The equitable Anti-Injunction Act.

• Author: Hawley, Erin Morrow
• Position: Introduction through III. The Anti-Injunction Act C. Content 3. Waiver, p. 81-107

ABSTRACT

The Anti-Injunction Act of 1867 (AIA or the Act) has never been more important. Originally enacted to expedite the collection of revenue-raising taxes, courts and scholars have for years assumed that the statute imposes a jurisdictional bar on any pre-enforcement challenge to a tax. On this interpretation, taxpayers subject to an invalid tax have two choices only: comply or pay the tax and pursue a refund. Read this way, the Act is a marked departure from the general rule that pre-enforcement challenges are permissible so long as justiciability requirements are met. And it imposes a marked burden on aggrieved taxpayers that grows all the more significant as the federal government regulates more and more activity through the tax code.

This Article argues that the conventional wisdom is wrong. Scholars--and courts--have too readily relied on the Supreme Court's past permissive use of the term jurisdiction. But the Supreme Court has recently backed away from this jurisprudence, and more to the point, the traditional tools of statutory interpretation indicate that the AIA is not jurisdictional after all--at least, not in the traditional way.

This Article examines the text, structure, history, and early interpretation of the AIA and comes to a novel conclusion: the Act is not jurisdictional in the usual sense, but rather governs the equity jurisdiction of the federal courts. While "equity jurisdiction" is now a term unfamiliar to us, it governed the exercise of extraordinary remedies like injunctions for over a century. And it functioned much differently than jurisdiction does today. That the AIA refers to equity jurisdiction will change the landscape of tax litigation: contrary to the conventional wisdom, preenforcement tax challenges may go forward where the government waives or forfeits reliance on the AIA and in certain extraordinary circumstances.

INTRODUCTION

Whatever the Supreme Court says, there is a law for tax law alone--at least in the enforcement context. (1) The puzzle is this: pre-enforcement challenges to statutes and regulations are generally allowed in the law. (2) But not for taxes. In contrast to measures enacted under Congress's other powers, there is generally no such thing as the pre-enforcement review of a tax. This is all because of the Anti-Injunction Act of 1867 (AIA or the Act), (3) a statute that bars a taxpayer who believes a tax to be unconstitutional or otherwise invalid from bringing a preemptive suit. (4) In order to have her day in court, a taxpayer must pay the disputed tax--only then may she raise a constitutional (or other) challenge in federal court, and only by way of a refund action.

The deeply embedded conventional wisdom is that the AIA is jurisdictional. If that is true, then the AIA's limitation on pre-enforcement tax challenges is absolute. The government may not waive the prohibition, a meritorious excuse is irrelevant, and the federal courts have no authority to craft equitable exceptions.

Consider the implications. In National Federation of Independent Business v. Sebelius (NFIB), the recent litigation over the Affordable Care Act, the AIA nearly prevented the Supreme Court from deciding whether the individual mandate was constitutional--an outcome avoided only when the Court concluded the fines in question were "penalties" for purposes of the statute rather than "taxes." (5) There is an even stronger argument that the AIA should have barred the Supreme Court from hearing Burrell v. Hobby Lobby Stores, Inc., (6) the case finding unconstitutional regulations requiring employers to provide contraceptive insurance coverage, precisely because Congress labeled the penalties for non-compliance "taxes." (7) If the AIA applies, then under the conventional view, the Supreme Court must dismiss.

Questions like these will only become more frequent as Congress increasingly turns to the tax code to enforce various mandates of federal law. (8) Indeed, the Chief Justice's opinion in NFIB (9) practically invites Congress to use the taxing power for purposes of regulation rather than for its other enumerated powers. (10) And here is the point: if the conventional wisdom about the AIA is correct, the growing myriad regulatory tax penalties are all but immune from pre-enforcement challenge. Taxpayers subject to an unconstitutional tax regulation have two choices only: comply with the (invalid) regulation or pay the tax penalty and institute a refund action.

But what if the AIA is not jurisdictional? This Article argues that the conventional wisdom is wrong. It depends upon a highly permissive view of what counts as a jurisdictional requirement. The Supreme Court, however, recently has backed away from this overbroad conception of jurisdiction. This new revisionist jurisprudence destabilizes the consensus view and directs courts to return to text, structure, and context to determine whether a provision is in fact jurisdictional.

This Article does just that. It examines the text, structure, and context of the Anti-Injunction Act of 1867 and its early interpretation. This investigation reveals that the conventional wisdom is wrong: the AIA is not jurisdictional in the traditional sense. Moreover, because scholars and jurists uniformly have disregarded or misread early caselaw interpreting the AIA, they have missed discovering what it is that the statute actually does: it governs the equitable jurisdiction of the federal courts.

This category of "equitable jurisdiction" is one largely forgotten in our law, but it governed the exercise of extraordinary remedies like injunctions for over a century. And it functioned much differently than jurisdiction does today. That the AIA refers to equity jurisdiction will change the landscape of tax litigation--contrary to the conventional wisdom, pre-enforcement tax challenges may go forward where the government waives or forfeits reliance on the AIA and in certain extraordinary circumstances.

Recovering the concept of equitable jurisdiction also sheds new light on the longstanding debate over the reach of various bars on the authority of federal courts to grant equitable relief. A series of "Anti-Injunction Acts": the Anti-Injunction Act of 1793, which governs federal-state injunctions; the Anti-Injunction Act of 1867, which governs federal-federal tax injunctions; the Johnson Act of 1934, which governs federal-state agency rate-making injunctions; and the Tax Anti-Injunction Act of 1937, which governs federal-state tax injunctions--have bedeviled courts and commentators. Do these statutes bar any and every exercise of jurisdiction? Or do they instead allow for jurisdiction in the extraordinary case? The Supreme Court's answer has varied over time and with the circumstances of each case. This Article helps bring clarity to this debate by recovering an understanding of equity practice that may bear on the proper interpretation of all these "jurisdictional" bars.

Part I examines the judicial and scholarly consensus that the AIA is jurisdictional. Part II analyzes the Supreme Court's recent and destabilizing jurisdictional decisions--decisions that cut back on an overly permissive use of the term "jurisdiction" and mandate a return to text, structure, and history. Part III takes a fresh look at the text, structure, and history of the AIA and concludes that the conventional wisdom is wrong: the AIA is not jurisdictional, at least in the traditional sense. Part IV examines early interpretations of the AIA. Often seen as incoherent, these early cases reveal a surprisingly consistent line of precedent once one accounts for the equitable rules that governed tax injunction suits prior to the AIA's enactment. This leads to a novel interpretation: the Anti-Injunction Act of 1867 governs the equitable jurisdiction of the federal courts. Part V briefly develops the scope of an equitable AIA, sketching out categories of cases in which pre-enforcement review might be available.

1. THE CONVENTIONAL WISDOM

   The overwhelming academic consensus is that the AIA is a jurisdictional statute. (11) As Kevin Walsh put it, the AIA "easily satisfies the test for a jurisdictional bar." (12) The statute, according to Walsh, "clearly governs a court's 'adjudicatory capacity.'" (13) Writing about the Affordable Care Act litigation in her Supreme Court Foreword, Pam Karlan agreed that the ALA is jurisdictional. (14) "Had the [[section] 5000A] payment been construed as a tax for purposes of the Anti-Injunction Act," Karlan wrote, "the Court would have been deprived of jurisdiction, and determination of the constitutionality of the minimum coverage provision would have had to await a suit after 2014 by an individual who made the payment and then sued for a refund." (15) And while Michael Dorf and Neil Siegel do not address the question themselves, they wrote of "directly" on-point Supreme Court precedent for the proposition that the ALA is "a limit on federal court jurisdiction." (16)

   Further, in anticipation of the Supreme Court's decision in NFIB scholars devised novel ways of reading either the AIA or the Affordable Care Act's [section] 5000A penalty to avoid their intersection--analyses predicated on avoiding a jurisdictional AIA. Dorf and Siegel, for example, wrote that the AIA did not apply to the Affordable Care Act since the challenges at issue in NFIB did not have the "purpose" of immediately restraining tax assessment or collection. (17) Others have argued that the Affordable Care Act's penalty does not qualify as a tax for purposes of the AIA. (18) Despite the barrage of articles presenting various grounds upon which the Supreme Court could avoid application of the AIA to the Affordable Care Act, scholars did not contend that the AIA was not jurisdictional. (19)

   For their part, the federal courts are unanimous in their conclusion that the AIA is jurisdictional. (20) Indeed, the Affordable Care Act litigation provided recent and focused attention on the...