part34-9
- 34.5.5.1
Nature of Proceedings - 34.5.5.2
Rules for Seeking Injunctive Relief - 34.5.5.3
Prohibition of Suits to Enjoin - 34.5.5.4
Exceptions to Statutory Prohibition of Section 7421 - 34.5.5.5
Termination of Taxable Period, Jeopardy Assessment and Jeopardy
Levy Procedures — Section 7429 - 34.5.5.6
Freedom of Information Act Injunctions and Actions Under the Privacy
Act - 34.5.5.7
Hybrid Injunction—Refund Suit - 34.5.5.8
Consent by Justice Department to Temporary Restraining Order
-
An injunction case is a court proceeding whereby the plaintiff seeks
one of two things, either to prevent the defendant from doing in the future
that which threatens to cause or is already causing harm to the plaintiff,
or to compel an affirmative act by the defendant. The first is a preventative
or negative injunction, the second a mandatory injunction. -
In its various stages the injunction may take the form of a temporary
restraining order (TRO), a preliminary injunction, or a permanent injunction.
The restraining order is a temporary order entered in an action, if necessary,
without notice to the other party, and upon a summary showing of its necessity
in order to prevent immediate and irreparable injury pending a fuller hearing
and determination of the rights of the parties or the courts jurisdiction
upon a motion or bill for a preliminary injunction. Its purpose is to preserve
the status quo until the motion for a preliminary injunction can be brought
on for hearing and decision. Such order is effective for ten days only, unless
extended during such period. Fed. R. Civ. P. 65(b). -
A preliminary injunction, on the other hand, can only be issued after
notice (Fed. R. Civ. P. 65(a)) and usually is not for a fixed period of time,
since ordinarily its purpose is to preserve the status quo until the issues
are adjudged after a final hearing. A permanent injunction is one granted
by the judgment that finally disposes of the injunction suit. -
The entry of an order granting a TRO or other injunction should always
be called to the attention of the administrative office concerned, which should
be advised to desist from taking action until receipt of further advice by
Field Counsel.
-
Federal Rule of Civil Procedure 65 covers the procedures under which
injunctions and temporary restraining orders are issued in federal courts.
If a restraining order, or injunction, is issued, the order must set forth
the reason for its issuance, in specific terms, and must describe in reasonable
detail the act or acts sought to be restrained. -
The relief sought by a taxpayer frequently does not take the express
form of an injunction. If the relief sought constitutes in effect a request
for an injunction, the complaint will be treated as such and will be governed
by the law applicable to injunctions. Some examples are:-
Suits to quash a levy
-
Suits to have tax assessments declared invalid
-
Suits to enjoin the Governments suit to foreclose its tax liens
-
Suits to enjoin a sale pursuant to levy made upon property
-
Suits to prevent the collection of certain penalty assessments
-
-
Some taxpayers attempt to thwart a levy by having a receiver appointed
under state law after a levy has been made by the federal
government. The receiver would obtain authority to take possession of all
the taxpayers assets under an injunction issued in the receivership proceedings
enjoining everyone from interfering with the receiver in taking charge of
the assets. Such actions are proscribed by the statutory prohibition against
injunctions contained in section 7421, and the action of any state court
in issuing such an order is contrary to the provisions of 28 U.S.C. § 2463. -
Injunction actions are instituted by nontaxpayers as well as by taxpayers
having unpaid tax liabilities.
-
A taxpayer is prohibited from seeking an injunction against the enforcement
of the internal revenue laws. This prohibition is contained in section 7421,
the Anti-Injunction Act. -
Section 7421 states the general rule of equity that where a person
has an adequate remedy at law, by way of suit for refund or appeal to the
Tax Court of the United States, equitable relief by way of injunction against
the assessment or collection of taxes may not be sought. -
In addition, many times the prohibition against declaratory judgments
with respect to tax matters provided by 28 U.S.C. § 2201 can be
used to prohibit injunctive relief.
-
Section 7421 provides certain exceptions to the prohibition of
suits to restrain assessment or collection of a tax. These exceptions relate
to provisions of sections 6015(e), 6212(a) and (c), 6213(a), 6225(b),
6246(b), 6330(e)(1), 6331(i), 6672(c), 6694(c), 7426(a) and (b)(1), 7429(b),
and 7436. -
See CCDM 34.5.5.5 concerning injunctive relief under section 7429
following jeopardy and termination assessments under the provisions of sections 6851,
6861, and 6862, or jeopardy levies under section 6331(a). -
Section 6212(a) provides that if a deficiency in income, estate
or gift taxes or public charities, private foundations or qualified pension
plan taxes or Real Estate Investment Trusts is determined, the Secretary of
the Treasury or delegate is authorized to send a notice of deficiency to the
taxpayer by certified or registered mail. section 6212(c) provides, with
certain exceptions, that if a deficiency notice is mailed as provided in section
6212(a), and if, thereafter, the taxpayer files a timely petition with the
Tax Court of the United States, an additional deficiency may not be determined
for the same taxable year (if income taxes are involved), or for the taxable
estate of the same decedent. Accordingly, if timely appeal is taken to the
Tax Court, the issuance of a second statutory notice could be enjoined. -
Section 7421 also excepts from the general prohibition on suits
to restrain the assessment or collection of taxes suits for wrongful levy
under section 7426(a)(1), suits for surplus proceeds under section 7426(a)(2),
and suits for substituted sales proceeds under section 7426(a)(3). -
Other statutory exceptions to the rule that no injunction may issue
to restrain assessment or collection of any tax are those recognized in sections
6015(e), 6212(c), 6213(a), 6225(b), 6246(b), 6330(e)(1), 6331(i), 6672(c),
6694(c), 7426(a)(1), 7429(b) and 7436 6213(a), 6672(b), and 6694(c). -
The courts have recognized an additional exception to section 7421
based on well-established rules prevailing in a court of equity. Before an
injunction may be issued:-
The United States cannot establish its claim for the tax under the most
liberal view of the law and the facts. -
There must be present special and extraordinary circumstances establishing
that the taxpayer does not have an adequate remedy at law by way of a suit
for refund of the taxes sought to be collected. -
Illegality without special circumstances is not sufficient.
-
Conversely, the fact that the taxpayer may suffer irreparable injury if
collection is enforced is not grounds for relief if the Government can possibly
establish its claim for the tax.
-
-
In accordance with IRM 5.1.4.3, Field Counsel will prereview the recommendation
to determine whether there is sufficient basis in fact to defend any lawsuit
that may be brought challenging whether the termination or jeopardy assessment
action was warranted and whether the amount to be assessed or demanded as
a result of the proposed action is appropriate under the circumstances. -
Section 7429(a)(1)(A) requires that the Chief Counsel or his delegate
personally approve in writing a jeopardy or termination assessment or a levy
made less than 30 days after notice and demand for payment is made. The Chief
Counsel has delegated his authority to the Area Counsel, and this authority
may be redelegated to the Associate Area Counsel. -
The attorney assigned to review the proposed assessment or levy for
the reasonableness of the tax determined should note approval or prepare a
brief memorandum setting forth any additional reasons why it is believed that
the amount of the proposed assessment is or is not appropriate under the circumstances.
This memorandum will then be associated with the legal file to be opened with
respect to the jeopardy or termination assessment action, or jeopardy levy. -
The legal file should contain copies of the following documents:
-
Recommendation for assessment or levy
-
The agents report
-
Prior returns
-
Any other supporting documentation, memoranda and written comments used
in review
-
-
Policies concerning the use of jeopardy and termination assessments
are contained in IRM 5.1.4.1, P-4-88, and P-4-89.
-
The Territory Manager, Technical Services will monitor the course of
administrative review procedures initiated by the taxpayer and will advise
Field Counsel immediately upon learning that judicial proceedings have been
commenced under section 7429(b). Counsel shall also have the responsibility
to monitor the case by maintaining contact with the Technical Services where
there is reasonable cause to believe that litigation may ensue. -
Upon learning that the taxpayer has commenced judicial proceedings under
section 7429(b), Field Counsel will request the Chief, P & I or Technical
Services to transmit the administrative file to Field Counsel within one working
day. If it is determined that the case will require review by the Office of
the Assistant Chief Counsel (Collection, Bankruptcy & Summonses), then
Field Counsel will promptly telephone the Chief of CBS, Branch 1 and advise
him/her of the case. If the case is to be referred directly to DJ, then Field
Counsel should notify the appropriate Section Chief of the Tax Division by
telephone. -
Upon receiving the administrative file, a defense letter will be prepared
by the Field Counsel directed to the Tax Division of DJ. This letter should
include, among other things, an analysis of whether the making of the assessment
or levy was reasonable under the circumstances and whether the amount assessed
was appropriate. The proposed letter will be transmitted to the recipient
by the quickest means possible within two working days of the receipt of the
administrative file. -
Upon receipt of a proposed defense letter by CBS, Branch 1, the attorney
assigned the case will immediately review the letter and transmit the letter
to the Tax Division within one working day following its receipt.
-
Since the district court must rule on the reasonableness of the assessment
or levy and the appropriateness of the amount assessed within 20 days of the
filing of the initial pleadings, unless the taxpayer requests an extension,
the Field Counsel should make arrangements to have the U.S. Attorneys Office
immediately notify the Field Counsel of the commencement of a section 7429(b)
action.
-
Injunction actions under the Freedom of Information Act (5 U.S.C. § 522)
and any actions in the nature of injunctions under the Privacy Act of 1974
(5 U.S.C. § 552a) are handled by the Office of the Assistant Chief
Counsel (Disclosure and Privacy Law). Pleadings of any sort received in the
field office indicating action under these Acts should be immediately forwarded
to that office, which handles all actions, including defense letters, in such
cases.
-
Whenever letters are referred to the Office of the Assistant Chief Counsel
(CBS) wherein the plaintiff taxpayer alleges a refund is due from the Government
for taxes, and there is also a prayer that injunctive relief be granted to
restrain the collection of other tax liabilities owed by the plaintiff, the
appropriate branch of CBS must confer with a supervisor in the appropriate
branch of APJP to decide which office will handle the case. CBS will advise
the field office servicing the particular district court which division will
handle the case. -
Where time allows, the defense letter in these cases should discuss
the merits of the claim as well as the issue of injunctive relief. The request
for an injunction will often require immediate action before the administrative
files can be assembled.
-
Since injunction cases are often set for hearing on very short notice,
DJ, in some instances, will consent to a status quo arrangement
whereby the Territory Manager will agree to take no collection activity for
a specified period of time in order to afford the Internal Revenue Service
an opportunity to conduct an investigation and prepare a defense letter. In
some instances, however, it may be necessary to consent to a Temporary Restraining
Order to accomplish the same purpose. Fed. R. Civ. P. 65(b). In either case,
prior authorization would be obtained from the appropriate Civil Trial Section
of the Tax Division, usually after clearance with the Office of the Assistant
Chief Counsel (CBS). CBS would in turn contact the appropriate field office
before advising DJ in the case. The field office would contact the Territory
Managers office.
