does not change the fact that the filing of tax returns is only an admission of the underlying facts asserted in the return, and not an admission of tax liability or tax status.