In Harper v. Rettig, No. 21-1316 (1st Cir. 2022), the appellant sued the IRS for injunctive relief and damages alleging that the IRS violated his constitutional and statutory rights when it obtained information regarding his virtual currency accounts and transactions via a third-party summons. The district court held that it lacked jurisdiction over the appellant’s suit under the Anti-Injunction Act of the Internal Revenue Code and dismissed the complaint. 

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5 U.S.C. § 702

Under the doctrine of sovereign immunity, the United States cannot be sued without its consent. A waiver of sovereign immunity must be unequivocally expressed and the waiver must be strictly construed. The appellant identified 5 U.S.C. § 702 as the applicable waiver provision. This provision sets out that a person suffering a legal wrong because of agency action within the meaning of a relevant statute is entitled to judicial review. Furthermore, the section states that an action seeking relief other than monetary damages and stating a claim that an agency acted in an official capacity should not be dismissed on sovereign immunity grounds. The United States Court of Appeals for the First Circuit found that the appellant’s suit fit comfortably within the plain language of this waiver. 

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Anti-Injunction Act

The IRS argued, and the district court agreed, that the Anti-Injunction Act of the Internal Revenue Code, 26 U.S.C. § 7421, was a statutory exception to the waiver of sovereign immunity in section 702. The Anti-Injunction Act sets out that no suit for the purpose of restraining the assessment or collection of any tax shall be maintained in any court by any person. 

The Court explained that the United States Supreme Court has distinguished information gathering from acts of assessment or collection. The Anti-Injunction Act limits courts’  jurisdiction only in suits involving assessment and collection. In this case, the plaintiff challenged the IRS’s summons authority. Thus, the Court found that these challenged activities fell within the category of information gathering. 

The Court rejected the IRS’s argument that the appellant’s suit fell within the scope of the Anti-Injunction Act because the purpose of the appellant's suit was to restrain the assessment or collection of taxes. In this case, the target of the injunction was the IRS’s continued retention of the appellant’s personal financial information. Thus, the injunction did not run against a tax. 

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Disposition

The Court vacated the judgment of dismissal for lack of subject matter jurisdiction and remanded the case for the district court to consider whether the appellant stated a claim on which relief could be granted given the IRS’s alternative 12(b)(6) argument.