United States District Court, District of Columbia
MONTE SILVER, et al. Plaintiffs,
INTERNAL REVENUE SERVICE, et al. Defendants.
MEMORANDUM OPINION AND ORDER
P. Mehta United States District Judge.
of the Tax Cut and Jobs Act of 2017 (“TCJA”),
Congress enacted certain “transition tax”
provisions applicable to “controlled foreign
corporations” owned by “United States
persons.” See generally Pub. L. 115-97, 131
Stat. 2054 (2017). On January 15, 2019, Defendants Internal
Revenue Service and United States Department of Treasury
published final regulations to effectuate these tax
Monte Silver is the sole shareholder of Monte Silver, Ltd., a
company based in Israel. Plaintiffs assert that they are
subject to the TCJA's transition tax provisions. They
bring this action to challenge Defendants' alleged
failure, in connection with promulgating the TCJA's final
regulations, to carry out required small-business impact
evaluations under the Regulatory Flexibility Act and the
Paperwork Reduction Act. Defendants now move to dismiss
Plaintiffs' Complaint. Defendants maintain that the court
lacks subject-matter jurisdiction over this action because
(1) Plaintiffs lack standing, and (2) the Anti-Injunction Act
and the tax exception to the Declaratory Judgment Act
prohibit this lawsuit. See generally Defs.' Mot.
to Dismiss for Lack of Jurisdiction, ECF No. 21 [hereinafter
reasons that follow, Defendants' Motion is denied.
Relatedly, Plaintiffs' Motion to Expedite, ECF No. 27, is
denied as moot.
plaintiff in federal court bears the burden of showing that
she meets the “irreducible constitutional
minimum” of Article III standing: (1) injury in fact,
(2) causation, and (3) redressability. Lujan v. Defs. of
Wildlife, 504 U.S. 555, 560-61 (1992). To establish
standing, as here, at the motion to dismiss stage, the
plaintiff “must state a plausible claim that [she has]
suffered an injury in fact fairly traceable to the actions of
the defendant that is likely to be redressed by a favorable
decision on the merits.” Food & Water
Watch, Inc. v. Vilsack, 808 F.3d 905, 913 (D.C. Cir.
2015) (quoting Humane Soc'y of the U.S. v.
Vilsack, 797 F.3d 4, 8 (D.C. Cir. 2015)). The court must
accept the well-pleaded allegations of the complaint as true
and draw all inferences in favor of the plaintiff. Arpaio
v. Obama, 797 F.3d 11, 19 (D.C. Cir. 2015).
Plaintiffs allege what is known as a “procedural
injury, ” that is, an injury resulting from the
violation of a procedural right created by statute. See
Ctr. for Law & Educ. v. Dep't of Educ., 396 F.3d
1152, 1157 (D.C. Cir. 2005). In such cases, the
redressability and imminence requirements of standing are
relaxed. See Wildearth Guardians v. Jewell, 738 F.3d
298, 305 (D.C. Cir. 2013). The plaintiff need not show that
“but for the alleged procedural deficiency the agency
would have reached a different substantive result.”
Id. at 306. Rather, she need only establish that the
agency violated a procedural right designed to protect her
interests, and that it is plausible “‘that the
procedural breach will cause the essential injury to the
plaintiff's own interest.'” Ctr. for Law
& Educ., 396 F.3d at 1159 (quoting Fl. Audubon
Soc. v. Bentsen, 94 F.3d 658, 664-65 (D.C. Cir. 1996)
(en banc)). In other words, “the requirement of injury
in fact is a hard floor of Article III jurisdiction that
cannot be removed by statute.” Summers v. Earth
Island Inst., 555 U.S. 488, 497 (2009).
“A procedural injury claim therefore must be tethered
to some concrete interest adversely affected by the
procedural deprivation . . . .” WildEarth
Guardians, 738 F.3d at 305.
alleged injury is the cost associated with complying with the
TJCA's transition tax regulations, which include certain
“collection of information” and
“recordkeeping obligations.” Am. Compl., ECF No.
5 [hereinafter Am. Compl.], ¶ 54. Plaintiffs complain
that the regulations have “imposed significant burdens
on Plaintiffs and other small businesses, ” including
“forc[ing] small businesses to spend enormous amounts
of time in futile efforts just to try and understand what
[the regulations] mean, ” and “forc[ing] small
businesses to expend significant funds to try and
comply” with the regulations. Id. ¶¶
33-34. Plaintiff Silver declares: “[I]n trying to
comply with the statute and regulations . . . I have been
forced to spend significant funds. Worse still, I will be
forced to expend money on Transition tax-related compliance
for years to come, even though I did not report any
Transition tax liability.” Decl. of Monte Silver, ECF
No. 23-2, ¶ 18. These asserted facts plausibly establish
a concrete injury to support standing. See State Nat.
Bank of Big Spring v. Lew, 795 F.3d 48, 53 (D.C. Cir.
2015) (holding that regulated bank had standing where
“monitoring program” devised to comply with
regulations “cause[d] it to incur costs”);
Ass'n of Private Sector Colls. & Univs. v.
Duncan, 681 F.3d 427, 458 (D.C. Cir. 2012) (finding that
regulated schools were “harmed because they will face
even greater compliance costs” and thus had standing).
Plaintiffs' straightforward injury and the relaxed
redressability standard, Defendants still dispute standing on
the element of causation. They assert that Plaintiffs'
quarrel is with the TCJA rather than the regulations, and
thus any alleged injury stems from the TCJA itself and not
the agencies' newly adopted regulations. Defs.' Mot.
at 8-11. But this argument fundamentally misconstrues
Plaintiffs' claims. Plaintiffs are not challenging any
specific regulation that might or might not be traceable
directly to the TCJA. Rather, Plaintiffs allege that the
agencies neglected to undertake procedural measures designed
to protect small business from the burden of unwieldy and
cost-intensive regulations-namely, the publishing of an
initial and a final regulatory flexibility analysis, 5 U.S.C.
§§ 601, 603(a), and a certification that the
regulation has reduced compliance burdens on small
businesses, 44 U.S.C. § 3506. Plaintiffs alleged
injuries are therefore traceable to Defendants' alleged
violation of these separate statutory requirements, not the
TCJA. Causation is easily satisfied. See Fl. Audubon
Soc., 94 F.3d at 664 (stating that a “plaintiff
alleging a procedural violation [must show] a causal
connection between the government action that supposedly
required the disregarded procedure and some reasonably
increased risk of injury to its particularized
the court rejects Defendants' assertion that Plaintiffs
lack standing to advance their claims.
fare no better with their argument that the court lacks
subject-matter jurisdiction under the Anti-Injunction Act and
the tax exception to the Declaratory Judgment Act. Defendants
contend that Plaintiffs' suit is barred because it
challenges regulations implementing Sections 965, 962, and
951 of the Internal Revenue Code, and invalidating those
regulations would directly prevent the collection of taxes.
Defs.' Mot. at 1, 14. Plaintiffs respond that the
Anti-Injunction Act prohibits only those suits seeking to
restrain the assessment and collection phases of the taxation
process-not challenges to the antecedent procedural steps
that are the subject of this lawsuit. Moreover, they argue,
the Anti-Injunction Act does not apply where, as here,
Plaintiffs have no other avenue to litigate their claims
because they do not owe a transition tax liability. Pls.'
Opp'n to Mot. to Dismiss, ECF No. 23, at 15-19.
Anti-Injunction Act bars judicial review of lawsuits filed
“for the purpose of restraining the assessment or
collection of any tax.” 26 U.S.C. § 7421(a).
Similarly, the Declaratory Judgment Act excludes from its
purview actions “with respect to Federal taxes.”
28 U.S.C. § 2201(a). The D.C. Circuit has explained that
the Anti-Injunction Act and the tax provision of the
Declaratory Judgment Act are “coterminous.”
Cohen v. United States, 650 F.3d 717, 730-31 (D.C.
Cir. 2011) (en banc). Therefore, for simplicity, the court
focuses on the Anti-Injunction Act.
principal purpose of the Anti-Injunction Act is “the
protection of the Government's need to assess and collect
taxes as expeditiously as possible with a minimum of
preenforcement judicial interference, ‘and to require
that the legal right to the disputed sums be determined in a
suit for refund.'” Bob Jones Univ. v.
Simon, 416 U.S. 725, 736-37 (1974) (quoting Enochs
v. Williams Packing & Navigation Co., 370 U.S. 1, 7
(1962)). But, as the D.C. Circuit has explained, the Act does
not bar any and all lawsuits that might ultimately impact the
amount of revenue in the U.S. treasury. See Cohen,
650 F.3d at 726 (citing Hibbs v. Winn, 542 U.S. 88,
102 (2004)). Although “[t]he IRS envisions a world in
which no challenge to its actions is ever outside the closed
loop of its taxing authority[, ]” the Act's
prohibition does not sweep so broadly:
“‘assessment' is not synonymous with the
entire plan of taxation, but rather with the trigger for levy
and collection efforts, and ‘collection' is the
actual imposition of a tax against a plaintiff.”
Id. (cleaned up). Accordingly, the D.C. Circuit has
refused to “read[ ] the [Anti-Injunction Act] to reach
all disputes tangentially related to taxes.”
Id. at 726-27. Rather, the Circuit has instructed
that whether the Anti-Injunction Act prohibits a suit depends
on whether the action is ...