Hancock County Land Acquisitions, LLC v. USA

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[DO NOT PUBLISH]
In the
United States Court of Appeals
For the Eleventh Circuit
____________________
No. 21-12508
____________________
HANCOCK COUNTY LAND ACQUISITIONS, LLC,
Plaintiff-Appellant,
BRYAN KELLEY,
individually and as the Tax Matters Partner for
Southeastern Argive Investments, LLC, et al.,
Plaintiffs,
versus
UNITED STATES OF AMERICA,
THE INTERNAL REVENUE SERVICE,
CATHERINE C. BROOKS,
Internal Revenue Service Manager,
PAMELA V. STAFFORD,
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2 Opinion of the Court 21-12508
Internal Revenue Service Revenue Agent,
Defendants-Appellees.
____________________
Appeal from the United States District Court
for the Northern District of Georgia
D.C. Docket No. 1:20-cv-03096-AT
____________________
Before WILLIAM PRYOR, Chief Judge, LUCK, and ED CARNES, Circuit
Judges.
PER CURIAM:
Hancock County Land Acquisitions, LLC, claimed a tax de-
duction for a conservation easement that it donated on property it
owned in Mississippi. The IRS undertook a review of the return
and ultimately issued a Final Partnership Administrative Adjust-
ment (FPAA). 1 Hancock then sued the IRS and related parties,
seeking various forms of injunctive and declaratory relief. The
1 “An FPAA is the functional equivalent of a Statutory Notice of Deficiency
for individual taxpayers” and is issued when the IRS determines that an adjust-
ment to a partnership tax return is required. See United States v. Clarke, 816
F.3d 1310, 1313 n.2 (11th Cir. 2016).
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21-12508 Opinion of the Court 3
district court dismissed the lawsuit on jurisdictional grounds. This
is Hancock’s appeal.
I.
In its 2016 tax return, Hancock claimed a charitable contri-
bution deduction of approximately $180 million for a conservation
easement it had donated on land it owned. Two years later, in
2018, the IRS opened an investigation into Hancock’s 2016 tax re-
turn. Thereafter, the IRS asked if Hancock would agree to extend
the statutory deadline for the IRS to complete its investigation. See
I.R.C. § 6229(a) (repealed effective for tax returns filed after 2017).
Hancock initially did not agree to the extension but changed its
mind eleven months later. At that point, the IRS had almost com-
pleted its investigation, and the parties never agreed on an exten-
sion of the limitations period. The IRS issued Hancock’s FPAA and
mailed it to Hancock’s tax matters partner on July 23, 2020.
Two days later, on July 25, 2020, apparently without realiz-
ing that the FPAA had already been issued, Hancock filed this law-
suit. Later it filed an amended complaint, which is the operative
one, asserting one claim under the Administrative Procedure Act.
The claim alleged that I.R.C. § 7803(e)(4) required the IRS to pro-
vide Hancock with “an opportunity to resolve [its] case with the
Appeals Office.” Hancock alleged that issuance of the FPAA with-
out first sending the case to the Appeals Office would allow the IRS
“to immediately assess a tax” and deprive Hancock of its right to
pre-litigation administrative resolution of its tax dispute.
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4 Opinion of the Court 21-12508
Hancock’s amended complaint asked the district court to de-
clare that: (1) Hancock has “the statutory right to the independent
review of its case by the Appeals Office,” and (2) the IRS is “re-
quired to comply with all of the legal requirements imposed by
[I.R.C.] § 7803(e).” It also sought injunctive relief: (1) compelling
the IRS to agree to extend the statute of limitations, (2) compelling
the IRS to provide Hancock with “independent review” of its tax
case by the Appeals Office, (3) enjoining the IRS from violating
I.R.C. § 7803(e), and (4) temporarily enjoining the IRS “from issu-
ing an FPAA” until after providing Hancock with “an independent
review of its case by the Appeals Office.”
The IRS moved to dismiss Hancock’s complaint, and the dis-
trict court did so. The court concluded that it did not have subject
matter jurisdiction to decide the dispute because the relief Hancock
sought was barred by the Anti-Injunction Act (AIA) and the tax ex-
ception to the Declaratory Judgment Act (DJA).
II.
We review de novo a district court’s decision to grant a mo-
tion to dismiss for lack of subject matter jurisdiction. McElmurray
v. Consol. Gov’t of Augusta-Richmond Cnty., 501 F.3d 1244, 1250
(11th Cir. 2007).
Hancock contends that its suit is not barred by the AIA or
the tax exception to the DJA.
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21-12508 Opinion of the Court 5
A.
The AIA provides that, with exceptions that are not relevant
in this case, “no suit for the purpose of restraining the assessment
or collection of any tax shall be maintained in any court by any per-
son.” I.R.C. § 7421(a). To determine whether the suit seeks to re-
strain the assessment or collection of taxes, “we inquire not into a
taxpayer’s subjective motive, but into the action’s objective aim —
essentially, the relief the suit requests.” CIC Servs., LLC v. Internal
Revenue Serv., 141 S. Ct. 1582, 1589 (2021). “When the [AIA] ap-
plies, it deprives federal courts of jurisdiction.” In re Walter En-
ergy, Inc., 911 F.3d 1121, 1136 (11th Cir. 2018).
Hancock first argues that its suit is not barred by the AIA
because it does not seek to restrain the assessment or collection of
a tax. Relying on CIC Services, Hancock argues that its suit chal-
lenges only unlawful IRS conduct, not the assessment of a tax. In
the CIC Services case, the Supreme Court considered whether a
suit challenging an information-reporting requirement was barred
by the AIA. 141 S. Ct. at 1588. Failure to comply with the reporting
requirement would lead to both tax and criminal penalties. Id. at
1587–88. The Court held that the suit fell “outside the [AIA] be-
cause the injunction” that it requested did not “run against a tax at
all.” Id. at 1593. Instead, the tax penalty functioned “only as a sanc-
tion for noncompliance with the reporting obligation,” so the
plaintiff’s suit seeking to enjoin the reporting requirement was not
barred by the AIA. Id. at 1594.
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Three considerations led to that conclusion in CIC Services.
First, the reporting rule at issue “impose[d] affirmative reporting
obligations, inflicting costs separate and apart from the statutory
tax penalty,” id. at 1591; second, the taxpayer was “nowhere near
the cusp of tax liability” because the “reporting rule and the statu-
tory tax penalty [were] several steps removed from each other,” id.;
and third, the requirement was enforced through criminal penal-
ties in addition to tax penalties, id. at 1591–92.
Those same three considerations lead to the opposite con-
clusion here. First, Hancock will not be subject to any “costs sepa-
rate and apart” from the tax penalty that may result from the
FPAA. Id. at 1591. Second, Hancock was on “the cusp of tax liabil-
ity” when it filed its suit, id., because the FPAA is the statutory pre-
requisite to assessing a tax on Hancock, see I.R.C. § 6232(b), and
Hancock concedes that “if the FPAA is allowed [to] stand, the IRS
will be able to immediately assess a tax.” Third, Hancock will suf-
fer no criminal punishment by following the AIA’s “familiar pay-
now-sue-later procedure.” Id. at 1592.
At its heart, this suit is “a dispute over taxes.” Id. at 1593
(quotation marks omitted). Unlike in CIC Services, the “legal rule
at issue” here, id., is a tax provision, not a reporting requirement
backed up with a tax provision. Hancock’s single claim alleged that
the IRS violated § 7803(e)(4) by failing to provide Hancock with ad-
ministrative review of its tax case. To remedy that alleged viola-
tion, Hancock sought to compel the IRS to provide it with admin-
istrative review and, until it did, to prevent the IRS from issuing an
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21-12508 Opinion of the Court 7
FPAA (which the IRS had already issued). The FPAA that the IRS
had issued finds that Hancock improperly claimed a $180 million
deduction on its 2016 tax return, resulting in an underpayment of
taxes. Because the relief Hancock’s lawsuit seeks would restrain
the IRS from assessing and collecting those taxes, it is barred by the
AIA.
B.
Hancock argues that even if its lawsuit seeks to restrain the
assessment of a tax, it falls within a narrow exception to the AIA.
That exception permits injunctive relief for plaintiffs who show
that they will “suffer irreparable injury if collection [of the tax]
were effected” and show that “it is clear that under no circum-
stances could the [IRS] ultimately prevail.” Enochs v. Williams
Packing & Navigation Co., 370 U.S. 1, 7 (1962).
Hancock cannot make either showing. A plaintiff suffers ir-
reparable injury for injunctive purposes when there is no adequate
remedy at law. Rosen v. Cascade Int’l, Inc., 21 F.3d 1520, 1527
(11th Cir. 1994). The district court correctly pointed out that “an-
other remedy at law exists in connection with [Hancock’s] chal-
lenge to the FPAA, specifically through the Tax Court.” Hancock
has already challenged the FPAA in tax court in a parallel proceed-
ing. If issuing the FPAA without providing Hancock administrative
review was a violation of I.R.C. § 7803(e)(4), that parallel proceed-
ing can provide a remedy.
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It is also far from “clear that under no circumstances could”
the IRS prevail on the merits of Hancock’s claim. Williams Pack-
ing, 370 U.S. at 7. Hancock’s strict interpretation of § 7803(e)(4) is
not the only plausible one. The district court pointed out that
I.R.C. § 7803(e)(5) provides for referral to the Appeals Office for
“any taxpayer which is in receipt of a notice of deficiency.” It in-
terpreted that provision as contemplating appeals for taxpayers al-
ready in receipt of a notice of deficiency,” or in the case of partner-
ships, an FPAA. It is at least debatable whether Hancock would
succeed on the merits of its claim, which is enough to foreclose
application of the Williams Packing exception. See Bob Jones Univ.
v. Simon, 416 U.S. 725, 749 (1974) (holding that the petitioner’s ar-
guments were “sufficiently debatable to foreclose any notion that”
the Williams Packing exception applied).
C.
Finally, the tax exception to the Declaratory Judgment Act
bars Hancock’s requested declaratory relief. It forbids courts from
issuing declaratory judgments “with respect to Federal taxes.” 28
U.S.C. § 2201(a). And it is “clear that the federal tax exception to
the Declaratory Judgment Act is at least as broad as the prohibition
of the Anti-Injunction Act.” Alexander v. Ams. United Inc., 416
U.S. 752, 759 n.10 (1974); accord Mobile Republican Assembly v.
United States, 353 F.3d 1357, 1362 n.6 (11th Cir. 2003).
Hancock concedes that “courts have determined [the two
Acts] to be coextensive and coterminous.” Because we hold that
the AIA bars Hancock’s suit, it follows that the tax exception to the
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21-12508 Opinion of the Court 9
DJA bars the declaratory relief Hancock seeks. See Mobile Repub-
lican Assembly, 353 F.3d at 1362 n.6 (holding that the AIA prohib-
ited the appellees from seeking injunctive relief, which “also fore-
close[d] the appellees from seeking declaratory relief”); see also Al-
exander, 416 U.S. at 759 n.10 (“Because we hold that the [Anti-In-
junction] Act bars the instant suit, there is no occasion to deal sep-
arately with the [tax exception to the Declaratory Judgment Act].”).
AFFIRMED.