Summary
The D.C. Circuit reviewed consolidated appeals concerning the IRS’s viewpoint-based targeting and delayed processing of tax-exemption applications associated with conservative or anti-Administration organizations. The court affirmed dismissal of the Bivens and 26 U.S.C. § 6103 claims but held that the plaintiffs’ equitable claims were not moot because the IRS had not met its heavy burden under the voluntary-cessation doctrine, and remanded those claims for further proceedings.
Topics
Practice areas
Questions Presented
- Whether the plaintiffs could maintain Bivens claims against IRS employees or the IRS for alleged constitutional violations in the processing of tax-exemption applications.
- Whether the complaints stated claims under 26 U.S.C. §§ 6103 and 7431 for unauthorized inspection or disclosure of return information.
- Whether the plaintiffs' claims for injunctive and declaratory relief were rendered moot by the IRS's voluntary cessation or suspension of the challenged conduct.
- Whether the void-for-vagueness challenges to 26 C.F.R. § 1.501(c)(4)-1 and Revenue Procedure 86-43 were moot.
Holdings
- The plaintiffs' Bivens claims were properly dismissed because the comprehensive remedial scheme of the Internal Revenue Code precludes a Bivens remedy against IRS employees in their individual capacities, and the claims could not proceed against the IRS.
- The statutory claims were properly dismissed because the complaints did not allege facts sufficient to establish that IRS officials knowingly or negligently inspected or disclosed return information in violation of § 6103.
- The IRS may not process tax-exemption applications according to different standards or at different rates based on the applicants' viewpoints; such viewpoint-based targeting is a violation of the First Amendment.
- The equitable claims were not moot because the IRS failed to meet its heavy burden of establishing voluntary cessation: it had not shown that the challenged conduct could not reasonably recur or that its effects had been completely and irrevocably eradicated.
- The void-for-vagueness challenges to 26 C.F.R. § 1.501(c)(4)-1 and Revenue Procedure 86-43 were not moot for the same reasons that the equitable claims were not moot.
Key quotations
“to process exemption applications pursuant to different standards and at different rates depending upon the viewpoint of the applicants” (at 564)
“a blatant violation of the First Amendment.” (at 564)
“Their heavy burden requires that they establish cessation, not near cessation.” (at 566)
“if you haven’t ceased to violate the rights of the taxpayers, then there is no cessation.” (at 567)
“A violation of right that is “suspended until further notice” has not become the subject of voluntary cessation, with no reasonable expectation of resumption, so as to moot litigation against the violation of rights.” (at 570)
Factual background
The appellants applied for recognition of tax-exempt status under 26 U.S.C. § 501(c)(3) or § 501(c)(4). The IRS selected applications associated with conservative or anti-Administration viewpoints for enhanced scrutiny through criteria and BOLO lists involving terms such as "Tea Party," "Patriot," and "9/12," resulting in delays and requests for donor information, political affiliations, Internet passwords, and other material. Although the IRS later suspended use of the BOLO lists and ended some challenged practices, at least two appellant applications remained pending when the appeals were decided.
Procedural history
The plaintiffs applied to the IRS for recognition of tax-exempt status and alleged that the IRS subjected their applications to viewpoint-based enhanced scrutiny, delay, and intrusive information requests. The District Court for the District of Columbia dismissed the Bivens and statutory claims under Rule 12(b)(6) and dismissed the injunctive and declaratory claims as moot based on the IRS's discontinuation or suspension of the challenged practices. The Court of Appeals affirmed the dismissal of the Bivens and statutory claims, reversed the mootness dismissals, and remanded the equitable claims for further proceedings.
Remand instructions
The equitable claims for injunctive and declaratory relief, including the void-for-vagueness challenges, were remanded for further proceedings consistent with the opinion. The district court's dismissals of the Bivens and statutory claims were affirmed.