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have enjoined summary seizures under the Internal Revenue Code.99 Recently, the Supreme Court declared that the Anti-Injunction Act did not prohibit a taxpayer from obtaining injunctive relief where the facts. of the case brought it within the Williams Packing & Navigation Co. exception.100 In Commissioner v. Shapiro, the Service assessed $92,726.41 in taxes against the taxpayer, and used notices of levy to freeze $35,000 in bank accounts and the contents of safe deposit boxes. 101 Because the taxpayer was subject to an imminent extradition order and pending criminal charges in a foreign country, he argued that he would not be able to litigate the issue of the assessments unless he could use the money in the levied bank accounts to post bail overseas.1 102 The Court agreed with the taxpayer's contention that the combined effect of the extradition order and the jeopardy assessment would cause him irreparable injury,

99 The Fifth Circuit has mainly been responsible for recent initiative in enjoining jeopardy or termination assessments. See, e.g., Lucia v. United States, 474 F.2d 565, 573 (5th Cir. 1973):

[T]his court holds that a taxpayer under a jeopardy assessment is entitled to an injunction against collection of the tax if the Internal Revenue Service's assessment is entirely excessive, arbitrary, capricious, and without factual foundation, and equity jurisdiction otherwise exists. We hold that such a set of facts would bring the taxpayer within the narrow bounds of the exception to the anti-injunction statute designed by the United States Supreme Court in Standard Nut Margarine and Enochs. (Footnote omitted.)

See also Aguilar v. United States, 501 F.2d 127 (5th Cir. 1974); Willits v. Richardson, 497 F.2d 240 (5th Cir. 1974), reversing and remanding 362 F. Supp. 456 (S.D. Fla. 1973), accord, Shapiro v. Secretary of State, 499 F.2d 527 (D.C. Cir. 1974), cert. granted sub nom., Comm'r v. Shapiro, 420 U.S. 923 (1975); Sherman v. Nash, 488 F.2d 1081 (3d Cir. 1973); Pizzarello v. United States, 408 F.2d 579 (2d Cir.), cert. denied, 396 U.S. 986 (1969); United States v. Bonaguro, 294 F. Supp. 750 (E.D,N.Y. 1968), aff'd sub nom., United States v. Dono, 428 F.2d 204 (2d Cir.), cert. denied, 400 U.S. 829 (1970). But see Irving v. Gray, 479 F.2d 20 (2d Cir. 1973); Ianelli v. Long, 487 F.2d 317 (3d Cir. 1973), cert. denied, 414 U.S. 1040 (1974); Lloyd v. Patterson, 242 F.2d 742 (5th Cir. 1957); Darnell v. Tomlinson, 220 F.2d 894 (5th Cir. 1955); Harvey v. Early, 160 F.2d 836 (4th Cir. 1947); Lalonde v. United States, 350 F. Supp. 976 (D. Minn. 1972); Parrish v. Daly, 350 F. Supp. 735 (S.D. Ind. 1972); Hamilton v. United States, 309 F. Supp. 468 (S.D.N.Y. 1969), aff'd per curiam, 429 F.2d 427 (2d Cir. 1970), cert. denied, 401 U.S. 913 (1971); McAllister v. Cohen, 308 F. Supp. 517 (S.D.W. Va. 1970), aff'd per curiam, 436 F.2d 422 (4th Cir. 1971); Publishers New Press, Inc. v. Moysey, 141 F. Supp. 340 (S.D.N.Y. 1956); Communist Party, U.S.A. v. Moysey, 141 F. Supp. 332 (S.D.N.Y. 1956). 100 Commissioner v. Shapiro, 96 S. Ct. 1062 (1976).

191 Id. at 1067. The assessments were based on deficiencies for the tax years 1970 and 1971. The 1970 assessment was based on an unexplained bank deposit of $18,000 and the assessment for 1971, on "$137,280 derived from respondent's alleged activities as a dealer in narcotics."

102

Although the taxpayer was subsequently extradited and was able to meet a reduced bail amount, the Court remanded the case to the District Court to determine whether any additional irreparable injury remained from the levies. 96 S. Ct. at 1074.

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[Vol. 31: and held that the Anti-Injunction Act did not foreclose injunctive relief, 103

To meet the first of the two requirements under Williams Packing & Navigation Co. the taxpayer must show that the assessment is wholly invalid, which can be done "only if it is . . . apparent that, under the most liberal view of the law and the facts, the United States cannot establish its claim." 104 In Shapiro, the Court accepted the taxpayer's argument that unless the government is required to disclose the factual basis for the assessment, the taxpayer would never be able to prove the government's inability to prevail on its claim.105 The Court specifically denied the government's contention that the Service could defeat the taxpayer's request for injunctive relief merely by claiming that the assessment was made in good faith.106 Although the Court left the taxpayer with the ultimate burden of persuading the court of the propriety of in

103 The Court explicitly noted that if the failure to obtain a final determination in the Tax Court was due to the taxpayer's decision not to vigorously pursue that remedy, then equity would intervene and his complaint for injunctive relief would be dismissed. 96 S. Ct. at 1074 n.15. This requires the taxpayer to continue efforts to obtain relief in the Tax Court, while seeking injunctive relief.

104 Enochs v. Williams Packing & Navigation Co., 370 U.S. 1, 7 (1962). 105 96 S. Ct. at 1070-1071.

100 Although the Court found sufficient basis for its conclusion in the Williams Packing & Navigation Co. exception to the Anti-Injunction Act, the Court stated that "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." 96 S. Ct. at 1072.

The Court's opinion in Williams Packing & Navigation Co. suggests that, even as applied to summary tax seizures, the good faith of the Service might be sufficient to sustain the official conduct:

[T]o require more than good faith on the part of the Government would unduly interfere with a collateral objective of the Act-protection of the collector from litigation pending a suit for refund . . . . [I]n general, the Act prohibits suits for injunctions barring the collection of Federal taxes when the collecting officers have made the assessment and claim that it is valid.

370 U.S. at 7, 8. The opinion fails to state whether a finding of an improper purpose alone would be a sufficient ground for granting an injunction. Compare Janelli v. Long, 487 F.2d 317 (3d Cir. 1973), cert. denied, 414 U.S. 1040 (1974), with Sherman v. Nash, 488 F.2d 1081 (3d Cir. 1973). In Ianelli the court found the Service's good faith to be relevant to whether or not the assessment was a "bona fide effort to collect revenue." 487 F.2d at 318. However, the court concluded that even though the purpose in levying the assessment was "to put economic pressure upon persons believed to be engaged in large scale criminal activities," an injunction was effectively prohibited by section 7421(a) since the levies were "potentially productive attempts to collect revenues." Id.

Although Shapiro apparently rejects the "good-faith" test in Williams Packing & Navigation Co., it fails to specify the effect that a finding of an improper purpose in levying the assessment will have on a suit for injunctive relief.

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junctive relief,107 the opinion clearly indicates a duty on the part of the government to make available to the taxpayer facts in its sole possession which could be used to test the validity of the assessment.108

The second requirement under Williams Navigation & Packing Co. is that the taxpayer must be able to show that the collection of the tax would cause irreparable injury for which there is no legal remedy. The Court in Shapiro found compelling the taxpayer's argument that his extradition and incarceration without sufficient funds to post bail would cause irreparable injury and prevent him from litigating the validity of the assessment. The Court's decision leaves the way open for a taxpayer who is not subject to extradition to argue that, because the freezing or seizure of his assets will deprive him of the ability to hire competent counsel to contest the tax liability or to defend against criminal charges, the assessment will cause irreparable injury.10

109

107 Referring to the standard enunciated in Williams Packing & Navigation Co., the Court held:

[T]he 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. 108 The Court upheld the decision of the court of appeals, even though it declined to specify precisely how the government would make relevant facts available to the taxpayer on remand. The Court held that “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 discloses such evidence by responding to a discovery motion made or interrogatories served by the taxpayer." 96 S. Ct. at 1071.

Unfortunately, the Court failed to state whether the taxpayer can meet the burden imposed on him by Williams Packing & Navigation Co. by merely attacking the Commissioner's finding that collection of the tax was in jeopardy, or whether he must also prove the substantive illegality of the tax. Lower courts have generally focused on the inability of the Service to sustain the amount of the deficiency. See, e.g., Aguilar v. United States, 501 F.2d 127, 130 (5th Cir. 1974) ("total-the word is total-lack of any basis for computing the quick terminated tax"); Willits v. Richardson, 497 F.2d 240 (5th Cir. 1974) (insufficient evidence to link the taxpayer with an alleged sale of drugs on which tax was based); Lucia v. United States, 474 F.2d 565 (5th Cir. 1973) (evidence that computations of tax were taken from a single day's betting slips insufficient to demonstrate tax liability); Pizzarello v. United States, 408 F.2d 579 (2d Cir.), cert. denied, 396 U.S. 986 (1969) (tax collected by use of a three day average of receipts and extrapolated over a five year period found totally excessive). But cf., United States v. Bonaguro, 294 F. Supp. 750 (E.D.N.Y. 1968), aff'd sub nom., United States v. Dono, 428 F.2d 204 (2d Cir. 1969), cert. denied, 400 U.S. 829 (1970) (finding that the Service had failed to make sufficient findings to warrant the conclusion that the Commissioner had maintained the requisite belief under the statute that the tax payment was in jeopardy).

109 See N. 37 supra.

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[Vol. 31: Although Shapiro does give the taxpayer relief against irreparable injury, the potential availability of that remedy cannot be an effective substitute for measures which might prevent improper assessments in the first place. Even under Shapiro, an injunction will be denied where the injury resulting from the assessment is not irreparable, requiring the taxpayer to seek an adequate remedy at law.110 Secondly, even if an injunction is granted, it will not lessen the irreparable injury which may occur immediately upon levy or seizure. Finally, the determination. whether or not the Service has a chance of ultimately prevailing on its claim is to be resolved on the basis of the information available to the Commissioner at the time of suit; the government may still levy a spurious assessment in the hope of obtaining information to justify its levy or seizure prior to the suit.111

111

Constitutionality of Summary Seizure Power Under the Fifth Amendment

To date, no arguments have been advanced that the jeopardy and termination assessment provisions are unconstitutional based upon the guarantees of the fourth amendment. Where the constitutionality of the summary seizure power has been attacked, the focus has been on

110

112

10 The fact that an assessment was computed on the basis of illegally seized evidence will not be sufficient grounds to warrant injunctive relief since the taxpayer has an adequate remedy at law. See McAllister v. Cohen, 308 F. Supp. 517 (S.D.W. Va. 1970), aff'd per curiam, 436 F.2d 422 (4th Cir. 1971). See generally, Ns. 134-36 and the accompanying text infra.

111 Where an injunction is sought for an assessment of a tax which had already become due there would be little sense in enjoining the collection of the tax; even if the assessment could be declared invalid, such a ruling would not prevent the Service from making additional assessments. However, in the case of a termination assessment, a tax may be correctly computed for the portion of the taxpayer's taxable year, but not due for up to fifteen months. In such case, even if the tax is correctly computed the taxpayer should not be denied the use of his assets unless the Service can prove that the collection of the tax is in jeopardy.

112 But cf. General Motors Leasing Corp. v. United States, 514 F.2d 935 (10th Cir.), cert. granted, 96 S. Ct. 561 (1975). The court reversed a lower court decision which had concluded that jeopardy assessments resulting in the seizure of the taxpayer's automobile and documents were illegal seizures. However, the court of appeals limited its analysis to a determination of whether the Service had acted within the scope of the statutory authority granted them and did not reach the constitutional issues. Furthermore, the court based its decision, in part, on its finding that the lower court's reliance on the "malicious character" of the seizures was clearly erroneous. Since the taxpayer has argued that the search and seizure conducted by Service agents in carrying out the assessment was in violation of his constitutional right to privacy and, as such, was an illegal search and seizure, the case offers the Supreme Court an opportunity to confront the fourth amendment issues underlying the jeopardy assessment problem.

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the right to an adversary hearing prior to the seizure of assets, under the fifth amendment due process clause.113 Although the Supreme Court has held that the procedures do not constitute a denial of due process,114 because it limited its analysis to an alleged infringement of property rights, it left open the question of whether or not the summary tax seizure provisions violate the guarantees afforded personal rights under the fourth amendment.

The claim that the summary seizure provisions result in a denial of due process was decided by the Supreme Court in Phillips v. Commissioner.115 The case arose out of the attempt by the government to use

113 The fifth amendment to the Constitution states: "nor be deprived of life, liberty, or property, without due process of law; nor shall private property be taken for a public use, without just compensation." See, e.g., Phillips v. Comm'r, 283 U.S. 589 (1931); Dyer v. Gallagher, 203 F.2d 477 (6th Cir. 1953); Continental Products Co. v. Comm'r, 66 F.2d 434 (1st Cir. 1933); Hamilton v. United States, 309 F. Supp. 468 (S.D.N.Y. 1969), aff'd per curiam, 429 F.2d 427 (2d Cir. 1970), cert. denied, 401 U.S. 913 (1971). See also Note, Jeopardy Assessment: The Sovereign's Stranglehold, 55 GEO. L.J. 701 (1967); Note, Termination of the Taxable Year: the Need for Timely Judicial Review, 48 S. CAL. L. Rev. 184, 196 (1974).

114 Phillips v. Comm'r, 283 U.S. 589 (1931). However, in Laing v. United States, 96 S. Ct. 473 (1976), and United States v. Hall, 96 S. Ct. 473, 485 n.26 (1976), the Court left open the question of the constitutionality of the jeopardy and termination provisions under the fifth amendment. Recently, the Court, in Commissioner v. Shapiro, 96 S. Ct. 1062, 1072 (1976), noted the limitations on the summary seizure power imposed by the Due Process Clause:

[T]o 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 a 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 parties, the Due Process Clause requires that the party whose property is taken be given an opportunity for some kind of predeprivation or prompt post-deprivation hearing at which some showing of the probable validity of the deprivation must be made. (Footnote omitted.)

115 283 U.S. 589 (1931). However, recently the Court distinguished the holding from dicta in Phillips, indicating an intention to construe Phillips narrowly. The Court in Commissioner v. Shapiro, 96 S. Ct. 1062, 1073 (1976), stated:

[T]he 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 omitted.] Thus, insofar as Phillips may be said to have sustained the constitutionality of the Anti-Injunction Act, as applied