Cohen v. United States

United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued May 1, 2009 Decided August 7, 2009

No. 08-5088

NEILAND COHEN,
APPELLANT

v.

UNITED STATES OF AMERICA,
APPELLEE

Consolidated with 08-5093, 08-5174

Appeals from the United States District Court
for the District of Columbia
(No. 1:07-cv-00051)

Michael A. Bowen and Robert J. Cynkar argued the cause
for appellants. With them on the briefs were Jonathan W.
Cuneo, Marc B. Dorfman, Henry D. Levine, Charles Tiefer,
Mark C. Rifkin, Mark D. Griffin, and Randy J. Hart.

Ellen Page DelSole, Attorney, U.S. Department of Justice,
argued the cause for appellee. With her on the brief were
Gilbert S. Rothenberg, Acting Deputy Assistant Attorney
 2
General, Jeffrey A. Taylor, U.S. Attorney, and Teresa E.
McLaughlin, Attorney. R. Craig Lawrence, Assistant U.S.
Attorney, entered an appearance.

Before: GARLAND, BROWN, and KAVANAUGH, Circuit
Judges.

Opinion for the Court filed by Circuit Judge BROWN.

Dissenting opinion filed by Circuit Judge KAVANAUGH.

BROWN, Circuit Judge: Comic-strip writer Bob Thaves
famously quipped, “A fool and his money are soon parted. It
takes creative tax laws for the rest.” In this case it took the
Internal Revenue Service’s (“IRS” or “the Service”) aggressive
interpretation of the tax code to part millions of Americans with
billions of dollars in excise tax collections. Even this
remarkable feat did not end the IRS’s creativity. When it finally
conceded defeat on the legal front, the IRS got really inventive
and developed a refund scheme under which almost half the
funds remained unclaimed. Now the IRS seeks to avoid judicial
review by insisting the notice it issued, acknowledging its error
and announcing the refund process, is not a binding rule but
only a general policy statement.

We conclude the notice bound the Service, tax collectors,
and taxpayers. Accordingly, we reverse the district court’s
dismissal of Appellants’ claims made under the Administrative
Procedures Act (“APA”). We further determine Appellant
Neiland Cohen filed his refund claim prematurely and, thus,
affirm the district court’s dismissal of his refund claim.
 3
I

The Internal Revenue Code imposes a three percent excise
tax on phone calls. 26 U.S.C. § 4251. Telephone service
providers collect the tax and pay it over to the IRS. See id.
§ 4291. The Code taxes only communications charges that vary
with distance and transmission time. Id. § 4252(b). Decades
ago, these requirements posed no problem as phone companies
based their billing on multiple factors, including the key
components of distance and time. Nat’l R.R. Passenger Corp. v.
United States, 431 F.3d 374, 375 (D.C. Cir. 2005). The
telecommunications revolution has changed all that: many
consumers now pay strictly based on transmission time—
frequently, rates no longer vary based on the distance of a call.
Id. Despite recognizing this shift, the IRS continued to collect
taxes on all long-distance communications. See IRS Not. 2005-
79 (Oct. 20, 2005) (“Notice 2005-79”); see also IRS Rev. Rul.
79-404, 1979-2 C.B. 382 (determining communication between
ships at sea or other offshore facilities and telephone subscribers
in the United States were subject to the excise tax though the
charges varied only based on transmission time).

Multiple corporate taxpayers brought suit seeking refunds
and several circuits, including this one, concluded time-only rate
structures render calls nontaxable under the Code. Nat’l R.R.
Passenger, 431 F.3d at 375–76. While these lawsuits
proceeded, the IRS remained adamant regarding the continuing
applicability of the excise tax. After it lost an appeal in the
Eleventh Circuit, see Am. Bankers Ins. Group v. United States,
408 F.3d 1328 (11th Cir. 2005), the Service issued Notice 2005-
79, which declared it would continue to litigate the applicability
of the tax and directed phone service providers to continue
collecting the tax, even from individuals in the Eleventh
Circuit’s jurisdiction. Notice 2005-79. It ordered taxpayers to
continue paying the tax but permitted place-holder refund claims
 4
“for overpayments.” Id. Taxpayers were advised, however, the
Service would not process these claims while related cases
pended in federal courts of appeals. Id.

The IRS lost in every circuit that considered its application
of § 4251. Five circuits held the tax inapplicable to long-
distance calls charged without reference to the distance variable.
Nat’l R.R. Passenger, 431 F.3d 374; Reese Bros., Inc. v. United
States, 447 F.3d 229 (3d Cir. 2006); Fortis, Inc. v. United States,
447 F.3d 190, 191 (2d Cir. 2006); OfficeMax, Inc. v. United
States, 428 F.3d 583 (6th Cir. 2005); Am. Bankers Ins. Group,
408 F.3d at 1338. In response, on May 26, 2006, the IRS issued
Notice 2006-50. See IRS Not. 2006-50 (May 26, 2006)
(“Notice 2006-50”). The notice announced the discontinuation
of the excise tax for phone charges based solely on transmission
time and the refund process for taxes erroneously collected
between February 28, 2003 and August 1, 2006. Id.

Under Notice 2006-50, individual taxpayers had to request
their refund or credit on their 2006 federal income tax returns.
Id. This requirement extended to individuals who otherwise did
not need to file income tax returns. Id. Taxpayers could either
request a “safe harbor” amount, which required no
documentation, or the actual amount of tax they paid, for which
the IRS could demand documentation. Id. § 5(c).

Various lawsuits arose challenging the refund process. See
In re Long-Distance Telephone Service Federal Excise Tax
Refund Litigation, Docket No. 1798 (J.P.M.L. Dec. 28, 2006)
(Transfer Order). The Multidistrict Litigation (“MDL”) Panel
centralized and transferred three district court cases into an
MDL proceeding before the United States District Court for the
District of Columbia. Id., slip op. at 2. The district court
dismissed the cases after concluding Appellants failed to
exhaust their administrative remedies for their refund claims and
 5
failed to state valid claims under federal law, including the
APA, 5 U.S.C. § 702. The district court also ruled their claims
for injunctive and declaratory relief were mooted by the IRS’s
decision to discontinue the tax on time-based phone charges. In
re Long-Distance Tel. Serv. Federal Excise Tax Refund
Litigation, 539 F. Supp. 2d 281, 287 (D.D.C. 2008). Appellants
appeal the district court’s dismissal of their APA claims.
Appellant Cohen appeals the district court’s conclusion that he
failed to meet jurisdictional exhaustion requirements.

II

We review de novo the district court’s dismissal of
Appellants’ APA claims for failure to state a claim upon which
relief can be granted, Kassem v. Wash. Hosp. Ctr., 513 F.3d
251, 253 (D.C. Cir. 2008), as well as the dismissal of Appellant
Cohen’s refund claim for lack of subject-matter jurisdiction,
Nat’l Taxpayers Union, Inc. v. United States, 68 F.3d 1428,
1432 (D.C. Cir. 1995). Applying this standard, we reverse the
dismissal of Appellants’ APA claims, but affirm the dismissal of
Cohen’s refund claim.

A

Before delving into the propriety of the district court’s
dismissal, we pause to consider jurisdiction. The IRS raises two
challenges to our jurisdiction: (1) the Anti-Injunction Act
(“AIA”), which provides “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,” 26 U.S.C.
§ 7421(a), and (2) the Declaratory Judgment Act (“DJA”),
which allows for declaratory relief but specifically excludes
federal taxes from its reach, 28 U.S.C. § 2201(a). As these acts
 6
are coterminous, Investment Annuity v. Blumenthal, 609 F.2d 1,
4 (D.C. Cir. 1979), we address them jointly. They do not apply.

At the district court, Appellants made various claims for
injunctive and declaratory relief as well as claims under the
APA. In re Long-Distance Tel. Serv., 539 F. Supp. 2d at 287–
99. On appeal, however, Appellants only press the APA claims
asking us to strike down the IRS’s refund regime as unlawful or,
alternatively, to remand the issue to the district court.
Appellants do not seek to restrain the assessment or collection
of taxes and the requested relief, if granted, could not result in
impermissible restraints. As such, on the unusual facts of this
case, neither the AIA nor the DJA apply.1

We also step back to contemplate the basis of our
jurisdiction. After all, this is not your typical tax case. In a run-
of-the-mill case, taxpayers litigate who has the right to disputed
funds, along with incidental quarrels over the IRS’s procedures,
in the context of a suit for refund. This pattern exists for good
reason: usually the taxpayer’s goal is to get his money back and
the only way to do this is to bring a refund claim. Enochs v.
Williams Packing & Navigation Co., 370 U.S. 1, 7 (1962) (the
tax code “require[s] that the legal right to the disputed sums be
determined in a suit for refund”). To accomplish this, taxpayers
must strictly comply with the refund procedures set forth in the
tax code, including the obligation under § 7422 to file an
administrative claim with the IRS before filing suit. United
States v. Clintwood Elkhorn Mining Co., 128 S. Ct. 1511, 1515
(2008).

But this case is different: the fight is over process, not
disputed funds. The IRS has conceded it did not have the right

1
We need not decide whether the relief sought constitutes a
declaratory judgment as, regardless, the DJA does not apply.
 7
to collect the excise tax for phone charges based solely on
transmission time in the first place and, with the exception of
Appellant Cohen’s separate claim addressed infra, Appellants
no longer seek a refund in this suit. See Appellants’ Reply Br.
5. They seek to challenge the procedural obstacles the IRS
inserted between individual taxpayers and their right to file suit
to recover unlawfully collected taxes. They, therefore, request
that we review and overturn Notice 2006-50. This presents us
with a wrinkle. The tax code waives sovereign immunity and
grants district courts original jurisdiction only for civil actions
for the recovery of taxes. 28 U.S.C. § 1346(a)(1). So, under
what authority do we review Appellants’ APA claims and is that
review permissible in light of the tax code’s vigorous limits on
judicial intervention?

Federal jurisdiction to hear this administrative challenge
lies not in the tax code, but in our federal question jurisdiction.
See Road Sprinkler Fitters Local Union 669 v. Herman, 234
F.3d 1316, 1319 (D.C. Cir. 2000) (quoting 28 U.S.C. § 1331)
(Federal courts have jurisdiction over “‘all civil actions arising
under the . . . laws . . . of the United States,’ including those
brought under the APA.”); 28 U.S.C. § 1291. The APA waives
the government’s sovereign immunity, and thus permits the
exercise of jurisdiction, in actions seeking non-monetary relief
with respect to agency action. 5 U.S.C. § 702. This waiver
applies as long as another statute does not limit judicial review
or forbid the type of relief sought. Id.

The tax code deprives federal courts of jurisdiction over
suits “for the recovery of any internal revenue tax alleged to
have been erroneously or illegally assessed or collected, . . . or
of any sum alleged to have been excessive or in any manner
wrongfully collected, until a claim for refund or credit has been
duly filed.” 26 U.S.C. § 7422(a) (emphasis added). As a result,
no suit for refund can be brought under the APA—taxpayers
 8
looking to recoup funds must proceed under the refund scheme
set forth in the tax code. Rather, only in the anomalous case
where the wrongful assessment is not disputed and litigants do
not seek a refund is a standalone claim under the APA viable.
This is that case.

Of course, Appellants hope to parlay a victory in this suit
into a successful suit for recovery. But these aspirations are too
remote to transform these APA claims into a suit for refund.
Even if Notice 2006-50 were struck down as unlawful,
Appellants still may achieve only a pyrrhic victory. Moreover,
Appellants’ desire to pursue refunds later, depending on the
outcome of this litigation, is perfectly acceptable and has no
bearing on the nature of their claims or the remedy to which
they now may be entitled. Most taxpayers seek “proper tax
treatment” in addition to invalidation of a flawed regulation.
Kristin E. Hickman, A Problem of Remedy: Responding to
Treasury’s (Lack of) Compliance with Administrative Procedure
Act Rulemaking Requirements, 76 GEO. WASH. L. REV. 1153,
1185 (2008). The possibility that this suit may help create a
later opportunity for Appellants to pursue a refund in
compliance with the dictates of the tax code does not affect our
jurisdiction.

With our jurisdiction established, we consider Appellants’
APA claims. The APA affords causes of action to parties
adversely affected by agency action. 5 U.S.C. §§ 702, 704;
Trudeau v. FTC, 456 F.3d 178, 185 (D.C. Cir. 2006). Section
704, however, limits judicial review to “[a]gency action made
reviewable by statute and final agency action for which there is
no other adequate remedy in a court.” 5 U.S.C. § 704. A
substantive rule constitutes a binding final agency action and is
reviewable. Id. § 704. Courts review substantive rules to
ensure, inter alia, the agency acted in a reasonable manner
within its statutory authority and promulgated the rules in
 9
accordance with the notice-and-comment requirements of the
APA. Id. § 706. A general statement of policy, on the other
hand, is exempt from notice-and-comment rulemaking
requirements and is not a “final agency action,” rendering it
unreviewable. Id. §§ 553, 704.

Appellants assert Notice 2006-50 constitutes final agency
action that “arbitrarily, unreasonably, and unlawfully limits
restitution of the funds unlawfully exacted.” In re Long-
Distance Tel. Serv. Fed. Excise Tax Refund Litig., 501 F. Supp.
2d 34, 38–39 (D.D.C. 2007). To determine whether Notice
2006-50 is a binding standard, and thus a final and reviewable
agency action, we consider whether it (1) marked the
“consummation” of the IRS’s decisionmaking process and
(2) either affects legal “rights or obligations” or results in “legal
consequences.” Bennett v. Spear, 520 U.S. 154, 177–78 (1997).
We conclude Notice 2006-50 operates as a substantive rule that
binds the IRS, excise tax collectors, and taxpayers.

Notice 2006-50 marked the culmination of the IRS’s
deliberations on the refund process for individual taxpayers.
Once the IRS conceded it owed taxpayers approximately
$8 billion, it had to administer the refunds. That is where the
agency ran into trouble. Congress had provided a refund
method—but only via the service providers who collected the
taxes. 26 U.S.C. § 6415(a). Congress had not anticipated
taxpayers might wish to seek their refunds directly, rather than
relying on the industriousness or responsiveness of the
intermediary tax collectors. The IRS overcame this glitch by
issuing Notice 2006-50, agreeing to refund the amounts paid for
nontaxable long-distance service to individual taxpayers who
claimed their refunds on their 2006 federal income tax returns.
Notice 2006-50, § 5(a). The notice is not equivocal, nor is it “of
a merely tentative or interlocutory nature,” Bennett, 520 U.S. at
178. It clearly concluded the IRS’s decisionmaking process.
 10
We turn, then, to consider whether the notice produced
legal consequences. First, we inquire whether the language and
the content of the notice bound the IRS or “genuinely [left] the
agency and its decisionmakers free to exercise discretion.” Ctr.
for Auto Safety v. NHTSA, 452 F.3d 798, 806 (D.C. Cir. 2006)
(alteration in original). After that, we consider whether the
notice alters the legal rights or obligations of tax collectors or
taxpayers.

“The primary distinction between a substantive rule—
really any rule—and a general statement of policy . . . turns on
whether an agency intends to bind itself to a particular legal
position.” Syncor Int’l Corp. v. Shalala, 127 F.3d 90, 94 (D.C.
Cir. 1997). To that end, the language an agency uses when it
characterizes its action can be telling. Ctr. for Auto Safety, 452
F.3d at 806–07; see also Nat'l Ass'n of Home Builders v. Norton,
415 F.3d 8, 14 (D.C. Cir. 2005) (finding Department of Interior
survey protocols were policy statements in part because agency
documents repeatedly characterized them as “recommended
rather than mandatory” and because of “the voluntary nature of
the language” used in the protocols). We have given decisive
weight to agencies’ use of mandatory words like “will” instead
of permissive words like “may.” Compare Am. Bus Ass’n v.
United States, 627 F.2d 525, 532 (D.C. Cir. 1980) (finding the
use of “will” indicates a statement is a binding norm) with
Guardian Fed. Savings & Loan Ass’n v. FSLIC, 589 F.2d 658,
667 (D.C. Cir. 1978) (finding the use of “may” indicates a
statement is a general statement of policy). Notice 2006-50 is
laden with mandatory language. See, e.g., Notice 2006-50,
§ 1(a) (stating that the IRS “will follow the holdings” of five
circuits that deemed service time-only rate structures
nontaxable); id. (“[T]he government will no longer litigate this
issue.”). Additionally, it does not include the classic “weasel
words” through which agencies try—with variable success—to
reserve discretion for themselves. See, e.g., Wilderness Soc’y v.
 11
Norton, 434 F.3d 584, 595–96 (D.C. Cir. 2006); Appalachian
Power Co. v. EPA, 208 F.3d 1015, 1022–23 (D.C. Cir. 2000).

Moreover, the IRS made several commitments that curb the
agency’s discretion. For instance, the notice declares the
agency’s decision to follow the holdings of the five circuits that
concluded time-only rate structures make calls nontaxable under
the Code. Notice 2006-50 § 1(a). Having finally admitted
“amounts paid for time-only service are not subject to the tax
imposed by § 4251,” id., the IRS can hardly go back now and
try to collect taxes on these calls. The notice also created an
obligation for the IRS to process and pay properly requested
refunds. Under the tax code the IRS usually has discretion as to
whether it will process refund requests. See, e.g., 26 U.S.C.
§ 6532(a)(1) (providing a six-month window in which the IRS
may render a decision on refund claims prior to litigation, but
creating no obligation for it to do so); see also Milbank v.
Duggan, 131 F.2d 898, 900 (2d Cir. 1942) (stating the purpose
of 26 U.S.C. § 3772(a)(2), predecessor to 26 U.S.C. § 6532, was
“to give the Commissioner six months after he becomes aware
that the taxpayer has called upon him to act”). The IRS would
retain the same discretion here, had it not pledged “to credit or
refund the amounts paid for nontaxable service if the taxpayer
requests the credit or refund in the manner prescribed in this
Notice.” Notice 2006-50 § 5(a). As counsel for the IRS
conceded during oral argument, through the notice the IRS
obligated itself to process and pay refund claims if the requests
conform to the notice’s requirements. Tr. of Oral Arg. at 35–37.

The IRS argues the statutory scheme leaves the decision of
whether or not to process refund requests entirely up to the
Service’s discretion and the IRS’s method for exercising its
discretion is unreviewable under the APA, 5 U.S.C. § 701(a)(2).
Indeed, the Supreme Court has concluded the tax code was
designed “‘to advise the appropriate officials of the demands or
 12
claims intended to be asserted, so as to insure an orderly
administration of the revenue,’ to provide that refund claims are
made promptly, and to allow the IRS to avoid unnecessary
litigation by correcting conceded errors.” Clintwood Elkhorn
Mining Co., 128 S. Ct. at 1519 (quoting United States v. Felt &
Tarrant Mfg. Co., 283 U.S. 269, 272 (1931)). The IRS urges
Notice 2006-50 amounts to no more than a policy statement
explaining how the Service will exercise its statutory discretion
with respect to refunds of nontaxable communications excise
taxes.

Due to the inverted posture of this refund case, the IRS’s
policy-based arguments fail. We agree the tax code favors IRS
flexibility in the administration of refunds. The IRS’s
“exceedingly strong interest in financial stability,” id., is at its
peak when the Service’s right to retain the funds is in dispute,
but this interest ebbs considerably when, as here, the IRS has
conceded it had no right to collect the funds in the first place.
When the IRS made that concession, via Notice 2006-50, it did
not merely forecast how it intended to exercise its statutory
discretion to address a refund claim. Rather, it promulgated a
reviewable, substantive rule dictating the future administration
of this type of claim. In doing so, the Service forfeited the
discretion it retained prior to issuing the notice. Its asymmetry
notwithstanding, Notice 2006-50 binds the IRS.

Notice 2006-50 also alters the legal obligations of service
providers charged with collecting excise taxes under § 4291.
Until the notice issued, the IRS required service providers to
collect taxes on purely time-based service charges. See Notice
2005-79. Notice 2006-50 directs collectors “to cease collecting
and paying over tax under § 4251 on [this] nontaxable service,”
thereby altering their legal obligations. Notice 2006-50, § 4(c).
It is, of course, arguable that the five federal circuit court
decisions that declared the services nontaxable actually altered
 13
the service providers’ collection obligations, and the IRS merely
communicated this fact to them via the notice. Id. § 4 (entitled
“Effect of ABIG, OfficeMax, Amtrak, Fortis, and Reese Bros.”).
But, as these excise tax cases demonstrate, the IRS apparently
believes it has discretion about whether or when to follow
Article III decisions. See Notice 2005-79 (directing phone
service providers to continue collecting the tax, even from
individuals in the Eleventh Circuit’s jurisdiction, after the
Eleventh Circuit held its application of the statute unlawful and
the IRS declined to seek Supreme Court review). In Notice
2006-50, the Service deigned to comply with the courts’
holdings and required its collectors to do the same, thus altering
the operative legal regime.

Finally, Notice 2006-50 changes taxpayers’ rights and
obligations. The notice gives taxpayers the right not to pay
excise taxes on phone calls for which the charges vary based
only on transmission time, and not with distance. Notice 2006-
50, § 4(a) (“[T]axpayers are no longer required to pay tax under
§ 4251 for nontaxable service.”); id. § 4(c) (“[Collectors] are not
required to report to the IRS any refusal by their customers to
pay any tax on nontaxable services that is billed after May 25,
2006.”). The notice also creates a right to reimbursement.
When “the language of the document is such that private parties
can rely on it as a norm or safe harbor by which to shape their
actions, it can be binding as a practical matter.” See Gen. Elec.
Co. v. EPA, 290 F.3d 377, 383 (D.C. Cir. 2002). Just as Notice
2006-50 created an obligation on the part of the IRS to pay
properly requested refunds, it also gave taxpayers the
concomitant right to receive a refund if they conformed to the
notice’s instructions. Notice 2006-50, § 5(a) (“The
Commissioner agrees to credit or refund the amounts paid for
nontaxable service if the taxpayer requests the credit or refund
in the manner prescribed in this Notice.”).
 14
The notice also creates taxpayer obligations. On its face,
Notice 2006-50 presents a hurdle taxpayers must surmount
before they can file suit to recover the funds the IRS illegally
took from them. Under § 7422, taxpayers cannot file suit to
recover unlawfully exacted taxes “until a claim for refund or
credit has been duly filed with the Secretary, according to the
provisions of law in that regard, and the regulations of the
Secretary established in pursuance thereof.” 26 U.S.C.
§ 7422(a). The notice states “[r]equest[s] must follow this
notice” and “a request for this credit or refund on any other form
(such as a Form 720, 843, or 8849) will not be processed by the
Service.” Notice 2006-50, § 5(a). It makes clear that taxpayers
cannot seek administrative refunds in any other manner.

The IRS insists taxpayers do not need to follow the notice
in order to exercise their right to file suit under § 7422. It
claims, “Nothing in [the notice] prohibits taxpayers from
submitting otherwise valid claims for refund under the usual
statutory procedures for claiming a refund of tax, nor does it in
any way sanction taxpayers who elect to use the statutory
procedure.” Appellee’s Br. 58. That’s just mean. To go the
“statutory” route, as the IRS suggests, places taxpayers in a
virtual house of mirrors. Section 7422 requires taxpayers to file
a refund claim “with the Secretary, according to the provisions
of law in that regard, and the regulations of the Secretary
established in pursuance thereof.” 26 U.S.C. § 7422.
Regulation, 26 CFR § 301.6402-2, enunciates the process for
filing a refund claim. Of primary importance here, it dictates
the appropriate form for the taxpayer to use. Id. § 302.6402-
2(c). It states, in relevant part, that “all claims by taxpayers for
the refunding of taxes, interest, penalties, and additions to tax
shall be made on Form 843.” Id.2 Form 843, however, does not

2
The district court incorrectly states this regulation “directs taxpayers
seeking non-income tax refunds to use the appropriate form in this
 15
permit this type of refund claim. At the top of the form, it reads,
“Do not use Form 843 if your claim is for . . . [a]n overpayment
of excise taxes reported on Form(s) 11-c, 720, 730, or 2290.”
Form 720 is the Quarterly Federal Excise Tax Return on which
communications excise taxes, including the excise tax at issue
here, are reported by the service providers (who collect and
remit the taxes). Therefore, taxpayers cannot use Form 843 to
file their refund claim. The instructions for Form 843, however,
suggest that taxpayers fill out Form 8849 “to claim a refund of
excise taxes other than those resulting from adjustments to
[their] reported liabilities” and refers them to IRS Publication
510, Excise Taxes, “for the appropriate forms to use to claim
excise tax refunds.” IRS Publication 510 states, “Do not use
Form 8849, Form 720, or Form 843 to make claims for
nontaxable service; the IRS will not process these claims.”
Even if the taxpayer ignored the reference to the IRS
publication, Form 8849 itself cautions “Do not use Form 8849 .
. . to claim any amounts that were or will be claimed on
Schedule C (Form 720), Claims . . . .” While this language
sounds slightly more flexible, taxpayers have no way of
knowing whether their service provider has or will claim the
nontaxable funds at issue.

case, Notice 2006-50.” In re Long-Distance Tel. Serv., 539 F. Supp.
2d at 294. But the regulation does not say “use the appropriate form.”
Rather, it specifically instructs taxpayers to use Form 843 and to refer
to “other provisions . . . relating to the particular tax.” Id. § 302.6402-
2(c). No other provisions relating to the refund of these excise taxes
apply to individual taxpayers. See generally, Code of Federal
Regulations, Title 26, Subchapter D, Part 40, Excise Tax Procedural
Regulations, 26 C.F.R. §§ 40.0-1–40.7701-1; id. § 40.0-1(a)
(describing that the regulations in part 40 set forth the administrative
provisions relating to excise taxes imposed under chapter 33, which
includes the long-distance excise tax); see also Part 49, Subpart C,
Communications, 26 C.F.R. §§ 49.4251-1–49.4254-2 (no provisions
related to refunds).
 16
Counsel for the IRS took the enigmatic position at oral
argument that if the taxpayers had used either Form 843 or Form
8849 to file their refund claims, then IRS’s acceptance would
have been mandatory and the claims would have sufficed to
meet § 7422’s jurisdictional exhaustion requirements. Tr. of
Oral Arg. at 29–31. But these assertions directly conflict with
the cautionary instructions printed in bold typeface on the front
of both forms and the explicit directions given in IRS
Publication 510. Furthermore, the IRS provided absolutely no
authority supporting its position. In reality, unless taxpayers
follow the dictates of Notice 2006-50, they run into nothing but
dead ends. The “usual statutory procedures for claiming a
refund of tax,” Appellee’s Br. 58, provide no avenue by which
individual taxpayers can fulfill their obligations in order to seek
judicial review.

The district court implied taxpayers may be able to satisfy
the administrative exhaustion requirements of § 7422 by filing
an informal claim. In re Long-Distance Tel. Serv., 539 F. Supp.
2d at 309–10 (claiming the notice’s refusal to process
noncompliant claims “does not mean that a deviant form could
not substantially comply with the duly promulgated regulations
governing the form of refund claims” and referencing the
prerequisites for informal claims to be recognized by the courts
for the purpose of administrative exhaustion). Counsel for the
IRS defended the position at oral argument. Tr. of Oral Arg. at
29–30 (claiming many courts have upheld the use of informal
refund claims). But an informal claim will not solve the 2006-
50 conundrum.

Informal refund claims have one limited purpose: to “put[]
the IRS on notice that a claim is being made [which] tolls the
statute of limitations until the deficiencies are corrected in a
subsequent refund claim.” Kaffenberger v. United States, 314
F.3d 944, 954 (8th Cir. 2003) (emphasis added). “The informal
 17
claim doctrine is predicated on the expectation that any formal
deficiency will at some point be corrected. To hold otherwise
would eliminate, as a practical matter, the formal claim
requirement.” Greene-Thapedi v. United States, 549 F.3d 530,
533 (7th Cir. 2008) (citing Pala Emples. Profit Sharing Plan v.
United States, 234 F.3d 873, 879 (5th Cir. 2000)). Thus, a
taxpayer may use an informal claim, perfected by a subsequent
formal claim, to meet the jurisdictional requirements of § 7422.
Id.; United States v. Forma, 42 F.3d 759, 767 (2d Cir. 1994)
(citing United States v. Kales, 314 U.S. 186, 194 (1941) (an
informal notice “will nevertheless be treated as a claim, where
formal defects and lack of specificity have been remedied by
amendment filed after the lapse of the statutory period.”)).

If, however, the taxpayer fails to perfect the administrative
claim with a valid, formal claim, the informal claim will be
dismissed for lack of subject-matter jurisdiction. Greene-
Thapedi, 549 F.3d at 533; Kaffenberger, 314 F.3d at 954
(“Although the regulation states that a claim that fails to comply
with the requirements will not be considered as a claim for
refund, the Supreme Court has endorsed informal claims . . . that
have technical deficiencies, as long as a valid refund claim is
subsequently made after the period has run.”) (citing
§ 301.6402-2(b)(1)). Thus, while taxpayers could initially use
informal claims to meet the jurisdictional requirements of
§ 7422, those claims would need to be perfected by filing formal
claims complying with both the statute and regulations. As
discussed above, attempts to follow the “usual” procedures only
return taxpayers to the heart of the maze.

Despite the obvious infirmities of these options, the IRS
still has the chutzpah to chide taxpayers for failing to intuit that
neither the agency’s express instructions nor the warning on its
forms should be taken seriously. According to the IRS,
taxpayers should have realized all the options the Service said
 18
were closed to them—using forms that proclaim their
inapplicability in bold letter or filing informal claims that could
not be perfected—were nonetheless sufficient to fulfill their
administrative refund obligations and to serve as a prerequisite
to judicial review. Not hardly. Taxpayers bear a heavy burden
when pursuing refund claims, but we have yet to demand
clairvoyance.

The IRS next contends the Appellants are not “aggrieved”
as required under the APA, 5 U.S.C. § 702, because Notice
2006-50 did not abrogate their rights to bring civil suit before
the district court. As discussed supra, the notice provided the
only process by which individual taxpayers could seek refunds
for the unlawfully exacted excise tax and, according to
Appellants, that process was unreasonable. Moreover, the
notice gave taxpayers the only discernable method for fulfilling
the jurisdictional requirements under § 7422 in order to pursue
judicial review for their refund claims.

Section 702 provides standing to a “person suffering [a]
legal wrong because of [an] agency action, or [one] adversely
affected or aggrieved by agency action within the meaning of a
relevant statute.” 5 U.S.C. § 702. Analysis under § 702 is akin
to the prudential zone of interest test. Clarke v. Securities
Indus. Ass’n, 479 U.S. 388, 395–97, 399, 400 n.16 (1987).
Therefore, Appellants must establish that their injury falls
within the “zone of interests” sought to be protected by § 7422.
Lujan v. Nat’l Wildlife Fed’n, 497 U.S. 871, 883 (1990). The
IRS correctly points out that the main interest the provision
protects is the IRS’s interest in taking the first crack at refund
claims before they are litigated. But Appellants only need to
show their “interest is ‘arguably’ one regulated or protected by
‘the statutory provision at issue.’” Safe Extensions, Inc. v. FAA,
509 F.3d 593, 600–01 (D.C. Cir. 2007) (quoting PDK Labs.,
Inc. v. DEA, 362 F.3d 786, 791 (D.C. Cir. 2004)). Under
 19
§ 7422, taxpayers must scrupulously follow both the statutory
and regulatory rules for filing a refund claim. 26 U.S.C. § 7422.
Thus, taxpayers have an interest in having a reasonable refund
process available to recover funds unlawfully exacted and to
gain access to the courts when they are dissatisfied with the
IRS’s response. This is at least arguably within the zone of
interests protected by § 7422, and that is enough.

In sum, the IRS unlawfully expropriated billions of dollars
from taxpayers, conceded the illegitimacy of its actions, and
developed a mandatory process as the sole avenue by which the
agency would consider refunding its ill-gotten gains. It cannot
avoid judicial review of that process by simply designating it a
policy statement. Notice 2006-50 constituted a final agency
action that aggrieved taxpayers by hindering their access to
court. Accordingly, we reverse the district court and remand
Appellants’ APA claims for further consideration.

***
The dissent argues we do not have jurisdiction to hear
Appellants’ APA claims. In the dissent’s view, the tax
exception in the DJA bars Appellants’ claims. Our colleague
insists the text of the DJA prohibits our review. But binding
circuit precedent interpreting the text of the DJA tells us the tax
exception is coextensive with the limits described in the more
narrowly worded AIA. Nat’l Taxpayers, 68 F.3d at 1435
(stating, in 1995, “Because the AIA and DJA operate
coterminously, the following analysis of the impact of the AIA
upon [the plaintiff’s] complaint also determines the effect of the
DJA.”); Investment Annuity, 609 F.2d at 4; E. Ky. Welfare
Rights Org. v. Simon, 506 F.2d 1278, 1285 n.11 (D.C. Cir.
1974), rev’d on other grounds, 426 U.S. 26 (1976) (explaining
the DJA did not originally contain the phrase ‘except with
respect to Federal taxes,’ which Congress added later in order to
prevent taxpayers from accomplishing by declaratory judgment
 20
that which was forbidden under the AIA)3; Am. United v.
Walters, 477 F.2d 1169, 1175–76 (D.C. Cir. 1973), rev’d on
other grounds, 416 U.S. 752 (1974) (“The breadth of the tax
exception of § 2201 is co-extensive with the effect of § 7421(a),
and so the applicability of the latter to our situation is
determinative of jurisdiction.”); see also Ecclesiastical Order of
ISM of AM, Inc. v. IRS, 725 F.2d 398, 404–05 (6th Cir. 1984).

So, despite its broad language, the DJA bars only
declaratory relief sought “for the purpose of restraining the
assessment or collection of any tax.” The dissent prefers the

3
The dissent complains the precedential status of this case is dubious
because it was vacated. The fact that two cases have since re-
embraced the rationale as enunciated in Eastern Kentucky renders that
concern irrelevant. See Nat’l Taxpayers Union, 68 F.3d at 1435;
Investment Annuity, 609 F.2d at 4 (citing E. Ky. Welfare Rights Org.,
506 F.2d at 1283–85; Am. United, 477 F.2d at 1175–76). To
overcome this obstacle to his novel interpretation, the dissent claims
neither National Taxpayers nor Investment Annuity passed on whether
the broader language of the DJA or the narrower language of the AIA
governs the inquiry. Actually, both cases confirmed that the AIA’s
applicability controls and conducted the analysis accordingly. Nat’l
Taxpayers, 68 F.3d at 1435 (“[A]nalysis of the impact of the AIA
upon [the plaintiff’s] complaint also determines the effect of the
DJA.”); Investment Annuity, 609 F.2d at 4 (recognizing the DJA “is, if
anything, more restrictive,” but expressly deciding to follow the
holdings of Eastern Kentucky and Americans United and focus the
analysis on the AIA). Moreover, for the dissent to ask “coterminous
in what direction” and pretend precedent leaves open the question of
which statute’s language controls is revisionist history. This circuit
concluded the provisions are coextensive because Congress only
added the tax exception to the DJA to stop taxpayers from using the
DJA to circumvent the AIA. E. Ky. Welfare Rights Org., 506 F.2d at
1285 n.11; Am. United, 477 F.2d at 1175–76. Thus, we construe the
provisions as coterminous for the precise purpose of limiting the scope
of the DJA tax exception to the effect of the AIA. Id.
 21
broader language of the DJA, and thus wants to interpret the
statutes as precluding injunctive and declaratory relief “with
respect to Federal taxes.” To support this interpretation, the
dissent relies on one half of a sentence from Murphy v. IRS, 493
F.3d 170, 174 (D.C. Cir. 2007) (addressing whether the IRS
could be sued eo nomine), which states, “ . . . Congress has
preserved the immunity of the United States from declaratory
and injunctive relief with respect to all tax controversies except
those pertaining to the classification of organizations under
§ 501(c) of the IRC.” But this admittedly loose language does
not support the dissent’s preferred standard. Murphy does not
purport to analyze the interplay between the AIA and the DJA
or even suggest the DJA’s broader language controls. Id. Nor
could it. Just as stare decisis compels this panel to follow
precedent, so too those same principles confined the Murphy
court. Maxwell v. Snow, 409 F.3d 354, 358 (D.C. Cir. 2005)
(“[T]his Court is bound to follow circuit precedent until it is
overruled either by an en banc court or the Supreme Court.”).
The only other support the dissent offers is a law review article.
With all due respect to the Academy, we take the law as we
find it in the opinions of this circuit. Because the AIA does not
apply, the DJA’s tax exception likewise does not apply.

The dissent also contends the ripeness doctrine forbids
Appellants’ “pre-enforcement” APA challenges to Notice 2006-
50 and emphasizes that “the majority opinion can cite no case
that has permitted a pre-enforcement APA challenge to a tax
regulation of this kind.” Of course, the dissent similarly cannot
point to any case that has disallowed a pre-enforcement APA
challenge in a context like this one. It appears the Federal
Reporters’ silence is deafening on both sides. But that is of no
moment, as this is a post-enforcement case. To be ripe, typically
courts require “some concrete action applying the regulation to
the claimant’s situation in a fashion that harms or threatens to
harm him.” Nat’l Park Hospitality Ass’n v. DOI, 538 U.S. 803,
 22
808 (2003). Here, Appellants have been barred from pursuing
their refunds in court by virtue of the fact that they did not
exhaust their administrative remedies under the only available
avenue—Notice 2006-50.4 This post-enforcement case is ripe
for review.

We agree that the thrust of legislation and jurisprudence in
this area aims at protecting the IRS from draining litigation.
That much is evident from the AIA, the DJA, and Congress’s
decision to relieve the IRS from some, but not all, of the
requirements in the APA, see 26 U.S.C. § 7852(e). Once the
limits of the protections Congress provided have been
surpassed, however, the IRS is subject to the same legal
requirements as other administrative agencies. And rightfully
so. No agency operates beyond the reach of the law. In this odd
case, neither the AIA, the DJA, the tax code’s statutory
exhaustion provision, nor the ripeness doctrine apply to protect
the IRS from scrutiny.

B

Under 26 U.S.C. § 6532, taxpayers cannot file suit to
recover taxes until six months after filing a valid refund claim
with the IRS “unless the Secretary renders a decision thereon
within that time.” 26 U.S.C. § 6532. Cohen contends the
district erred by dismissing his refund claim for lack of subject-
matter jurisdiction on the grounds that he filed suit prematurely.
We disagree.

4
The district court alludes to other methods for pursuing refund. As
discussed supra, however, those alternatives are illusory at best.
Consequently, while Appellants generally failed to make any attempt
reasonably calculated to exhaust their administrative remedies, the
only remedy available to exhaust was the process provided by Notice
2006-50.
 23
In November 2005, the same month the IRS issued Notice
2005-79, Appellant Cohen filed a refund claim for excise taxes
he paid in 2004 and 2005. In re Long-Distance Tel. Serv. Fed.
Excise Tax Refund Litig., 539 F. Supp. 2d at 295. He received a
letter from the IRS, dated December 20, 2005, stating they had
received his claim but had not resolved it as they had not
“completed all the research necessary for a complete response.”
Id. The letter continued, “We will contact you again within 45
days to let you know what action we are taking. You don’t need
to do anything further now on this matter.” Id. Cohen received
a second letter from the IRS, dated January 4, 2006, which
(consistent with Notice 2005-79) stated: “We are unable to
process your claim . . . . The tax is currently a subject in
litigation and additional information will be provided to you as
it is received.” Id. at 296. Cohen understood this letter as
denying his refund claims. Id. Thus, he added a refund claim to
his ongoing civil suit on February 6, 2006. Id.

Cohen asserts the second letter he received from the IRS,
dated January 4, 2006, communicated the IRS’s “decision” not
to voluntarily return Cohen’s money and thus triggered his right
to sue under the statute. But the letter communicated no such
thing. It stated, “We are unable to process your claim . . . . The
tax is currently a subject in litigation and additional information
will be provided to you as it is received.” Taken at face value,
the letter merely communicated the IRS would take no action
because the tax was “currently” the subject of litigation—an
interpretation completely consistent with Notice 2005-79, which
similarly notified all taxpayers that the Service would not
process refund claims while the excise tax cases were pending in
federal appellate courts. Like the general notice, Cohen’s letter
does not suggest any permanent resolution. In fact, the message
specifically contemplates future interaction by promising to
provide further information at a later date. Commonsense
 24
dictates a letter pledging to supply “additional information . . .
as it is received” does not resolve a matter.

Cohen compares his situation to Gervasio v. United States,
627 F. Supp. 428 (N.D. Ill. 1986), where an IRS officer told the
plaintiff he could not accept her claim and mailed it back to her.
This case, however, is distinguishable. The IRS did not refuse
to accept Cohen’s claim; it told him why it had not yet been
processed and invited him to contact the IRS with any questions.
Cohen next accuses the IRS of trying to prevent judicial review
by disguising its decision as inaction. This is meritless.
Regardless of the IRS’s inaction, under the statute Cohen could
have brought suit after six months. 26 U.S.C. § 6532. Finally,
Cohen urges the IRS made a “decision” when it chose to halt
consideration of his claim pending the outcome of litigation,
which, for purposes of the statute, triggered his right to file suit.
Cohen ignores that it is the IRS’s prerogative when or even
whether to process his claim. The statute allows the IRS a six-
month window in which it may act before a claim can be
litigated. Id. During that time, the IRS can process the claim,
ignore the claim, or twiddle its thumbs if it wants to. It can
certainly make processing the claim contingent on a condition
precedent, such as the completion of pending legal action, even
if the realization of that condition could easily occur outside the
six-month period. If the IRS’s stalling tactic (which it had every
right to employ) extended beyond six months, the taxpayer
could file suit. If the contingency occurred within the six
months, presumably the IRS would issue a decision as it did
here. Regardless, the Service’s choice to precondition
processing on a future event does not give the taxpayer the
immediate right to file suit.

After receiving the IRS’s letter, Cohen had two safe
options: to wait four-and-a-half months until the six-month
period expired or to contact the IRS to clarify its intent. As it
 25
stands, he chose not to err on the side of caution, but rather to
rely on his own interpretation of a somewhat ambiguously
worded missive. He rolled the dice and lost. Accordingly,
Cohen’s refund claim was premature and the district court
rightly concluded it lacked subject-matter jurisdiction.

III

Appellants invite us to resolve the merits of their claims
that IRS’s refund procedure was “inadequate and unlawful”
under the APA. As the district court did not reach the merits of
the claims and because the factual record is not sufficiently
developed, we decline. See, e.g., National Fed’n of Fed.
Employees v. Weinberger, 818 F.2d 935, 937 (D.C. Cir. 1987)
(declining to decide the merits of the case where the district
court based its decision on a purely jurisdictional issue).
Instead, we remand for further proceedings before the district
court.

So ordered.
 KAVANAUGH, Circuit Judge, dissenting in part:1

Plaintiffs filed suit in federal district court to challenge
IRS Notice 2006-50 and to obtain tax refunds larger than
those permitted by the Notice. But plaintiffs did not first file
refund claims with the IRS. They therefore failed to comply
with the statutory exhaustion requirement of 26 U.S.C.
§ 7422(a), which bars taxpayers from bringing suits for
“recovery” of taxes paid “until a claim for refund or credit has
been duly filed with the Secretary.”

On appeal, plaintiffs creatively seek to end-run the
exhaustion requirement by arguing that they are no longer
seeking money – at least in this case – but instead are
pursuing only a pure Administrative Procedure Act challenge
to Notice 2006-50. But as I see it, plaintiffs still face two
insurmountable hurdles that preclude the federal courts from
entertaining their suit at this time. First, plaintiffs’ APA
claims seek a judicial declaration that Notice 2006-50 does
not provide them sufficient tax refunds and that the Notice is
procedurally invalid. But § 2201(a) of title 28 bars courts
from entertaining a claim for declaratory relief “with respect
to Federal taxes.” Second, and in the alternative, the ripeness
doctrine precludes pre-enforcement APA challenges to IRS
rules of this kind.

As a result of either § 2201(a) or the ripeness doctrine,
plaintiffs must raise their arguments about Notice 2006-50 in
a refund suit, as authorized by § 7422(a) and 28 U.S.C.
§ 1346. And they may file such a refund case only after

1
This case involves three consolidated suits. I agree with the
majority’s decision to dismiss the Cohen plaintiffs’ suit for the
reasons well explained in its opinion. I respectfully disagree with
the majority’s decision to allow the suit by the Sloan and Gurrola
plaintiffs to go forward. References to “plaintiffs” in this
dissenting opinion are to the Sloan and Gurrola plaintiffs.
 2
complying with the exhaustion requirements of § 7422(a),
which they have not done.

It is long established that a refund suit – after exhaustion
of administrative remedies – is the proper forum to raise
claims about tax laws and regulations. It therefore comes as
no surprise that the majority opinion can cite no case that has
permitted a pre-enforcement APA challenge to a tax
regulation of this kind. Because we should not entertain this
suit at this time, I respectfully dissent.

A

In Notice 2006-50, the IRS announced that it would
refund excise taxes paid by millions of Americans for long-
distance telephone calls billed between February 28, 2003,
and August 1, 2006. The Notice informed taxpayers that they
could claim refunds on their tax returns for 2006. Those who
wanted to claim a standard amount – ranging from $30 to $60
depending on the number of exemptions claimed on Form
1040 – could simply check a box on their returns. Those who
wished to claim a greater amount could file a Form 8913 with
their returns. And those who would not otherwise file a tax
return for 2006 could file a newly created Form 1040EZ-T for
the standard amount or claim a greater amount by also
completing a Form 8913.

Approximately 90 million Americans followed those
simple instructions and promptly received their refunds.

But the plaintiffs involved in this case did not properly
seek refunds from the IRS pursuant to those authorized
procedures. Instead, they filed suit in federal court and
attempted to style the case as a class action on behalf of tens
of millions of Americans who paid the improper telephone
 3
excise taxes. Plaintiffs’ complaint primarily argued that the
refunds authorized by Notice 2006-50 would not fully
compensate taxpayers for the telephone excise taxes that had
been improperly collected. The complaint alleged, in
particular, that taxpayers are entitled to refunds for service
taxed before February 28, 2003 – not just from February 28,
2003, to August 1, 2006. The complaint also contended that
Notice 2006-50 requires excessive documentation in order to
claim an amount above the standard amount – another way of
saying that Notice 2006-50 undercompensates many
taxpayers for the actual excise taxes paid. The complaint
further claimed that Notice 2006-50 was procedurally flawed
because the IRS promulgated it without notice and comment.
The complaint expressly asked the district court to order
additional tax refunds to tens of millions of Americans.

It would have been easy enough for the individual named
plaintiffs to first seek refunds from the IRS. And then, if they
were denied refunds or did not receive a response within the
statutory six-month period under 26 U.S.C. § 6532(a), they
could have brought suits challenging the amounts they
received or the procedures by which the IRS determined those
amounts. For whatever reason, presumably strategic
considerations related to their efforts to obtain class
certification and significant classwide monetary relief,
plaintiffs did not do so.

B

Plaintiffs’ failure to exhaust their available remedies with
the IRS precludes them from proceeding in federal court at
this time.

In the district court, to the extent plaintiffs were seeking
money refunds, they ran smack into the exhaustion
 4
requirement of § 7422(a). That statute bars federal courts
from entertaining suits for recovery of federal taxes unless
and until the taxpayers first seek refunds from the IRS.

On appeal, no doubt recognizing the § 7422(a)
exhaustion problem with their refund claims, plaintiffs have
simply dropped those arguments and now pursue only a free-
standing Administrative Procedure Act challenge to Notice
2006-50. The majority opinion allows those APA claims to
proceed.2 Although I respect the majority opinion’s analysis,
I disagree with allowing this case to go forward at this time,
for two alternative reasons.

First, plaintiffs’ suit – even as stripped down on appeal –
still runs headlong into the phalanx of statutory provisions
mandating that challenges to tax laws, regulations, decisions,
or actions ordinarily be brought in refund suits after plaintiffs
have sought a refund from, and exhausted their administrative
remedies with, the IRS. See 26 U.S.C. § 7422(a) (exhaustion
requirement); id. § 7421(a) (Anti-Injunction Act); 28 U.S.C.
§ 2201(a) (tax exception to courts’ power to grant declaratory
relief); see also 5 U.S.C. § 702 (preserving other limitations
on judicial review in APA cases). Those statutory provisions
help ensure the efficient administration of the tax system by
funneling challenges to the tax laws into one refund procedure
and by precluding premature judicial review of disputes
involving taxes owed or paid. See Bob Jones Univ. v. Simon,
416 U.S. 725, 746-47 (1974).

2
On remand, to the extent plaintiffs ultimately prevail on their
argument that Notice 2006-50 was improperly promulgated without
notice and comment, the IRS can simply re-promulgate it after
notice and comment and, under 26 U.S.C. § 7805(b)(4), make it
retroactive to the date of the original Notice.
 5
Of particular relevance here is § 2201(a) of title 28. With
their APA claims, plaintiffs seek a judicial declaration that
Notice 2006-50 is arbitrary and capricious because it
undercompensates them and was adopted in a procedurally
improper manner. See J.A. 340-42 (Sloan complaint) (asking
for “declaratory relief” and “a declaratory judgment” and that
the court “declare” rights); J.A. 348 (Gurrola complaint)
(seeking “declaratory relief”).3

But by enacting § 2201(a) back in 1935, Congress
generally barred suits for declaratory relief in cases “with
respect to Federal taxes.” The text of § 2201(a) squarely
precludes this APA suit at this time. It means that plaintiffs
must raise their arguments about Notice 2006-50 in a refund
suit, as authorized by § 7422, after first seeking refunds from
the IRS.4

The majority opinion concludes that § 2201(a) does not
apply here because this Court has said that § 2201(a) and the

3
Because the APA preserves the limitations on judicial review
in other statutes such as § 2201(a), plaintiffs may not use the APA
to avoid the limitations of § 2201(a). See, e.g., Taylor v. United
States, 292 Fed. App’x. 383, 388-89 (5th Cir. 2008) (per curiam)
(“as both the Anti-Injunction Act and the Declaratory Judgment Act
bar the equitable relief sought by the Taylors, they cannot avail
themselves of the APA’s waiver of sovereign immunity to seek that
relief in the district court”); Fostvedt v. United States, 978 F.2d
1201, 1203-04 (10th Cir. 1992) (Ҥ 702 of the APA does not
override the limitations of the Anti-Injunction Act and the
Declaratory Judgment Act”).
4
Section 2201(a) would not bar plaintiffs’ suit if they had no
other legal avenue available to obtain relief. See South Carolina v.
Regan, 465 U.S. 367, 378-79 (1984). But here, of course, those
who wanted to challenge Notice 2006-50 could have brought a
refund suit and raised their concerns there.
 6
Anti-Injunction Act are “coterminous.” Maj. Op. at 6 (citing
Inv. Annuity, Inc. v. Blumenthal, 609 F.2d 1, 4 (D.C. Cir.
1979)). By their terms, of course, the statutes are not
coterminous: § 2201(a) bars declaratory relief “with respect
to Federal taxes,” and the Anti-Injunction Act precludes
injunctive relief “restraining the assessment or collection of
any tax.” Despite the statutes’ different language, the
majority opinion is correct that our cases have said the two
statutes are “coterminous.”

But coterminous in what direction: (i) coterminously
narrow such that the statutes bar declaratory and injunctive
relief restraining the assessment or collection of taxes or
(ii) coterminously broad such that the statutes bar declaratory
and injunctive relief with respect to federal taxes?

In one recent decision, we indicated that the Anti-
Injunction Act and § 2201(a) should be read to be
coterminous and broad, barring all declaratory and injunctive
relief with respect to Federal taxes. See Murphy v. IRS, 493
F.3d 170, 174 (D.C. Cir. 2007). In Murphy, citing both
§ 2201(a) and the Anti-Injunction Act, we said that “Congress
has preserved the immunity of the United States from
declaratory and injunctive relief with respect to all tax
controversies except those pertaining to the classification of
organizations under § 501(c)” of the Internal Revenue Code.
Id. (emphasis added).

The Murphy statement is consistent, moreover, with the
oft-articulated general principle that “the tax field is marked
by the general preclusion of advance declaratory or injunctive
relief. . . . For most tax issues and most taxpayers, a
subsequent action for refund adequately safeguards all
appropriate concerns.” Inv. Annuity, Inc. v. Blumenthal, 609
F.2d 1, 9 (D.C. Cir. 1979). The Murphy statement also
 7
corresponds to the case law elsewhere: “Given the breadth of
[§ 2201(a)], conclusions by many lower courts that I.R.C.
§ 7421 and [§ 2201(a)] should be interpreted in pari materia
seem to derive at least partly from the courts’ broad
interpretation of I.R.C. § 7421.” Kristin E. Hickman, A
Problem of Remedy: Responding to Treasury’s (Lack of)
Compliance with the Administrative Procedure Act
Rulemaking Requirements, 76 GEO. WASH. L. REV. 1153,
1212 (2008).

In short, reading the two statutes to coterminously bar
declaratory and injunctive relief with respect to federal taxes
is consistent with precedent, adheres to the plain text of the
later-enacted 26 U.S.C. § 2201(a), and corresponds to the
well-established principle that challenges to tax regulations
should be brought in refund suits. Therefore, to the extent we
must read the two statutes coterminously (and as a panel we
must, see infra n.6), I would read them to bar free-standing
suits seeking declaratory and injunctive relief with respect to
federal taxes.

The majority opinion disagrees and cites four of our cases
in concluding that the Anti-Injunction Act and § 2201(a) must
be interpreted conterminously but narrowly – thereby
allowing the federal courts to entertain plaintiffs’ free-
standing challenge to Notice 2006-50 before they have
exhausted their administrative remedies with the IRS. Upon
examination, however, none of the cited cases actually
supports that result.

Our decision in E. Ky. Welfare Rights Org. v. Simon, 506
F.2d 1278, 1285 n.11 (D.C. Cir. 1974), is not binding
precedent because it was vacated by the Supreme Court on
standing grounds, meaning the federal courts had no
jurisdiction to hear the case. See Simon v. E. Ky. Welfare
 8
Rights Org., 426 U.S. 26, 37, 46 (1976). As the Supreme
Court has explained, a decision “vacating the judgment of the
Court of Appeals deprives that court’s opinion of precedential
effect.” County of Los Angeles v. Davis, 440 U.S. 625, 634
n.6 (1979) (internal quotation marks omitted).

So, too, our pre-Eastern Kentucky decision in
“Americans United” Inc. v. Walters, 477 F.2d 1169, 1175-76
(D.C. Cir. 1973), was reversed by the Supreme Court on other
grounds – namely, that the Anti-Injunction Act by its own
terms jurisdictionally barred the suit. See Alexander v.
“Americans United” Inc., 416 U.S. 752, 758-59 & n.10
(1974). A judicial opinion lacks precedential force if it is not
connected to a judgment. Therefore, prior panel decisions
that were reversed by the Supreme Court – like those that
were vacated – are not binding precedent. See Charles A.
Sullivan, On Vacation, 43 HOUS. L. REV. 1143, 1149 (2006)
(“it is not clear why any opinion survives the extinction of the
judgment it supports (whether that extinction is by vacatur or
reversal), but, if some opinions do survive, it seems strange
that the distinction is drawn between judgments which are
vacated and those that are reversed”); Jon O. Newman,
Decretal Language: Last Words of an Appellate Opinion, 70
BROOK. L. REV. 727, 728 (2005) (noting “difference of
opinion among judges as to the circumstances in which
‘vacated’ or ‘reversed’ should be used in decretal language”).5

5
To be sure, after a reversal or vacatur by the Supreme Court,
a panel may then have to decide the case on remand by addressing
issues that were not considered by the Supreme Court. And the
panel’s post-remand decision and accompanying ratio decidendi
may of course become binding precedent. But a prior panel
decision that was vacated or reversed by the Supreme Court has no
more weight than dicta. It can be analyzed and cited for its
persuasive value, but it is not binding.
 9
Finally, the majority opinion cites two later cases that
purportedly “re-embraced” the rationale of Americans United
and Eastern Kentucky. Maj. Op. at 20 n.3 (citing Nat’l
Taxpayers Union, Inc. v. United States, 68 F.3d 1428, 1436-
37 (D.C. Cir. 1995) and Inv. Annuity, 609 F.2d at 4, 10). But
National Taxpayers Union and Investment Annuity merely
reiterated that the statutes were coterminous in the course of
concluding that the suits in question were barred by the
narrow terms of the Anti-Injunction Act. Neither case
therefore had occasion to pass on the key question here:
whether the statutes are (i) coterminously narrow and bar
declaratory and injunctive relief restraining the assessment or
collection of taxes or (ii) coterminously broad and bar
declaratory and injunctive relief with respect to federal taxes.6

In sum, I respectfully disagree with the majority
opinion’s decision to aggressively interpret National
Taxpayers Union and Investment Annuity and thereby allow
this case to go forward at this time. In my judgment, none of
6
This whole effort in assessing the “coterminous in what
direction” question is admittedly a rather odd exercise. I say that
because, contrary to what our 1970s-era cases said, the texts of the
Anti-Injunction Act and § 2201(a) are of course not coterminous.
And courts today likely would not find them coterminous because
courts today tend to pay greater attention to statutory text. So at
some point, the en banc Court should clear this up and ensure that
our case law aligns with the text of the two statutes, as Professor
Bittker advocated years ago. See Boris I. Bittker & Kenneth M.
Kaufman, Taxes and Civil Rights: “Constitutionalizing” the
Internal Revenue Code, 82 YALE L.J. 51, 58 (1972) (“reducing the
Declaratory Judgment Act to a mere echo of § 7421(a) . . . deprives
it of any independent significance . . . and the fact that Congress
amended the Declaratory Judgment Act in 1935 to exclude
controversies ‘with respect to Federal taxes’ argues for giving the
amendment some independent significance”); cf. Bob Jones Univ.,
416 U.S. at 732 n.7.
 10
our precedents compels or permits us to disregard the very
plain statutory text of § 2201(a). And pursuant to that text,
courts may not entertain this kind of free-standing suit for
declaratory relief “with respect to Federal taxes.” 26 U.S.C.
§ 2201(a). A refund suit – after exhaustion – is the proper
vehicle for plaintiffs to challenge Notice 2006-50. On that
basis alone, we should dismiss plaintiffs’ suit.

Second, even if § 2201(a) does not bar the APA claims,
the ripeness doctrine does so. The Supreme Court’s decision
in Abbott Laboratories v. Gardner permits many pre-
enforcement challenges to agency rules – and those disputes
are, of course, a staple of this Court’s diet. 387 U.S. 136
(1967). But Abbott Laboratories by no means opens the door
to every pre-enforcement challenge to an agency rule. Rather,
the ripeness inquiry examines the fitness of the issues for
judicial decision and the hardship to the parties of
withholding court consideration. See id. at 148-49. Under the
hardship prong of that test, a plaintiff ordinarily may not bring
a pre-enforcement challenge to a rule that does not “as a
practical matter require[] the plaintiff to adjust his conduct
immediately.” Nat’l Park Hospitality Ass’n v. Dep’t of the
Interior, 538 U.S. 803, 808 (2003) (internal quotation marks
omitted); see also Ohio Forestry Ass’n v. Sierra Club, 523
U.S. 726, 733-35 (1998); Lujan v. Nat’l Wildlife Fed’n, 497
U.S. 871, 891 (1990). Therefore, pre-enforcement review
typically is more appropriate for regulations imposing
burdens than for those (like Notice 2006-50) offering benefits
or establishing criteria for benefits. See Reno v. Catholic Soc.
Servs., Inc., 509 U.S. 43, 57-59 (1993); 2 RICHARD J. PIERCE,
JR. ADMINISTRATIVE LAW TREATISE § 15.14, at 1078-79 (4th
ed. 2002). In other words, plaintiffs in such cases must
ordinarily apply for benefits (here, for additional tax refunds)
 11
before launching a lawsuit against the agency regulation that
sets forth the criteria for the benefits.7

Under the governing precedents, plaintiffs’ APA
challenge to IRS Notice 2006-50 is not ripe. Plaintiffs must
file a refund request and first give the IRS a chance to assess
the merits of their arguments for additional refunds. After
that step, plaintiffs may file a refund suit and complain in
court about the Notice. See Stephenson v. Brady, No. 90-
3042, 1991 WL 22835, at *3-4 (4th Cir. 1991).

The majority opinion says the ripeness doctrine does not
apply because this is a post-enforcement suit. That
explanation is mystifying. Until plaintiffs seek a larger refund
from the IRS and are denied, Notice 2006-50 will not have
been enforced against them by the IRS. So this lawsuit is a
pre-enforcement suit targeting Notice 2006-50. And the
ripeness doctrine, in my judgment, precludes hearing this pre-
enforcement case at this time.

C

Both § 2201(a)’s bar on declaratory relief “with respect
to Federal taxes” and the ripeness doctrine exemplify the
broad theme that runs throughout administrative law in the tax
area. As noted above, we have stated, for example, that “the
tax field is marked by the general preclusion of advance
declaratory or injunctive relief. . . . For most tax issues and
most taxpayers, a subsequent action for refund adequately
7
Courts have also been more reluctant to find a specific pre-
enforcement challenge ripe where (as here) a statute (26 U.S.C.
§§ 1346, 7422) creates a separate process for review. See, e.g.,
Thunder Basin Coal Co. v. Reich, 510 U.S. 200, 207-209 (1994).
That body of case law also counsels against premature adjudication
of plaintiffs’ claims.
 12
safeguards all appropriate concerns.” Inv. Annuity, Inc. v.
Blumenthal, 609 F.2d 1, 9 (D.C. Cir. 1979). We also have
flatly stated that “Congress has preserved the immunity of the
United States from declaratory and injunctive relief with
respect to all tax controversies except those pertaining to the
classification of organizations under § 501(c)” of the Internal
Revenue Code. Murphy v. IRS, 493 F.3d 170, 174 (D.C. Cir.
2007).

So, too, the leading academic on this issue has explained
that the precedents applying § 7421(a), § 7422(a), § 2201(a),
and the ripeness doctrine stand “almost unyieldingly against
pre-enforcement challenges to Treasury’s regulations
promulgated in violation of APA procedural requirements.”
Kristin E. Hickman, A Problem of Remedy: Responding to
Treasury’s (Lack of) Compliance with the Administrative
Procedure Act Rulemaking Requirements, 76 GEO. WASH. L.
REV. 1153, 1200 (2008). It is true that Professor Hickman
argues for changing the state of the law, but she
acknowledges frankly that it “is perhaps quixotic to suggest
that the courts rethink doctrine firmly rooted in forty years of
jurisprudence.” Id. at 1201.

In charting a new course in this case, the majority opinion
refers to the IRS’s position in the events surrounding this case
as “adamant,” “aggressive,” “creative,” “inventive,”
“remarkable,” “mean,” and exhibiting “chutzpah” – and the
majority opinion then proclaims that “[n]o agency operates
beyond the reach of the law.” Maj. Op. at 23. I of course
agree wholeheartedly with the sentiment that the IRS must
comply with the law. But that sentiment, as I see it, is a red
herring in this case. The question here concerns only the
timing of judicial review, not the availability of judicial
review.
 13
With respect to the actual issue presented – namely, the
timing of judicial review – it is telling that the majority
opinion and plaintiffs cite no decision that has entertained an
APA challenge to an IRS rule relating to taxes outside the
context of a refund suit. The lack of support in the Federal
Reporters for entertaining a free-standing, pre-enforcement
APA challenge to a tax regulation counsels judicial caution
and restraint – and helps demonstrate, in my judgment, the
novelty and error of the majority opinion’s approach.

The majority opinion claims that the lack of case law
permitting challenges to tax regulations except in refund suits
actually is of no moment because, it says, there are not many
opinions expressly rejecting this precise kind of free-standing
APA challenge. But we could line Constitution Avenue from
this Courthouse to the IRS Building with judicial decisions
that apply § 2201(a), the Anti-Injunction Act, the statutory
exhaustion principle, and the ripeness doctrine and hold that
challenges to tax laws and regulations must occur in refund
suits. Those many decisions, in my judgment, establish a
principle of judicial restraint that plainly covers this suit.

***

In sum, plaintiffs’ APA claims are barred from review at
this time by 28 U.S.C. § 2201(a), or in the alternative, by the
ripeness doctrine. I respectfully dissent from the majority
opinion’s contrary conclusion.