The Federal Unemployment Tax Act established a cooperative
federal-state scheme to provide benefits to unemployed workers. The
Act requires employers to pay an excise tax on wages paid to
employees in "covered" employment, but entitles them to a credit on
the federal tax for contributions paid into federally approved
state unemployment compensation programs. The Act, in 26 U.S.C. §
3309(b), exempts from mandatory state coverage employees of,
inter alia,
"an organization which is operated primarily for religious
purposes and which is operated, supervised, controlled, or
principally supported by a church or convention or association of
churches."
A number of California churches and religious schools, including
religious schools unaffiliated with any church, brought suit in
Federal District Court to enjoin the Secretary of Labor from
conditioning his approval of the California unemployment insurance
program on its coverage of plaintiffs' employees, and to enjoin the
State from collecting both tax information and the state
unemployment compensation tax. The District Court conducted various
proceedings and issued several opinions and orders extending over
almost a year and a half, in one of which proceedings it rejected
the Federal Government's argument that the court was barred from
granting injunctive relief by the Tax Injunction Act, which
provides that district courts "shall not enjoin, suspend or
restrain" the assessment or collection of any state tax where "a
plain, speedy and efficient remedy" may be had in the courts of
such State. Ultimately, as pertinent here, on the ground that the
benefit entitlement decisions for employees of the religious
schools unaffiliated with churches risked excessive entanglement
with religion in violation of the Establishment Clause of the First
Amendment, the court permanently enjoined the state defendants from
collecting unemployment taxes from such schools, but did not issue
an injunction against the federal defendants as to the schools,
because it had no information as to
Page 457 U. S. 394
what response the Secretary of Labor would make to the court's
conclusion that the state defendants could not constitutionally
impose state unemployment taxes on the employees of such schools.
The court said that, if the Secretary instituted decertification
proceedings against California for failing to collect the taxes on
behalf of such employees, the parties could apply to the court for
further relief.
Held:
1. This Court has jurisdiction to hear these appeals under 28
U.S.C. § 1252, which permits appeals to this Court from a federal
court judgment holding an Act of Congress unconstitutional in any
civil action to which the United States or any of its agencies, or
any officer or employee thereof, is a party. While the District
Court did not expressly hold § 3309(b) unconstitutional as applied
to religious schools unaffiliated with churches, the effect of its
several opinions and orders was to make "the United States or its
officers . . . bound by a holding of unconstitutionality."
McLucas v. DeChamplain, 421 U. S. 21,
421 U. S. 31.
Pp.
457 U. S.
404-407.
2. The Tax Injunction Act deprived the District Court of
jurisdiction to issue declaratory and injunctive relief. Pp.
457 U. S.
407-419.
(a) That Act prohibits declaratory as well as injunctive relief.
Because the declaratory judgment procedure "may in every practical
sense operate to suspend collection of the state taxes until the
litigation is ended,"
Great Lakes Dredge & Dock Co. v.
Huffman, 319 U. S. 293,
319 U. S. 299,
the very language of the Act -- "suspend or restrain" the
assessment or collection of state taxes -- suggests that a district
court is prohibited from issuing declaratory relief in state tax
cases. Moreover, because there is little practical difference
between injunctive and declaratory relief, it is unlikely that
Congress intended to prohibit taxpayers from seeking one form of
relief, while permitting them to seek another, thereby defeating
the principal purpose of the Tax Injunction Act "to limit
drastically" federal court interference with the assessment and
collection of state taxes. Pp.
457 U. S.
407-411.
(b) A state court remedy is "plain, speedy and efficient" within
the meaning of the Tax Injunction Act only if it
"provides the taxpayer with a 'full hearing and judicial
determination' at which she may raise any and all constitutional
objections to the tax."
Rosewell v. LaSalle National Bank, 450 U.
S. 503,
450 U. S. 514.
Pp.
457 U. S.
411-413.
(c) Here, because the taxpayers in question could seek a refund
of their state unemployment insurance taxes through state
administrative and judicial procedures, and thereby obtain state
judicial review of their constitutional claims, their remedy under
state law was "plain, speedy and efficient" within the meaning of
the Tax Injunction Act. There is no merit to the taxpayers'
argument that the California refund procedures
Page 457 U. S. 395
did not constitute a "plain, speedy and efficient remedy"
because their First Amendment claims could be effectively remedied
only by injunctive relief, and that such relief was unavailable in
California. First, under California procedures, the taxpayers
should be able to challenge the constitutionality of the
unemployment tax in state court before extensive entanglement
occurs, and state tax collection agencies can be expected to abide
by resulting state court rulings. Second, to the extent that any
entanglement occurs before state review of the constitutional
questions, that entanglement would not be reduced by seeking relief
instead in the federal courts. Moreover, to carve out a special
exception for taxpayers who raise First Amendment claims would
undermine the Tax Injunction Act's primary purpose. Pp.
457 U. S.
413-417.
(d) Where the District Court was without jurisdiction, this
Court will not consider the merits of the taxpayers' First
Amendment claims.
McLucas v. DeChamplain, supra, and
Weinberger v. Salfi, 422 U. S. 749,
distinguished. Pp.
457 U. S.
418-419.
Vacated and remanded.
O'CONNOR, J., delivered the opinion of the Court, in which
BURGER, C.J., and BRENNAN, WHITE, MARSHALL, POWELL, and REHNQUIST,
JJ., joined. STEVENS, J., filed a dissenting opinion, in which
BLACKMUN, J., joined,
post, p.
457 U. S.
419.
Page 457 U. S. 396
JUSTICE O'CONNOR delivered the opinion of the Court.
The principal question presented by the parties to these appeals
is whether certain state and federal statutes violate the
Establishment and Free Exercise Clauses of the First Amendment
[
Footnote 1] by requiring
religious schools unaffiliated with any church to pay unemployment
insurance taxes. We do not reach this substantive question,
however, holding instead that the Tax Injunction Act, 28 U.S.C. §
1341, [
Footnote 2] deprived the
District Court of jurisdiction to hear these challenges.
Accordingly, we vacate the judgment below.
I
Last Term, in
St. Martin Evangelical Lutheran Church v.
South Dakota, 451 U. S. 772
(1981), this Court considered statutory and constitutional
challenges to provisions of the Federal Unemployment Tax Act
(FUTA), 26 U.S.C. §§ 3301-3311 (1976 ed. and Supp. IV). Because the
present claims involve the same provisions that we interpreted in
St. Martin, we recount only briefly the substance and
legislative history of the relevant statutes before turning to the
facts in the present cases.
A
In FUTA, [
Footnote 3]
Congress has authorized a cooperative federal-state scheme to
provide benefits to unemployed workers.
Page 457 U. S. 397
The Act requires employers to pay an excise tax on wages paid to
employees in "covered" employment, [
Footnote 4] but entitles them to a credit of up to 90% of
the federal tax for contributions they have paid into federally
approved state unemployment compensation programs. [
Footnote 5] One of the requirements for
federal approval is that state programs "cover" certain broad
categories of employment.
Until 1970, 26 U.S.C. § 3306(c)(8) excluded from the definition
of covered employment "service performed in the employ of a
religious, charitable, educational, or other [tax exempt]
organization." Pub.L. 86-778, § 533, 74 Stat. 984. As a
consequence, such organizations were not required to pay either
federal excise taxes or state unemployment compensation taxes. In
1970, Congress amended FUTA to require state plans to cover
employees of nonprofit organizations, state hospitals, and state
institutions of higher education, thus eliminating the broad
exemption available to nonprofit organizations. [
Footnote 6]
See § 3309(a)(1). At the
same time, Congress enacted § 3309(b) to exempt from mandatory
Page 457 U. S. 398
state coverage a narrow class of religious and educational
employees,
i.e., Congress exempted services performed
"(1) in the employ of (A) a church or convention or association
of churches, or (B) an organization which is operated primarily for
religious purposes and which is operated, supervised, controlled,
or principally supported by a church or convention or association
of churches;"
"(2) by a duly ordained, commissioned, or licensed minister of a
church in the exercise of his ministry or by a member of a
religious order in the exercise of duties required by such
order;"
"(3) in the employ of a school which is not an institution of
higher education."
Pub.L. 91-373, § 104(b)(1), 84 Stat. 698.
In 1976, Congress again amended FUTA, this time eliminating the
substance of § 3309(b)(3), thereby removing the blanket exemption
for school employees.
See Unemployment Compensation
Amendments of 1976, Pub.L. 94-566, § 115(b)(1), 90 Stat. 2670.
[
Footnote 7] In order to
maintain compliance with FUTA, the States promptly amended their
corresponding state programs.
See, e.g., Cal.Un.Ins.Code
Ann. §§ 634.5(a), (b) (West Supp.1982).
B
The plaintiffs in these cases, a number of California churches
and religious schools, sought to enjoin the Secretary of Labor from
conditioning his approval of the California unemployment insurance
program on its coverage of the plaintiffs' employees, and to enjoin
the State from collecting both tax information and the state tax.
[
Footnote 8] For the purposes
of
Page 457 U. S. 399
evaluating their statutory and constitutional claims, the
District Court divided the plaintiffs into three classes of
employers: Category I represents those schools that are part of the
corporate structure of a church or association of churches;
Category II includes schools that are separate corporations formed
by a church or association of churches; and Category III includes
schools that are
"operated primarily for religious purposes, but which [are] not
operated, supervised, controlled or principally supported by a
church or convention or association of churches,
i.e., an
independent, non-church affiliated religious school."
Supplemental Opinion, reprinted in App. to Juris.Statement in
No. 81-31, p. 71 (J. S. App.). [
Footnote 9]
On September 21, 1979, the District Court granted a preliminary
injunction against the State, restraining it from collecting the
state unemployment tax from the Category I plaintiffs.
See
id. at 51. The basis for the court's order was its conclusion
that the plaintiffs were exempt from mandatory state coverage under
§ 3309(b)(1), and alternatively, that, if they were not exempt
under the terms of FUTA, collection of the tax from the plaintiffs
would involve excessive governmental entanglement with religion, in
violation of the Establishment Clause of the First Amendment.
See J.S.App. 58-65.
In the same opinion, the District Court rejected the Federal
Government's argument that, because the state remedy was "plain,
speedy and efficient," the Tax Injunction Act, 28 U.S.C. § 1341,
barred the court from granting injunctive relief. Considering first
the availability of injunctive relief
Page 457 U. S. 400
from the state courts, the court concluded that state statutory
and constitutional provisions [
Footnote 10] made such relief "at best,
Page 457 U. S. 401
uncertain." J.S.App. 66. The court then concluded that a state
suit for a refund was an inadequate remedy because the plaintiffs
claimed not only that their property had been taken unlawfully, but
also that the "very process of determining whether any tax is due
at all results in a violation of their First Amendment rights."
Id. at 67. Because this First Amendment injury was
"irreparable" once the taxes had been collected, only an injunction
against collection of the tax could remedy the plaintiffs' claims.
Accordingly, because there existed no "plain, speedy and efficient"
remedy in the state courts, the District Court concluded that it
had jurisdiction to grant injunctive and declaratory relief
In a supplemental opinion filed June 2, 1980, the court
clarified its earlier opinion, stating expressly that the
preliminary injunction covered only Category I plaintiffs.
See
id. at 71. For the same reasons that it had granted the
initial preliminary injunction, however, the court extended the
preliminary injunction to Category II plaintiffs. The court
continued to deny relief to the Category III plaintiffs after
concluding that they were not covered by the statutory exemptions
in § 3309(b) and that the risk of excessive governmental
entanglement with religion was too small to violate the
Establishment Clause. J.S.App. 77-79. [
Footnote 11]
Page 457 U. S. 402
Finally, on April 3, 1981, the court filed a second supplemental
opinion ruling on all of the plaintiffs' motions for permanent
injunctions enjoining the State from collecting unemployment
compensation taxes and the Federal Government from conditioning
approval of the state unemployment compensation programs on their
inclusion of the plaintiffs' employees.
See id. at 1.
Considering first the statutory claims, the court concluded that
Category I and Category II schools, but not Category III schools,
are exempt from coverage under 26 U.S.C. § 3309(b) and the
corresponding state provision, Cal.Un.Ins.Code Ann. § 634.5(a)
(West Supp.1982). J.S.App. 3-15. [
Footnote 12] The court also found that the benefit
entitlement decisions for employees of Category III schools risk
excessive governmental entanglement with religion in violation of
the Establishment Clause of the First Amendment.
Id. at
25-33. [
Footnote 13]
Consequently, the court held that "constitutional considerations
bar the application of the scheme" to the Category III plaintiffs.
Id. at 33.
Based on these findings, the court issued orders permanently
enjoining the federal defendants from requiring state unemployment
insurance programs to cover Category I and Category II schools as a
precondition for federal approval of the state programs,
id. at 47, 51, and permanently enjoining
Page 457 U. S. 403
the state defendants from "collecting, or attempting to collect,
unemployment compensation . . . taxes" from the Category I, II, or
III schools.
Id. at 47, 50. The court expressly held
Cal.Un.Ins.Code Ann. § 634.5(a) (West Supp.1982) unconstitutional.
See J.S.App. 45, 46. The court did not issue an injunction
against the federal defendants as to Category III schools because
it
"has no information indicating what response, if any, the
Secretary will make to the Court's conclusion that the state
defendants may not constitutionally impose the state unemployment
compensation tax scheme on the Category 3 employees of non-church
affiliated schools. . . . If the Secretary, in response to failure
by the state defendants to collect unemployment compensation taxes
on behalf of Category 3 employees, institutes decertification
proceedings against the State of California, the parties may apply
to this Court for further relief."
Second Supplemental Opinion, reprinted in J.S.App. 44, n.
39.
Following issuance of the court's injunction, this Court decided
St. Martin Evangelical Lutheran Church v. South Dakota,
holding that § 3309(b)(1)(A) exempts Category I schools from
mandatory coverage under the state unemployment insurance programs.
Although no Category II schools were before the Court in
St.
Martin, the Court noted in a footnote that
"[t]o establish exemption from FUTA, a separately incorporated
church school (or other organization) must satisfy the requirements
of § 3309(b)(1)(B): (1) that the organization 'is operated
primarily for religious purposes,' and (2) that it is 'operated,
supervised, controlled, or principally supported by a church or
convention or association of churches.'"
451 U.S. at
451 U. S.
782-783, n. 12.
As a result of this opinion, the Secretary of Labor reconsidered
his position and decided that both Category I and Category
Page 457 U. S. 404
II schools are statutorily exempt from mandatory coverage under
FUTA. Consequently, the federal defendants, as well as the State
defendants, have not appealed the District Court's injunction
involving Category I and Category II schools, but only that part of
the District Court order involving the Category III schools.
[
Footnote 14]
II
An initial matter requiring our attention is whether this Court
has jurisdiction to hear these appeals. [
Footnote 15] Congress has provided that
"[a]ny party may appeal to the Supreme Court from an
interlocutory or final judgment, decree or order of any court of
the United States . . . holding an Act of Congress unconstitutional
in any civil action, suit, or proceeding to which the United States
or any of its agencies, or any officer or employee thereof, as such
officer or employee, is a party."
28 U.S.C. § 1252.
Page 457 U. S. 405
The only possible doubt regarding our appellate jurisdiction
under this provision is the requirement that the District Court
hold "an Act of Congress unconstitutional."
In
McLucas v. DeChamplain, 421 U. S.
21 (1975), we stated that § 1252 was an unambiguous
exception to the policy of minimizing the mandatory docket of this
Court. Indeed, the
"language of the statute sufficiently demonstrates its purpose:
to afford immediate review in this Court in civil actions to which
the United States or its officers are parties, and thus will be
bound by a holding of unconstitutionality."
Id. at
421 U. S. 31.
Moreover, this Court has appellate jurisdiction under § 1252
"when the ruling of unconstitutionality is made in the
application of the statute to a particular circumstance, . . .
rather than upon the challenged statute as a whole."
Fleming v. Rhodes, 331 U. S. 100,
331 U. S.
102-103 (1947) (discussing the predecessor to § 1252,
Act of Aug. 24, 1937, 50 Stat. 751).
See United States v.
Christian Echoes National Ministry, Inc., 404 U.
S. 561,
404 U. S. 563
(1972) (per curiam);
United States v. Darusmont,
449 U. S. 292,
449 U. S. 293
(1981). Finally, § 1252 provides jurisdiction even though the lower
court did not expressly declare a federal statute unconstitutional,
so long as a determination that a statutory provision was
unconstitutional "was a necessary predicate to the relief" that the
lower court granted.
United States v. Clark, 445 U. S.
23,
445 U. S. 26, n.
2 (1980). [
Footnote 16]
In the present case, the District Court did not expressly hold §
3309(b) of FUTA unconstitutional as applied to the Category III
appellees, [
Footnote 17] but
the effect of its several opinions
Page 457 U. S. 406
and orders was to make "the United States or its officers . . .
bound by a holding of unconstitutionality."
McLucas v.
DeChamplain, supra, at
421 U. S. 31.
For example, while discussing the Establishment Clause claim of the
Category III schools, the District Court held:
"Since such entanglement [involving the resolution of questions
of faith and doctrine by secular tribunals] is inevitable during
the benefit eligibility determination process if religious schools
are brought within the scope of the unemployment compensation tax
scheme, constitutional considerations bar the
application of the scheme to them."
Second Supplemental Opinion, reprinted in J.S.App. 33 (emphasis
added). Examination of other portions of the court's opinion makes
clear that the court's use of the word "scheme" refers to the
combined federal and state provisions.
See, e.g., id. at
421 U. S. 26
(expressly referring to both federal and state statutory provisions
in discussing the "unemployment compensation scheme");
id.
at
421 U. S. 25
(referring to the intent of Congress and the California Legislature
in discussing the "unemployment compensation tax scheme").
Moreover, the District Court's analysis leading to its order
holding the California provision unconstitutional is based solely
on its understanding of the operation and effect of FUTA, which, of
course, prompted the passage of the corresponding state statute in
the first place. [
Footnote
18]
Page 457 U. S. 407
Cf. St. Martin Evangelical Lutheran Church v. South
Dakota, 451 U.S. at
451 U. S. 780,
n. 9 (holding that the Court could review the South Dakota Supreme
Court's interpretation of its unemployment compensation tax statute
because its "analysis depended entirely on its understanding of the
meaning of FUTA and the First Amendment"). Finally, in its second
supplemental opinion, the court made clear that, if the Secretary
"institutes decertification proceedings against the State of
California" for failing to collect unemployment compensation taxes
on behalf of Category III employees, "the parties may apply to this
Court for further relief," which can only mean injunctive relief
against the Secretary. J.S.App. 44, n. 39. Under these
circumstances, it is clear that the Secretary is "bound by a
holding of unconstitutionality," and that this Court has
jurisdiction under § 1252 to hear this appeal.
III
As we noted above, the District Court declared Cal.Un.Ins.Code
Ann. § 634.5(a) (West Supp.1982) unconstitutional and enjoined the
state defendants from collecting state unemployment compensation
taxes from the Category III schools. [
Footnote 19] In the course of granting this declaratory
and injunctive relief, the court expressly rejected the Federal
Government's argument that the Tax Injunction Act, 28 U.S.C. §
1341, deprived the court of jurisdiction.
See J.S.App.
65-69. Consequently, before reaching the merits of the appellees'
claim, we must decide whether the District Court correctly ruled
that it had jurisdiction under the Tax Injunction Act to issue
declaratory and injunctive relief
A
The Tax Injunction Act states simply that the district courts
"shall not enjoin, suspend or restrain the . . . collection
Page 457 U. S. 408
of any tax under State law where a plain, speedy and efficient
remedy may be had in the courts of such State."
It is plain from this language that the Tax Injunction Act
prohibits a federal district court, in most circumstances, from
issuing an injunction enjoining the collection of state taxes.
Although this Court once reserved the question, [
Footnote 20] we now conclude that the Act
also prohibits a district court from issuing a declaratory judgment
holding state tax laws unconstitutional.
Initially, we observe that the Act divests the district court
not only of jurisdiction to issue an injunction enjoining state
officials, but also of jurisdiction to take actions that "suspend
or restrain" the assessment and collection of state taxes. Because
the declaratory judgment "procedure may in every practical sense
operate to suspend collection of the state taxes until the
litigation is ended,"
Great Lakes Dredge & Dock Co. v.
Huffman, 319 U. S. 293,
319 U. S. 299
(1943), the very language of the Act suggests that a federal court
is prohibited from issuing declaratory relief in state tax cases.
[
Footnote 21] Additionally,
because there is little practical difference between injunctive and
declaratory relief, we would be hard-pressed to conclude that
Congress intended to prohibit taxpayers from seeking one form of
anticipatory relief against state tax officials in federal court
while permitting them to seek another, thereby defeating the
principal purpose of the Tax Injunction Act: "to limit drastically
federal district court jurisdiction to interfere with so important
a local concern
Page 457 U. S. 409
as the collection of taxes."
Rosewell v. LaSalle National
Balk, 450 U. S. 503,
450 U. S. 522
(1981). [
Footnote 22] As
JUSTICE BRENNAN
Page 457 U. S. 410
stated in his opinion concurring in part and dissenting in part
in
Perez v. Ledesma, 401 U. S. 82,
401 U. S. 128,
n. 17 (1971):
"If federal declaratory relief were available to test state tax
assessments, state tax administration might be thrown into
disarray, and taxpayers might escape the ordinary procedural
requirements imposed by state law. During the pendency of the
federal suit, the collection of revenue under the challenged law
might be obstructed, with consequent damage to the State's budget,
and perhaps a shift to the State of the risk of taxpayer
insolvency. Moreover, federal constitutional issues are likely to
turn on questions of state tax law, which, like issues of state
regulatory law, are more properly heard in the state courts."
See Fair Assessment in Real Estate Assn., Inc. v.
McNary, 454 U. S. 100,
454 U. S.
108-109, n. 6 (1981). [
Footnote 23]
Page 457 U. S. 411
Consequently, because Congress' intent in enacting the Tax
Injunction Act was to prevent federal court interference with the
assessment and collection of state taxes, we hold that the Act
prohibits declaratory, as well as injunctive, relief. Accordingly,
the District Court in these cases was without jurisdiction to
declare the California tax provision unconstitutional or to issue
its injunction against state authorities unless the appellees had
no "plain, speedy and efficient remedy" in the state courts.
Last Term, in
Rosewell v. LaSalle National Bank, this
Court had occasion to consider the meaning of the "plain, speedy
and efficient" exception in the Tax Injunction Act. After reviewing
previous decisions [
Footnote
24] and the legislative history of the Act, [
Footnote 25] the Court concluded that the
"plain, speedy and efficient" exception requires the "state court
remedy [to meet] certain minimal
procedural criteria." 450
U.S. at
450 U. S. 512
(emphasis in original). In particular, a state court remedy is
"plain, speedy and efficient" only if it
"provides the taxpayer with a 'full hearing and judicial
determination' at which she may raise any and all constitutional
objections to the tax."
Id. at
450 U. S. 514
(quoting
LaSalle National Bank v. County of
Cook, 57 Ill. 2d
318, 324,
312 N.E.2d
252, 255-256
Page 457 U. S. 412
(1974)). [
Footnote 26]
Applying these considerations, the
Rosewell Court held
that an Illinois tax scheme, requiring the taxpayer to pay an
allegedly unconstitutional tax [
Footnote 27] and seek a refund through state
administrative and judicial procedures, was a "plain, speedy and
efficient remedy" within the meaning of the Tax Injunction Act. In
reaching this holding, the Court specifically relied on legislative
Reports demonstrating congressional awareness that refunds were the
exclusive remedy in many state tax systems. [
Footnote 28]
The holding in
Rosewell reflects not only Congress'
express command in the Tax Injunction Act, but also the historical
reluctance of the federal courts to interfere with the operation of
state tax systems if the taxpayer had available an adequate remedy
in the state courts. As this Court stated in
Dows v.
City of Chicago, 11 Wall. 108,
78 U. S. 110
(1871), long before enactment of the Tax Injunction Act:
"No court of equity will . . . allow its injunction to issue to
restrain [state officers collecting state taxes] except where it
may be necessary to protect the rights of the citizen whose
property is taxed, and he has no adequate remedy by the ordinary
processes of the law. It must appear that the enforcement of the
tax would lead to a multiplicity of suits, or produce irreparable
injury, . . . before the aid of a court of equity can be invoked.
[
Footnote 29] "
Page 457 U. S. 413
In order to accommodate these concerns and be faithful to the
congressional intent "to limit drastically" federal court
interference with state tax systems, we must construe narrowly the
"plain, speedy and efficient" exception to the Tax Injunction
Act.
With these cases and principles in mind, we turn to the
California provisions to determine whether there exists a "plain,
speedy and efficient" state remedy for the appellees' claim.
B
There is no dispute that appellees in the present cases can seek
a refund of the California unemployment tax through state
administrative and judicial procedures. Once a taxpayer has sought
from, and been denied a refund by, the appropriate state agency,
see Cal.Un.Ins.Code Ann. §§ 1176-1185 (West 1972 and
Supp.1982), [
Footnote 30] he
may file an action
Page 457 U. S. 414
in Superior Court for a refund of the taxes paid, raising all
arguments against the validity of the tax. Cal.Un.Ins.Code Ann. §
1241 (West Supp.1982). If the taxpayer is unsuccessful at trial, he
may appeal the decision to higher state courts and ultimately seek
review in this Court. Nothing in this scheme prevents the taxpayer
from "rais[ing] any and all constitutional objections to the tax"
in the state courts.
Rosewell v. LaSalle National Bank,
450 U.S. at
450 U. S. 514.
As the Court in
Rosewell noted, the "Act contemplates
nothing more."
Id. at
450 U. S. 516,
n.19. [
Footnote 31]
Moreover, assuming that the appellees' constitutional claims are
meritorious, an issue on which we express no view, there is every
reason to believe that, once a state appellate court has declared
the tax unconstitutional, the appropriate state agencies will
respect that declaration.
See Pacific Motor Transport Co. v.
State Board of Equalization, 28 Cal.
App. 3d 230, 236, 104 Cal. Rptr. 558, 562 (1972) (noting that
while the "relief afforded may not
prevent or enjoin' or
otherwise hamper present or future tax assessment or collection
effort . . . [i]t will be presumed that
Page 457 U. S.
415
the governmental agency will respect a judicial declaration
concerning a regulation's validity"). Accordingly, it appears that
Rosewell is directly applicable to the present cases, and
that the District Court had no jurisdiction to hear the appellees'
claims.
The appellees contend, however, that the California refund
procedures do not constitute a "plain, speedy and efficient remedy"
because their claims can be remedied only by injunctive relief, and
that such relief is unavailable in California courts to restrain
the collection of state taxes.
See n 10,
supra. Injunctive relief is
necessary, the appellees claim, because, prior to state judicial
review, the employer must meet certain recordkeeping, registration,
and reporting requirements,
see Cal.Un.Ins.Code Ann. §§
1085, 1086, 1088, 1092 (West 1972 and Supp.1982), and potentially
is subject to administrative benefit eligibility hearings [
Footnote 32] in violation of the
appellees' First Amendment rights. The appellees thus fear that
their constitutional rights will be violated before they have an
opportunity to challenge the constitutionality of the unemployment
tax scheme in state court.
This argument is unpersuasive. First, nothing in the California
scheme precludes the appellees from challenging the unemployment
tax before a benefit eligibility hearing is held for one of their
former employees. As soon as an employer makes its first payment to
the state unemployment insurance fund, it may file for a refund
and, after exhausting state administrative remedies, seek a
judicial determination of the constitutionality of the tax.
[
Footnote 33] If the
employer ultimately prevails
Page 457 U. S. 416
on his constitutional argument, the state taxing authorities can
be expected to respect that court's holding in future
administrative proceedings.
See Pacific Motor Transport Co. v.
State Board of Equalization, supra, at 236, 104 Cal. Rptr. at
562. Thus, before any entanglement from the benefit eligibility
hearings occurs, the appellees should be able to challenge the
constitutionality of the state unemployment insurance taxes.
Second, while an employer may be subject to some recordkeeping
and reporting requirements, or even a benefit eligibility hearing,
pending the resolution of its constitutional claims in state court,
it will be subject to the same burdens even if it seeks relief from
the federal courts. Thus, whatever harm the appellees may suffer
pending resolution of their constitutional claims, that harm is not
reduced by seeking relief in federal court. Stated differently,
there are no apparent advantages to federal court relief that make
state court remedies less than "plain, speedy and efficient."
[
Footnote 34]
Finally, we must keep in mind that, at the time that it passed
the Tax Injunction Act, Congress was well aware that refund
procedures were the sole remedy in many States for unlawfully
collected taxes.
See S.Rep. No. 1035, 75th Cong., 1st
Sess., 1 (1937); H.R.Rep. No. 1503, 75th Cong., 1st Sess., 2
(1937). [
Footnote 35]
Carving out a special exception for taxpayers
Page 457 U. S. 417
raising First Amendment claims would undermine significantly
Congress' primary purpose "to limit drastically federal district
court jurisdiction to interfere with so important a local concern
as the collection of taxes."
Rosewell v. LaSalle National
Bank, 450 U.S. at
450 U. S. 522.
[
Footnote 36] Because we do
not believe that Congress intended federal injunctions and
declaratory judgments to disrupt state tax administration when
state refund procedures are available, we decline to find an
exception in the Tax Injunction Act for the appellees' claims.
[
Footnote 37] Accordingly,
because the appellees could seek a refund of their state
unemployment insurance taxes, and thereby obtain state judicial
review of their constitutional claims, we hold that their remedy
under state law was "plain, speedy and efficient" within the
meaning of the Tax Injunction Act, and consequently, that the
District Court had no jurisdiction to issue injunctive or
declaratory relief. [
Footnote
38]
Page 457 U. S. 418
C
Despite the absence of jurisdiction in the District Court, the
federal defendants urge us to consider the merits of the appellees'
First Amendment claims because of the "public interest in, and the
Secretary's need for, a definitive interpretation of 26 U.S.C. §
3309(b)." Brief for United States 21. The Government bases this
argument on our decision in
McLucas v. DeChamplain, 421
U.S. at
421 U. S. 32, in
which we held that "whether the District Court did or did not have
jurisdiction to act, this case is properly here under § 1252."
See also Weinberger v. Salfi, 422 U.
S. 749,
422 U. S. 763,
n. 8 (1975).
The Government's argument is unavailing, however, for in
McLucas and
Salfi, some federal trial court had
jurisdiction, [
Footnote
39]
Page 457 U. S. 419
whereas, in the present cases, no federal district court had
jurisdiction. If this Court were nonetheless to reach the First
Amendment issues presented in these appeals, the litigants would
have sidestepped neatly Congress' intent and our longstanding
policy "to limit drastically" federal interference in the
administration of state taxes when a "plain, speedy and efficient"
state remedy is available. [
Footnote 40] Accordingly, we do not reach the appellees'
First Amendment claims.
The judgment of the District Court is vacated, and the cases are
remanded for further proceedings consistent with this opinion.
So ordered.
* Together with No. 81-228,
United States et al. v. Grace
Brethren Church et al.; and No. 8155,
Grace Brethren
Church et al. v. United States et al., also on appeal from the
same court.
[
Footnote 1]
The First Amendment provides in pertinent part that "Congress
shall make no law respecting an establishment of religion, or
prohibiting the free exercise thereof." The Free Exercise and
Establishment Clauses apply to the States through the Due Process
Clause of the Fourteenth Amendment.
See Cantwell v.
Connecticut, 310 U. S. 296,
310 U. S. 303
(1940);
Everson v. Board of Education, 330 U. S.
1,
330 U. S. 15
(1947).
[
Footnote 2]
The Act provides:
"The district courts shall not enjoin, suspend or restrain the
assessment, levy or collection of any tax under State law where a
plain, speedy and efficient remedy may be had in the courts of such
State."
[
Footnote 3]
FUTA was enacted originally as Title IX of the Social Security
Act of 1935, ch. 531, 49 Stat. 639.
[
Footnote 4]
See 26 U.S.C. § 3301.
[
Footnote 5]
See 26 U.S.C. § 3302 (1976 ed. and Supp. IV). Each
state program receives annual approval after the Secretary of Labor
finds that it complies with federal statutory standards.
See 26 U.S.C. §§ 3304(a), (c) (1976 ed. and Supp. IV). The
federal standards for the state programs are contained in §§ 3304
and 3309. If a state plan complies with federal standards, the
State is authorized to receive a federal grant to administer the
state plan.
See 29 U.S.C. § 49d(b); 42 U.S.C. § 501.
[
Footnote 6]
See Employment Security Amendments of 1970, Pub.L.
91-373, § 104 (b)(1), 84 Stat. 697. Under §§ 3309(a)(2) and
3304(a)(6)(B), such nonprofit organizations were given the option
of either making the same contribution to the state unemployment
compensation fund required of other employers, or reimbursing the
fund for unemployment compensation payments actually made to the
nonprofit organizations' former employees.
Although nonprofit organizations were covered by federally
approved state unemployment compensation laws, they continued to be
exempt from the federal excise tax on wages because the definition
of "employment" in § 3306(c)(8), excluding services performed for
such organizations, remained unchanged.
[
Footnote 7]
In its place, Congress substituted an unrelated provision.
[
Footnote 8]
This litigation grew out of two suits, one filed in the District
Court by Grace Brethren Church
et al. (Case No. CV 79-93
MRP), and the other filed in state court by the Lutheran Church
Missouri Synod. The Secretary of Labor successfully removed the
Lutheran Church case (Case No. CV 79-162 RP) to the District Court,
which consolidated the cases for trial.
[
Footnote 9]
Category I and II schools comprise schools from the
Lutheran
Church case,
see Order (filed Apr. 3, 1981),
reprinted in J.S.App. 49, as well as some of the schools from the
Grace Brethren case.
See Order (filed Apr. 3,
1981), reprinted in J.S.App. 45. Category III schools include only
schools from the
Grace Brethren case.
See
J.S.App. 46.
[
Footnote 10]
California Un.Ins.Code Ann. § 1851 (West 1972) provides:
"No injunction or writ of mandate or other legal or equitable
process shall issue in any suit, action or proceeding, in any court
against this State or against any officer thereof to prevent or
enjoin the collection of any contribution sought to be collected
under this division."
California Const., Art. XIII, § 32, provides:
"No legal or equitable process shall issue in any proceeding in
any court against this State or any officer thereof to prevent or
enjoin the collection of any tax. After payment of a tax claimed to
be illegal, an action may be maintained to recover the tax paid,
with interest, in such manner as may be provided by the
Legislature."
Despite the apparently unambiguous language of these provisions,
the District Court considered the availability of injunctive relief
only "uncertain" because of state decisions indicating that
injunctive relief may be available when the plaintiff challenges
the state tax law as being unconstitutional.
See Las Animas
& San Joaquin Land Co. v. Preciado, 167 Cal. 580, 587, 140
P. 239, 242 (1914) (injunction available to restrain a school
district from assessing property taxes on land over which it has no
authority);
Bueneman v. City of Santa
Barbara, 8 Cal. 2d 405,
407, 65 P.2d 884, 886 (1937) (statutory provision precluding courts
from enjoining execution of public laws for public benefit does not
apply to claims that a taxing statute is unconstitutional).
More recent decisions, however, have held injunctive relief to
be precluded.
See Modern Barber Colleges, Inc. v. California
Employment Stabilization Comm'n, 31 Cal. 2d
720, 723, 192 P.2d 916, 918 (1948) (holding that a provision in
the Unemployment Insurance Act, similar to § 1851, prohibited
injunctive relief, leaving the taxpayer only with the option to pay
the tax and seek a refund);
Aronoff v. Franchise Tax
Board, 60 Cal. 2d
177, 180, 383 P.2d 409, 411 (1963) (holding that Cal.Const.,
Art. XIII, § 15, and Cal.Rev. & Tax Code Ann. § 19081 (West
1970) preclude issuance of an injunction to prevent collection of
additional income taxes). Relying on
Aronoff, a District
Court of Appeal held that Cal.Const., Art. XIII, § 32 (which, in
1974, became the successor to § 15), and the corresponding
statutory provision, Cal.Un.Ins.Code Ann. § 1851 (West 1972),
prohibit the courts from enjoining the collection of unemployment
insurance taxes.
Lorco Properties, Inc. v. Department of
Benefit Payments, 57 Cal. App. 3d
809, 815, 129 Cal. Rptr. 312, 315 (1976). Recently, in
Pacific Gas & Electric Co. v. State Board of
Equalization, 27 Cal. 3d
277, 279, 611 P.2d 463, 464 (1980), the California Supreme
Court held that, under Cal.Const., Art. XIII, § 32, a taxpayer was
barred from seeking relief compelling the state tax board to adjust
the taxpayer's real property assessments. The court expressly held
that there were no equitable exceptions to this rule,
id.
at 282, 611 P.2d at 466, and reaffirmed the importance of the state
policy to permit the uninterrupted collection of taxes.
Cf.
Pacific Motor Transport Co. v. State Board of
Equalization, 28 Cal. App. 3d
230, 236, 104 Cal. Rptr. 558, 562 (1972) (noted without
approval in
Pacific Gas & Electric Co. v. State Board of
Equalization, supra, and holding that a taxpayer could seek
declaratory relief to challenge the validity of a tax regulation,
but that such relief could not "
prevent or enjoin' or otherwise
hamper present or future tax assessment or collection
effort").
[
Footnote 11]
The court also rejected the arguments offered by the Category
III plaintiffs that imposition of the tax violates the Free
Exercise Clause, and that the unique statutory treatment of
Category III plaintiffs violates equal protection. J.S.App. 78.
[
Footnote 12]
The court held alternatively that, if the Secretary of Labor's
interpretation of § 3309(b) were correct (
i.e., Category I
and II schools were not exempt from coverage), then that provision
violated the First Amendment because it caused excessive
governmental entanglement with religion by requiring
"[i]ntrusive monitoring of the activities of employees of
religious schools in order to determine whether or not those
employees are exempt from unemployment insurance . . . taxes"
and by requiring
"[i]nvolvement of state officials in the resolution of questions
of religious doctrine in the course of determining the benefit
eligibility of discharged employees of religious schools."
Order (filed Apr. 3, 1981), reprinted in J.S.App. 45, 46; Order
(filed Apr. 3, 1981), reprinted in
id. at 49, 50.
[
Footnote 13]
The court again rejected the plaintiffs' argument that statutory
coverage of Category III schools violates the Free Exercise Clause
of the First Amendment,
id. at 16-25, and found it
unnecessary to reach the Category III plaintiffs' equal protection
claim.
Id. at 35.
[
Footnote 14]
See J.S.App. 11-12; Juris.Statement in No. 81-228, pp.
4, n. 2, 6, n. 5. The Category III schools are parties only in the
Grace Brethren case, the suit originally filed in federal
court.
See n 8,
supra.
The
Grace Brethren appellees filed a cross-appeal (No.
81-455) claiming that the District Court erred in holding that FUTA
and the corresponding California statutory provisions do not
violate the Free Exercise Clause of the First Amendment. The
cross-appeal, however, is unnecessary to preserve this argument,
since, under this Court's Rule 10.5,
"an appellee, without filing a cross-appeal, [may] defend a
judgment on any ground that the law and record permit and that
would not expand the relief he has been granted."
The plaintiffs in the
Lutheran Church case have filed a
brief in support of the judgment below. Because, however, neither
the State nor the Federal Government appealed from that part of the
judgment involving the Lutheran Church plaintiffs, we do not
address their claims.
[
Footnote 15]
In our order setting these cases for oral argument, we postponed
the question of jurisdiction until consideration of the merits.
See 454 U.S. 961 (1981).
[
Footnote 16]
In
Clark, the Court of Claims simply ordered relief
based on its earlier decision in another case. In that earlier
decision, the court had declared the challenged statutory provision
unconstitutional.
See Gentry v. United States, 212 Ct.Cl.
1, 546 F.2d 343 (1976),
rehearing denied, 212 Ct.Cl. 27,
551 F.2d 852 (1977).
[
Footnote 17]
See Order (filed Apr. 3, 1981), reprinted in J.S.App.
45, 46 (holding Cal.Un.Ins.Code Ann. § 634.5(a) (West Supp.1982)
unconstitutional, but making no direct reference to § 3309(b)).
[
Footnote 18]
The court's analysis of Category I and II schools also
demonstrates that it believed FUTA, as applied to Category III
schools, to be unconstitutional. In its discussion of Category I
and II schools, the court held that, if it were to follow the
Secretary's interpretation of § 3309,
i.e., if no
exemption existed, then FUTA would be unconstitutional as applied
to those schools in part because of the excessive governmental
entanglement in the benefit eligibility hearing.
See
n 12,
supra. Since
the court also found an entanglement problem with respect to
benefit eligibility hearings for Category III schools, and since
there is no statutory exemption for those schools, it follows that
the District Court must have believed that FUTA was
unconstitutional as applied to the Category III plaintiffs.
[
Footnote 19]
No federal tax is involved in this case, for the services
performed for Category III schools are exempted by § 3306(c)(8)
from the definition of employment for which the federal excise tax
must be paid.
[
Footnote 20]
See Great Lakes Dredge & Dock Co. v. Huffman,
319 U. S. 293,
319 U. S. 299
(1943)
[
Footnote 21]
In enacting the Declaratory Judgment Act, Congress recognized
the substantial effect declaratory relief would have on legal
disputes. Thus, while Congress perceived declaratory judgments as a
device to reduce federal court abuses associated with injunctions,
Congress also recognized that declaratory relief would "settle
controversies," S.Rep. No. 1005, 73d Cong., 2d Sess., 2 (1934), and
permit the federal courts "the power to exercise in some instances
preventive relief." H.R.Rep. No. 1264, 73d Cong., 2d Sess., 2
(1934).
[
Footnote 22]
To be sure, in enacting the Tax Injunction Act, Congress
considered primarily injunctions against state officials because
that form of anticipatory relief was the principal weapon used by
businesses to delay or avoid paying state taxes.
See,
e.g., S.Rep. No. 1035, 75th Cong., 1st Sess., 1-2 (1937); 81
Cong.Rec. 1416 (1937) (remarks of Sen. Bone). Moreover, it is
arguable that Congress' failure to mention the Declaratory Judgment
Act, enacted only three years earlier, indicates that Congress
intended the Tax Injunction Act to prohibit only federal injunctive
relief. Nevertheless, the legislative history of the Tax Injunction
Act demonstrates that Congress worried not so much about the form
of relief available in the federal courts as about divesting the
federal courts of jurisdiction to interfere with state tax
administration.
Both the Senate and House Reports, as well as the congressional
debates of the Act, expressly rely on the congressional purpose
underlying the Johnson Act of 1934, 28 U.S.C. § 1342, which divests
the district courts of jurisdiction of any suit to "enjoin,
suspend, or restrain the operation" of any public utility
commission order.
See S.Rep. No. 1035,
supra, at
2; H.R.Rep. No. 1503, 75th Cong., 1st Sess., 2 (1937); 81 Cong.Rec.
1415-1417 (1937) (remarks of Sen. Bone). The legislative history of
the Johnson Act, in turn, makes clear that its purpose was to
prevent public utilities from going to federal district court to
challenge state administrative orders or avoid state administrative
and judicial proceedings.
See, e.g., S.Rep. No. 125, 73d
Cong., 1st Sess., 3 (1933) (in support of the Johnson bill,
declaring that a utility "will be required, in all cases where a
State has set up a public utility commission, to proceed before
that commission if it has any complaint. It can appeal from this
State board to the State courts and, if it is dissatisfied with the
final judgment of the supreme court of the State, it can take an
appeal to the Supreme Court of the United States");
id. at
33 ("It is the jurisdiction which Congress has given to Federal
courts to pass on matters of State regulation which holds up the
laws of the States, prevents the officials of the States from doing
their duty, and robs the people of the benefit which would accrue
to them, if the commissions which they have set up by law in the
various States were permitted to perform their duty"); H.R.Rep. No.
1194, 73d Cong., 2d Sess., 2 (1934) (in opposition to the Johnson
bill, declaring that it "seeks to withdraw completely from the
district courts of the United States all jurisdiction in suits
relating to orders of State administrative boards or commissions
affecting rate chargeable by public utilities"); 78 Cong.Rec.1916
(1934) (remarks of Sen. Johnson);
id. at 1918 ("the object
is to make [the utilities] subject to the jurisdiction of the laws
of our States; to give them their rights in every instance to the
trial of the question of fact first before the public utility
commission, to give them every legal right they have, and if any
right that is guaranteed by the Constitution is infringed upon at
all, then, of course, the legal right of appeal ultimately from the
highest tribunal in the State to the United States Supreme Court");
id. at 8324 (remarks of Rep. Mapes) ("It is simply a
question as to whether or not States are going to be allowed to
perform their proper functions in the supervision and fixing of
rates, without interference of Federal law. It is a question as to
whether or not Congress is going to continue to permit the
utilities in important cases to thwart the will of the States and
the State authorities. . . . This bill will only deprive the lower
Federal courts of the jurisdiction they now have over rate cases");
id. at 8328 (remarks of Rep. Lewis) ("The Johnson bill
absolutely abolishes the jurisdiction of the United States courts
in rate cases");
id. at 8338 (remarks of Rep. Tarver)
("The Johnson bill contains but one substantive proposition, and
that is to divest the district courts of the United States of
jurisdiction in public utility rate cases");
id. at 8419
(remarks of Rep. Hancock) ("the Johnson bill seeks to [save time
and money] by divesting the Federal courts of all jurisdiction in
public utility cases except the right of appeal to the Supreme
Court of the United States after the final decision of the State
court of last resort").
[
Footnote 23]
This Court has long recognized the dangers inherent in
disrupting the administration of state tax systems.
See, e.g.,
78 U. S. City of
Chicago, 11 Wall. 108,
78 U. S. 110
(1871) ("It is upon taxation that the several States chiefly rely
to obtain the means to carry on their respective governments, and
it is of the utmost importance to all of them that the modes
adopted to enforce the taxes levied should be interfered with as
little as possible. Any delay in the proceedings of the officers,
upon whom the duty is devolved of collecting the taxes, may derange
the operations of government, and thereby cause serious detriment
to the public").
[
Footnote 24]
See Tully v. Griffin, Inc., 429 U. S.
68,
429 U. S. 74
(1976);
Hillsborough v. Cromwell, 326 U.
S. 620,
326 U. S. 625
(1946);
Great Lakes Dredge & Dock Co. v. Huffman, 319
U.S. at
319 U. S.
300-301.
[
Footnote 25]
See 81 Cong.Rec. 1416 (1937) (remarks of Sen. Bone);
S.Rep. No. 1035, 75th Cong., 1st Sess., 2 (1937). The Court also
relied on the legislative history of the Johnson Act of 1934, 28
U.S.C. § 1342 (prohibiting federal court interference with orders
issued by state administrative agencies to public utilities), on
which the Tax Injunction Act was modeled.
[
Footnote 26]
See also 450 U.S. at
450 U. S. 515,
and n.19,
450 U. S. 517
(making clear that some opportunity to raise constitutional
objections is the most important consideration); S.Rep. No. 1035,
supra, at 2 (under the Tax Injunction Act, a "full hearing
and judicial determination of the controversy is assured. An appeal
to the Supreme Court of the United States is available as in other
cases").
[
Footnote 27]
The plaintiff in
Rosewell had claimed that requiring
payment of the county property tax violated her equal protection
and due process rights.
[
Footnote 28]
See S.Rep. 1035,
supra, at 1 (state "statutes
generally provide that taxpayers may contest their taxes only in
refund actions after payment under protest"); H.R.Rep. No. 1503,
75th Cong., 1st Sess., 2 (1937).
[
Footnote 29]
See also Boise Artesian Hot and Cold Water Co. v. Boise
City, 213 U. S. 276,
213 U. S. 282
(1909) (holding that "the illegality or unconstitutionality of a
state or municipal tax or imposition is not of itself a ground for
equitable relief in the courts of the United States. In such a
case, the aggrieved party is left to his remedy at law, when that
remedy is as complete, practicable and efficient as the remedy in
equity");
Singer Sewing Machine Co. v. Benedict,
229 U. S. 481,
229 U. S. 488
(1913) (holding that federal courts will not enjoin the collection
of unconstitutional state taxes where the taxpayer "ha[s] a plain,
adequate and complete remedy" at law);
Great Lakes Dredge &
Dock Co. v. Huffman, supra, at
319 U. S. 299
(holding that the same "considerations which have led federal
courts of equity to refuse to enjoin the collection of state taxes,
save in exceptional cases, require a like restraint in the use of
the declaratory judgment procedure");
Fair Assessment in Real
Estate Assn., Inc. v. McNary, 454 U.
S. 100,
454 U. S. 103
(1981) (noting that the Tax Injunction Act, "and the decisions of
this Court which preceded it, reflect the fundamental principle of
comity between federal courts and state governments that is
essential to
Our Federalism,' particularly in the area of state
taxation").
[
Footnote 30]
Apparently, California taxpayers cannot raise their
constitutional challenges in the administrative tax refund
proceeding unless an appellate court already has sustained such a
challenge.
See Cal.Const., Art. III, § 3.5, which provides
in part that
"[a]n administrative agency . . . has no power:"
"(a) To declare a statute unenforceable, or refuse to enforce a
statute, on the basis of it being unconstitutional unless an
appellate court has made a determination that such statute is
unconstitutional;"
"(b) To declare a statute unconstitutional."
[
Footnote 31]
Significantly, the California administrative and judicial scheme
for challenging a tax assessment is remarkably similar to the
Illinois scheme that we upheld in
Rosewell as "plain,
speedy and efficient."
See 450 U.S. at
450 U. S.
508-509, and nn. 6, 7. In fact, the California tax
scheme is more favorable to the taxpayer than the Illinois scheme
in that it requires the State to pay interest on improperly
collected taxes.
See Cal.Un.Ins.Code Ann. § 1242 (West
Supp.1982).
This Court has not hesitated to declare a state refund provision
inadequate to bar federal relief if the taxpayer's opportunity to
raise his constitutional claims in the state proceedings is
uncertain. In
Hillsborough v. Cromwell, 326 U.
S. 620 (1946), the taxpayer could not raise his
constitutional challenge in the administrative proceedings, and
appeal to the state courts was discretionary with those courts.
Consequently, because "there [was] such uncertainty concerning the
New Jersey remedy as to make it speculative,"
id. at
326 U. S. 625,
the Court held that the taxpayer could seek declaratory relief in
federal court.
[
Footnote 32]
Under Cal.Un.Ins.Code Ann. § 1256 (West Supp.1982), a former
employee can collect unemployment benefits only if he has not been
dismissed for "misconduct" or has not "left his most recent work
voluntarily without good cause."
[
Footnote 33]
Part of the appellees' argument for the necessity of injunctive
relief rests on the premise that payments to the state fund are
made only after a benefit eligibility hearing has been held. Under
26 U.S.C. §§ 3309(a)(2) and 3304(a)(6)(B), however, the States are
required to give nonprofit organizations, including the appellees,
the option either of making regular contributions to the state
unemployment insurance fund or of reimbursing the fund for payments
actually made to the employers' former employees. The nonprofit
organizations are not required to choose the reimbursement method,
however, and can make regular payments to the fund in advance of
any employee's being discharged.
[
Footnote 34]
Our conclusion that the state court remedy is plain, speedy and
efficient is reenforced by our observation that it took the
appellees in these cases over two years to obtain injunctive relief
in federal court.
[
Footnote 35]
The dissent errs when it states, without authority, that the Tax
Injunction Act is not applicable to these cases because of the
"layers of review that must be exhausted in the California system."
Post at
457 U. S. 422,
n. 4. Certainly, nothing in the legislative history of the Act
suggests that requiring a taxpayer to seek a refund first through
administrative procedures makes the state remedy less than "plain,
speedy and efficient." Moreover, the legislative history of the
Johnson Act, after which the Tax Injunction Act was modeled,
see n 22,
supra, makes clear congressional intent that a state
remedy is "plain, speedy and efficient" even though a utility must
proceed first through administrative and then judicial proceedings
in order to challenge the constitutionality of utility rates.
See S.Rep. No. 125, 73d Cong., 1st Sess., 2-3 (1933).
[
Footnote 36]
In addition, there seems to be no principled basis for limiting
the appellees' argument to First Amendment claims. Any employer
required to pay state taxes in a manner allegedly violating the
Equal Protection Clause, for example, might argue that the absence
of state injunctive relief permitted the infliction of an
irreparable injury that could be remedied only by a federal
injunction.
[
Footnote 37]
We also reject the appellees' argument to the extent that it
assumes that the state courts will not protect their constitutional
rights. As we stated in another context:
"[W]e are unwilling to assume that there now exists a general
lack of appropriate sensitivity to constitutional rights in the
trial and appellate courts of the several States. State courts,
like federal courts, have a constitutional obligation to safeguard
personal liberties and to uphold federal law."
Stone v. Powell, 428 U. S. 465,
428 U. S. 494,
n. 35 (1976).
[
Footnote 38]
The state defendants also argue that, because the Federal
Government is an indispensable party to this action, and could not
be compelled to submit to state court jurisdiction, the state
courts could not afford the appellees complete relief.
Consequently, the state defendants reason, the Tax Injunction Act
does not deprive the District Court of jurisdiction.
See
Brief for Appellants State of California
et al. 35. The
error in this argument is its premise; as
St. Martin
Evangelical Lutheran Church v. South Dakota, 451 U.
S. 772 (1981), demonstrates, the Federal Government need
not be a party in order for the appellees to litigate their
statutory and constitutional claims.
Finally, none of the parties suggests that we avoid the
jurisdictional bar of the Tax Injunction Act by restricting our
review to the appellees' challenge to 26 U.S.C. § 3309(b), and
disregarding their challenge to the corresponding state provisions,
§§ 634.5(a), (b). Such a suggestion would be untenable since, after
all, the state provisions were enacted in order to comply with
federal statutory requirements, and consequently are identically
worded to the federal provisions. Thus, a challenge to FUTA would
be a direct effort to "enjoin, suspend or restrain" state tax
officials from collecting unemployment taxes from the appellees.
Alternatively, if the challenge to FUTA would not affect the
actions of state officials, there would be serious doubts whether
the appellees were injured by FUTA's provisions. Accordingly, we
vacate not only the District Court's judgment with respect to the
appellees' state claims, but also its judgment regarding the
constitutionality of FUTA.
[
Footnote 39]
In both of those cases, the question was whether a single
district judge or a three-judge district court had jurisdiction. In
the present cases, by contrast, the issue is whether the federal
courts or the state courts have jurisdiction.
[
Footnote 40]
Similarly, the state defendants' reliance on
Williams v.
Zbaraz, 448 U. S. 358
(1980), is misplaced. In that case, the District Court had held
unconstitutional a federal statute that the parties had not
challenged. We held that, because there was no case or controversy
on that issue, the District Court had exceeded its jurisdiction for
that issue.
Id. at
448 U. S. 367.
Nevertheless, because of the holding of unconstitutionality, we
concluded that we had jurisdiction under § 1252 to "review the
whole case.'" Id. at 448 U. S. 368.
That review, however, was restricted to those issues over which the
District Court had had jurisdiction, and we vacated that portion of
the judgment holding the federal statute unconstitutional.
Ibid.
JUSTICE STEVENS, with whom JUSTICE BLACKMUN joins,
dissenting.
Appellee Grace Brethren Church filed suit against the United
States Secretary of Labor and other defendants in the United States
District Court for the Central District of California claiming that
the Federal Unemployment Tax Act violates the First Amendment to
the Federal Constitution. The District Court held the Act
unconstitutional. Pursuant to a federal statute providing for
expedited review in cases of this kind, [
Footnote 2/1] the defendants appealed directly to this
Court, bypassing
Page 457 U. S. 420
the Court of Appeals precisely as Congress intended. Recognizing
the need for prompt review of a constitutional question affecting
the nationwide operation of a federal statute, the Court holds that
this special jurisdiction was properly invoked. It then reaches the
curious conclusion that, because some of the defendants are
California taxing authorities that administer this cooperative
federal-state program in that State, Congress intended that only
state courts could pass on the constitutional validity of this
federal statute. [
Footnote 2/2]
Neither the language nor the legislative history of the Tax
Injunction Act requires such a strange result.
The Tax Injunction Act provides that federal district courts
"shall not enjoin, suspend, or restrain" the activities of state
taxing authorities. The preclusion of federal injunctive relief was
a response to a specific problem that concerned Congress in 1937.
In the States in which taxpayers were required to challenge a tax
assessment in a refund suit, only taxpayers that could sue state
taxing authorities in federal court could obtain injunctive relief.
The privileged taxpayers were primarily the foreign corporations
that could invoke federal diversity jurisdiction. These federal
suits were objectionable not only because of this discrimination
but also because state treasuries often were deprived of tax
revenues while the federal suits were adjudicated and because the
federal suits involved only state law questions that were more
appropriate for state court resolution.
See S.Rep. No.
1035, 75th Cong., 1st Sess., 1-2 (1937); 81 Cong.Rec. 1416-1417
(1937) (Sen. Bone);
See also Rosewell v.
LaSalle
Page 457 U. S. 421
National Bank, 450 U. S. 503,
450 U. S. 533
(STEVENS, J., dissenting). A literal reading of the Tax Injunction
Act manifestly does not preclude the declaratory judgment entered
in this litigation. Nor do the concerns that gave rise to its
enactment require such a bar. Appellees' challenge is based on the
Federal Constitution, and is directed at a federal-state program
administered according to federal requirements. Only federal
questions are involved.
In
Great Lakes Dredge & Dock Co. v. Huffman,
319 U. S. 293, the
Court recognized that equitable considerations can in some cases
provide adequate justification for federal courts to withhold
declaratory relief when the Tax Injunction Act precluded injunctive
relief. In the intervening 40 years, this equitable doctrine has
been sufficient to protect state tax laws from unnecessary federal
interference. Today, however, the Court confronts a situation in
which the challenge to a state tax does not implicate these
concerns. [
Footnote 2/3]
Ironically, the absence in these unusual cases of the traditional
justification for a ban on declaratory relief seems to spur the
Court to revise the Tax Injunction Act to preclude declaratory as
well as injunctive relief. To accomplish this revision, the Court
must ignore the plain meaning of the statute and the limited
concerns that gave rise to its enactment. The Court instead relies
upon the legislative history of the Johnson Act, ch. 283, 48 Stat.
775,
see ante at
457 U. S.
409-410, n. 22, even though that statute was enacted
before the Declaratory Judgment Act, ch. 512, 48 Stat. 955. Even if
that suspect analysis could be overlooked, the fact remains that,
after the Declaratory Judgment Act was on the books for three
years, Congress did not see fit to bar declaratory relief when it
expressly precluded injunctive relief in the Tax Injunction Act.
The avoidance of
Page 457 U. S. 422
a decision on the merits in this litigation hardly seems worth
the Court's nimble exercise in lawmaking. [
Footnote 2/4]
The Court has both the power and the duty to decide the merits.
I therefore respectfully dissent.
[
Footnote 2/1]
Title 28 U.S.C. § 1252 provides:
"Any party may appeal to the Supreme Court from an interlocutory
or final judgment, decree or order of any court of the United
States . . . holding an Act of Congress unconstitutional in any
civil action, suit, or proceeding to which the United States or any
of its agencies, or any officer or employee thereof, as such
officer or employee, is a party."
[
Footnote 2/2]
A further irony is that the Secretary of Labor, who is certainly
the principal defendant even if not an indispensable party, could
remove such an action if it were filed in state court. Indeed, with
respect to one of the actions consolidated in the District Court,
the Secretary did just that.
[
Footnote 2/3]
Indeed, to the extent that equitable considerations are
implicated, they favor the procedure followed in these cases
whereby expedited review in this Court is available.
[
Footnote 2/4]
There is an independent reason why the Tax Injunction Act does
not preclude federal declaratory relief in this litigation. When
one compares the layers of review that must be exhausted in the
California system with the direct appeal to this Court provided by
28 U.S.C. § 1252, one surely cannot conclude that the state system
provides the "plain, speedy and efficient" remedy that Congress
intended for the resolution of the federal questions these cases
present.