Finding that the imminent departure of respondent taxpayer
Samuel Shapiro (hereinafter respondent) for Israel under an
extradition order to stand trial there on criminal charges
jeopardized the collection of income taxes claimed owed by
respondent for 1970 and 1971, petitioner Commissioner of Internal
Revenue made a jeopardy assessment, filed liens against respondent,
and served notices of levy on various banks in which respondent had
accounts or safe deposit boxes. Respondent then brought suit,
claiming that he owed no taxes, that he could not litigate the
issue while jailed in Israel, and that he would be in jail there
unless he could use the levied bank accounts as bail money, and
seeking an order enjoining his extradition until he could litigate
whether he owed taxes or directing the Internal Revenue Service to
lift the levy notices. After the Commissioner, in response to
interrogatories, furnished deficiency notices disclosing that the
claimed bases for the assessments were for 1970 unexplained cash
bank deposits and for 1971 income derived from alleged narcotics
sales, the District Court dismissed the complaint on the ground,
inter alia, that the Anti-Injunction Act (Act), § 7421(a)
of the Internal Revenue Code, which prohibits suits for the purpose
of restraining the assessment or collection of taxes, withdrew its
jurisdiction to order levies lifted. The Court of Appeals
disagreed, and remanded for further proceedings, holding that an
unresolved fact issue existed as to whether the case fell within
the exception to the Act formulated in
Enochs v. Williams
Packing Co., 370 U. S. 1,
370 U. S. 7,
whereby an injunction may be obtained against the collection of any
tax if (1) it is "clear that, under no circumstances could the
Government ultimately prevail" and (2) "equity jurisdiction"
otherwise exists in that the taxpayer shows that he would otherwise
suffer irreparable injury. The court found that respondent had
satisfied the second test because he would be incarcerated until
his bank accounts could be used for bail money, and that, as to the
first test, the District Court should not have dismissed the
Page 424 U. S. 615
complaint without a further inquiry into whether, upon viewing
the law and the facts most favorably to the Commissioner, there was
no "factual foundation" for his claim that respondent was a
tax-delinquent narcotics dealer during 1971, and thus no basis for
the assessment.
Held: The Act did not require dismissal of respondent's
complaint. Pp.
424 U. S.
624-633.
(a) Whether the Commissioner has a chance of ultimately
prevailing for purposes of the
Williams Packing exception
is a question to be resolved on the basis of the information
available to the Commissioner at the time of the suit. Hence, the
Court of Appeals did not err in declining to specify the precise
manner in which the relevant facts would be revealed on remand,
since whether the Commissioner discloses such facts because he has
the technical burden of proof or discloses them in response to a
discovery motion or interrogatories, under
Williams
Packing, the relevant facts are those in the Commissioner's
possession, and must somehow be obtained from him. Pp.
424 U. S.
624-628.
(b) The Act's primary purpose is not interfered with by not
requiring the taxpayer to plead specific facts which, if true,
would establish that the Commissioner cannot ultimately prevail,
since the collection of taxes will not be restrained unless the
District Court is persuaded from the evidence eventually adduced
that the Commissioner will under no circumstances prevail.
Moreover, the Act's "collateral objective" to protect the collector
from tax litigation outside the statutory scheme is not undercut,
since the taxpayer himself must still plead and prove facts
establishing that his remedy in the Tax Court or in a refund suit
is inadequate to repair any injury caused by an erroneous
assessment or collection, in which case, the Commissioner is
required simply to litigate the question whether his assessment has
a basis in fact. Pp.
424 U. S.
628-629.
(c) While to permit the Commissioner to seize and hold property
on the mere good faith allegation of an unpaid tax would raise
serious due process problems in cases like this one, where it is
asserted that seizure of assets pursuant to a jeopardy assessment
is causing irreparable injury, the case may be resolved, under the
Williams Packing exception, solely by reference to the
Act, whose required standard as to affording the taxpayer an
opportunity for a hearing and as to the evidence necessary to show
that an assessment has a basis, in fact, is at least as favorable
to the taxpayer as that required by the Constitution. Pp.
424 U. S.
629-633.
162 U.S.App.D.C. 391, 499 F.2d 527, affirmed.
Page 424 U. S. 616
WHITE, J., delivered the opinion of the Court, in which BURGER,
C.J., and BRENNAN, STEWART, MARSHALL, and POWELL, JJ., joined.
BLACKMUN, J., filed a dissenting opinion, in which REHNQUIST, J.,
joined,
post, p.
424 U. S. 634.
STEVENS, J., took no part in the consideration or decision of the
case.
MR. JUSTICE WHITE delivered the opinion of the Court.
This case presents questions relating to the scope of the
Internal Revenue Code's Anti-Injunction Act, 26 U.S.C. § 7421(a),
[
Footnote 1] in the context of
a summary seizure of a taxpayer's assets pursuant to a jeopardy
assessment. §§ 6861, 6331, 6213.
I
Normally, the Internal Revenue Service may not "assess" a tax or
collect it, by levying on or otherwise seizing a taxpayer's assets,
until the taxpayer has had an opportunity to exhaust his
administrative remedies, which include an opportunity to litigate
his tax liability
Page 424 U. S. 617
fully in the Tax Court, 26 U.S.C. §§ 6212, 6213; [
Footnote 2] and if the Internal Revenue
Service does attempt to collect the tax by levy or otherwise,
before such exhaustion of remedies in violation of § 6213, the
collection is not protected by the Anti-Injunction Act, and may be
restrained by a United States district court at the instance of the
taxpayer. §§ 6213(a), 7421(a). The rule is otherwise when the
Commissioner proceeds under § 6861 and finds that collection of a
tax due and owing from a taxpayer will be "jeopardized by delay" in
collection. In such a case, the Commissioner may immediately assess
the tax and, upon "notice and demand . . . for payment thereof"
followed by the taxpayer's "failure or refusal to pay such
Page 424 U. S. 618
tax," may immediately levy on the taxpayer's assets. §§ 6861,
6331. [
Footnote 3] When the
Commissioner follows this procedure, the Anti-Injunction Act
applies in full force, and
Page 424 U. S. 619
"no suit for the purpose of restraining the assessment or
collection of any tax shall be maintained in any court by any
person." § 7421(a).
In this case, the Commissioner found, on December 6, 1973, that
the imminent departure of respondent Samuel Shapiro (hereinafter
Shapiro or respondent) for Israel and the probable departure with
him of the assets in his New York bank accounts and safe-deposit
boxes jeopardized the collection of income taxes claimed to be due
and owing by him for the tax years 1970 and 1971. Accordingly, he
assessed income taxes against respondent in the amount of
$92,726.41 for the tax years 1970 and 1971. On the same day, he
filed liens against respondent and served notices of levy upon
various banks in New York State in which respondent maintained
accounts or had safe deposit boxes. These notices of levy
effectively froze the money in the accounts -- totaling about
$35,000 -- and the contents of the safe-deposit boxes.
At that time, respondent Shapiro was under a final order of
extradition to Israel, for trial on criminal fraud charges, issued
by the United States District Court for the Southern District of
New York, and was scheduled to leave for Israel on December 9, 1973
-- three days later. That date had been set as a result of an
agreement between Shapiro and the State of Israel pursuant to which
he had withdrawn a petition for writ of certiorari seeking review
by this Court of the affirmance of the extradition order by the
Court of Appeals for the Second Circuit,
Page 424 U. S. 620
Shapiro v. Ferrandina, 478 F.2d 894 (1973), and the
State of Israel had agreed to grant him a speedy trial when he
arrived in Israel and to release him on $60,000 bail pending such
trial.
Upon learning of the notices of levy, respondent obtained the
consent of the State of Israel to postpone his extradition date
until December 16, 1973; and then, on December 13, 1973, he
initiated the instant lawsuit. Claiming that he owed no taxes; that
he could not litigate the issue with the Internal Revenue Service
while in jail in Israel; that he would be in jail in Israel, unless
he could use the frozen $35,000 as bail money; and that the
Internal Revenue Service had deliberately and in bad faith waited
until December 6, 1973, before filing its notices of levy precisely
in order to place him in this predicament, respondent requested in
his complaint an order enjoining his extradition until he had an
opportunity to litigate the question whether he owed the Internal
Revenue Service any taxes or, in the alternative, an order
directing the Internal Revenue Service to lift the notices of
levy.
Over the Government's claim that the court lacked jurisdiction
over the case by reason of the Anti-Injunction Act and because the
timing of an extradition is a matter within the exclusive
jurisdiction of the Executive Branch, the District Court granted a
temporary restraining order against extradition on December 13,
1973, and set argument on the motion for a preliminary injunction
for December 19, 1973, later postponed until December 21, 1973.
Interrogatories were then served on the Government inquiring,
inter alia, into the basis for the assessments. In
partial, expedited, response to the interrogatories, the Government
stated, on December 19, 1973, that respondent was not yet entitled
to know the basis for the assessments. Then on December 21,
Page 424 U. S. 621
1973, the Commissioner served counsel for respondent with
supplements to the responses to the interrogatories to which were
appended notices of deficiency,
see 26 U.S.C. § 6212. The
notices of deficiency disclosed that the 1970 assessment was based
on unexplained cash bank deposits of $18,000, and that the 1971
assessment was based on income in the amount of $137,280 derived
from respondent's alleged activities as a dealer in narcotics.
[
Footnote 4] On that date, the
District Court dissolved the temporary restraining order and
granted the Commissioner's motion to dismiss the complaint. The
court concluded that the Anti-Injunction Act withdrew its
jurisdiction to order the levies to be lifted, and that the timing
of the extradition, validly ordered by the United States District
Court for the Southern District of New York under a treaty with
Israel, was a matter within the exclusive jurisdiction of the State
Department.
On December 26, 1973, after respondent had filed a notice of
appeal, the Court of Appeals for the District of Columbia Circuit
stayed the extradition pending resolution of that appeal. [
Footnote 5] The stay was lifted by the
Court
Page 424 U. S. 622
of Appeals on February 12, 1974. On May 15, 1974, the Court of
Appeals affirmed the District Court's holding that it had no
jurisdiction over the extradition order, and respondent was
extradited several days thereafter. [
Footnote 6] The Court of Appeals, however, disagreed with
the District Court that it had no jurisdiction to consider the
claim for relief from the levies, and remanded for further
proceedings.
Shapiro v. Secretary of State, 162
U.S.App.D.C. 391, 499 F.2d 527 (1974).
The Court of Appeals held that an unresolved fact issue existed
on the question whether this case falls within the narrow exception
to the Anti-Injunction Act formulated in this Court's decision in
Enochs v. Williams Packing Co., 370 U. S.
1 (1962). [
Footnote
7] As the court understood
Page 424 U. S. 623
the
Williams Packing decision, the Anti-Injunction Act
does not deprive the District Court of jurisdiction to restrain
collection of a tax, if (1) the taxpayer shows "extraordinary
circumstances causing irreparable harm" for which he has no
"adequate remedy at law," and (2) it is apparent that, under the
most liberal view of the law and the facts, the United States
"
cannot establish its claim.'" 162 U.S.App.D.C. &t 396, 499
F.2d at 532. The court found that Shapiro had satisfied the first
test: the money frozen in his New York banks was to be used as bail
money in Israel, and, without it, Shapiro would be incarcerated.
Accordingly, his remedy at law -- i.e., his ability later
to contest the validity of the assessment in the Tax Court or in a
suit for a refund -- was inadequate. As for the second test, the
court concluded that the District Court should not have dismissed
the complaint without further inquiry into the factual foundation
for the jeopardy assessment, and that further proceedings were
necessary before finally determining whether, upon viewing the law
and the facts most favorably to the Government, there was "no
factual foundation" for the Government's claim that Shapiro was a
tax-delinquent narcotics dealer during 1971, and thus no basis for
the assessment. Accordingly, the court remanded in order to "allow
the District Court. . . to develop a record" and to determine in
light of it whether the asserted deficiency was "so arbitrary and
excessive" [Footnote 8] as to
be an exaction in the guise of a tax. [Footnote 9] Id. at 399, 499 F.2d at 535.
Page 424 U. S. 624
II
The Government argues that the order of the Court of Appeals was
erroneous because it laced a burden on the Government to prove a
factual basis for its assessment
Page 424 U. S. 625
instead of requiring the taxpayer to prove that "under no
circumstances could the Government ultimately prevail."
Enochs
v. Williams Packing Co., 370
Page 424 U. S. 626
U.S. at
370 U. S. 7. The
Government argues further that, since the taxpayer had and still
has wholly failed to prove or even plead specific facts
establishing that the Government can under no circumstances
prevail, the Court of Appeals should have affirmed the District
Court's initial dismissal and its decision to the contrary should
be reversed.
Respondent argues, on the other hand, that, unless the
Government has some obligation to disclose the factual basis for
its assessments, either in response to a discovery request or on
direct order of the court, the exception to the Anti-Injunction Act
provided in
Enochs v. Williams Packing Co., supra, is
meaningless. The taxpayer can never know, unless the Government
tells him, what the
Page 424 U. S. 627
basis for the assessment is, and thus can never show that the
Government will certainly be unable to prevail. We agree with
Shapiro.
In
Enochs v. Williams Packing Co., supra, the Court
held that an injunction may be obtained against the collection of
any tax if (1) it is "clear that, under no circumstances could the
Government ultimately prevail" and (2) "equity jurisdiction"
otherwise exists,
i.e., the taxpayer shows that he would
otherwise suffer irreparable injury. 370 U.S. at
370 U. S. 7. The
Court also said that
"the question of whether the Government has a chance of
ultimately prevailing is to be determined on the basis of the
information available to it at the time of the suit,"
ibid. The Government's claim that the Court of Appeals
placed on it the burden of justifying its assessment and thereby
erroneously applied the
Williams Packing rule is wrong.
Williams Packing did not hold that the taxpayer's burden
of persuading the District Court that the Government will under no
circumstances prevail must be accomplished without any disclosure
of information by the Government. It says instead that the question
will be resolved on the basis of the information available to the
Government at the time of the suit. Since it is absolutely
impossible to determine what information is available to the
Government at the time of the suit, unless the Government discloses
such information in the District Court pursuant to appropriate
procedures, it is obvious that the Court in
Williams
Packing intended some disclosure by the Government. Although
the Government casts its argument in terms of "burden of proof,"
the Court of Appeals did not place any technical burden of
producing evidence on the Government, and it would appear to matter
little whether the Government discloses such information because it
is said to have the burden of producing evidence on the question or
whether it
Page 424 U. S. 628
discloses such evidence by responding to a discovery motion made
or interrogatories served by the taxpayer -- in which case the
burden of producing evidence may be said to have rested with the
taxpayer. Thus, the Court of Appeals cannot be said to have erred
in declining to specify the precise manner in which the relevant
facts would be revealed on remand. In either event, under
Williams Packing, the relevant facts are those in the
Government's possession, and they must somehow be obtainable from
the Government. [
Footnote
10]
The Government argues, however, that, unless the taxpayer is
required to plead specific facts which, if true, would establish
that the Government cannot ultimately prevail, then the
Anti-Injunction Act is eviscerated. Any taxpayer can allege in
conclusory fashion that he owes no tax and, therefore, under the
Court of Appeals' decision, any taxpayer may, in effect, force the
Government to justify its assessment in a United States District
Court -- thereby interfering with a "collateral objective" of the
Act,
Enochs v. Williams Packing Co., supra at
370 U. S. 7-8,
i.e., to protect the collector from tax litigation outside
of the statutory scheme provided by Congress. As the Government's
argument itself implicitly concedes, the primary purpose of the Act
is not interfered with, since the collection of taxes will not be
restrained unless the District Court is persuaded from the evidence
eventually adduced that the Government will under no circumstances
prevail. We do not understand the Court of Appeals to have departed
from this standard
Page 424 U. S. 629
enunciated in
Williams Packing, or to have removed from
the taxpayer the ultimate burden, which that decision appears to
place on him, of persuading the District Court that it has been
met. Moreover, the "collateral objective" of the Act is undercut no
more than was contemplated by
Williams Packing. The
taxpayer himself must still plead and prove facts establishing that
his remedy in the Tax Court or in a refund suit is inadequate to
repair any injury that might be caused by an erroneous assessment
or collection of an asserted tax liability. Even then, the
Government is not required to litigate fully the taxpayer's
liability outside the statutory scheme provided by Congress. It is
required simply to litigate the question whether its assessment has
a basis in fact. Our conclusion that the Court of Appeals correctly
reversed the judgment of the District Court and remanded for
further proceedings is fortified by the fact that construing the
Act to permit the Government to seize and hold property on the mere
good faith allegation of an unpaid tax would raise serious
constitutional problems in cases, such as this one, where it is
asserted that seizure of assets pursuant to a jeopardy assessment
is causing irreparable injury. This Court has recently and
repeatedly held that, at least where irreparable injury may result
from a deprivation of property pending final adjudication of the
rights of the parties, the Due Process Clause requires that the
party whose property is taken be given an opportunity for some kind
of pre-deprivation or prompt post-deprivation hearing at which some
showing of the probable validity of the deprivation must be made.
[
Footnote 11] Here the
Government seized respondent's property
Page 424 U. S. 630
and contends that it has absolutely no obligation to prove that
the seizure has any basis, in fact, no matter how severe or
irreparable the injury to the taxpayer and no matter how inadequate
his eventual remedy in the Tax Court. [
Footnote 12]
It is true that, in
Phillips v.
Commissioner, 283 U.S.
Page 424 U. S. 631
589 (1931), this Court sustained against constitutional
challenge the statutory scheme created by Congress for the
litigation of tax disputes, and in so doing referred both to the
jeopardy assessment provisions and the Anti-Injunction Act,
id. at
283 U. S. 596
n. 6. However, the
Phillips case itself did not involve a
jeopardy assessment and the taxpayer's assets could not have been
taken or frozen in that case until he had either had, or waived his
right to, a full and final adjudication of his tax liability before
the Tax Court (then the Board of Tax Appeals). The taxpayer's claim
in that case was simply that a statutory scheme which would permit
the tax to be assessed and collected prior to any judicial
determination of his liability -- by way of a refund suit or review
of the Board of Tax Appeals' decision -- was unconstitutional.
[
Footnote 13] Thus, insofar
as
Phillips may be said to have sustained the
constitutionality of the Anti-Injunction Act, as applied to a
jeopardy assessment and consequent levy on a taxpayer's assets
without prompt opportunity for final resolution of the question of
his liability by the Tax Court, it did so only by way of dicta. The
dicta were carefully expressed. The Court said:
"
Where, as here, adequate opportunity is afforded for a
later judicial determination of the legal rights, summary
proceedings to secure prompt performance of pecuniary obligations
to the government have been consistently sustained."
"
* * * *"
"Where only property rights are involved, mere postponement of
the judicial enquiry is not a denial
Page 424 U. S. 632
of due process,
if the opportunity given for the ultimate
judicial determination of the liability is adequate. . .
."
Id. at
283 U. S. 595,
283 U. S.
596-597. (Emphasis supplied.) Accordingly, neither the
holding nor the dicta in
Phillips support the proposition
that the tax collector may constitutionally seize a taxpayer's
assets without showing some basis for the seizure under
circumstances in which the seizure will injure the taxpayer in a
way that cannot be adequately remedied by a Tax Court judgment in
his favor. Instead, it would appear to be entirely consistent with
our more recent holdings.
In any event, we are satisfied that, under the exception to the
Anti-Injunction Act described in the
Williams Packing
case, this case may be resolved by reference to that Act alone. At
the time the District Court dismissed the complaint, the Government
had done little more than assert that respondent owed taxes in an
amount greater than the value of the property levied -- it had
alleged that respondent had made an unexplained bank deposit of
$18,000 in 1970 and, in a wholly conclusory fashion, that he had
received $137,280 in income from selling hashish. [
Footnote 14] Before the taxpayer had an
opportunity to inquire into the factual basis for this conclusory
allegation, it was not possible to tell whether the Government had
any chance of ultimately prevailing. Accordingly, the Court of
Appeals properly concluded that the Anti-Injunction Act did not
require dismissal of the taxpayer's complaint.
Page 424 U. S. 633
Moreover, we are satisfied that the standard required by the
Anti-Injunction Act is at least as favorable to the taxpayer as
that required by the Constitution, and that the standard to be
applied by the District Court will therefore not be affected by the
resolution of the constitutional issue. The Government may defeat a
claim by the taxpayer that its assessment has no basis, in fact, --
and therefore render applicable the Anti-Injunction Act -- without
resort to oral testimony and cross-examination. Affidavits are
sufficient so long as they disclose basic facts from which it
appears that the Government may prevail. The Constitution does not
invariably require more,
Gerstein v. Pugh, 420 U.
S. 103 (1975);
Mathews v. Eldridge,
424 U. S. 319
(1976), and we would not hold that it does where collection of the
revenues is involved.
Finally, it seems apparent that, if the facts do not even
disclose "probable cause,"
North Georgia Finishing, Inc. v.
Di-Chem, Inc., 419 U. S. 601,
419 U. S. 607
(1975);
Gerstein v. Pugh, supra, to support the
assessment, the Government would certainly be unable to prevail at
trial. Thus the
Williams Packing standard is consistent
with the applicable constitutional standard.
We point out also that a preliminary issue would appear to
require resolution on remand. Irreparable injury was, of course,
quite properly found by the Court of Appeals. At the time of that
court's decision, it appeared that respondent Shapiro had been
deprived by the levies of the money needed to post bail in Israel
and thereby avoid incarceration. However, it would appear that the
basis for the Court of Appeals' finding of irreparable injury has
since disappeared. Thus, the District Court's preliminary task on
remand will be to determine whether this is so and, if so, whether
respondent can
Page 424 U. S. 634
establish some other sort of irreparable injury flowing from the
levies. [
Footnote 15]
The judgment of the Court of Appeals is
Affirmed.
MR. JUSTICE STEVENS took no part in the consideration or
decision of this case.
[
Footnote 1]
Title 26 U.S.C. § 7421(a) provides in full:
"(a) Tax."
"Except as provided in sections 6212(a) and (c), 6213(a), and
7426(a) and (b)(1), 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."
[
Footnote 2]
Title 26 U.S.C. § 6212 provides in relevant part:
"(a) In general."
"If the Secretary or his delegate determines that there is a
deficiency in respect of any tax imposed by subtitles A or B or
chapter 42, he is authorized to send notice of such deficiency to
the taxpayer by certified mail or registered mail."
Title 26 U.S.C. § 6213 provides in relevant part:
"(a) Time for filing petition and restriction on
assessment."
"Within 90 days, or 150 days if the notice is addressed to a
person outside the States of the Union and the District of
Columbia, after the notice of deficiency authorized in section 6212
is mailed (not counting Saturday, Sunday, or a legal holiday in
District of Columbia as the last day), the taxpayer may file
petition with the Tax Court for a redetermination of the
deficiency. Except as otherwise provided in section 6861 no
assessment of a deficiency in respect of any tax imposed by
subtitle A or B or chapter 42 and no levy or proceeding in court
for its collection shall be made, begun, or prosecuted until such
notice has been mailed to the taxpayer, nor until the expiration of
such 90-day or 150-day period, as the case may be, nor, if a
petition has been filed with the Tax Court, until the decision of
the Tax Court has become final. Notwithstanding the provisions of
section 7421(a), the making of such assessment or the beginning of
such proceeding or levy during the time such prohibition is in
force may be enjoined by a proceeding in the proper court."
[
Footnote 3]
Title 26 U.S.C. § 6331 provides in relevant part:
"(a) Authority of Secretary or delegate."
"If any person liable to pay any tax neglects or refuses to pay
the same within 10 days after notice and demand, it shall be lawful
for the Secretary or his delegate to collect such tax (and such
further sum as shall be sufficient to cover the expenses of the
levy) by levy upon all property and rights to property (except such
property as is exempt under section 6334) belonging to such person
or on which there is a lien provided in this chapter for the
payment of such tax. Levy may be made upon the accrued salary or
wages of any officer, employee, or elected official, of the United
States, the District of Columbia, or any agency or instrumentality
of the United States or the District of Columbia, by serving a
notice of levy on the employer (as defined in section 3401(d)) of
such officer, employee, or elected official. If the Secretary or
his delegate makes a finding that the collection of such tax is in
jeopardy, notice and demand for immediate payment of such tax may
be made by the Secretary or his delegate and, upon failure or
refusal to pay such tax, collection thereof by levy shall be lawful
without regard to the 10-day period provided in this section."
"(b) Seizure and sale of property."
"The term 'levy' as used in this title includes the power of
distraint and seizure by any means. A levy shall extend only to
property possessed and obligations existing at the time thereof. In
any case in which the Secretary or his delegate may levy upon
property or rights to property, he may seize and sell such property
or rights to property (whether real or personal, tangible or
intangible)."
Title 26 U.S.C. § 6861 provides in relevant part:
"(a) Authority for Making."
"If the Secretary or his delegate believes that the assessment
or collection of a deficiency, as defined in section 6211, will be
jeopardized by delay, he shall, notwithstanding the provisions of
section 6213(a), immediately asses such deficiency (together with
all interest, additional amounts, and additions to the tax provided
for by law), and notice and demand shall be made by the Secretary
or his delegate for the payment thereof."
"(b) Deficiency Letters."
"If the jeopardy assessment is made before any notice in respect
of the tax to which the jeopardy assessment relates has been mailed
under section 6212(a), then the Secretary or his delegate shall
mail a notice under such subsection within 60 days after the making
of the assessment."
[
Footnote 4]
The relevant part of the deficiency notice for the year 1970
provided:
"It is determined that you realized unreported taxable income
from unexplained bank deposits at the 1st National City Bank in the
amount of $18,000.00"
App. 135.
The relevant part of the deficiency notice for the year 1971
provided,
id. at 136:
"It is determined that you realized unreported taxable income in
the amount of $137,280.00 for the taxable year ended December 31,
1971 from your activities as a dealer in narcotics, computed as
follows:"
Gross income from hashish sales . . . $381,680.00
Less: costs. . . . . . . . . . . . . 244,400.00
-----------
Net Income. . . . . . . . . . . . . . $137,280.00
[
Footnote 5]
On January 3, 1974, respondent, armed with his deficiency
notice, filed in the Tax Court for a redetermination of the
deficiency. 26 U.S.C. § 6213(a).
[
Footnote 6]
The extradition issue is therefore no longer in this case.
[
Footnote 7]
The Court of Appeals rejected, on the record before it, and on
the authority of
Phillips v. Commissioner, 283 U.
S. 589 (1931), respondent's claim that the assessment,
absent a hearing, violated the Due Process Clause. It noted,
however, that, if respondent could establish on remand that his
extradition would prevent him from litigating effectively before
the Tax Court, then one of the predicates for the
Phillips
decision would be lacking. The court also noted, but did not
resolve, a factual dispute as to whether the levy was in conformity
with the statute. Shapiro had alleged, for the first time on
appeal, that no notice had been given to him or demand made of him
to pay the taxes at the time the levies were served. Such notice
and demand are required by 26 U.S.C. § 6861, compliance with which
is necessary under § 6213(a), if the Anti-Injunction Act is to
apply. The Commissioner claimed that he had mailed a deficiency
notice to Shapiro on December 6, 1973.
It is clear that a demand has now been made for payment of the
tax assessed and that the levies are now in compliance with § 6213.
A notice of deficiency was served on Shapiro's attorney in the
District Court on December 21, 1973. The Internal Revenue Service,
conceding that it could not be sure whether the original notice of
deficiency was mailed before or after the notices of levy were
served, served new notices of levy on October 11 and 15, 1974. This
moots both the question whether the IRS mailed a notice of
deficiency to Shapiro on December 6, 1973, and whether the notice
preceded the levies. There can be no question at this point,
therefore, that, in these respects the levies are in technical
compliance with the provisions of § 6861.
[
Footnote 8]
This standard, considered by the Court of Appeals to be
consistent with
Enochs v. Williams Packing was based on
cases decided by other Courts of Appeals, primarily
Pizzaello
v. United States, 408 F.2d 579 (CA2 1969), and
Lucia v.
United States, 474 F.2d 565 (CA5 1973) (en banc).
[
Footnote 9]
Subsequent to the time of the Court of Appeals' order and prior
to argument of this case before this Court, several things have
concededly occurred of arguable relevance to this lawsuit. First,
respondent Shapiro has been extradited, the State of Israel has
reduced the amount of his bail and he has been able to meet it.
Accordingly, he is not -- as the Court of Appeals assumed he would
be -- incarcerated as a result of the fact that the levies have put
the money in the New York banks beyond his reach. Second, the
District Court interpreted the Court of Appeals' order in this case
to require the Government to come forward with proof sufficient to
establish a factual foundation for the tax assessment and to
negative a finding that the assessment is "entirely excessive,
arbitrary, capricious, and without factual foundation." The
Government then made an effort at compliance with the District
Court's order, consisting of the filing of an affidavit by the
revenue agent who investigated respondent's income tax liabilities.
The affidavit states that the basis for the assessments is as
follows:
"a. There was no record that Samuel Shapiro had filed an income
tax return for 1970."
"b. That Samuel Shapiro had filed an income tax return for 1971
reporting no tax liability based upon $1,600 in adjusted gross
income, consisting of $2,600 miscellaneous income from private
tutoring and net short-term losses from commodity transactions of
$1,450 (limited to $1,000 in computing adjusted gross income)."
"c. That deposits were credited to two accounts in the name of
Samuel Shapiro at the First National City Bank, New York, Nos.:
04993564 and 05008773, in the amounts of $18,000 in 1970 and
$36,735 in 1971."
"d. That . . . Samuel Shapiro paid in excess of $3,000 in
currency for the purchase of an automobile."
"e. That information available to the Internal Revenue Service
indicated that early in 1973 Samuel Shapiro paid over $40,000 for a
home purchased for over $60,000."
"f. That information supplied to the Internal Revenue Service
indicated that Samuel Shapiro had been smuggling into the United
States substantial amounts of an illegal substance, hashish, every
six days from Israel, presumably for resale within the United
States, and also supported a conclusion that Samuel Shapiro was
dealing in hashish, during 1971."
"g. That included in the 1971 bank deposits referred to in
subparagraph (c) above, were money transfers from an individual
since convicted of selling hashish, who stated that the transfers
were for hashish supplied to him by Samuel Shapiro as follows:"
April 19, 1971 . . . . . . $2,000
April 23, 1971 . . . . . . 2,300
May 6, 1971. . . . . . . . 2,000
May 11, 1971 . . . . . . . 1,500
June 8, 1971 . . . . . . . 1,500
August 18, 1971. . . . . . 5,600
"h. That information available to the Internal Revenue Service
indicated that the known practice in hashish trafficking was to
deal in full kilos (kilograms), equal to 2.2 pounds; that, during
1971, the retail price of hashish was $1,360 to $1,980 per pound,
or $2,992 to .4,356 per kilo; and that the wholesale cost to a
dealer would approximate $2,350 per kilo; and that the common
practice in hashish dealing was to receive payment in two parts --
the first for cost and the second for profit."
"i. That on the basis of the information set forth in
subparagraphs g. and h. above, [the revenue agent] concluded that,
during 1971 Samuel Shapiro was dealing in at least 2 kilos of
hashish per week, and that his taxable profit therefrom was
$137,280, computed as follows:"
Selling price . . . . . . . . . $ 7,340
Cost. . . . . . . . . . . . . . . 4,700
Weekly profit . . . . . . . . . . 2,640
-------
1971 profit (52 weeks) . . . $137,280
"j. That unexplained deposits of 18,000 during 1970 should be
deemed to be taxable income."
At a hearing held by the District Court on November 12, 1974,
respondent submitted two affidavits (which had been filed in the
Tax Court) denying that he was or ever had been a dealer in
narcotics. Respondent's affidavits further stated that his 1971
income tax return was correct. Respondent also submitted an
affidavit of Rachel Laub, a resident of Switzerland, which stated
that, at respondent's request in 1970, she held for him in
safekeeping $50,000 in cash and approximately 18 to 20 kilos of
gold bars. That affidavit further stated that, at respondent's
request, she transmitted the cash to him in 1971, and the proceeds
of the sale of the gold bars ($32,000 and $35,000) in 1971 and
1972, respectively. Finally, the District Judge has tentatively
ruled that the Government must, if the court is to deny injunctive
relief, submit its informant for
in camera examination by
the court. Following the Court's granting of the Government's
petition for a writ of certiorari, 420 U.S. 923 (1975), no further
proceedings have taken place below.
The proceedings before the District Court on remand and the
other events just described are, of course, not before us at this
time. These proceedings occurred after the decision of the Court of
Appeals which we review. However, the parties appear to agree that
these events have occurred as described, and we mention them
because they are relevant to the question of what proceedings must
eventually be conducted by the District Court following our
decision in this case.
[
Footnote 10]
We believe that it is consistent with
Williams Packing
to place the burden of producing evidence with the taxpayer, and to
require, if the Government insists, that facts in its sole
possession be obtained through discovery. However, nothing we say
here should prevent the Government from voluntarily and immediately
disclosing the basis for its assessment, which, if sufficient,
would terminate discovery proceedings and justify judgment for the
Government.
[
Footnote 11]
Goldberg v. Kelly, 397 U. S. 254,
397 U. S. 264
(1970) (temporary deprivation of welfare payments may deprive
recipient of "the very means by which to live while he waits");
Sniadach v. Family Finance Corp., 395 U.
S. 337,
395 U. S.
341-342 (1969) (temporary deprivation of wages may
"drive a wage-earning family to the wall");
North Georgia
Finishing, Inc. v. Di-Chem, Inc., 419 U.
S. 601,
419 U. S. 608
(1975) ("probability of irreparable injury" sufficient to warrant
preseizure probable validity hearing);
see also Gerstein v.
Pugh, 420 U. S. 103
(1975) (incarceration must be preceded by probable cause finding or
promptly followed by probable cause hearing);
cf. Regional Rail
Reorganization Act Cases, 419 U. S. 102,
419 U. S. 156
(1974) (no probable cause hearing required where complainant
eventually will be "made whole" for any inadequacy in compensation
for confiscated property).
[
Footnote 12]
We have often noted that, in resolving a claimed violation of
procedural due process, a careful weighing of the respective
interests is required,
Goss v. Lopez, 419 U.
S. 565,
419 U. S. 579
(1975); and we have noted that the Government's interest in
collecting the revenues is an important one,
Fuentes v.
Shevin, 407 U. S. 67,
407 U. S. 92
(1972). This interest is clearly sufficient to justify seizure of a
taxpayer's assets without a preseizure hearing,
Fuentes v.
Shevin, supra, and to remove any need to subject the
Commissioner to the burden of an inquiry into the basis for his
assessment absent factual allegations of irreparable injury by the
taxpayer.
Phillips v. Commissioner, 283 U.
S. 589,
283 U. S.
595-597 (1931). However, it is very doubtful that the
need to collect the revenues is a sufficient reason to justify
seizure causing irreparable injury without a prompt post-seizure
inquiry of any kind into the Commissioner's basis for his
claim.
The taxpayer has no right to start a proceeding before the Tax
Court for 60 days following a jeopardy seizure: the IRS may under
the statute wait 60 days before it issues the deficiency notice
which gives the taxpayer his "ticket to the Tax Court." 26 U.S.C. §
6861. The record does not indicate how quickly a hearing on the
merits can be obtained there. Preliminary relief is not there
available. Nothing we hold today, of course, would prevent the
Government from providing an administrative or other forum outside
the Art. III judicial system for whatever preliminary inquiry is to
be made as to the basis for a jeopardy assessment and levy.
[
Footnote 13]
The taxpayer also challenged unsuccessfully the provision
requiring a court of appeals to give deference to a fact
determination by the Board of Tax Appeals on review of the Board's
decision.
[
Footnote 14]
We do not decide whether the allegation of an $18,000
unexplained bank deposit is insufficient to establish income in
that amount -- for the purposes of the
Williams Packing
test -- for the year 1970. The levies, being greatly in excess of
the tax due for 1970 in any event, may not be sustained unless the
allegations with respect to respondent's tax liability for 1971 are
sufficient.
[
Footnote 15]
We note that it has now been over two years since respondent
filed his petition before the Tax Court, and, so far as we are
informed, there has been no final determination by that court. It
may be that, for some reason, it has been impossible -- despite the
respondent's best efforts -- to obtain a decision by the Tax Court.
However, it is also possible that the taxpayer has not vigorously
sought such a determination, and has chosen instead to devote most
of his energies litigating in the federal courts. If, on remand,
the District Court concludes that the absence of a remedy at law at
this time is due to respondent's failure to pursue that remedy,
then equity will not intervene, and the complaint should be
dismissed. The inadequacy of his legal remedy would then be due to
his own choice not to pursue it.
MR. JUSTICE BLACKMUN, with whom MR. JUSTICE REHNQUIST joins,
dissenting.
I would have thought that, when the Commissioner of Internal
Revenue, on December 21, 1973, provided respondent Samuel Shapiro
with supplements to the responses to the interrogatories, at that
time, if not before, he surely satisfied and met all that was
required to bring the Anti-Injunction Act, 26 U.S.C. § 7421(a), and
the principle of
Enochs v. Williams Packing Co.,
370 U. S. 1 (1962),
into full and effective application. It would follow that the
District Court's dismissal of the complaint at that point was
entirely proper, and should have been affirmed.
Given, however, the result the Court very recently reached in
Laing v. United States, 423 U. S. 161
(1976), the decision today, shored up by what seem to me to be
Page 424 U. S. 635
the inapposite cases cited,
ante at
424 U. S.
629-630, n. 11, is not unexpected. I am far from certain
that the Court is correct, and I am confused by the Court's failure
even to cite
Bob Jones University v. Simon, 416 U.
S. 725 (1974), and
Commissioner v. "Americans
United," Inc., 416 U. S. 752
(1974), two cases heavily relied upon by the Commissioner here and,
I think, of some significance. I observe only that, with
Laing and the present decision, the Court now has traveled
a long way down the road to the emasculation of the Anti-Injunction
Act, and down the companion pathway that leads to the blunting of
the strict requirements of
Williams Packing and, now, of
Mr. Justice Brandeis' opinion for a unanimous Court in
Phillips
v. Commissioner, 283 U. S. 589
(1931). The Court has taken this
Laing-Shapiro tack, I
suspect, as a response to what it deems to be administrative
excesses with respect to suspected narcotics operatives who also
are, or should be, taxpayers. Whether all this will prove to be
stultifying or embarrassing to the collection of the revenues in a
more temperate and untroubled time I do not know. Perhaps, up to a
point, the Congress will come to the rescue.
The Court,
ante at
424 U. S.
624-626, n. 9, demonstrates, of course, that the present
case is in a most unsatisfactory posture for review here. It is
unfortunate that a case so posed occasions the pronouncement of new
and, so far as tax collection efforts are concerned, regressive
law.
I would reverse the judgment of the Court of Appeals.