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  • Charles E. Leves, Joseph W. Chamberlain v. Internal Revenue Service, Commissioner, 796 F.2d 1433, 11th Cir. (1986)

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    This document summarizes a court case in which two U.S. citizens working for the Panama Canal Commission sued the IRS to prevent tax collection actions against them. The district court dismissed the case for lack of jurisdiction, citing the Anti-Injunction Act. The appeals court affirmed, finding that the plaintiffs could challenge their tax liability through the Tax Court or by paying the tax and filing a refund suit, so an exception to the Anti-Injunction Act did not apply.

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    Filed: 1986-08-28 Precedential Status: Precedential Citations: 796 F.2d 1433 Docket: 86-3012

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    This document summarizes a court case in which two U.S. citizens working for the Panama Canal Commission sued the IRS to prevent tax collection actions against them. The district court dismissed the case for lack of jurisdiction, citing the Anti-Injunction Act. The appeals court affirmed, finding that the plaintiffs could challenge their tax liability through the Tax Court or by paying the tax and filing a refund suit, so an exception to the Anti-Injunction Act did not apply.

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    22 views4 pages

    Charles E. Leves, Joseph W. Chamberlain v. Internal Revenue Service, Commissioner, 796 F.2d 1433, 11th Cir. (1986)

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    This document summarizes a court case in which two U.S. citizens working for the Panama Canal Commission sued the IRS to prevent tax collection actions against them. The district court dismissed the case for lack of jurisdiction, citing the Anti-Injunction Act. The appeals court affirmed, finding that the plaintiffs could challenge their tax liability through the Tax Court or by paying the tax and filing a refund suit, so an exception to the Anti-Injunction Act did not apply.

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    of 4

    796 F.

    2d 1433
    58 A.F.T.R.2d 86-5604, 86-2 USTC P 9625

    Charles E. LEVES, Joseph W. Chamberlain, PlaintiffsAppellants,


    v.
    INTERNAL REVENUE SERVICE, COMMISSIONER, et al.,
    Defendants-Appellees.
    No. 86-3012
    Non-Argument Calendar.

    United States Court of Appeals,


    Eleventh Circuit.
    Aug. 15, 1986.
    As Amended Aug. 28, 1986.

    Michael L. Paup, Chief, Roger M. Olsen, Acting Asst. Atty. Gen., David
    E. Carmack, Steven Parks, U.S. Dept. of Justice, Appellate Section, Tax
    Div., Washington, D.C., for plaintiff-appellee.
    Appeals from the United States District Court for the Middle District of
    Florida.
    Before GODBOLD, Chief Judge, VANCE and JOHNSON, Circuit
    Judges.
    GODBOLD, Chief Judge:

    Plaintiffs are citizens of the United States who live in Panama and work for and
    receive a salary from the Panama Canal Commission (PCC). Plaintiffs brought
    these suits to enjoin the Internal Revenue Service (IRS) from placing tax liens
    on their property and from seizing their assets, and to require the IRS to return
    monies already collected and to honor the exemption from tax allegedly
    granted under the Panama Canal Treaty of 1977.1

    The suits were consolidated. The district court dismissed the complaints for
    lack of subject matter jurisdiction. We affirm.

    The district court held that the Anti-Injunction Act of the Internal Revenue
    Code of 1954, 26 U.S.C. Sec. 7421, barred these suits. The Anti-Injunction Act
    provides that, subject to certain inapplicable statutory exceptions,2 "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."

    In addition to the statutory exceptions to the Anti-Injunction Act, the Supreme


    Court has recognized two judicial exceptions. First, an injunction may issue
    where the taxpayer can clearly demonstrate "that the Government [can] in no
    circumstances ultimately prevail on the merits, and that equity jurisdiction
    exist[s]." U.S. v. American Friends Service Committee, 419 U.S. 7, 10, 95 S.Ct.
    13, 15, 42 L.Ed.2d 7 (1974). Second, the Supreme Court has recognized that
    the Anti-Injunction Act "was not intended to bar an action where ... Congress
    has not provided the plaintiff with an alternative legal way to challenge the
    validity of a tax." South Carolina v. Regan, 465 U.S. 367, 373, 104 S.Ct. 1107,
    1111, 79 L.Ed.2d 372 (1984).

    Plaintiffs rely on the second of these exceptions. They contend that as


    employees of the PCC under Article XV of the Agreement in Implementation of
    the Panama Canal Treaty of 1977, T.I.A.S. No. 10031, they are exempt from
    the tax asserted by the Commissioner, and therefore, they are not taxpayers
    eligible to litigate the issue of their liability for the taxes either in the Tax Court
    or in a tax refund suit.

    In Harris v. U.S., 768 F.2d 1240 (11th Cir.1985), pet. for cert. pending, No. 851011, this court held that Article XV(2) of the Agreement creates a bi-national
    tax exemption for PCC employees.3 Under Harris plaintiffs are exempt from
    federal taxes. Plaintiffs' tax exempt status, however, does not prevent their
    bringing an action in the Tax Court or suing for a refund.

    Plaintiffs' reliance on South Carolina v. Regan and Economy Plumbing &


    Heating Co., Inc. v. U.S., 470 F.2d 585, 200 Ct.Cl. 31 (1972) is misplaced.
    Both of those cases involved the rights of third parties to litigate the tax liability
    of persons against whom the tax was assessed.

    In South Carolina v. Regan the Court held that the Anti-Injunction Act did not
    bar an action brought by the state of South Carolina to enjoin the collection of
    federal income taxes from its citizens under 26 U.S.C. Sec. 103(j)(1) because
    Congress had not provided the state with an alternative legal way to challenge
    the validity of the tax. The Court noted that if the Anti-Injunction Act applied,

    the state would be forced to rely upon one of its citizens to bring suit in the Tax
    Court or sue for a refund because neither of these remedies was available to a
    plaintiff who was not a taxpayer. The Court held that "Congress did not intend
    the [Anti-Injunction] Act to apply where an aggrieved party would be required
    to depend on the mere possibility of persuading a third party to assert his
    claims." 465 U.S. at 381, 104 S.Ct. at 1116.
    9

    In Economy Plumbing & Heating Co., money that was due to the plaintiffs
    under a contract was wrongfully applied to the payment of a third party's taxes.
    The court held that plaintiffs were not taxpayers within the meaning of the
    internal revenue laws because they were not the person against whom the taxes
    were assessed and therefore were not entitled to bring suit in tax court or sue for
    a tax refund.

    10

    In this case plaintiffs are persons against whom federal taxes have been
    assessed. Their remedies for the allegedly wrongful assessment are to bring a
    timely suit in the tax court under 26 U.S.C. Secs. 6212 and 6213 or to pay the
    tax and sue for a refund in district court or court of claims under 26 U.S.C. Sec.
    7422 and 28 U.S.C. Secs. 1346(a)(1) and 1491. The Anti-Injunction Act applies
    in this case. See, e.g., Bob Jones University v. Simon, 416 U.S. 725, 746, 94
    S.Ct. 2038, 2050-51, 40 L.Ed.2d 496 (1973) (organization may challenge
    withdrawal of its tax exempt status by petition to the tax court or in a refund
    suit).

    11

    Plaintiffs' other arguments lack merit and require no further discussion.

    12

    AFFIRMED.

    Plaintiffs rely on Article XV of the Agreement in Implementation of Article III


    of the Panama Canal Treaty, September 7, 1977, T.I.A.S. No. 10031, which
    provides:

    By virtue of this Agreement, the Commission, its contractors and


    subcontractors are exempt from payment in the Republic of Panama of all
    taxes, fees or other charges on their activities or property

    United States citizen employees and dependents shall be exempt from any
    taxes, fees, or other charges on income received as a result of their work for the
    Commission. Similarly, they shall be exempt from payment of taxes, fees or
    other charges on income derived from sources outside the Republic of Panama

    United States citizen employees and dependents shall be exempt from taxes,
    fees, or other charges on gifts or inheritance or on personal property, the
    presence of which within the territory of the Republic of Panama is due solely
    to the stay therein of such persons on account of their or their sponsor's work
    with the Commission

    The Coordinating Committee may establish such regulations as may be


    appropriate for the Implementation of this Article

    These exceptions pertain to (1) the assessment and collection of deficiencies


    prior to the issuance of a notice of deficiency (26 U.S.C. Secs. 6212 and 6213);
    (2) the collection of "responsible person" penalties where a bond has been filed
    (Sec. 6672(b)); (3) the collection of a tax return preparer penalty (Sec. 6694(c));
    (4) the enforcement of a levy on property where such enforcement would injure
    the interest of a lienholder other than the person against whom the tax has been
    assessed (Secs. 7426(a) and (b)(1)); and (5) the review of the reasonableness of
    a jeopardy assessment (Sec. 7429(b))

    Although Harris is the rule of this circuit, its holding has been brought into
    question. The Supreme Court has granted certiorari in Coplin v. U.S., 761 F.2d
    688 (Fed.Cir.1985), cert. granted sub nom. O'Connor v. U.S., --- U.S. ----, 106
    S.Ct. 784, 88 L.Ed.2d 763 (1986), in which the Federal Circuit held that PCC
    employees are not exempt from United States taxes under Article XV of the
    Agreement

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