From: Keith Henson <hkhenson@netcom3.netcom.com>
Subject: IRS appeal reply
Date: 2000/03/29
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I am going to let others read and comment on this remarkable document
before I do. See if you reach the same conclusions I did. Keith Henson
*******
IN THE UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
No. 99-17038
H. KEITH HENSON,
Plaintiff-Appellant
V.
INTERNAL REVENUE SERVICE1
Defendant -Appel lee
ON APPEAL FROM THE JUDGMENT OF THE
UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF CALIFORNIA
BRIEF FOR THE APPELLEE
JURISDICTIONAL STATEMENT
1. Jurisdiction in the District Court
Mr. H. Keith Henson, appellant, filed a complaint and an
amended complaint seekin9 a declaration, injunction, and
dama9es of an unspecified amount a9ainst the Internal Revenue
Service (i.e., the United States) on December 31, 1998, and
-2-
March 22, 1999, respectively.1/ (CR 1 & 3.)2/ The amended
complaint alleged that jurisdiction existed because "this is a
matter involving a Federal agency." (CR 3 at 2, l~-l8.) As
more fully explained in the argument section of this brief!
the District Court lacked subject matter jurisdiction over the
suit.
2. A~~ealable decision and jurisdiction in the Court of
A~~eals
On August 20, 1999, the District Court granted the motion
of the Internal Revenue Service to dismiss the complaint and
entered judgment in favor of the Internal Revenue Service.
(CR 19 & 20.) The judgment disposes of all claims of all
parties and is a final, appealable judgment. This Court has
jurisdiction pursuant 28 U.S.C. 1291.
3. Timeliness of a~~eal
Mr. Henson filed a timely notice of appeal on
September 1, 1999. (ER 70.) See 7483, Internal Revenue
******fn
1/ Mr. Henson also named "Does 1-3~" as defendants, although
he did not indicate who the Does were or in what capacity he
was suing them, or make any specific claims against them. In
his opening brief on appeal, he does not name the Does as
appellees, and does not make any argument concerning them.
Consequently, he has waived whatever claims he may have made
against the Does in his amended complaint.
2/ "CR references are to the documents of the original record
on appeal as numbered by the Clerk of the District Court.
end*****fn
-3-
Code of 1986 (26 U.S.C.)3/; Fed. R. App. P. 13(a). See
28 U.S.C. 2107 and Fed R. App. P. 4(a)(1).
STATEMENT OF THE ISSUE
Whether the District Court correctly dismissed Mr.
Henson's complaint for lack of jurisdiction because Mr. Henson
lacked standing to challenge the decision of the Internal
Revenue Service not to contest a charitable deduction that a
taxpayer might claim for a fixed donation to the Church of
Scientology.
STATEMENT OF THE CASE
The Internal Revenue Service entered into a closing
agreement with the Church of Scientology, under which the
Internal Revenue Service to agreed to allow taxpayers who made
payments to the Church with respect to qualified religious
services to deduct those payments as charitable contributions
Mr. Henson filed a complaint claiming that the Internal
Revenue Service thereby acted illegally and caused him both
injury-in-fact and injury as a federal taxpayer. As relief
for his alleged injuries, Mr. Henson sought a declaration that
the closing agreement was illegal, an injunc~ion against its
*****fn
3/ Unless otherwise indicated, all statutory references ar
to the Internal Revenue Code of 1986, as amended and in effect
during the years at issue and at the time the complaint was
filed.
*****end fn
-4 -~
enforcement, and damages in an unspecified amount. Mr. Henson
asserted that the District Court had jurisdiction to grant him
such relief because the case involved a Federal agency. (CR 3
at 2, 16-17.)
The United States (Internal Revenue Service) filed a
motion to dismiss the complaint for lack of jurisdiction, and
a supporting memorandum, arguing, inter alia, that Mr. Henson
lacked standing. (CR 8.) After Mr. Henson filed an
opposition to the motion and a supporting memorandum (CR 15),
the District Court granted the Government's motion to dismiss
and entered judgment for the Government, holding that Mr.
Henson lacked standing to bring the suit (CR 19 & 20).
STATEMENT OF FACTS
The Church of Scientology and the Internal Revenue
Service executed a closing agreement in 1993 to settle a
controversy spanning 30 years. (CR 1, Ex. 3, p. 2.) One
aspect of the controversy involved the deductibility under
I.R.C. 170 of payments that individuals made to the Church
in exchange for the provision of educational and religious
services, known as "audits" and "processing." Earlier, in
1978, the Internal Revenue Service had issued Rev. Rul.
78-189, 1978-1 C.B. 68, taking the position that the payments,
which the Church called "fixed donations," were not deductible
-5-
as charitable contributions under I.R.C. 170, except to the
extent that payments exceeded the fair market value of the
services. Consistent with that position, in 1989, the United
States Supreme Court held in Hernandez V. Commissioner, 490
U.S. 680, 692 (1989) , that, on the record before it, fixed
donations to the Church were part of a quid pro quo exchange,
and therefore did not constitute contributions or gifts under
170. Nonetheless, litigation regarding the deductibility of
such fixed donations continued. See, e.g., Powell v. United
States, 945 F.2d 374 (11th Cir. 1991).
In 1993, as part of a closing agreement with the Church
covering a number of ongoing suits, the Internal Revenue
Service agreed not to contest deductions claimed by
individuals for fixed donations to the Church in connection
with qualified religious services, and to withdraw, obsolete
or supersede Rev. Rul. 78-189. (CR 3, Ex. 3, part VII. B &
E.) In accordance with that agreement, the Internal Revenue
Service, in 1993, issued Rev. Rul. 93-73, 1993-2 C.B. 75,
which declares that Rev. Rul. 78-189 is obsolete.
In the present case, Mr. Henson claimed in his complaint
that the Internal Revenue Service acted illegally in agreeing
to allow charitable deductions for fixed donations to the
Church, and in issuing Rev. Rul. 93-73 in accordance with that
-6-
agreement, because the allowance of such deductions was in
violation of the Establishment Clause of the First Amendment
to the United States Constitution and I.R.C. 170 as
interpreted by Hernandez. (CR 3 at 1.) In support of his
constitutional claim, Mr. Henson alleged that, pursuant to the
terms of the closing agreement and the effect of Rev. Rul.
93-73, (1) the Internal Revenue Service gave tax benefits to
Church members that were unavailable to members of other
religions (CR 3 at 5, 12) , (2) the Internal Revenue Service
compelled taxpayers who were not members of the Church "to
subsidize Scientology education courses" (CR 3 at 14), and
(3) the "closing agreement entangled the government (IRS) and
Scientology to an impressive degree, making Scientology almost
part of the IRS for enforcement of the tax code on its
members" (CR 3 at 13).
Mr. Henson maintained that he had standing to make those
claims in the district court because (1) he was a federal
taxpayer and (2) such conduct on the part of the Internal
Revenue Service had caused him injury-in-fact. (CR 3 at 2-3,
6.) In support the latter claim, Mr. Henson alleged that
various branches of the Church had used tax exempt funds to
harass him with lawsuits and to pay private investigators to
-7-
attack his reputation and to attack him physically while
picketing. (ifid.)
As relief, Mr. Henson requested the district court (1) t
declare that the Internal Revenue Service had acted illegally
in agreeing to allow taxpayers who made fixed donations to the
Church to deduct the payments as charitable contributions and
enjoin such action (CR 3 at 18), (2) to set aside Rev. Rul.
93~73 (ifid.), and (3) to award him attorney's fees and
"~p]unitive and exemplary damages in an appropriate amount"
(CR 3 at 19). Mr. Henson asserted that the District Court had
jurisdiction over the case under because his claims involved a
Federal agency. (CR 3 at 2.)
The Internal Revenue Service filed a motion to dismiss
the complaint. (CR 8.) In support of the motion, the
Internal Revenue Service argued (1) that Mr. Henson lacked
standing to bring the case, (2) that the case was barred under
the doctrine of sovereign immunity, and (3) that the Church of
Scientology, which had not been joined, was an indispensable
party to the suit. (ifid.) On June 28, 1999, Mr. Henson filed
a response to the Internal Revenue Service's motion to
dismiss, arguing that sovereign immunity was not a bar to his
suit, that as a taxpayer he had standing to bring the suit
-8-
even without suffering injury, and that the Church was not an
appropriate party to the action. (CR 15.)
On August 20, 1999, the District Court issued an order
granting the Internal Revenue Service's motion to dismiss on
the ground that Mr. Henson lacked standing to bring the
lawsuit. (CR 19 at 2.) The District Court held that Mr.
Henson lacked standing as a "federal taxpayer" because (1) he
was "not challenging congressional power, but rather [was]
challenging an executive branch action, the IRS execution of a
closing agreement with the Church," and (2) he "failed to
show, and cannot show that the IRS' conduct exceeded
constitutional limitations." (CR 19 at 3.) With regard to
Mr. Henson's allegations that the Church had used tax exempt
funds to harass and physically attack him, the District Court
held that those allegations, if true, did not constitute
injuries that were sufficient to confer standing because the
injuries were not fairly traceable to the conduct of the
Internal Revenue Service and, as Mr. Henson had acknowledged,
were not likely to be redressed in the case. (Id.) In
addition to finding that Mr. Henson lacked standing, the
District Court held that Mr. Henson had failed to establish
that the court had jurisdiction over the case. (CR 19 at 2.)
The court did not address the Internal Revenue Service's
-9-
contention that the Church of Scientology was an indispensable
party to the suit.
Mr. Henson appeals. (CR 21.)
SUMMARY OF ARGUMENT
Mr. H. Keith Henson brought the instant action to obtain
a declaration that the IRS's administrative decision to allo
taxpayers who make fixed donations to the Church of
Scientology to deduct the donations under 170 of the
Internal Revenue Code was illegal, an injunction against its
enforcement, and monetary damages. The District Court
correctly dismissed the case on the ground that Mr. Henson
lacked standing.
1. A federal court has no subject matter jurisdiction
over a case if the plaintiff lacks standing. To establish
standing, a plaintiff generally must show a distinct and
palpable injury to himself which is likely to be redressed if
the requested relief is granted. The injury must also be
fairly traced to the challenged action of the defendant and
not one that results from the independent action of a third
party. Here, Mr. Henson alleged two injuries. One--that the
Church has harassed and attacked him--results from the
independent actions of third parties--i.e., the Church of
Scientology--not from the challenged administrative decision
- 10 -
of the IRS to allow deductions for fixed donations to the
Church. Moreover, as Mr. Henson has conceded, it is purely
speculative whether the desired exercise of the court's
remedial powers in this suit--i.e., declaratory and injunctive
relief prohibiting the IRS from allowing the deductions~-would
eliminate the alleged harassment and attacks on the part of
the Church.
2. Mr. Henson also claimed that he had standing as a
taxpayer who has been injured by the IRS's decision. A
plaintiff has standing as a taxpayer only if he or she
challenges the constitutionality of exercises of congressional
power under the taxing and spending clause of the
Constitution, and establishes a nexus between his status as a
taxpayer and constitutional infringement alleged. Flast v.
Cohen, 392 U.S. 83, 102-03 (1968). Mr. Henson, however,
railed to satisfy either requirement. He failed to identify
any manner in which Congress has exacted and spent his tax
monies in contravention of a specific constitutional
limitation on the taxing and spending power. Instead, he
challenged an administrative decision of an agency of the
executive branch that has no direct effect whatsoever on his
tax obligations. Moreover, his contentions that the IRS's
administrative decision violated the Establishment Clause of
- 11 -
the Constitution because it discriminates among religious
organizations is speculative and meritless
3. Suits against the United States or its agencies are
barred by the doctrine of sovereign immunity absent the
enactment of a specific statute by Congress that waives the
Government's immunity. There is no statute that grants the
requisite consent for the instant action against the Internal
Revenue Service and, accordingly, Mr. Henson's complaint was
dismissible on that ground as well. In addition, Mr. Henson' 5
claim for declaratory relief is barred by 28 U.S.C. 2201.
Finally, Mr. Henson failed to establish irreparable injury or
the lack of an adequate remedy at law, the prerequisites to
injunctive relief.
The judgment of the district court is correct and should
be affirmed.
- 12
ARGUMENT
THE DISTRICT COURT CORRECTLY DISMISSED MR.
HENSON'S COMPLAINT FOR LACK OF JURISDICTION
BECAUSE MR. HENSON LACKED STANDING TO
CHALLENGE THE DECISION OF THE INTERNAL
REVENUE SERVICE NOT TO CONTEST A CHARITABLE
DEDUCTION THAT A TAXPAYER MIGHT CLAIM FOR A
FIXED DONATION TO THE CHURCH OF SCIENTOLOGY
Standard of Review
Standing questions are reviewable de novo. Johns v.
County of SAA Diego, 114 F.3d 874, 876 (9th Cir. 1997).
Issue Raised and Ruled u~on
The issue of Mr. Henson's standing was raised in the
Internal Revenue Service's motion to dismiss the complaint (CR
8), and ruled upon in the district court's order granting the
motion (CR 19).
A. Introduction
A federal court has no subject matter jurisdiction over a
case if the "case or controversy" requirement of Article III
of the Constitution, including the requirement that the
plaintiff has standing, is not satisfied. Bender v.
Williams~ort Area School District, 475 U.S. 534, 541-542
(1986). The basic principles that govern the question whether
a plaintiff has standing to maintain a lawsuit in federal
court are well established. "The fundamental aspect of
standing is that it focuses on the party seeking to get his
- 13 -
complaint before a federal court." Flast v. Cohen, 392 U.S.
83, 99 (1968). A plaintiff must "allege [1 such a personal
stake in the outcome of the controversy as to warrant his
invocation of federal-court jurisdiction and to justify his
exercise of the court's remedial powers on his behalf." Warth
v. Seldin, 422 U.S. 490, 498-499 (1975) (emphasis in
original) . The decision to seek review is placed only "in the
hands of those who have a direct stake in the outcome" (Sierra
Club v. Morton, 405 U.S. 727, 740 (1972)), in order to "assure
that [there will exist] concrete adverseness which sharpens
the presentation of issues upon which the court so largely
depends for the resolution of difficult constitutional
questions" (Baker v. Carr, 369 U.S. 186, 204 (1962)).
"[C]oncerned bystanders," who seek to invoke the judicial
power as a "vehicle for the vindication of value interests,"
lack standing to sue. United States v. SCRAP, 412 U.S. 669,
687 (1973).
In this case, Mr. Henson challenged a purely
administrative decision that the Internal Revenue Service made
to allow individuals who make fixed donations to the Church of
Scientology to deduct those payments as charitable
contributions under I.R.C. 170. Thus, in 1993, the Internal
Revenue Service agreed to allow deductions for fixed donations
14 -
to the Church as part of a closin9 agreement that the Internal
Revenue Service entered into with the Church of Scientolo9y to
compromise long-standin9 litigation. See ~, Powell V.
United States, 945 F.2d 374 (11th Cir. 1991) (distin9uishin9
Hernandez to overturn district court determination that member
of Church of Scientolo9y failed to state a claim for deduction
of fixed donation) . Mr. Henson asserted that the Internal
Revenue Service's decision was illegal because it was
inconsistent with Hernandez v. Commissioner, 490 U.S. 680
(1989). In his amended complaint, Mr. Henson claimed that he
had a personal stake in the Internal Revenue Service's
decision necessary for standin9 because (1) the Internal
Revenue Service's decision to allow the deductions caused him
specific and personal injuries, and (2) the Internal Revenue
Service's decision caused injuries to him and others as
federal taxpayers As the District Court held and as
demonstrated below, however, neither of those alleged grounds
were sufficient to confer standing upon Mr. Henson to maintain
this case.
B. Mr. Henson's allegations that the Church of
Scientology used tax exemrt funds to harass and
attack him were insufficient to establish standing
against the Internal Revenue Service
The core component of standing is that the exercise of
judicial power is limited to litigants who can show "injury in
- 15 -
fact" resulting from the action which they seek to have the
court adjudicate. Valley Forge Christian College V. Americans
United for Se~aration of Church and State, Inc., 454 U.S 464,
472 (1982) Consequently, a plaintiff must allege a distinct
and palpable injury to himself that is likely to be redressed
if the requested relief is granted. See Allen V. Wright, 468
U.S. 737, 751 (1984); Simon V. Eastern Kentucky Welfare Rights
Organization, 426 U.S. 26, 38, 41 n.22 (1976). "[S]tanding to
sue may not be predicated upon an interest * * * which is held
in common by all members of the public, because of the
necessarily abstract nature of the injury all citizens share."
Schlesinger V. Reservists Committee to Sto~ the War, 418 U.S.
208, 220 (1974). The "case or controversy" limitation of
Article III requires that a federal court "act only to redress
injury that fairly can be traced to the challenged action of
the defendant, and not injury that results from the
independent action of some third party * * * . " Simon, 426
U.S. at 41-42. "Absent such a showing, exercise of its power
by a federal court would be gratuitous and thus inconsistent
with the Article III limitation." 426 U.S. at 38.
In the present case, Mr. Henson claimed in his amended
complaint that the Internal Revenue Service's decision to
allow individuals to claim charitable deductions for fixed
- 16 -
donations they made to the Church of Scientology injured him
personally because the Church of Scientology allegedly
harassed him with lawsuits and hired a private investigator to
attack his reputation and attack him physically while he was
picketing the Church. As the District Court held, however,
those alleged personal injuries were insufficient to confer
standing because they were not fairly traceable to or caused
by the administrative action of Internal Revenue Service, and
were not likely to be redressed by a decision of the District
Court in Mr. Henson's favor.
In this regard, the case of Simon V. Eastern Kentucky
Welfare Rights Organization, 426 U.S. 26, in which the Supreme
Court found that the plaintiffs lacked standing to litigate
whether the Government was properly enforcing the tax laws
against other persons, is instructive. In that case, a group
of indigent plaintiffs sued Treasury off4cials to challenge a
Revenue Ruling that allowed nonprofit hospitals to qualify for
tax exemption under Section 501(c) (3) even if they provided
indigents with no more than emergency room services. Although
the Supreme Court acknowledged that some of the plaintiffs had
been injured by the hospitals' relatively restrictive policy
regarding services to indigents (ifid. at 40-41), the Supreme
Court held that this injury did not confer standing to sue the
- 17 -
Government, because it was "purely speculative" whether the
alleged injury could fairly be traced to the Government's tax
enforcement ruling, "or instead result [5] from decisions made
by the hospitals without regard to the tax implications" (id.
at 42-43). Moreover, although the complaint alleged that the
hospitals received "substantial donations deductible by
donors," the Supreme Court stated that it was "speculative at
best" to infer that the hospitals were so financially
dependent on the favorable tax exempt treatment that they
would admit the indigents if required to do so as a condition
of receiving the tax benefit. Id. at 43. See also Allen, 468
U.S. at 758-759 (inadequate desegregation of public schools
not properly traceable to tax exemptions being challenged)
The Supreme Court in Simon V. Eastern Kentucky Welfare Rights
Organization also found standing lacking because it was
equally speculative whether the desired exercise of the
Court's remedial powers in this suit would result in the
availability to [the plaintiff group of indigents] * * * of
such services." Id. at 43.
When these principles are applied to the facts of the
amended complaint at hand, it is obvious that the attempt to
invoke federal-court jurisdiction here suffers from the same
weaknesses as did the complaint in Simon V. Eastern Kentucky
- 18 -
Welfare Rights Organization. "It is purely speculative" that
the alleged harassment and attacks that the Church allegedly
imposed upon Mr. Henson can be traced to the Internal Revenue
Service's decision in 1993 to allow charitable contribution
deductions to individuals who make fixed payments to the
Church. Rather, the alleged harassment and attacks resulted
from the independent actions of a third party--i.e., the
Church of Scientology and the private investigators that the
Church allegedly hired. See Simon, 426 U.S. at 41. Moreover,
although Mr. Henson alleged that the Church financed its
persecution of him with tax-exempt funds, it was "speculative
at best" to infer from that allegation that the funds that the
Church utilized to harass and attack Mr. Henson consisted of
fixed donations that the Church received after 1993, or that
the Church would not have harassed and attacked Mr. Henson had
those payments been nondeductible. See Simon, 426 U.S. at 43.
By the same token, "[i]t is equally speculative whether the
desired exercise of the court's remedial powers in this suit"
--i.e., a declaration that the Internal Revenue Service's
action in allowing individuals to deduct fixed payments to the
Church was illegal and the setting aside of Rev. Rul. 93-73--
would cause the Church of Scientology to modify its behavior
toward Mr. Henson. See Simon, 426 U.S. at 43. Indeed, as the
- 19 -
District Court noted (CR 19 at 3),Mr. Henson conceded in the
District Court that the Church was unlikely to cease its
alleged persecution of him even if he prevailed in this
action. (CR 15 at 18.) Thus, Mr. Henson's claim of standing
rests "'on little more than the remote possibility,
unsubstantiated by allegations of fact, that [his] situation
might have been better had [the Internal Revenue Service]
acted otherwise, and might improve were the court to afford
relief.'" Simon, 426 U.S. at 44 (quoting Warth, 422 U.S. at
507). Such "unadorned speculation will not suffice to invoke
the federal judicial power." Simon, 426 U.S. at 44.
C. Mr. Henson's contention that he alternatively had
standing as a federal taxrayer to challenge the
Internal Revenue Service's administrative decision
lacked merit
The Supreme Court first considered the question whether a
taxpayer has standing to challenge the appropriation of moneys
to administer an assertedly unconstitutional statute in
Frothingham V. Mellon, 262 U.S. 447 (1923). There, the Court
rejected, for lack of standing, a taxpayer challenge to the
constitutionality of the Maternity Act of 1921, which provided
federal funding to the states for the purpose of reducing
maternal and infant mortality. The Supreme Court concluded
that, in substance, the "injury" alleged was the expenditure
of government funds in the administration of an assertedly
- 20 -
unconstitutional statute. Id. at 488. But as the Court
explained, the interest of a taxpayer "in the moneys of the
Treasury * * * is shared with millions of others; is
comparatively minute and indeterminable; and the effect upon
future taxation, of any payment out of the funds, so remote,
fluctuating and uncertain, that no basis is afforded for an
appeal to the preventive powers of a court of equity." Id. at
487. The Court stated that "[t]he administration of any
statute, likely to produce additional taxation to be imposed
upon a vast number of taxpayers, the extent of whose several
liability is definite and constantly changing, is essentially
a matter of public and not individual concern." Ibid. The
taxpayer's asserted injury to her pocketbook was not
judicially cognizable, because a plaintiff "must be able to
show not only that the statute is invalid but that he has
sustained or is immediately in danger of sustaining some
direct injury as the result of its enforcement, and not merely
that he suffers in some indefinite way in common with people
generally." Id. at 488.
The decision in Frothingham V. Mellon stood for nearly
half a century as an absolute bar to federal taxpayers'
standing gua taxpayers to challenge the execution of a federal
appropriation action. Then, in Flast V. Cohen, 392 U.S. 83
- 21 -
(1968), taxpayers sued to enjoin the expenditure of funds
under a federal statute granting financial aid to religious
schools. The Court stated that "we find no absolute bar in
Article III to suits by federal taxpayers challenging
allegedly unconstitutional taxing and spending programs." Id.
at 102. The Court found that "[w]hether such individuals have
standing to maintain that form of action turns on whether they
can demonstrate the necessary stake as taxpayers in the
outcome of the litigation to satisfy Article III
requirements." Ibid.
In order to show this stake, the Court in Flast
established a two-prong test. First, a taxpayer must show a
"logical link" between his status as a taxpayer and the type
of legislative enactment attacked. 392 U.S. at 102. A
taxpayer would be a proper party to challenge the
unconstitutionality "only of exercises of congressional power
under the taxing and spending clause of Art. I, ~ 8, of the
Constitution"1/ (ibid.), and not "the incidental expenditur
of tax funds in the administration of an essentially
regulatory statute" (ibid.). Second, the taxpayer must show a
fn**********
1/ Article I, Section 8, Clause 1 of the Constitution of the
United States authorizes Congress to "lay and collect Taxes
* * * and provide for the common Defence and general Welfare
of the United States."
end fn ******
- 22 -
nexus between his status as taxpayer "and the precise nature
of the constitutional infringement alleged." (Ibid.) Th
challenged enactment must exceed "specific constitutional
limitations imposed upon the exercise of the congressional
taxing and spending power" (id. at 102-103), and "not simply
that the enactment is generally beyond the powers delegated to
Congress by Art. I, ~ 8' (id. at 103).
The Court in Flast went on to hold that the Establishment
Clause of the First Amendment "operates as a specific
constitutional limitation upon the exercise by Congress of the
taxing and spending power conferred by Art. I, 8." 392 U.S
at 104. In the Court's view, the taxpayers had established
both criteria, in that federal tax money had been disbursed to
finance instruction in religious and sectarian schools under a
statute enacted under the authority of Article I, Section 8,
and further, that the funds were being sent in violation of a
specific constitutional limitation upon the taxing and
spending power, namely, the Establishment Clause. As a
result, the taxpayers in Flast had "the requisite personal
stake" in the litigation (392 U.S. at 101) to maintain
standing to sue.
The Flast test for taxpayer standing, however, serves as
an overlay to the minimum Article III requirement of an actual
- 23 -
injury. Bell V. City of Kellogg, 922 F.2d 1418, 1422 (9th
Cir. 1991). Thus, to invoke the Flast test for taxpayer
standing, the plaintiff must first allege that he is a federal
taxpayer and that he was injured due the government's wrongful
expenditure of tax revenues. Doe V. Madison School District,
177 F.3d 789, 793-794 (9th Cir. 1999).
Mr. Henson claimed in this case that he had standing as a
federal taxpayer to challenge the decision of the Internal
Revenue Service to allow individuals who make fixed payments
to the Church of Scientology to deduct those payments as
charitable contributions under 170. As the District Court
held, however, Mr. Henson's claim is meritless.
To begin with, Mr. Henson challenges only the Internal
Revenue Service's administrative decision to allow the
deductions to other taxpayers; he does not complain about any
expenditure of tax revenues. He therefore failed to allege an
actual financial injury to himself as a taxpayer, as is
minimally required under Article III of the constitution for a
plaintiff to have standing as a federal taxpayer. See Valley
Forge Christian College V. Americans United for Se~aration of
Church & State, Inc., 454 U.S. 464, 485 (1982) (holding that
plaintiffs lacked standing to challenge as unconstitutional
conveyance of surplus federal property to sectarian
- 24 -
institutions, because plaintiffs "fail[ed] to identify any
personal injury suffered by them as a conse~uence of the
alleged constitutional error, other than the psychological
consequence presumably produced by observation of conduct with
which one disagrees")
Furthermore, under Flast, a taxpayer has standing to
challenge "only exercises of congressional power" (Flast, 418
U.S. at 102); he does not have standing to challenge "a
decision by the executive branch" (Ranid Transit Advocates V.
Southern California Ra~id Transit, 752 F.2d 373, 379 (9th Cir.
1985)). For example, in Schlesinger V. Reservists Committee
to Ston the War, 418 U.S. 208, 221 (1974) the plaintiffs
sought to have members of Congress then serving in the armed
forces reserves barred from such service under the
Incompatibility Clause, Article I, Section 6, Clause 2 of the
Constitution, which prohibits members of Congress from holding
"any Office of the United States." The Supreme Court rejected
the claim that the plaintiffs had standing to sue as
taxpayers, because the plaintiffs "did not challenge an
enactment under Art. I, 8, but rather the action of the
Executive Branch in permitting Members of Congress to maintain
their Reserve status." Id. at 228 (footnote omitted) . The
Court's decision in Valley Forge Christian College, 454 U.S.
- 25 -
at 478-481, is to the same effect. There, the Court rejected
the plaintiffs' claim that they had standing as taxpayers to
challenge the transfer of surplus federal property, because
the plaintiffs were challenging an action by the Department of
Health, Education, and Welfare rather than a "congressional
action.
In this case, the source of the Internal Revenue
Service's decision to allow the deduction of fixed donations
to the Church of Scientology was the closing agreement that
the Internal Revenue Service entered into with the Church in
compromise of long-standing tax disputes. As part of that
closing agreement, the Internal Revenue Service agreed to no
longer contest deductions that taxpayer claimed under Section
170 of the Code for fixed donations to the Church. In
challenging that closing agreement, Mr. Henson makes no
challenge to the constitutionality of any legislative
enactment, much less (1) to the legislative enactments
pursuant to which the Internal Revenue Service entered into
the closing agreements (which are I.R.C. 7121 and 7122), or
(2) to I.R.C. 170 (which provides for the deduction of
charitable contributions) . Instead, Mr. Henson challenges an
administrative decision that the Internal Revenue Service made
in executing those statutory provisions. The Internal Revenue
- 26 -
Service, however, made that decision as a federal agency of
the Treasury Department, which is part of the executive branch
of the United States. Accordingly, its decision to agree as
part of its closing agreement not to contest deductions
claimed for fixed donations to the Church of Scientology was
an executive branch decision, and not an exercise of
Congressional power. It follows that, as the District Court
held, Mr. Henson's amended complaint did not satisfy the first
prong of the Flast test.
In his brief on appeal (at 3-4), Mr. Henson incorrectly
suggests that a federal taxpayer does have standing to
challenge the constitutionality of an executive branch action.
In this regard, he cites Bowen V. Kendrick, 487 U.S. 589
(1988). His reliance upon that case, however, is misplaced.
There, the Court held that where a taxpayer challenges the
constitutionality of a legislative enactment on its face, his
challenge to the legislation "as applied" by the agency
responsible for executing is similarly a challenge to the
constitutionality of the legislative enactment. See 487 U.S.
at 618-619. Here, Mr. Henson does not challenge the
constitutionality of any legislative enactment. Jnstead, he
contends that the Internal Revenue Service allowed deductions
for fixed donations to the Church of Scientology in violation
- 27 -
of I.R.C. 170, as interpreted by the Supreme Court in
Hernandez. His challenge is therefore readily distinguishable
from the one at issue in Bowen.
Morever, even if Mr. Henson's amended complaint could be
construed as challenging an exercise of congressional power
(which it cannot), Mr. Henson nonetheless failed to satisfy
the second prong of the Flast test. To show that the closing
agreement violated a constitutional limitation imposed upon
Congress' 5 power to tax and spend, Mr. Henson claimed the
agreement violated the Establishment Clause of the
constitution because (1) its purpose was to advance the Church
of Scientology, (2) it's effect was to discriminate among
religions by allowing deductions to members of the Church of
Scientology that are not allowed to members of other
religions, (3) it forces taxpayers to subsidize the Church of
Scientology, and (4) the decision advanced the Church of
Scientology over other religions and fostered excessive
entanglement of the government in the Church's affairs (CR 3
at 13).
The first and second claims listed above were
insufficient because they were purely speculative. See Los
Angeles V. Lyons, 461 U.S. 95, 102 (1983) (injury required for
standing must be immediate," not "conjectural" or
- 28 -
"hypothetical") Indeed, Mr. Henson offered no factual
allegations to support his claim that the Internal Revenue
Service entered into the closing agreement for the purpose of
preferring the Church of ScientolQgy over other religious
organizations. To the contrary, the closing agreement itself
states that its purpose is to compromise long-standing
litigation with the Church. (CR 3, Ex. 3 p.2.) Furthermore,
Mr. Henson made no factual allegations, and offered no legal
authorities, suggesting that, after entering into the closing
agreement, the Internal Revenue Service contested or
disallowed any deduction that a taxpayer claimed for a payment
he made to another religious organization that was similar to
the fixed donations to Church of Scientology involved in the
closing agreement.
The third constitutional claim listed above was
insufficient because it was meritless. It has long been
settled that tax exemptions for charitable organizations, and,
consequently, tax deductions for donations to charitable
organizations, including churches and other religious
organizations, do not violate the First Amendment. Walz V.
Tax Commission of the City of New York, 397 U.S. 664, 673-673
(1970); id. at 685 (Brennan, J. concurring) ("No judicial
decision, state or federal, has ever held that [tax exemptions
29
for reli9ious or9anizations] violate the Establishment
Clause.") ; Mueller V. Allen, 463 U.S. 388, 397-99 (1983)
(approving tax deduction for educational expenses that applied
to expenses incurred at broad range of public and private
schools, sectarian as well as non-sectarian)
Finally, Mr. Henson's fourth constitutional claim was
also insufficient to satisfy the second prong of the Flast
test. In making that claim, Mr. Henson was essentially
contending that, in deciding as part of the closing agreement
to allow charitable deductions for fixed donations to the
Church, the Internal Revenue Service necessarily made a
denominational preference and necessarily became excessively
entangled with the Church, in violation of the Establishment
clause. In Hernandez V. Commissioner, 490 U.S. 680 (1989),
the Supreme Court rejected the very same contention with
respect to I.R.C. ~ 170. There, to determine if ~ 170 created
unconstitutional denominational preferences, even though it
did not facially differentiate among religions, the Court
applied "the customary three-pronged Establishment Clause
inquiry derived from Lemon v. Kurtzman, 403 U.S. 602' (1971).
Hernandez, 490 U.S. at 695. Under that test, a legislative
enactment accords with the Establishment Clause so long as (1)
it has a secular purpose, (2) its principle effect is one that
- 30 -
neither advances nor inhibits religion, and (3) the statute
does not foster "an excessive entanglement with religion."
Id. at 695, n. 11. The Court held that Section 170 easily
passed (1) the first part of that test because it "is neutral
in both design and purpose" with respect to differing
religious organizations, (2) the second part of the test
because its did not endorse any religion or religious
practice, and (3) the third part of the test because the
determination of whether a payment to a religious organization
was deductible under its Section 170 requires only "routine
regulatory action which involves no inquiries into religious
doctrine, * * * no delegation of state power to a religious
body, * * * and no 'detailed monitoring and close
administrative contact' between secular and religious bodies."
Id. at 696-697 (citations omitted)
Here, as was the case with I.R.C. ~ 170 in Hernandez, the
closing agreement that Mr. Henson challenges does not facially
differentiate among religions. Instead, the agreement
addresses the deductibility only of fixed donations to the
Church of Scientology; the agreement des not address the
deductibility of payments to any other religious
organizations. Furthermore, the purpose of the agreement is
to compromise litigation. That purpose is secular. Moreover,
- 31 -
the closing agreement does not endorse the Church of
Scientology or its religious practices. Instead, it merely
provides that the Internal Revenue Service will not contest
deductions claimed for fixed donations to the Church.
Finally, ascertaining whether a payment is a fixed donation
and therefore is deductible under the terms of the closing
agreement involves only routine regulatory practice, with no
entanglement in religious doctrine or other religious
concerns. See Hernandez, 490 U.S. at 696-697.
D. Alternatively, Mr. Henson claims were barred under
the doctrine of sovereign immunity
It is well settled that the United States, as sovereign,
may not be sued without its consent and that the terms of its
consent define the court's jurisdiction.~/ United States v.
Mitchell, 445 U.S. 535, 538 (1980); United States v. Testan,
424 U.S. 392, 399 (1976); United States v. Sherwood, 312 U.S.
584, 586 (1941); United States v. Shaw, 309 U.S. 495, 500-501
(1940). In this regard, sovereign immunity is waived only by
a statute specifically providing for the maintenance of a suit
against the United States. See Holloman v. Watt, 708 F.2d
fn*******
5/ Mr. Henson's complaint against the Internal Revenue Service
was invalid on its face as Congress has not authorized suits
against that agency en nominee. See Blackmar v. Guerre, 34
U.S. 512 (1952). Nonetheless, the District Court treated
Mr. Henson's complaint as one against the United States, and
we adhere to that treatment in this brief.
end fn ******
- 32 -
1399, 1401 (9th Cir. 1983), cert. denied sub nom. Holloman v.
Clark, 466 U.S. 958 (1984); Essex v. Vinal, 499 F.2d 226, 231
(8th Cir. 1974) , cert. denied, 419 U.S. 1107 (1975);
Geurkink Farms, Inc. v. United States, 452 F.2d 643, 644 (7th
~ir. 1971). A waiver of sovereign immunity must be strictly
construed. Honda v. Clark, 386 U.S. 484, 501 (1967); Soriano
v. United States, 352 U.S. 270, 276 (1957). Where there is no
statute expressly waiving sovereign immunity, dismissal of the
action is required. Hutchinson v. United States, 677 F.2d
1322, 1327 (9th Cir. 1982); Stout v. United States, 229 F.2d
918, 919 (2d Cir. 1956), cert. denied, 351 U.S. 982 (1956).
The burden is upon the party bringing the action to
demonstrate that the United States has consented to suit.
Hill v. United States, 571 F.2d 1098, 1102-1103 (9th Cir.
1990)
It is clear that Mr. Henson's complaint against the
Internal Revenue Service--i.e., that the Internal Revenue
Service's decision to allow charitable deductions for fixed
donations to the Church of Scientology is illegal--cannot be
entertained absent a waiver of sovereign immunity. Mr.
Henson, however, cited no statutory waiver of sovereign
immunity applicable to the instant action, and, indeed, there
- 33 -
is none.6/ Thus, as the District Court held, Mr. Henson
"failed to establish that the Court has jurisdiction over this
case." (CR 19 at 2.)
The District Court's exercise of jurisdiction over
Mr. Henson's request for declaratory relief also was barred by
28 U.S.C. ~ 2201. That section provides district courts with
fn*********
6/ Although the complaint alleged that the Internal Revenue
Service violated 42 U.S.C., Sections 1985, and 1986, those
statutes cannot waive the sovereign immunity of the United
States since they do not specifically provide for the
maintenance of suits against the United States. See e.g.,
Morourgo v. Board of Higher Education in City of New York, 423
F. Supp. 704, 714 (S.D. N.Y. 1976) (United States cannot be
sued under 42 U.S.C., Sections 1983 and 1985 "because it is
not a 'person' and because these provisions do not waive
sovereign immunity"); Broome v. Simon, 255 F. Supp. 434, 440
(W.D. La. 1966) ("[n]one of the civil rights statutes * * *
expressly or inferentially authorize suit against the United
States") . See also Beale v.Blount, 461 F.2d 1133, 1138 (5th
Cir. 1972) (28 U.S.C., Section 1343, which grants the district
courts original jurisdiction of actions under 28 U.S.C.,
Sections 1983, 1985, and 1986, "may not be construed to
constitute waivers of the federal government's defense of
sovereign immunity" .)
Nor does the mere allegation of constitutional violations
provide the necessary waiver of sovereign immunity. While 28
U.S.C., Section 1331 provides the district courts with
''original jurisdiction of all civil actions arising under the
Constitution, laws, or treaties of the United States," the
Courts of Appeals have specifically held that 28 U.S.C.,
Section 1331 is not a general waiver of sovereign immunity.
Gilbert v. DaGrossa, 756 F.2d 1455 (9th Cir. 1985); Cotter
Cor~. v. Seaborg, 370 F.2d 686, 692 n.15 (10th Cir. 1966);
Radin v. United States, 699 F.2d 681, 685 n.9 (4th Cir. 1983);
Murray v. United States, 686 F.2d 1320, 1325 (8th Cir. 1982)
cert. denied, 459 U.S. 1147 (1983); Estate of Watson v.
Blumenthal, 586 F.2d 925 (2d Cir. 1978); Beale v. Blount,
suora.
end fn *******
- 34
jurisdiction over cases seeking declaratory relief. A
specific exception exists, however, for disputes "with respect
to Federal taxes." Here, Mr. Henson sought a declaration that
the IRS's decision to allow deductions for fixed donations to
the Church was illegal because it was contrary to I.R.C. ~ 170
and to the decision of the Supreme Court in Hernandez. To the
extent he sought declaratory relief, his suit was "with
respect to Federal taxes," and the district court lacked
jurisdiction to consider it. See Hughes v. United States, 953
F.2d 531, 536-537 (9th Cir. 1992).
Mr. Henson also requested injunctive relief apparently to
prohibit the IRS from allowing deductions for fixed donations
to the Church.2/ In order to obtain such relief, Mr. Henson
was required to show that, absent the injunction, there was no
adequate remedy at law and he would suffer irreparable injury.
See Enochs v. Williams Packing & Navigation Co., 370 U.S. 1,
6-7 (1962). Mr. Henson, however, failed to allege facts that
if true, would make that showing. As discussed above, he
failed to allege an injury that was sufficient to establish
his standing to sue the IRS, much less any irreparable injury.
fn *******
7/ We note that the Anti-Injunction Act (I.R.C. ~ 7421(a))
prohibits injunctions against the Government "for the purpose
of restraining the assessment or collection of any tax ...."
Thus, injunctive relief is generally barred against the
Government in tax cases.
end fn *****
- 35 -
Moreover, with regard to his claims that the Church harassed
and attacked him, he has an adequate remedy at law--he can sue
the Church. And his grievances about the manner in which the
IRS enforces the tax laws is "subject matter [that] is
committed to the surveillance of Congress." See United States
V. Richardson, 418 U.S. 166, 179 (1974) .8/
fn ********
8/ In the district court, we argued in the alternative that
dismissal was appropriate because Mr. Henson failed to name
the Church of Scientology as an party to this suit, as
required under Rule 19(a), Fed. R. Civ. P. (CR 8 at 12-13.)
Although the District Court did not address that argument,
because it dismissed the case on jurisdictional grounds, we
adhere to our position that the Church was an indispensable
party to the suit.
end fn *******
- 36 -
CONCLUSION
For the reasons stated above, the judgment of the
District Court should be affirmed.
Respectfully submitted,
PAULA M. JUNGHANS
Acting Assistant Attorney Generai
~~Šy <$q/~~
KENNETH L. GREEN~ (202) 514-3573
LAURIE SNYDER (202) 514-6066
Attorneys
Tax Division
Denartment of Justice
Post Office Box 502
Washington, D.C. 20044
Of Counsel:
MICHAEL J. YAMAGUCHI
United States Attorney
JAY ROBERT WEILL
Assistant United States Attorney
MARCH 2000
- 37
STATEMENT OF RELATED CASES
Pursuant to Local Rule 28-2.6, counsel for the appellee
state that they are not aware any related cases pending in
this Court.
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