+(,121/,1(

Citation:
Ronald A. Stein, Injunctions under Section 6213(a), 68
Taxes 411 (1990)

Content downloaded/printed from HeinOnline

Sat Jan 19 04:42:25 2019

-- Your use of this HeinOnline PDF indicates your

acceptance of HeinOnline's Terms and Conditions
of the license agreement available at
https://heinonline.org/HOL/License

-- The search text of this PDF is generated from

uncorrected OCR text.

-- To obtain permission to use this article beyond the scope

of your HeinOnline license, please use:

Copyright Information

Use QR Code reader to send PDF

to your smartphone or tablet device
Injunctions Under Section 6213(a)
By RONALD A. STEIN
The author discusses the current conflict among
the circuits as to when injunctive relief lies
under Section 6213(a). In addition, he points
out that a recent Tax Court decision may offer
new opportunities for winning injunctive
relief from invalid deficiency assessments.
Ronald A. Stein is an attorney
specializing in tax litigation
for Southwestern Bell Corporation,
St. Louis, Missouri.
@ 1990, Ronald A. Stein
June, 1990 TAXES-The Tax Magazine
The deficiency notice procedures contained
in Sections 6212 and 6213 afford taxpayers the
right to a prepayment adjudication of deficiencies
asserted by the Commissioner. To protect that
right, Section 6213(a) provides for the granting
of injunctive relief from assessment or collection
activity undertaken by the Commissioner in con-
travention of the notice procedures.
The availability of such relief at present
varies among the federal circuits, a result un-
doubtedly not envisioned by Congress. The Tax
Court's recent opinion in Kamholz v. Commis-
sioner1 raises new questions about when and
under what circumstances relief will be granted.
Statutory Background
Section 6212 authorizes the Commissioner to
mail a deficiency notice to a taxpayer's last
known address if he determines that the tax-
payer owes additional tax.
The'statute dates back to the enactment of
section 250(d) of the Revenue Act of 1921, which
required the Commissioner to send a taxpayer a
deficiency notice by registered mail if he "dis-
covered" a deficiency in tax.2 A taxpayer was
entitled to appeal the Commissioner's deficiency
1 CCH Dec. 46,318 at 3608, 94 TC -, No. 2 (1990).
242 Stat. 265.
determination to the Committee on Appeals and
Review within the Bureau of Internal Revenue
but had no right to a prepayment adjudication of
the determination.
Section 274(a) of the Revenue Act of 1924 '
continued the deficiency notice scheme and also
provided for appeals of contested deficiency deter-
minations to the Board of Tax Appeals, estab-
lished under section 900 of the 1924 Act as a
prepayment adjudicative venue.
Two Supreme Court decisions informed the
legislative developments of 1924. In Bailey v.
George 4the Court reversed a lower court decree
granting injunctive relief to a taxpayer who
sought to restrain the collection of the federal
child labor law tax on constitutional grounds.
The Court held that the Anti-Injunction Act 5
barred the taxpayer's suit and that, alternatively,
a tax refund suit afforded the taxpayer an ade-
quate remedy at law. In Graham v. DuPont,6 the
Court concluded that the Anti-Injunction Act
blocked a taxpayer's action to enjoin the collec-
tion of a $1.5 million income tax deficiency assess-
ment. The Court remarked that "as a rule such
attacks upon the validity of the tax could only
be heard and considered after the tax had been
paid in a suit to recover it back." '
As the legislative history of the 1924 Act
reveals, Congress took issue with the adequacy
of a refund suit as a remedy for an invalid income
tax deficiency assessment:
The right of appeal after payment of the tax
is an incomplete remedy, and does little to
remove the hardship occasioned by an incor-
rect assessment. The payment of a large
additional tax on income received several
years previous and which may have, since it
was received, been wiped out either by sub-
sequent losses or invested in non-liquid
assets or spent often causes great financial
hardship and sacrifice. These results are not
remedied by permitting the taxpayer to sue
for the recovery of the tax after this pay-
ment. He is entitled to an appeal and to a
determination of his liability for tax prior to
payment."
In the Revenue Act of 1926,1 Congress
buttressed the deficiency notice scheme in two
ways. First, it generally forbade the Commis-
sioner from seeking to assess a deficiency or to
collect a deficiency by lawsuit or levy until he
had mailed a deficiency notice and, if a taxpayer
petitioned the Board of Tax Appeals, until the
decision of the Board had become final. Second,
TAXES-The Tax Magazine
it provided that "[n]0twithstanding the provi-
sions of Section 3224 of the Revised Statutes, the
making of such assessment or the beginning of
such proceeding or distraint [prior to the mailing
of a deficiency notice] may be enjoined by a
proceeding in the proper court."1' The Senate
Finance Committee explained that "the taxpayer
may in a proper case go into court for an injunc-
tion to restrain the commissioner from assessing
or collecting a deficiency until the [deficiency
notice] procedure outlined in the bill has been
completed." "I
The restrictions on assessment and collection
contained in the 1926 Act, now found in Section
6213(a) of the current Code, have remained
12
basically unchanged since their enactment.
Section 6243(a) of the Technical and Mis-
cellaneous Revenue Act of 1988 (TAMRA) 13
amended Section 6213(a) by providing that the
Tax Court now qualifies as a "proper court" for
the purpose of seeking injunctive relief from a
violation of deficiency notice procedures. The
amendment added that
[tihe Tax Court shall have no jurisdiction
to enjoin any action or proceeding under this
subsection unless a timely petition for a
redetermination of the deficiency has been
filed and then only in respect of the defi-
ciency that is the subject of such petition.
The reason for the amendment was that
jurisdiction to restrain the IRS assessment
and collection of tax rests solely with the
Federal district courts. . . . The committee
believes that generally both taxpayers and
the Government are well served by per-
843 Stat. 297.
4259 U. S. 16 (1922).
5Section 3224, Revised Statutes. The Act was
codified as Section 3653(a) of the 1939 Code and Section
7421(a) of the 1954 and 1986 Codes. It currently reads
in pertinent part: "Except as provided in sections
6212(a) and (c) [and] 6213(a), no suit for the purpose
of restraining the assessment or collection of any tax
shall be maintained in any court by any person.
6 1 usrc 78, 262 U. S. 234 (1923).
1 Id. at 255.
8H. R. Rep. No. 179, 68th Cong., 1st Sess. 7 (1924);
S. Rep. No. 398, 68th Cong., 1st Sess. 7-8 (1924).
9 Section 274(a), Revenue Act of 1926, 44 Stat. 56.
10 Id.
'IS. Rep. No. 52, 69th Cong., 1st Sess. 25-26 (1926).
12 Section 274(a) of the Revenue Act of 1926 be-
came Section 272(a) of the Revenue Act of 1928, 45 Stat.
852, and was eventually codified as Section 272(a) of the
1939 Code. The latter section became Section 6212
of the 1954 Code, except that the restrictions on assess-
ment and collection were included in Section 6213(a).
1s p. L. 100-647, 102 Stat. 3342, 3749.
June, 1990
 mitting related issues to be litigated in the
same forum. '
Case Law Before 1980
The prevailing view before the last decade
was that an injunction should issue as a matter
of law to preclude the collection of an income tax
deficiency assessed in violation of deficiency
notice procedures. This view rejected or disre-
garded the application of conventional equity
rules in suits brought under the authority of
Section 6213(a) or its predecessors.
Two leading cases supporting this nondis-
cretionary approach to relief are Ventura Con-
solidated Oil Fields v. Rogan 15 and Maxwell v.
6 collection of an income tax assessment for their
Campbell."
In Ventura, the Commissioner sent the tax-
payer a letter of transmittal in 1929, along with
a closing agreement reflecting deficiencies for the
years 1920 through 1923. After the taxpayer
signed and returned the closing agreement, the
Commissioner declined to accept it. He treated
it as a waiver of restrictions on assessment, how-
ever, and assessed the deficiencies.
In 1930, the Commissioner mailed the tax-
payer a deficiency notice asserting, among other
things, additional deficiencies for 1920 and 1921.
The taxpayer petitioned the Board of Tax Appeals.
In 1931, the parties filed a stipulated decision
with the Board, reflecting the taxpayer's liability
for the deficiencies set forth in the deficiency notice.
The taxpayer then sued to enjoin the col-
lection of the assessments made in 1929, arguing
that the Commissioner had not issued a defi-
ciency notice for those taxes. The district court
dismissed the suit. The Ninth Circuit reversed.
The court held that the unaccepted closing
agreement was not a waiver of restrictions on
assessment, that the 1929 transmittal letter was
not a deficiency notice, and that the taxpayer had
not impliedly assented to the contested assess-
ments by virtue of having agreed to the addi-
tional deficiencies for 1920 and 1921 asserted in
the proceedings before the Board. The assess-
ments, in short, violated deficiency notice rules
and were defective. This left the issue of whether
injunctive relief was appropriate.
The statute of limitations barred reassess-
ment of the contested taxes. The Commissioner
argued that the court should apply the rule that
a claimant in equity may recover only what it
proves it is owed. This rule would condition
June, 1990 TAXES-The Tax Magazine
relief upon the taxpayer's establishing its correct
tax liability and paying any tax found to be due.
Rejecting the application of such principles,
based upon the "clear intent of the statute," the
court stated:
The injunction of section 274(a) is provided
for the specific purpose of assuring taxpayer
that a claimed deficiency shall be determined
by the administrative process and adjudica-
tion by the Board of Tax Appeals provided
by the statute. It must be granted without
condition. The Commissioner, by failing to
perform his administrative duty, cannot de-
prived a taxpayer of his statutory right. .. .1
In Maxwell, the taxpayers sued to enjoin the
fiscal year ending in 1944. The tax arose from
the disallowance of estimated tax overpayments
which the taxpayers sought to apply to that
fiscal year. The taxpayers argued that the assess-
ment was improper, because no deficiency notice
had been issued.
The Commissioner argued that the assessed
tax was not a deficiency and that, in any event,
the taxpayers were not entitled to relief, because
their "plight was brought about by their mis-
representation and . . . to grant the relief would
be permitting them to take advantage of their
own wrong." 18
The district court dismissed the suit. The
Fifth Circuit reversed. Holding that the con-
tested tax was, indeed, a deficiency for which a
deficiency notice was required, the court made
it clear that the Code left no room for discre-
tion in the matter of relief:
There is nothing inequitable in the relief
asked by the plaintiffs. It is the very relief
accorded them by and under the precise
terms the statutes making a violation of its
terms an express exception to the general
prohibition of section 3653(a). An essential
part of the whole statutory scheme of furn-
ishing the taxpayer with an option either
to pay and sue to recover back or to apply
for relief to the Tax Court, section 272(a) (1)
14 S. Rep. No. 309, 100th Cong., 2d Sess. 22 (1988).
1536-2 usTc 9494, 86 F. 2d 149 (CA-9), cert.
denied, 300 U. S. 672.
1653-2 usTc 9468, 205 F. 2d 461 (CA-5). Also
see Quigley v. Commissioner, 60-2 us-rc 9586, 289 F. 2d
878, 880, n. 4 (CA-DC) (conventional equity considera-
tions rejected); Steiner v. Nelson, 58-2 usTc 9871, 259
F. 2d 853 (CA-7) (conventional equity standards ig-
nored).
17 86 F. 2d at 154-55.
18205 F. 2d at 463.
413
 was not enacted as a mere idle gesture. The
commissioner is as bound as the taxpayer is
by its terms. 9
The Supreme Court's opinion in Laing v.
United States 20 also inferentially supported a non-
discretionary approach to relief under Section
6213(a). 2 ' Laing addressed the issue of whether
the Commissioner was required to mail a de-
ficiency notice to a taxpayer following a termi-
nation assessment under Section 6851.
The taxpayer, a New Zealand resident, was
detained by Customs while trying to leave the
United States. A search of his luggage revealed
more than $300,000, which Customs seized. The
Commissioner terminated the taxpayer's taxable
year and used part of the seized funds to satisfy
the termination assessment.
The taxpayer sued for an injunction to re-
cover the money on the ground that the Com-
missioner had not sent him a deficiency notice.
The district court dismissed, and the Second
Circuit affirmed. The Supreme Court reversed
and remanded.
Holding that a deficiency notice was re-
quired, the Court concluded that the Anti-
Injunction Act did not bar the taxpayer's
injunction suit. 22 Significantly, the Court attached
no significance to the facts that the tax had al-
ready been paid, the taxpayer had filed a collateral
refund suit, and there was no allegation of ir-
23
reparable harm.
Case Law After 1980
The last decade saw a marked shift in ju-
dicial attitudes towards the granting of Section
6213(a) injunctive relief. This was largely at-
tributable to the Supreme Court's recent admoni-
tion that the exercise of equity jurisdiction is
traditionally discretionary, and congressional
preemption of judicial discretion should not be
lightly inferred. 2 ' Three views have emerged.
Relief as Discretionary. Under the view that
relief is discretionary, led by the Ninth Circuit's
opinion in Cool Fuel, Inc. v. Connett,2 5 a taxpayer
must establish an inadequate remedy at law and
irreparable harm, as well as a violation of defi-
ciency notice procedures, in order to qualify for
an injunction under Section 6213(a). Relief lies
within the discretion of the District Court and
normally will be denied if the taxpayer can
afford to pay the tax (and thus sue for refund).
In Cool Fuel, the taxpayer challenged an
income tax deficiency assessment on the ground
TAXES-The Tax Magazine
that the deficiency notice had not been mailed
to its last known address. The District Court
rejected the taxpayer's argument that this was
the address reflected in its latest returns and
denied injunctive relief. The Ninth Circuit sided
with the taxpayer's view that the Commissioner
had failed to exercise due diligence, but affirmed.
The court inferred from the precatory lan-
guage of Section 6213(a) ("may be enjoined")
that Congress did not intend to foreclose the
application of conventional equity rules in pro-
ceedings brought under that section. 26 The court
held that a refund suit constituted an adequate
remedy at law, 27 since the taxpayer failed to
contend that it was unable to pay the deficiency
and made merely conclusory allegations of irrep-
2
arable harm. 3
The Third Circuit applied similar logic in
Flynn v. United States:
Section 6213(a) states that a court "may"
grant injunctive relief. Congress's use of the
conditional suggests that such relief is not
mandatory in every case where the IRS fails
to honor the notice provisions. If equitable
relief is not mandatory in all such cases, but
instead lies with the discretion of the court,
there is no reason to cast off those principles
that traditionally have informed the exercise
29
of a court's broad equity power.
19 Id.
20 76-1 usrc 19164, 423 U. S. 161 (1976).
21 Also compare Enochs v. Williams Packing & Navi-
gation Co., 62-1 usTc 9545, 370 U. S. 1 (1962) (suggest-
ing that inadequacy of the legal remedy must be estab-
lished even if Anti-Injunction Act inapplicable) (dicta)
with Bob Jones University v. Simon, 74-1 usTc 9438, 416
U. S. 725 (1974) (supporting inference, consistent with
nondiscretionary view, that statutory exceptions to Anti-
Injunction Act supplant traditional equitable criteria).
22 423 U. S. at 184 n. 27.
23 Id.
24 See United States v. Rodgers, 83-1 usrc 9374,
461 U. S. 677, 708-709 (1983) and the cases there cited.
2582-2 usTc 9559, 685 F. 2d 309 (CA-9). Also see
Perlowin v. Sassi, 83-2 us-rc 1 9499, 711 F. 2d 910 (CA-9).
26 The court made no reference to the legislative
history of the deficiency notice procedures. Nor did it
cite Ventura, which remains undistinguished.
27 The facts of the case suggest that the statute of
limitations barred the issuance of a second deficiency
notice for the year in dispute. In a refund suit, the
taxpayer would have to establish its correct liability
in order to recover, see Lewis v. Reynolds, 3 usTc 856,
284 U. S. 281 (1932) (refund suit is suit for money
had and received; Government may offset time-barred
adjustments against amount due taxpayer), the result
sought by the Commissioner in Ventura.
2 Also see Jenwen v. Internal Revenue Service, 88-1
usTc 19130, 835 F. 2d 196, 198 (CA-9 1987) (suggest-
ing that individual normally will fail irreparable harm
test unless assessment deprives him of life's necessities).
2986-1 usrc ff 9285, 786 F. 2d 586, 591 (CA-3).
June, 1990
 The Eleventh Circuit followed in Lovell v.
United States,30 refusing equitable relief to tax
shelter promoters who received neither deficiency
notices nor notices of liability under Section 6901
before their assets were levied upon by the Com-
missioner. Quoting extensively from Cool Fuel,
the court held that the taxpayers had failed to
establish irreparable harm and had other legal
remedies available to them.
Relief as Semidiscretionary. In Philadelphia
& Reading Co. v. Beck,"' the Seventh Circuit took
the view that a District Court normally should
grant injunctive relief from an invalid income
tax deficiency assessment but may withhold relief
under some circumstances.
The taxpayer in that case provisionally
agreed to deficiencies and overpayments for 1964
through 1968 totalling approximately $10.5 mil-
lion and $6.5 million, respectively, producing a
net tax liability of about $4 million. Seeking to
offset the overpayments against the deficiencies,
the taxpayer executed a conditional waiver of
restrictions on assessment which was to become
effective when the overpayments, which required
Joint Committee approval, were scheduled.
The Commissioner assessed the $10.5 million
of deficiencies, plus interest-and the period of
limitations on assessment for the deficiency years
expired-before the overpayments were scheduled.
The taxpayer sued to enjoin the collection of
the assessment, arguing that it was premature,
since no deficiency notice had been issued and
the waiver of restrictions on assessment had
never become effective. Conversely, the Govern-
ment claimed that it was entitled to collect the
entire assessment plus interest.
The District Court held that the taxpayer
was liable for the $4 million net liability, but
enjoined the collection of the balance of the
contested assessment.
On appeal, the taxpayer maintained that the
entire assessment was void as a matter of law
and should be abated. Upholding the district
court's judgment, the Seventh Circuit offered
only qualified agreement:
In many cases this argument would be correct;
assessments that violate the notice require-
ments of Section 62 13(a) should be enjoined
if the effect would be to prevent taxpayers
from using the Tax Court. But equity does
not require the injunction of premature assess-
ments when the taxpayer has no interest
June, 1990 TAXES-The Tax Magazine
in contesting its taxes in the Tax Court and
there is no other irreparable hardship caused
by a violation Section 6213(a). . . . Section
6213(a), which is in precatory form, did not
require the district court to enjoin the col-
lection of the net deficiency."
Relief as Nondiscretionary. The Tenth Cir-
cuit continued to espouse a nondiscretionary
viewpoint in Cyclone Drilling, Inc. v. Kelley,33 a
"last known address" case similar to Cool Fuel.
Reversing and remanding a summary judgment
in favor of the Government, the court held that
the taxpayer "would be entitled to an injunction
if the court were to find that the IRS did not
send a Notice of Deficiency to the taxpayer's
last known address."34
The Tax Court's Approach. Kamholz pre-
sented the Tax Court with its first opportunity
to address the subject of injunctive relief under
Section 6213(a), as amended by TAMRA.
In that case, the Commissioner sent the tax-
payer two deficiency notices for the taxable year
1983 from which the latter filed two timely peti-
tions with the court. Before the second petition
was filed, the Commissioner assessed a statutory
addition asserted in the second deficiency notice
and commenced collection activity.
The taxpayer moved to restrain the collec-
tion of the assessment, asserting that the assessed
amount was at issue before the court.
Finding the taxpayer's actual allegations
"plausible and believable," the court held that
the Commissioner was required to prove by a
preponderance of the evidence that the contested
assessment was not the subject of either of the
pending petitions. The Commissioner was un-
able to do so. Accordingly, the court concluded
that the assessment was premature and turned to
the question of whether injunctive relief was
appropriate.
The court seemed to endorse a discretionary
approach to relief, stating that "Section 6213
speaks permissively by providing that premature
assessments and collections may be enjoined by
this Court." 3
3o86-2 usrc 19604, 795 F. 2d 976 (CA-11).
8182-1 usrc 9334, 676 F. 2d 1159 (CA-7).
32 Id. at 1163.
a385-2 us-rc 9595, 769 F. 2d 662 (CA-10). Also
see Keado v. United States, 88-2 usTc 9489, 853 F. 2d
1209, 1214, n. 13 (CA-5) (noting split in circuits on
question of discretion).
84 Id. at 663.
35 CCH Dec. 46,318 at 3611 (emphasis in original).
415
 Since the case was appealable to the Ninth
Circuit, the court was required to. follow Cool
6
Fuel." It acknowledged that under Cool Fuel and
its progeny, a taxpayer must establish irrepa-
rable harm and an inadequate legal remedy, as
well as a premature assessment, in order to
qualify for an injunction.
Still, the court held that the taxpayer had
"selected his legal remedy by filing his petitions
with the Court . . . and having done so, we
think it is irrelevant whether he would suffer
irreparable injury should respondent collect." .3
The court enjoined the collection of the con-
tested assessment during the pendency of the
proceedings, without giving further consideration
to whether the taxpayer could afford to pay it.
Contemporary Approaches to Relief in Per-
spective. The deficiency notice rules have changed
little since their enactment over sixty years ago.
Legislative history suggests that Congress in-
tended to make injunctive relief from infractions
of those rules generally nondiscretionary. The
1924 committee reports make it clear that Con-
gress rejected the refund suit as an adequate
legal remedy for an invalid income tax deficiency
assessment and considered a prepayment adjudi-
cation of an asserted income tax deficiency to be
a taxpayer's right.
As previously noted, proponents of judicial
discretion in the granting of injunctive relief
principally offer the "may be enjoined by a pro-
ceeding" language of Section 6213(a) to support
a contrary argument. That language is ambigu-
ous at best, however, and may be viewed simply
as vesting a taxpayer with discretion in the
selection of remedies. Indeed, that was the gloss
placed upon the statute by the Seventh Circuit
in United States v. Yellow Cab Co.3 8
In Yellow Cab, the taxpayer filed a petition
with the Board of Tax Appeals for redetermina-
tion of a deficiency for 1924. While the case was
pending, the Commissioner assessed the defi-
ciency. He also filed a motion to dismiss the
1924 case for lack of jurisdiction, which the
Board granted. Before the dismissal became
final, the taxpayer paid the deficiency and filed
a refund claim, which was denied. The taxpayer
then sued to recover the payment on the ground
that the assessment violated deficiency notice
procedures.
The Commissioner argued that the refund
suit was barred because the taxpayer should
have sued for an injunction while the Board
TAXES-The Tax Magazine
proceedings were pending, and this was its ex-
clusive remedy. The Seventh Circuit disagreed,
stating that "[i]t seems to us a reasonable inter-
pretation of this provision [Section 6213(a)'s
predecessor] that it merely confers upon the
taxpayer an additional remedy. . . ." 89
This alternative construction of the statute
is buttressed by the fact that when Congress
has sought to indicate judicial discretion, it has
done so in far less equivocal terms. 0
One may argue, on the other hand, that a
purely nondiscretionary approach to Section
6213(a) relief pays too little respect to the 1926
committee reports, which explained that "the tax-
payer may in a proper case go into court for an
injunction. . . ." [emphasis supplied]
That enigmatic qualification may, indeed,
signify that it is appropriate to deny injunctive
relief on occasion-perhaps, for example, when
a taxpayer has waived his right to a prepayment
income tax deficiency adjudication either ex-
pressly" or implicitly.' 2 It is difficult to stretch
the import of the language, however, to make
injunctive relief turn merely on ability to pay,
a factor upon which Congress did not condition
the Commissioner's duty to send a deficiency
notice in the first instance.
Kamholz raises new possibilities and new
questions. The Tax Court unquestionably reached
the correct result in that case. It would be
86 See Golsen v. Commissioner, CCH Dec. 30,049, 54
TC 742 (1970) (Tax Court will follow law of circuit).
s7 CCH Dec. 46,318 at 3612.
88 37-2 USTC 19391, 90 F. 2d 699 (CA-7).
39 Id at 701.
40 See, e. g., IRC Sec. 7403(c) ("court may decree
a sale" in tax lien foreclosure suit); IRC Sec. 7407(b)
("court may enjoin" income tax preparer from engaging
in certain conduct); IRC Sec. 7408(b) ("court may en-
join" tax shelter promotor from engaging in certain
conduct); and IRC Sec. 7409(b) ("court may enjoin"
charitable organization from making flagrant political
expenditures. Cf. United States v. Rodgers (Government
arguing that "court may decree" language of IRC Sec.
7403(c) nondiscretionary).
41 See Quigley (no injunction where taxpayer ex-
ecuted valid waiver of restrictions on assessment).
42 See Philadelphia& Reading Co. (agreement to set-
tle multiple years involving deficiencies and overpay-
ments; taxpayer evinced no intention to petition Tax
Court); Lehigh Portland Cement Co. v. United States,
39-2 usmrc 9798, 30 F. Supp. 217 (Ct. Cl. 1939) (tax-
payer not entitled to refund of amounts paid in sat-
isfaction of premature deficiency assessments; taxpayer
received deficiency notice before assessments were made
but declined to petition Board of Tax Appeals and
took no other action to challenge assessments while
limitations period was open; taxpayer waived oppor-
tunity for prepayment adjudication). Compare Ventura,
86 F. 2d at 156 (no agreement or concession by tax-
payer that it owed deficiencies).
June, 1990
anomalous for the court to relegate a taxpayer
to a refund suit for an asserted tax properly
placed in issue before it, but prematurely assessed,
simply because the taxpayer could afford to
pay it.
Although the opinion holds that injunctive
relief under Section 6213(a) is "permissive," it
suggests that the Tax Court will tend to dispense
with or avoid rigidly conventional equity con-
cepts when a taxpayer invokes the court's juris-
diction to redetermine an asserted deficiency
properly placed in issue.
The question remains whether the court will
offer interim and permanent injunctive relief
from a deficiency assessment under similar prin-
ciples when a taxpayer seeks to challenge its
jurisdiction with a view towards establishing the
invalidity of the assessment," particularly when
the statute of limitations on assessment bars the
issuance of a new deficiency notice. Although
the court has permitted such jurisdictional chal-
lenges in the past,4 its historical lack of in-
junctive power 4 5 has exposed taxpayers to
enforced collection action by the Commissioner
during the pendency of proceedings. Moreover,
even when the court has found that the Commis-
sioner failed to follow deficiency notice procedures
and dismissed in favor of a taxpayer on that
basis, the taxpayer has had no means of com-
pelling an abatement of the assessment thus
established as premature, other than filing a
collateral injunction suit in district court.
Nothing in the TAMRA amendment to Sec-
tion 6213(a) expressly prevents the Tax Court
from granting injunctive relief in those cases in
which a taxpayer challenges the sufficiency of
a deficiency notice and thereby seeks to attack
an assessment. 46 The amendment does, it is true,
condition relief upon the timely filing of a
petition. A petition filed from a defective defi-
ciency notice (or when no notice is mailed) is
arguably always timely, however, since the period
within which a taxpayer may petition the court
does not begin to run until a valid deficiency
notice is properly mailed.'1
Equally important, the granting of injunc-
tive relief by the Tax Court from a deficiency
assessment, when the deficiency notice upon
which it is grounded is found to be defective,
June, 1990 TAXES-The Tax Magazine
would appear to be consonant with the aim of
the TAMRA amendment, that is, to encourage
litigation of related matters in the same forum.
If the Tax Court confirms that it has injunc-
tive power in such cases, and if the court exer-
cises that power consistent with the standards
applied in Kamholz (which minimize or disregard
ability to pay/irreparable harm as a factor in
granting relief), it may emerge as an attractive
forum for contesting premature deficiency assess-
ments when further assessment is time barred.
Conclusion
The current conflict among the circuits as
to when injunctive relief lies under Section
6213(a) means that some taxpayers who can
afford to pay concededly invalid income tax
deficiency assessments will be forced into refund
suits; other taxpayers, similarly situated, will not.
Courts which view injunctions under Section
62 13(a) as entirely discretionary and which have
made ability to pay a bar to an injunctive remedy
may have effectively transformed that statute's
restrictions on assessment and collection into a
dead letter.
The Tax Court may offer new opportunities
for winning injunctive relief from invalid defi-
ciency assessments. Although the court has
called such relief permissive, it may tend to
avoid or minimize conventional equity concepts
in awarding it. 0
4' See Shelton v. Commissioner, CCH Dec. 32,842,
63 TC 193 (1974) (taxpayer may file petition placing
deficiency in suit, followed by motion to dismiss for
lack of jurisdiction based on invalidity of deficiency
notice; court has jurisdiction to determine jurisdiction;
granting of taxpayer's motion vitiates underlying assess-
ment).
44 Id.
45See Commissioner v. Gooch Milling & Elevator Co.,
43-2 usmrc 7673, 320 U. S. 418 (1943) (court without
equitable power). But see Woods v. Commissioner, CCH
Dec. 45,602, 92 TC 776 (1989) (court may exercise
equitable power except when to do so would confer
jurisdiction denied by statute).
46 Lack of subject matter jurisdiction in the under-
lying Tax Court proceeding, resulting from an invalid
deficiency notice, should not preclude ancillary relief.
Cf. Weiss v. Commissioner, CCH Dec. 43,863, 88 TC
1036 (1987) (court has residual jurisdiction after dis-
missal for lack of jurisdiction), rev'd and rem'd on
other grounds, 88-2 usi'c 19419, 850 F. 2d I11 (CA-2
1988).
67 See IRC Sec. 6213(a).