Rocky Branch Timberlands LLC, et al v. USA, et al

[DO NOT PUBLISH]
In the
United States Court of Appeals
For the Eleventh Circuit
____________________
No. 22-12646
Non-Argument Calendar
____________________
ROCKY BRANCH TIMBERLANDS LLC,
ROCKY BRANCH INVESTMENTS LLC,
individually and as Tax Matters Partner for
Rocky Branch Timberlands LLC,
Plaintiffs-Appellants,
BRIAN KELLEY,
individually and as the Tax Matters Partner
Representative for Rocky Branch Investments
LLC as Tax Matters Partner for Rocky Branch
Timberlands LLC,
Plaintiff,
versus
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2 Opinion of the Court 22-12646
UNITED STATES OF AMERICA,
INTERNAL REVENUE SERVICE,
IRS MANAGER LEE VOLKMANN,
Defendants-Appellees.
____________________
Appeal from the United States District Court
for the Northern District of Georgia
D.C. Docket No. 1:21-cv-02605-MLB
____________________
Before N EWSOM, L AGOA, and BRASHER , Circuit Judges.
PER CURIAM:
Rocky Branch Timberlands, LLC, claimed a $26.5 million
tax deduction on its 2017 tax return for a conservation easement.
The IRS undertook a review of the return and ultimately issued a
Final Partnership Administrative Adjustment (FPAA) that disal-
lowed the deduction. Rocky Branch Timberlands then sued the
IRS and related parties, seeking various forms of injunctive and de-
claratory relief. The district court dismissed the lawsuit on juris-
dictional grounds because the relief that Rocky Branch Timber-
lands sought was barred by the Anti-Injunction Act and the tax ex-
ception to the Declaratory Judgment Act. We agree.
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22-12646 Opinion of the Court 3
I
We review de novo a district court’s decision to grant a mo-
tion to dismiss for lack of subject-matter jurisdiction. McElmurray
v. Consolidated Gov’t of Augusta-Richmond Cnty., 501 F.3d 1244, 1250
(11th Cir. 2007).
The Anti-Injunction Act provides that, with exceptions not
relevant to this case, “no suit for the purpose of restraining the as-
sessment or collection of any tax shall be maintained in any court
by any person.” I.R.C. § 7421(a). To determine whether the suit
seeks to restrain the assessment or collection of taxes, “we inquire
not into a taxpayer’s subjective motive, but into the action’s objec-
tive aim—essentially, the relief the suit requests.” CIC Servs., LLC
v. Internal Revenue Serv., 141 S. Ct. 1582, 1589 (2021). “When the
Anti-Injunction Act applies, it deprives federal courts of jurisdic-
tion.” In re Walter Energy, Inc., 911 F.3d 1121, 1136 (11th Cir. 2018).
A
Rocky Branch Timberlands first argues that its suit is not
barred by the Anti-Injunction Act because it does not seek to re-
strain the assessment or collection of a tax.
In CIC Services, the Supreme Court considered whether a suit
challenging an information-reporting requirement was barred by
the Anti-Injunction Act. 141 S. Ct. at 1588. Failure to comply with
the reporting requirement would lead to both tax and criminal pen-
alties. Id. at 1587–88. The Court held that the suit fell “outside the
Anti-Injunction Act because the injunction” that it requested did
not “run against a tax at all.” Id. at 1593. Instead, the tax penalty
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4 Opinion of the Court 22-12646
functioned “only as a sanction for noncompliance with the report-
ing obligation,” so the plaintiff’s suit seeking to enjoin the reporting
requirement was not barred by the Anti-Injunction Act. Id. at 1594.
Three considerations led to that conclusion in CIC Services:
(1) The reporting rule at issue “impose[d] affirmative reporting ob-
ligations, inflicting costs separate and apart from the statutory tax
penalty”; (2) the taxpayer was “nowhere near the cusp of tax liabil-
ity” because the “reporting rule and the statutory tax penalty
[were] several steps removed from each other”; and (3) the require-
ment was enforced through criminal penalties in addition to tax
penalties. Id. at 1591–92.
Those same three considerations lead to the opposite con-
clusion here. First, Rocky Branch Timberlands will not be subject
to any “costs separate and apart” from the tax penalty that may re-
sult from the FPAA. Id. at 1591. The cost of litigating the tax as-
sessment doesn’t count—that’s why the Anti-Injunction Act pro-
vides a pay-now-sue-later procedure. Second, Rocky Branch Tim-
berlands was on “the cusp of tax liability” when it filed its suit, id.,
because the FPAA is the statutory prerequisite to assessing a tax on
Rocky Branch Timberlands, see I.R.C. § 6232(b), and Rocky Branch
Timberlands concedes that if the FPAA is allowed to stand, the IRS
will be able to immediately assess a tax. Third, Rocky Branch Tim-
berlands will suffer no criminal punishment by following the Anti-
Injunction Act’s “familiar pay-now-sue-later procedure.” CIC
Servs., 141 S. Ct. at 1592.
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22-12646 Opinion of the Court 5
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 is a tax provision, not a reporting requirement backed
up with a tax provision. See id. Rocky Branch Timberlands’s single
claim alleged that the IRS violated § 7803(e)(4) by failing to provide
Rocky Branch Timberlands with administrative review of its tax
case. To remedy that alleged violation, Rocky Branch Timberlands
sought to compel the IRS to provide it with administrative review
and, until it did, to prevent the IRS from issuing an FPAA (which
the IRS had already issued). The FPAA that the IRS had issued
found that Rocky Branch Timberlands improperly claimed a de-
duction on its tax return, resulting in an underpayment of taxes.
Because the relief Rocky Branch Timberlands’s lawsuit seeks
would restrain the IRS from assessing and collecting those taxes, it
is barred by the Anti-Injunction Act.
B
Rocky Branch Timberlands argues that even if its lawsuit
seeks to restrain the assessment of a tax, it falls within a narrow
exception to the Anti-Injunction Act. That exception permits in-
junctive relief for plaintiffs who show that they will “suffer irrepa-
rable injury if collection [of the tax] were effected” and show that
“it is clear that under no circumstances could the [IRS] ultimately
prevail.” Enochs v. Williams Packing & Navigation Co., 370 U.S. 1, 7
(1962).
Rocky Branch Timberlands cannot make either showing. A
plaintiff suffers irreparable injury for injunctive purposes when
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6 Opinion of the Court 22-12646
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 Rocky Branch Timberlands had “another ade-
quate remedy [at law] for challenging the FPAA, specifically . . .
Tax Court.” Rocky Branch Timberlands has already challenged the
FPAA in tax court in a parallel proceeding. If issuing the FPAA
without providing Rocky Branch Timberlands administrative re-
view was a violation of I.R.C. § 7803(e)(4), that parallel proceeding
can provide a remedy.
It is also far from “clear that under no circumstances could”
the IRS prevail on the merits of Rocky Branch Timberlands’s claim.
Williams Packing, 370 U.S. at 7. Rocky Branch Timberlands’s strict
interpretation of § 7803(e)(4) is not the only plausible one. Section
§ 7803(e)(5)(A) contemplates requests for referral to the Appeals
Office by “taxpayer[s] . . . in receipt of a notice of deficiency.” The
district court interpreted that provision as contemplating appeals
for taxpayers already “in receipt of a notice of deficiency”—or, in
the case of partnerships, an FPAA. It is at least debatable whether
Rocky Branch Timberlands 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 arguments were “sufficiently
debatable to foreclose any notion that” the Williams Packing excep-
tion applied).
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22-12646 Opinion of the Court 7
II
Rocky Branch Timberlands also argues that its requested de-
claratory relief is not barred by the tax exception to the Declaratory
Judgment Act.
The tax exception to the Declaratory Judgment Act 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. “Americans
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).
Rocky Branch Timberlands concedes that “courts have de-
termined [the two Acts] to be coextensive and coterminous.” Be-
cause we hold that the Anti-Injunction Act bars Rocky Branch Tim-
berlands’s suit, it follows that the tax exception to the Declaratory
Judgment Act bars the declaratory relief Rocky Branch Timber-
lands seeks. See Mobile Republican Assembly, 353 F.3d at 1362 n.6
(holding that the conclusion that the Anti-Injunction Act prohib-
ited the appellees from seeking injunctive relief “also foreclose[d]
the appellees from seeking declaratory relief”); see also Alexander,
416 U.S. at 759 n.10 (“Because we hold that the [Anti-Injunction]
Act bars the instant suit, there is no occasion to deal separately with
the [tax exception to the Declaratory Judgment Act].”).
AFFIRMED.
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