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ALEXANDER v. "AMERICANS UNITED" INC.

decided: May 15, 1974.

ALEXANDER, COMMISSIONER OF INTERNAL REVENUE
v.
AMERICANS UNITED" INC.



CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE DISTRICT OF COLUMBIA CIRCUIT.

Powell, J., delivered the opinion of the Court, in which Burger, C. J., and Brennan, Stewart, White, Marshall, and Rehnquist, JJ., joined. Blackmun, J., filed a dissenting opinion, post, p. 763. Douglas, J., took no part in the decision of the case.

Author: Powell

[ 416 U.S. Page 754]

 MR. JUSTICE POWELL delivered the opinion of the Court.

Respondent is a nonprofit, educational corporation organized under the laws of the District of Columbia as "Protestants and Other Americans United for Separation of Church and State." Its purpose is to defend and maintain religious liberty in the United States by the dissemination of knowledge concerning the constitutional principle of the separation of church and State. In 1950, the Internal Revenue Service issued a ruling letter that respondent qualified as a tax-exempt organization under the predecessor provision to § 501 (c)(3) of the Internal Revenue Code of 1954 (the Code), 26 U. S. C. § 501 (c)(3).*fn1 As a result, the Service treated contributions to respondent as charitable deductions under the predecessor provision of § 170 (c)(2) of the Code, 26 U. S. C. § 170 (c)(2).*fn2 This situation continued unchanged until

[ 416 U.S. Page 755]

     April 25, 1969, when the Service issued a ruling letter revoking the 1950 ruling on the ground that respondent had violated §§ 501 (c)(3) and 170 (c)(2)(D) by devoting a substantial part of its activities to attempts to influence legislation. Shortly thereafter, the Service issued another ruling letter exempting respondent from income taxation as a "social welfare" organization under Code § 501 (c)(4), 26 U. S. C. § 501 (c)(4).*fn3 The effect of this change in status was to render respondent liable for unemployment (FUTA) taxes under Code § 3301, 26 U. S. C. § 3301,*fn4 and to destroy its eligibility for tax-deductible contributions under § 170.

[ 416 U.S. Page 756]

     Because the 1969 ruling letter caused a substantial decrease in its contributions, respondent and two of its benefactors initiated the instant action in the United States District Court for the District of Columbia on July 30, 1970.*fn5 They sought a declaratory judgment that the Service's administration of the lobbying proscriptions of §§ 501 (c)(3) and 170 was erroneous or unconstitutional*fn6 and injunctive relief requiring reinstatement

[ 416 U.S. Page 757]

     of respondent's § 501 (c)(3) ruling letter. Because their objections to the Service's action included a facial challenge to the constitutionality of federal statutes,*fn7 they also requested the convening of a three-judge district court pursuant to 28 U. S. C. § 2282.

The Service moved to dismiss the action, principally on the ground that the exception in the Declaratory Judgment Act for cases "with respect to Federal taxes,"*fn8 and the prohibition in the Anti-Injunction Act against suits "for the purpose of restraining the assessment or collection of any tax,"*fn9 ousted the court of subject-matter

[ 416 U.S. Page 758]

     jurisdiction. The District Court accepted this argument, refused to convene a three-judge court, and dismissed the complaint in an unpublished order filed March 9, 1971. The United States Court of Appeals for the District of Columbia Circuit affirmed the dismissal insofar as it pertained to the individual plaintiffs, but it reversed as to respondent and remanded the case to the District Court with instructions to convene a three-judge court. " Americans United" Inc. v. Walters, 155 U. S. App. D.C. 284, 477 F.2d 1169 (1973). The Service petitioned for review, and we granted certiorari. 412 U.S. 927 (1973). We reverse.

In our opinion in Bob Jones University v. Simon, ante, p. 725, we examined the meaning of the Anti-Injunction Act and its interpretation in prior opinions of this Court, and we reaffirmed our adherence to the two-part test announced in Enochs v. Williams Packing & Navigation Co., 370 U.S. 1 (1962). To reiterate, the Court in Williams Packing unanimously held that a pre-enforcement injunction against the assessment or collection of taxes may be granted only (i) "if it is clear that under no circumstances could the Government ultimately prevail . . . ," id., at 7, and (ii) "if equity jurisdiction otherwise exists." Ibid. Unless both conditions are met, a suit for preventive injunctive relief must be dismissed.

In the instant case the Court of Appeals recognized Williams Packing as controlling precedent for respondent's individual coplaintiffs and affirmed the dismissal of the suit as to them. 155 U. S. App. D.C., at 292, 477 F.2d, at 1177. The court held that the relief requested by the individual plaintiffs "relate[d] directly to the assessment and collection of taxes" and that the allegations of

[ 416 U.S. Page 759]

     infringements of constitutional rights were "to no avail" in overcoming the barrier of § 7421 (a). Id., at 291, 477 F.2d, at 1176. The court also recognized that respondent could not satisfy the Williams Packing criteria, id., at 298, 477 F.2d, at 1183, but concluded that respondent's suit was without the scope of the Anti-Injunction Act and therefore not subject to the Williams Packing test.*fn10

[ 416 U.S. Page 760]

     The court's conclusion with regard to respondent rested on the confluence of several factors. One was the constitutional nature of respondent's claims. As the court noted, the thrust of respondent's argument is not that it qualifies for a § 501 (c)(3) exemption under existing law but rather that that provision's "substantial part" test and proscription against efforts to influence legislation are unconstitutional. Id., at 293, 477 F.2d, at 1178. Obviously, this observation could not have been dispositive to the Court of Appeals, for this factor does not differentiate respondent, which was allowed to sue, from the individual coplaintiffs, who likewise pressed constitutional claims but who were dismissed from the action. Furthermore, decisions of this Court make it unmistakably clear that the constitutional nature of a taxpayer's claim, as distinct from its probability of success, is of no consequence under the Anti-Injunction Act. E. g., Page 760} Bailey v. George, 259 U.S. 16 (1922); Dodge v. Osborn, 240 U.S. 118 (1916).

The other three factors identified by the Court of Appeals are equally unpersuasive. First, the court noted that respondent "does not seek in this lawsuit to enjoin the assessment or collection of its own taxes." 155 U. S. App. D.C., at 292, 477 F.2d, at 1177. Because respondent volunteered to pay FUTA taxes even if it obtained an injunction restoring its § 501 (c)(3) status, this observation, we may assume, is correct. It is also irrelevant. Section 7421 (a) does not bar merely a taxpayer's attempt to enjoin the collection of his own taxes. Rather, it declares in sweeping terms that "no suit for the purpose of restraining the assessment or collection of any tax shall be maintained in any court by any person, whether or not such person is the person against whom such tax was assessed."*fn11 Thus a suit to enjoin the assessment or collection of anyone's taxes triggers the literal terms of § 7421 (a).

Perhaps the real point of the court's observation about respondent's taxes was to set the stage for its more pertinent conclusion that restraining the assessment or collection of taxes was "at best a collateral effect" of respondent's action and that this suit arose "in a posture removed from a restraint on assessment or collection." 155 U. S. App. D.C., at 294, 477 F.2d, at 1179. We disagree. Under any reasonable construction of the statutory term "purpose," the objective of this suit was to restrain the assessment and collection of taxes from respondent's contributors. The obvious

[ 416 U.S. Page 761]

     purpose of respondent's action was to restore advance assurance that donations to it would qualify as charitable deductions under § 170 that would reduce the level of taxes of its donors.*fn12 Indeed, respondent would not be interested in obtaining the declaratory and injunctive relief requested if that relief did not effectively restrain the taxation of its contributors. Thus we think it circular to conclude, as did the Court of Appeals, that respondent's "primary design" was not "to remove the burden of taxation from those presently contributing but rather to avoid the disposition of contributed funds away from the corporation." Ibid. The latter goal is merely a restatement of the former and can be accomplished only by restraining the assessment and collection of a tax in contravention of § 7421 (a).

Finally, the Court of Appeals emphasized that respondent had no "alternate legal remedy in the form of adequate refund litigation . . . ." Id., at 295, 477 F.2d, at 1180. The court recognized, of course, that respondent does have an opportunity to litigate its claims in an action for refund of FUTA taxes but dismissed this alternative with the statement that "it is subject to certain conditions and, we feel, is so far removed from the mainstream of the action and relief sought as to hardly be considered adequate." Id., at 294 n. 13, 477 F.2d, at 1179 n. 13. The import of these comments is unclear. If they are taken to mean that a refund action is, as a practical matter, inadequate to avoid the decrease in respondent's contributions for the interim between the withdrawal of § 501 (c)(3) status and the final adjudication of its entitlement

[ 416 U.S. Page 762]

     to that exemption, they are certainly accurate. This, however, is only a statement of irreparable injury, which is the essential prerequisite for injunctive relief under traditional equitable standards and only one part of the Williams Packing test. As noted in Bob Jones, ante, at 745-746, allowing injunctive relief on the basis of this showing alone would render § 7421 (a) quite meaningless.

If, on the other hand, the court's comments about the inadequacy of a refund action for FUTA taxes are interpreted to mean that respondent lacks an opportunity to have its claims finally adjudicated by a court of law, we think they are inaccurate. Respondent's liability for FUTA taxes hinges on precisely the same legal issue as does its eligibility for tax-deductible contributions under § 170, namely its entitlement to § 501 (c)(3) status. And respondent will have a full opportunity to litigate the legality of the Service's withdrawal of respondent's § 501 (c)(3) ruling letter in a refund suit following the payment of FUTA taxes. E. g., Christian Echoes National Ministry, Inc. v. United States, 470 F.2d 849 (CA10 1972), cert. denied, 414 U.S. 864 (1973).*fn13

[ 416 U.S. Page 763]

     We therefore conclude that there are no valid reasons to distinguish this case from Williams Packing for purposes of § 7421 (a) or to exempt respondent's suit from the dual requirements enunciated in that case.*fn14 The judgment is reversed.

It is so ordered.

MR. JUSTICE DOUGLAS took no part in the decision ...


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