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Targeted Groups Say Government Hasn't Shown End to Bias

JAN. 9, 2017

Linchpins of Liberty et al. v. United States et al.

DATED JAN. 9, 2017
DOCUMENT ATTRIBUTES

Linchpins of Liberty et al. v. United States et al.

 

UNITED STATES DISTRICT COURT

 

FOR THE DISTRICT OF COLUMBIA

 

 

Oral Argument Scheduled for

 

March 2, 2017

 

 

PLAINTIFFS' MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT

 

OF REQUEST TO ALLOW DISCOVERY UNDER RULE 56(d) AND IN OPPOSITION TO

 

FEDERAL DEFENDANTS' MOTION FOR SUMMARY JUDGMENT

 

 

                       TABLE OF CONTENTS

 

 

 INTRODUCTION

 

 

 STATEMENT OF POINTS AND AUTHORITIES

 

 

 I. Factual Background

 

 

 II. The Government's Pre-Discovery Summary Judgment Motion is

 

     Premature

 

 

 III. This Court Unquestionably Has Jurisdiction Over Plaintiffs'

 

      Equitable Claims

 

 

      A. There Remains a Live, Ongoing Controversy Regarding

 

         Plaintiffs' Claims for Declaratory and Injunctive Relief in

 

         Counts IV through VII

 

 

           1. Counts IV and V

 

 

           2. Counts VI and VII

 

 

      B. Plaintiffs' Equitable Claims in Counts IV Through VII Are

 

         Not Based on Speculative Future Harm But Instead on the

 

         Ongoing Effects of the IRS's Targeting Scheme

 

 

           1. Counts IV and V

 

 

           2. Counts VI and VI

 

 

      C. Plaintiffs' Claims in Counts VI and VII Are Ripe for

 

         Review

 

 

           1. Plaintiffs' facial challenges

 

 

           2. Plaintiffs' as-applied challenges

 

 

 IV. Counts VI and VII State Viable APA Claims

 

 

 V. The Relief Sought In Counts VI and VII Is Not Precluded By The AIA

 

 or DJA

 

 

 VI. This Court Has Jurisdiction to Consider Plaintiffs' Claims

 

 Regarding Ongoing and/or Future Harm

 

 

 CONCLUSION

 

 

 TABLE OF AUTHORITIES

 

 

 Cases

 

 

 Abbott Labs. v. Gardner, 387 U.S. 136 (1967)

 

 

 Alexander v. Americans United Inc., 416 U.S. 752 (1974)

 

 

 Already, LLC v. Nike, Inc., 133 S. Ct. 721 (2013)

 

 

 American Fed'n of Gov't Emps v. Fed. Labor Relations Auth., 750

 

 F.2d 143 (1984)

 

 

 Anderson v. Liberty Lobby, Inc., 477 U.S. 242 (1986)

 

 

 Arpaio v. Obama, 797 F.3d 11 (D.C. Cir. 2015)

 

 

 Berkeley v. Home Ins. Co., 68 F.3d 1409 (D.C. Cir 1995)

 

 

 * Better Gov't Ass'n v. Dep't of State, 780 F.2d 86 (D.C. Cir.

 

 1986)

 

 

 Big Mama Rag, Inc. v. United States, 631 F.2d 1030 (D.C. Cir.

 

 1980)

 

 

 Bob Jones Univ. v. Simon, 416 U.S. 725 (1974)

 

 

 Broadrick v. Oklahoma, 413 U.S. 601 (1973)

 

 

 Christian Coalition of Fla., Inc., v. United States, 662 F.3d

 

 1182 (11th Cir. 2011)

 

 

 * Clapper v. Amnesty Int'l USA, 133 S. Ct. 1138 (2013)

 

 

 Clarke v. United States, 915 F.2d 699 (D.C. Cir. 1990)

 

 

 * Cohen v. United States, 650 F.3d 717 (D.C. Cir. 2011)

 

 

 Commission v. McCoy, 484 U.S. 3 (1987)

 

 

 Convertino v. Dep't of Justice, 684 F.3d 93 (D.C. Cir. 2012)

 

 

 Direct Marketing Ass'n v. Brohl, 135 S. Ct. 1124 (2015)

 

 

 Elrod v. Burns, 427 U.S. 347 (1976)

 

 

 Enochs v. Williams Packing & Navigation Co., 370 U.S. 1 (1962)

 

 

 Florida Bankers Ass'n v. U.S. Dep't of Treasury, 799 F.3d 1065

 

 (D.C. Cir. 2015)

 

 

 Garcia v. Vilsack, 563 F.3d 519 (D.C. Cir. 2009)

 

 

 Halbig v. Burwell, 758 F.3d 390 (D.C. Cir. 2014)

 

 

 Hibbs v. Winn, 542 U.S. 88 (2004)

 

 

 Honig v. Doe, 484 U.S. 305 (1988)

 

 

 Initiative & Referendum Inst. v. U.S. Postal Service, 685 F.3d

 

 1066 (D.C. Cir. 2012)

 

 

 Lamb's Chapel v. Ctr. Moriches Union Free Sch. Dist., 508 U.S.

 

 384 (1993)

 

 

 Linn v. Chivatero, 714 F.2d 1278 (5th Cir. 1983)

 

 

 * Lujan v. Defs. of Wildlife, 504 U.S. 555 (1992)

 

 

 Mountain States Legal Found. v. Glickman, 92 F.3d 1228 (D.C.

 

 Cir. 1996)

 

 

 Munsell v. Dep't of Agric., 509 F.3d 572 (D.C. Cir. 2007)

 

 

 Nat'l Taxpayers Union v. United States, 68 F.3d 1428 (D.C. Cir.

 

 1995)

 

 

 New York Republican State Comm. & Tenn. Republican Party v.

 

 SEC, 799 F.3d 1126 (D.C. Cir. 2015)

 

 

 Oatman v. Dep't of Treasury, 34 F.3d 787 (9th Cir. 1994)

 

 

 Pendleton v. Heard, 824 F.2d 448 (5th Cir. 1987)

 

 

 * Qassim v. Bush, 466 F.3d 1073 (D.C. Cir. 2006)

 

 

 Schmidt v. United States, 749 F.3d 1064 (D.C. Cir. 2014)

 

 

 SEIU Nat'l Indus. Pension Fund v. Castle Hill Health Care

 

 Providers, LLC, 312 F.R.D. 678 (D.D.C. 2015)

 

 

 Seven-Sky v. Holder, 661 F.3d 1 (D.C. Cir. 2011)

 

 

 Sorenson v. Sec'y of the Treasury, 752 F. 2d 1433 (9th Cir.

 

 1985)

 

 

 South Carolina v. Regan, 465 U.S. 367 (1984)

 

 

 Sprint Commc'ns Co. v. APCC Servs., Inc., 554 U.S. 269 (2008)

 

 

 * True the Vote, Inc. v. IRS, 831 F.3d 551 (D.C. Cir. 2016)

 

 

 United Presbyterian Church v. Reagan, 739 F.2d 1375 (D.C. Cir.

 

 1984)

 

 

 Valley Forge Christian Coll. v. Americans United for Separation of

 

 Church & State, Inc., 454 U.S. 464 (1982)

 

 

 We the People Found., Inc. v. United States, 485 F.3d 140 (D.C.

 

 Cir. 2007)

 

 

 * Z Street v. Koskinen, 791 F.3d 24 (D.C. Cir. 2015)

 

 

 Statutes

 

 

 5 U.S.C. § 702

 

 

 5 U.S.C. § 704

 

 

 26 U.S.C. § 501(c)

 

 

 26 U.S.C. § 6212

 

 

 26 U.S.C. § 6213

 

 

 26 U.S.C. § 6332

 

 

 26 U.S.C. § 7422

 

 

 26 U.S.C. § 7428

 

 

 Rules/Regulations/Other

 

 

 26 C.F.R. § 1.501(c)(4)-1

 

 

 Brady and Roskam Letter to Commissioner Koskinen, Sep. 20, 2016,

 

 available at

 

 https://waysandmeans.house.gov/wp-content/uploads/2016/09/2016.09.20-Brady-Roskam-to-Koskinen.pdf

 

 

 Fed. R. Civ. P. 12

 

 

 GAO Report to Congressional Requesters, IRS Examination Selection:

 

 Internal Controls For Exempt Organization Selection Should Be

 

 Strengthened, July 2015, available at

 

 http://www.gao.gov/assets/680/671362.pdf

 

 

 Internal Revenue Manual 7.20.2.2

 

 

 Internal Revenue Manual 7.20.2.3(2)

 

 

 Linchpins of Liberty, et al. v. United States, et al., Case No.

 

 1:13-cv-0777 (RBW), Nov. 12, 2016 Status Conf. Trans

 

 

 Revenue Procedure 86-43

 

 

 U.S. House of Representatives Committee on Oversight and Government

 

 Reform, Staff Report "Lois Lerner's Involvement in the IRS Targeting

 

 of Tax-Exempt Organizations," March 11, 2014, Appendix 62-63 (Holly

 

 Paz Email of July 19, 2011, Bates Stamped IRS0000014372-73), available

 

 at https://oversight.house.gov/wp-content/uploads/2014/03/Lerner-Report1.pdf

 

 

 U.S. Senate Committee on Finance, "The Internal Revenue Service's

 

 Processing of 501(c)(3) and 501(c)(4) Applications for Tax-Exempt

 

 Status Submitted by 'Political Advocacy' Organizations From 2010-

 

 2013," August 5, 2015, available at

 

 http://www.finance.senate.gov/imo/media/doc/CRPT-114srpt119-pt1.pdf

 

INTRODUCTION

 

 

Plaintiffs filed this lawsuit to put an end to -- and prevent recurrence of -- the blatant discriminatory treatment they have been suffering at the hands of the IRS based on viewpoint and association. To be sure, Plaintiffs learned of this disparate treatment while their applications for tax-exempt status were pending with the IRS, but the allegations and relief requested in the Second Amended Complaint unquestionably address -- and seek to eliminate -- any and all IRS unconstitutional discrimination against Plaintiffs, including not only within the application process but also within processes that occur following issuance of a determination. The Government's attempt to re-write the Complaint here, such that it is cabined by the four corners of the 2013 and 2015 TIGTA Reports, wholly ignores Plaintiffs' actual allegations, as well as evidence that has come to light since Plaintiffs filed this lawsuit, and must not be permitted.

Rather, as the D.C. Circuit recognized in remanding Plaintiffs' equitable claims for further proceedings, it is imperative that this Court ensure that all vestiges of the IRS's Targeting Scheme have permanently ceased. This requires the Government1 to demonstrate not only that unconstitutional treatment has been eliminated within the application process but also that all effects of such treatment -- whether occurring within the application process or outside of it -- have been completely and irrevocably eradicated. Because the Government has failed to produce evidence demonstrating permanent cessation of discriminatory treatment in the application process, and is entrenched in the position that facts regarding the IRS's treatment of Plaintiffs outside the application process is irrelevant to the outcome of Plaintiffs' claims, however, it has failed to satisfy its heavy burden of demonstrating mootness through voluntary cessation.

The Government's additional arguments in support of its summary judgment motion are equally unavailing. As an initial matter, the Government's arguments all center on the issue of justiciability and a purported failure to state a claim under the Administrative Procedure Act (APA). In addition to its mootness arguments, the Government contends that this Court lacks jurisdiction because Plaintiffs lack standing, Plaintiffs' claims are not yet ripe, and/or Plaintiffs' claims are statutorily barred. Yet the Government fails to provide any authority to support the proposition that the absence of jurisdiction entitles a party to judgment as a matter of law. If jurisdiction were lacking for any of these reasons, or if a claim were not properly stated, the proper course would be to dismiss the claims, not grant the Government judgment as a matter of law. See Fed. R. Civ. P. 12.

In any event, neither dismissal nor a grant of judgment in favor of the Government is appropriate here, as the Government is wrong in each of its contentions. As explained more fully herein, Plaintiffs' claims for equitable relief are not moot; they undoubtedly have standing to pursue their claims; their claims are all ripe for review by this Court; none of their claims are statutorily barred; and their claims in Counts VI and VII are properly brought under the APA.

 

STATEMENT OF POINTS AND AUTHORITIES

 

 

I. FACTUAL BACKGROUND

 

 

Plaintiffs' Second Amended Complaint (SAC) alleges that the IRS's targeting of Plaintiffs includes discriminatory treatment, in part described and addressed in the 2013 Report from the Treasury Inspector General for Tax Administration (TIGTA) (hereinafter 2013 TIGTA Report) (Doc 51-1), as well as additional targeting outside the application process, including monitoring of the organizations' activities. (Doc. 51, ¶ 4; Doc. 119 (Answer), at ¶ 4). Plaintiffs have alleged that this targeting is ongoing. Id. See also, Pls. Stmt. Add'l Facts, ¶¶ 3-5 (filed herewith). Following dismissal of Plaintiffs' claims, and appeal of much of that decision by Plaintiffs, the D.C. Circuit issued an opinion on August 5, 2016, holding that Plaintiffs' equitable claims continued to present a live controversy, finding that because the Government failed to establish voluntary cessation of the illegal conduct alleged, despite the 2013 TIGTA findings, the Government had failed to establish mootness. Specifically, the Court held that the Government had failed to "demonstrate[ ] that there was no reasonable expectation that the conduct will recur or [that] interim relief or events have completely eradicated the effects of the alleged violation." True the Vote, Inc. v. IRS, 831 F.3d 551, 563 (D.C. Cir. 2016). The Court further noted that Plaintiffs' SAC "alleged extensive discriminatory conduct" beyond simply the BOLO segment of the targeting scheme. Id.

In response, the Government has filed a motion for summary judgment in yet another attempt to dismiss Plaintiffs' claims before they have had an opportunity to proceed with discovery. This time, the Government relies upon the 2015 Report issued by TIGTA to argue that because it has processed all of Plaintiffs' applications and made some corrections to the deficiencies identified by TIGTA, there is no ongoing illegal conduct to enjoin, such that Plaintiffs claims are moot, depriving this Court of jurisdiction. The Government, however, relies upon only the favorable findings made by TIGTA in its 2013 and 2015 reports, and those by the Senate Finance Committee in its report released on August 5, 2015. Crucially, however, the Government ignores the unfavorable findings of those entities, all of which contradict the Government's summary judgment arguments. See Pls. Stmt. Add'l Facts, ¶¶ 10-31.

The Government's filings also omit other essential evidence, thus utterly failing to comply with this Court's express findings that satisfaction of its mootness burden required all of the following: evidence demonstrating the IRS's treatment of these Plaintiffs, Linchpins of Liberty, et al. v. United States, et al., Case No. 1:13-cv-0777 (RBW), Nov. 12, 2016 Status Conf.Trans., at 23:13-24:3; evidence that the unconstitutional viewpoint-based IRS conduct has permanently ceased, id.; and "addressing why these plaintiffs who have been granted tax-exempt status will not experience any negative consequences resulting from the alleged discriminatory targeting scheme employed by defendants throughout their tenure as a [sic] tax-exempt entities." Order (Doc. 108), at 1-2 (emphases added). See also Nov. 12, 2016 Status Conf. Trans., at 22:18-23:10 (identifying specific examples of essential evidence concerning what treatment these Plaintiffs can expect as a result of having initially been targeted). Indeed, this Court instructed the Government that it "would have the burden of showing . . . that there are in fact no negative impacts that impact [Plaintiffs] in the future. And if that can't be shown, then I think we do have a problem as to whether I can conclude that the claims are moot." Id. at 34:22-35:2. Because the Government has provided none of the above, it has unquestioningly failed to meet this burden. In fact, it has done precisely what Plaintiffs expected, yet this Court said would not be sufficient: "Ms. Gammill: 'I presume what they're going to say once they've made the determinations is okay, now they're all moot.' . . . Court: 'I don't agree with that. I don't think I would be complying with what the Circuit told me to do if I made that determination." Id. at 30:13-21.

On December 9, 2015, the Government filed an Amended Answer to Plaintiffs' SAC. (Doc. 119) Curiously, despite its assertion that the events that form the basis of Plaintiffs' Complaint are described in the 2013 and 2015 TIGTA reports, the Government denies that much of these events ever touched Plaintiffs. See Pls. Stmt. Add'l Facts, ¶¶ 5-6.

In its 2013 Report, TIGTA found that the IRS's EO Determinations Unit used inappropriate criteria, including names and policy positions, to identify tax-exempt applications as potential political cases; all tax-exempt applicants with Tea Party, Patriots, or 9/12 in their names were selected for additional review and scrutiny as potential political cases; nearly one third (31%) of the applications that were selected for additional review and scrutiny did not include any indications of significant political campaign intervention; the applications selected for additional review and scrutiny experienced significant delays in processing, some for a period covering two election cycles; the organizations whose applications were selected for additional review and scrutiny were issued requests for information that was irrelevant to a determination of tax-exempt status, including the following: (1) donor names; (2) a list of issues of importance to the applicant organization, as well as the organization's position regarding those issues; (3) the type of conversations and discussions between members and participants at organization activities; (4) whether the organization's officer(s) or director(s) have run or plan to run for public office; (5) the political affiliation of the officer(s) or director(s) of the organization; (6) information regarding the employment (other than for the organization) of the organization's officer(s) or director(s); and (7) information regarding the activities of other organizations with which the applicant had a connection. Id. at ¶ 9; SAC, Ex. 1.

In its 2015 Report, TIGTA found that the IRS had only taken adequate corrective actions to address five of TIGTA's previous nine recommendations, identifying the following deficiencies as to the other recommendations: (1) 21% of the employees required to take the IRS's political campaign intervention training did not complete one or more of the training sessions and/or did not attend the training sessions for the required amount of time; (2) If employees miss key portions of training sessions, they may not have the knowledge needed to effectively and efficiently carry out their responsibilities, including proper identification of issues involving political campaign intervention; (3) The IRS's response to the missed training by employees was to extend the grace period for permissible missed training from 10 to 15 minutes; (4) The IRS did not complete the process designed to evaluate the effectiveness of the training; (5) IRS management did not believe completing the evaluation process would be an effective use of resources and time; (6) The Learning and Education office did not compile or evaluate case study results to determine if employees learned skills and acquired knowledge as a result of the training. See Pls. Stmt. Add'l Facts, ¶ 10; Gov't Ex. 1 (2015 TIGTA Report) (Doc. 113-1).

The TIGTA Reports cited by the Government are only a few of many sources of evidence concerning the IRS's unconstitutional treatment of conservative tax-exempt organizations. As a direct result of the initial targeting, Congress asked the U.S. Government Accountability Office (GAO) to undertake several investigations based on concerns that viewpoint-based treatment of exempt organizations may be occurring in other IRS processes. Pls. Stmt. Add'l Facts, ¶ 11. In July 2015, GAO issued a report entitled "IRS Examination Selection: Internal Controls for Exempt Organization Selection Should be Strengthened." Id. at ¶¶ 10-11. The GAO concluded that (1) there are deficiencies in the EO's internal controls which increase the risk of EO employees selecting organizations for examination based on the organizations' religious, educational, political, or other views; (2) EO's primary sources of guidance for compliance checks, compliance reviews, and Exempt Organizations Compliance Area (EOCA) classification are not included in the Internal Revenue Manual, as required by the Manual; (3) By not complying with agency requirements and standards for internal control, these internal procedures are not covered by the same standards as the Internal Revenue Manual; (4) Reliance on procedures outside the Internal Revenue Manual creates the risk of unfair selection of organizations' returns for examination and reduces transparency, since they are not available to the public; (5) Over 25% of the referrals GAO reviewed that were selected for examination were missing the required description of the allegation for the committee; (6) Despite EO's monitoring activities, EO employees were not always following documentation requirements for examination selection procedures; (7) Of the seven projects requiring a project proposal that GAO reviewed (all of which were projects not associated with 990 analytics queries, and one of which specifically examined a sample of organizations that had previously received determination letters), GAO found that none of the project proposals fully described the criteria to be used for the project; (8) With project proposals lacking clear selection criteria, EO management risks the potential of projects selecting organizations for review in an unfair manner; and (9) Contrary to applicable requirements, not all political activity referrals were reviewed by the Political Activities Referral Committee. See id. at ¶ 12. The IRS has not confirmed that it has implemented steps necessary to cure the deficiencies identified in either the 2015 TIGTA Report or the July 2015 GAO Report. Id. at ¶ 13. See generally, Govt. MSJ filings (Docs. 113, 113-2, 113-4). See also Ripperda Declaration (Doc. 113-4), at ¶ 25, n.10.

In addition, on August 5, 2015, the United States Senate Committee on Finance issued a four-part Bipartisan Investigative Report entitled "The Internal Revenue Service's Processing of 501(c)(3) and 501(c)(4) Applications for Tax-Exempt Status Submitted by 'Political Advocacy' Organizations From 2010-2013" ("Bipartisan Investigative Report"). See Pls. Stmt. Add'l Facts, ¶ 14. In the Bipartisan Investigative Report, the Committee concluded that concerns persist that the IRS can open examinations for an inappropriate reason, including an organization's religious, educational, political, or other views. See id. at ¶ 15. The Committee made several recommendations to the IRS in this regard. Id. at ¶ 16. The IRS has not confirmed that it has corrected the deficiencies identified, or implemented the recommendations made, in the Bipartisan Investigative Report. Id. at ¶ 17.

In addition, the IRS has not implemented prohibitions against IRS employees taking any of the following actions, prohibitions that are essential to a demonstration of mootness of Plaintiffs' claims, which seek to put an end to all discriminatory treatment of Plaintiffs and others similarly situated on the basis of viewpoint and/or association: (1) reviewing an application for tax-exempt status on the basis of the organization's policy positions or viewpoints. Id. at ¶ 18; (2) reviewing an application for tax-exempt status on the basis of the organization's associations. Id. at ¶ 19; (3) requesting donor identities from organizations during the tax-exempt determination process. Id. at ¶ 20; (4) requesting from tax-exempt applicants the information identified in the 2013 TIGTA Report as unnecessary. Id. at ¶ 21; (5) referring or selecting an organization for examination (i.e., audit) based on the organization's policy positions or viewpoints. Id. at ¶ 22; (6) referring or selecting an organization for examination (i.e., audit) based on the organization's associations. Id. at ¶ 23; (7) identifying "Sensitive Cases" on the basis of an organization's policy positions / viewpoints or its associations. Id. at ¶ 24; (8) identifying a referral for examination as a "high-profile" referral based on an organization's policy positions / viewpoints or its associations. Id. at ¶ 25; (9) taking any other action with regard to tax-exempt applicants or organizations on the basis of policy positions / viewpoints or associations. Id. at ¶ 26.

On September 20, 2016, the chairmen of the U.S. House of Representatives Committee on Ways and Means and its Subcommittee on Oversight sent a letter to IRS Commissioner Koskinen in which they stated, based on the results of "a series of [six] nonpartisan reviews" conducted by the GAO, that "the IRS has not taken sufficient steps to prevent targeting Americans based on their personal beliefs." Id. at ¶ 27.

The IRS has not confirmed that its targeting of Plaintiffs was limited to the conduct identified in the 2013 TIGTA Report and later addressed in the 2015 TIGTA Report. Id. at ¶ 28. The IRS has not identified the specific treatment, based on names, policy positions / viewpoints, and/or associations, received by any individual Plaintiff during the application process (and thus cannot demonstrate with any level of certainty that all such conduct has ceased). Id. at ¶ 29. The IRS has not even confirmed to what extent any Plaintiff was subjected to any of the conduct identified in the 2013 TIGTA Report, the 2015 TIGTA Report, and/or the Bipartisan Investigative Report. Id. at ¶ 30. The IRS has not confirmed whether any of the Plaintiffs are currently being subjected to, or whether they have been identified for upcoming application of, additional discriminatory treatment by the IRS based on their names, viewpoints and/or associations, including, but not limited to, ongoing monitoring of their activities and selection for examinations. Id. at ¶ 31.

Two Plaintiffs (Albuquerque Tea Party and Tri-Cities Tea Party) remain in the administrative process regarding applications, as they are protesting proposed denials of their applications for tax-exempt status, id. at ¶¶ 34-35, and another Plaintiff (PECAN) is re-submitting its application for tax exemption. Id. ¶¶ 1-2. Accordingly, there are three Plaintiffs still engaged in the administrative application process before the IRS. The Government itself has admitted that the applications of Albuquerque Tea Party and Tri-Cities Tea Party are still deemed pending before the IRS. See Gov't MSJ, at 18, n.14, and the D.C. Circuit unequivocally held that, at a minimum, so long as any Plaintiffs' applications remain pending, the Government can demonstrate, at best, "that the case is nearly moot," which does not satisfy its "heavy burden" of "establish[ing] cessation, not near cessation." True the Vote, Inc. v. IRS, et al., 831 F.3d at 561.

 

II. THE GOVERNMENT'S PRE-DISCOVERY SUMMARY JUDGMENT MOTION IS

 

PREMATURE.

 

 

The Government's summary judgment motion, filed prior to any discovery and immediately following the D.C. Circuit's decision, is in direct conflict with both the D.C. Circuit's instructions in this case and precedent disfavoring pre-discovery summary judgment motions. See SEIU Nat'l Indus. Pension Fund v. Castle Hill Health Care Providers, LLC, 312 F.R.D. 678, 683-84 (D.D.C. 2015) (citing Convertino v. DOJ, 684 F.3d 93, 99 (D.C. Cir. 2012) (citing Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 257 (1986)) ("[P]re-discovery summary judgment motions are premature unless all parties have had a full and fair opportunity for discovery."). The D.C. Circuit was quite clear in remanding Plaintiffs' equitable claims: Plaintiffs have more than sufficiently alleged an ongoing targeting scheme involving much more than simply the BOLO list, True the Vote, Inc., 831 F.3d at 563, and Plaintiffs' allegations "warrant[ ] a merits disposition based on substantive evidence, not simply a dismissal at the pleadings stage." Id.

Plaintiffs' diligent efforts to pursue this action and obtain discovery continue to be thwarted by the Government's attempts to frustrate and delay the justice to which Plaintiffs are entitled and which the D.C. Circuit has specifically mandated. The Government's motion is supported by bald assertions of fact -- many of which Plaintiffs are unable to dispute without proper discovery in this matter. See Plaintiffs' Response to Defendant's Statement of Material Facts Not in Dispute (Doc. 113-2) (hereinafter Pl. Resp. to Gov't SUMF), ¶¶ 4-6, and Plaintiffs' Rule 56(d) Declaration (both filed herewith). Accordingly, while this Court should deny the Government's motion outright for failure to satisfy its heavy burden in demonstrating mootness, at a minimum it should grant Plaintiffs' Rule 56(d) Declaration, demonstrating the need for discovery to properly oppose the Government's motion for summary judgment, in a manner consistent with the Court of Appeals' direction -- i.e. as "a matter of course," SEIU Nat'l Indus. Pension Fund, 312 F.R.D. at 683 (quoting Berkeley v. Home Ins. Co., 68 F.3d 1409, 1414 (D.C.Cir 1995)).

 

III. THIS COURT UNQUESTIONABLY HAS JURISDICTION OVER

 

PLAINTIFFS' EQUITABLE CLAIMS.

 

 

A. There Remains a Live, Ongoing Controversy Regarding Plaintiffs' Claims for Declaratory and Injunctive Relief in Counts IV through VII.

"The mootness doctrine, deriving from Article III, limits federal courts to deciding 'actual ongoing controversies.'" Clarke v. United States, 915 F.2d 699, 700-701 (D.C. Cir. 1990) (quoting Honig v. Doe, 484 U.S. 305, 317 (1988)). "To qualify as a case fit for federal-court adjudication, 'an actual controversy must be extant at all stages of review, not merely at the time the complaint is filed.'" Already, LLC v. Nike, Inc., 133 S. Ct. 721, 726 (2013) (citations omitted). A case is only moot, however, "if events have so transpired that the decision will neither presently affect the parties' rights nor have a more-than-speculative chance of affecting them in the future.'" True the Vote, Inc., 831 F.3d at 558 (quoting Clarke, 915 F.2d at 701) (other quotations omitted). Only if "the court can provide no effective remedy because a party has already 'obtained all the relief that [it] sought,'" is the case moot. Schmidt v. United States, 749 F.3d 1064, 1068 (D.C. Cir. 2014) (citations omitted).

Plaintiffs have hardly obtained all of the relief they seek, and a decision on the merits of this case will have more than a speculative effect on Plaintiffs in the future given the ongoing, comprehensive targeting scheme alleged by Plaintiffs -- a scheme which, notably, is not even acknowledged, must less corrected, by the actions allegedly taken by the Government in an attempt to moot this case.

 

1. Counts IV and V.

 

In Counts IV and V, Plaintiffs seek the following relief: (1) a declaration that Defendants' conduct was contrary to Plaintiffs' First and Fifth Amendment rights and violated the APA, and (2) a permanent injunction prohibiting all Defendants, and all those in active concert with them, from unlawfully targeting Plaintiffs, including their officers, directors, and members, for disparate treatment and particular scrutiny based on the unconstitutional criteria of viewpoint or association. SAC, Prayer for Relief, ¶ D(i)-(ii).2 The Government insists that because the IRS has now "acted upon" the applications of all Plaintiffs who wanted their applications processed, there remains no conduct to be enjoined, and Plaintiffs' claims for equitable relief are moot. Gov. MSJ, at 9-10. This position could be correct only if the Targeting Scheme about which Plaintiffs complain were limited to the delayed processing of their tax-exempt applications, and if there were no Plaintiffs to whom the application process still applied. The allegations in the SAC and Plaintiffs' evidence submitted here, however, belie both notions.

Plaintiffs identified in their SAC the specific components of the Targeting Scheme of which they were then aware (over three years ago, in 2013), which included, at a minimum: the IRS's singling out of their applications solely because of their conservative-sounding names and policy positions, the IRS's issuance of intrusive demands for information that was unnecessary and to which it was not entitled; exorbitant delays in the IRS's processing of Plaintiffs' applications (in some cases this time period spanned several years); and, crucially, ongoing IRS monitoring of targeted organizations, even after they receive a tax-exempt determination, "based on the same unlawful purposes for which their applications were originally targeted." SAC, ¶ 4. In fact, evidence obtained by Congress actually supports Plaintiffs' allegation concerning unlawful ongoing monitoring. See Pls. Stmt. Add'l Facts, ¶ 8 (citing U.S. House of Representatives Committee on Oversight and Government Reform, Staff Report "Lois Lerner's Involvement in the IRS Targeting of Tax-Exempt Organizations," March 11, 2014, Appendix 62-63 (Holly Paz Email of July 19, 2011, Bates Stamped IRS0000014372-73), available at https://oversight.house.gov/wp-content/uploads/2014/03/Lerner-Report1.pdf) (discussing EO's approach to handling the Tea Party (TP) cases and explaining that "[w]e suspect we will have to approve the majority of the (c)(4) applications" but "[w]e will also refer these organizations to the Review of operations for follow-up in a later year"). Additionally, Plaintiffs provided specific allegations about one similar organization that was initially targeted and whose founder was then subjected to numerous government investigations, including "multiple IRS audits." SAC, ¶ 122. The Government has failed to address these facts, which undoubtedly encompass discriminatory treatment outside the specific context of the application process.

Furthermore, the ongoing effects of the Targeting Scheme are readily apparent in that two Plaintiffs are still engaged in the administrative process with applications pending, see Gov't MSJ, at 18, n.14, and another Plaintiff (one that received a denial during the allegedly discriminatory process) has been forced, in order to obtain the tax-exempt status it has long been seeking, to re-submit its application. See Pls. Stmt. Add'l Facts, ¶¶ 1-2. The Government has not -- and, indeed, cannot -- demonstrate mootness so long as these effects persist. Nor does the fact that Plaintiffs were unable to identify additional components and/or effects of the Targeting Scheme mean that their claims fail to encompass the entirety of the scheme; rather, as the D.C. Circuit held, it means they are entitled to discovery as to any aspects of the IRS's discriminatory conduct to which they may still be subjected, as their allegations "are quite sufficient to warrant a merits disposition based on adjudication of substantive evidence. . . ." True the Vote, Inc., 831 F.3d at 563.

Whether the necessity for resubmission of applications, the continuation of the administrative process, or IRS conduct such as ongoing monitoring, selection for audits, etc., based on the targeted groups' viewpoints and associations are characterized as components of the Targeting Scheme, or effects flowing from it, the Government has an obligation, in order to establish mootness by way of voluntary cessation, to demonstrate that no such conduct is currently occurring and has been "completely and irrevocably eradicated" such that it cannot reasonably be expected to recur. See id. (quoting Qassim v. Bush, 466 F.3d 1073, 1075 (D.C. Cir. 2006)). Because there are still three Plaintiffs in the administrative process, and because the Government has failed to confirm that the IRS is not, in fact, engaging in other action against Plaintiffs, including, for example, ongoing monitoring of Plaintiffs' activities3 -- based on the same unlawful purposes for which they were initially targeted -- the Government has consequently failed to satisfy its heavy burden.

Contrary to the Government's primary argument, its "acting upon" most of the outstanding applications merely cured one effect of the Targeting Scheme -- the years-long delay in the processing -- and only as to most of the Plaintiffs' applications. It does not come close to demonstrating mootness as to the entirety of the Targeting Scheme, even as to most of the Plaintiffs, and certainly not as to those whose applications are still pending. See Gov't MSJ, at 18, n.14 (acknowledging that at least two Plaintiffs' applications are still pending); see Pls. Stmt. Add'l Facts, ¶¶ 1-2 (identifying Plaintiff that is re-submitting its application and will thus be subjected again to the application process); True the Vote, Inc., 831 F.3d at 561 (holding that claims are not moot at least so long as any Plaintiffs have pending applications). While the shortcomings in the Government's summary judgment filings should result in a denial of its motion, at a minimum, and as more fully set forth in the accompanying Rule 56(d) Declaration, Plaintiffs must be permitted to engage in discovery to obtain the evidence necessary for a proper determination as to whether the entire Targeting Scheme and the ongoing effects of that scheme have, in fact, been completely and irrevocably eradicated.

If, in fact, the Government itself believed the only components (or effects) of the Targeting Scheme were the initial selection based on names, policy positions, and/or associations; the issuance of intrusive and unnecessary demands for information; and delays in the processing of applications, it easily could have (and surely would have) confirmed as much in its summary judgment filings. Instead, the Government has limited the issues it addresses to those particular aspects of the Targeting Scheme because they are the ones confirmed by both TIGTA in its May 14, 2013 report entitled "Inappropriate Criteria Were Used to Identify Tax-Exempt Applications for Review" ("2013 TIGTA Report") and the United States Senate Committee on Finance's 2015 Bipartisan Investigative Report. Incredibly, however, the Government has been completely silent as to the specific targeting treatment received by any individual Plaintiff, and has not even acknowledged in its summary judgment filings (or in its Answer, see Doc. 119) that the IRS's conduct identified in the 2013 TIGTA Report and the 2015 Bipartisan Investigative Report was actually applied to these Plaintiffs, let alone that they can no longer expect to be subjected to improper IRS targeting. See Pls. Stmt. Add'l Facts, ¶¶ 4-5.

In fact, even as to those limited aspects of the Targeting Scheme identified by TIGTA and the Senate Finance Committee, the Government has not confirmed that viewpoint -- and/or association-based treatment of conservative organizations has entirely ceased. Even if the IRS has "eliminate[d] the use of BOLO lists or names . . . to select applications for review," Gov. MSJ at 14 (emphasis added) (an unconfirmed position, as there is no admissible evidence offered in support), it has not produced a scintilla of evidence confirming that IRS employees are prohibited from using an organization's policy positions (i.e., viewpoints) or associations as bases for subjecting them to heightened scrutiny and review (or other treatment) -- specific conduct of which Plaintiffs have complained. Even the Internal Revenue Manual fails to provide such assurances. See IRM 7.20.2.2 (cautioning employees to "[r]eview cases based on the activities of an organization, not on words in a name or labels" but failing to provide any prohibition, or even caution, against consideration of the viewpoint from which an organization conducts its various activities), available at https://www.irs.gov/irm/part7/irm_07-020-002r.html.

Following its investigation into the IRS Targeting Scheme, the Senate Finance Committee issued the specific recommendation to the IRS, to ensure this evil had been eliminated, that it "[p]ublish in the instructions to all relevant application forms objective criteria that may trigger additional review of applications for tax-exempt status and the procedures IRS specialists use to process applications involving political campaign activity." See Ripperda Decl., p. 22, ¶ 25(a) (emphases added). By the Government's own admission, however, the IRS refused to implement this recommendation because it concluded that this would "make those instructions too long and burdensome for taxpayers." Id. (Ironic, since the IRS didn't seem to think that delaying the application process for up to seven years and demanding intrusive information was "too long and burdensome for taxpayers."). Instead, Ms. Ripperda asserts, the IRS "concluded that it made more sense to include this information on the product page." Id. Shockingly, however, the specific information the Senate Committee identified -- objective criteria that may trigger additional review and the procedures IRS specialists use to process applications involving political campaign activity -- has not been produced by the Government and does not appear to be located at the web links identified in Ms. Ripperda's declaration. (If, in fact, this specific information is there, it is buried so deep in layers of hyperlinks that the process of locating it is the epitome of an exercise that is "too long and burdensome for taxpayers.")

Similarly, the Government claims that EO employees may only issue "unique" requests for additional information (rather than selecting from a template) if the unique request is approved by management. Id. p. 17, ¶ 21(c); p. 23, ¶ 25(a). Absent from the Government's filings, however, is any evidence confirming that managers may not approve unique requests seeking information that is unnecessary, irrelevant, and inappropriate, including such things as donor names, the identity of others with whom the organization associates, or the organization's position on various issues. In fact, one of the Senate Finance Committee's specific recommendations to cure this problem was to "[p]rohibit the IRS from requesting individual donor identities at the application stage." See id., p. 22, ¶ 25(a). But the IRM confirms that the IRS has not instituted any such prohibition. Rather, it has merely published a "reminder" that "[g]enerally, donor names aren't necessary to make a determination and should not be requested." IRM 7.20.2.3(2) (emphasis added), available at https://www.irs.gov/irm/part7/irm_07-020-002r.html. Consequently, the Government has not produced evidence sufficient to demonstrate that even the limited components of the Targeting Scheme addressed by TIGTA and the Senate Finance Committee (i.e., those components the Government addresses in its summary judgment filings) have fully and permanently ceased. Thus, for those Plaintiffs that have pending applications (Albuquerque and Tri-Cities) or are re-submitting an application (PECAN), see Declaration of Mark Kent ("Kent Decl."), ¶¶ 3-4 (filed herewith), the absence of such evidence means their claims seeking a fair, unbiased, non-discriminatory process continue to present a live controversy for this Court's adjudication. Even for those Plaintiffs who have received determinations of tax-exempt status, absent evidence sufficient to ensure that the initial, known components of the Targeting Scheme have completely ceased, and without probative evidence confirming that the Targeting Scheme was limited to those specific components, it cannot be said with any certainty that the effects of such conduct are no longer impacting Plaintiffs in any way.

More importantly, the 2013 TIGTA Report and the Bipartisan Investigative Report are only two of multiple sources of evidence concerning the ways in which the IRS has been -- and likely still is -- subjecting tax-exempt organizations, including Plaintiffs, to unconstitutional discrimination. As discussed supra, in 2015 TIGTA completed a follow-up audit to determine whether the IRS had even corrected the limited problems identified in the 2013 TIGTA Report. Additionally, as a direct result of the initial targeting, Congress asked the U.S. Government Accountability Office (GAO) to undertake several investigations based on concerns that viewpoint-based treatment of exempt organizations may be occurring in other IRS processes. The reports from the various investigations into the IRS's discriminatory treatment of conservative organizations identify numerous ongoing problems related to the IRS's improper viewpoint-based treatment of tax-exempt organizations, see generally Pls. Stmt. Add'l Facts, including the following:

  • Although the IRS "substantially changed its procedures for processing applications for tax-exempt status since [the 2013 TIGTA audit,]" the training the IRS offered to EO employees was not being done in a timely manner, a substantial number of employees did not complete the training, and, more importantly, the IRS did not even evaluate the effectiveness of the training. See Pls. Stmt. Add'l Facts, ¶ 10 (citing Gov't Ex. 1, 2015 TIGTA Report, also available at https://www.treasury.gov/tigta/auditreports/2015reports/201510025fr.pdf).

  • The IRS has in place controls that are deficient in either design or employee implementation such that organizations can be selected for audit based on inappropriate criteria, such as their political viewpoints, and employees have regularly failed to document the reason(s) entities have been selected. See Pls. Stmt. Add'l Facts, ¶ 12 (citing GAO Report to Congressional Requesters, IRS Examination Selection: Internal Controls for Exempt Organization Selection Should Be Strengthened, July 2015, available at http://www.gao.gov/assets/680/671362.pdf).

  • "The consequences of the IRS's actions in singling out organizations based on their name and subjecting them to heightened scrutiny, substantial delays, and to burdensome and sometimes intrusive questions are far reaching and troubling. Undoubtedly, these events will erode public confidence and sow doubt about the impartiality of the IRS. . . . Immediate and meaningful changes, including increased accountability to Congress and strengthened internal controls, are necessary if diminished public confidence in the IRS is to be restored." Senate Finance Committee, Bipartisan Investigative Report, Part 1 of 4 (August 5, 2015) at 126, available at http://www.finance.senate.gov/imo/media/doc/CRPT-114srpt119-pt1.pdf.

 

In the Bipartisan Investigative Report, the Committee specifically recommended to the IRS that it "fully implement all recommendations of the [GAO] in their July 2015 report." Id. at p. 9. In its summary judgment filings, however, the Government has taken the position that such recommendations, and any actions taken by the IRS to implement them, need not be addressed in order to demonstrate cessation of IRS viewpoint-based targeting because "they are not relevant to the processing of applications for tax exempt status." Ripperda Decl., ¶ 25 n.10. As previously explained, however, Plaintiffs' claims are not so limited, and the Government's refusal to (1) confirm the full scope of the IRS's unlawful viewpoint-and/or association-based Targeting Scheme or (2) provide evidence demonstrating that all facets and effects of that scheme have ceased, such that Plaintiffs will not be subjected to further disparate treatment by the IRS based on viewpoint and/or association, means the Government has failed to establish mootness because it has not demonstrated that the alleged violations have permanently ceased and cannot reasonably be expected to recur, or that the effects of the initial violation(s) have been "completely and irrevocably eradicated." True the Vote, Inc., 831 F.3d at 562-63 (citation omitted).

As the chairmen of the U.S. House of Representatives Committee on Ways and Means and its Subcommittee on Oversight stated in a recent letter to IRS Commissioner Koskinen, "Taxpayers should know that when they interact with the IRS, they are being treated fairly. Unfortunately, the IRS has not taken sufficient steps to prevent targeting Americans based on their personal beliefs." Pls. Stmt. Add'l Facts, ¶ 27 (citing Brady and Roskam Letter to Commissioner Koskinen, Sep. 20, 2016, available at https://waysandmeans.house.gov/wp-content/uploads/2016/09/2016.09.20-Brady-Roskam-to-Koskinen.pdf). For the reasons provided herein, this Court should deny the Government's summary judgment motion insofar as it is based on mootness of Plaintiffs' claims seeking equitable relief from the IRS's unconstitutional viewpoint-and/or association-based targeting. At a minimum, it should permit Plaintiffs to engage in discovery, as set forth in the accompanying Rule 56(d) Declaration, so they can thoroughly respond on this issue after obtaining evidence regarding the full scope of the Targeting Scheme and any continuing effects of that scheme.

 

2. Counts VI and VII.

 

In Counts VI and VII, Plaintiffs seek declarations that Treasury Regulation § 1.501(c)(4)-14 and Revenue Procedure 86-435 are unconstitutionally vague, on their face and as applied to Plaintiffs, and injunctive relief prohibiting the IRS from further application of these provisions. Doc. 51, at ¶¶ 385-391, 399-404; Prayer for Relief (E) and (F). The Government's argument that Counts VI and VII are also moot is based on two faulty assumptions: (1) that the regulation and procedure only affect those Plaintiffs with pending applications; and (2) that there are no Plaintiffs with applications for exemption pending, and thus no actual controversy remaining. In fact, however, the provisions continue to affect even those Plaintiffs that have been granted tax-exemption, as they are required to conform their conduct to those provisions to maintain that status. Additionally, there is one Plaintiff, PECAN, that is re-submitting its application. Pls. Stmt. Add'l Facts, ¶ 1, and two more Plaintiffs still have pending applications, as they remain in the administrative process while protesting their proposed denials. Id. at ¶¶ 34-35; Gov't MSJ, at 18, n. 14. Accordingly, and as the Government seemingly concedes, an actual controversy remains. Gov't MSJ, at 17.

The Government's mootness argument is also legally flawed, as it ignores both long-standing precedent and the D.C. Circuit's decision remanding this case for a decision on the merits. A challenge to a regulation becomes moot only after that regulation is amended or superseded. Initiative & Referendum Inst. v. U.S. Postal Service, 685 F.3d 1066, 1074 (D.C. Cir. 2012). Neither provision has been amended or superseded here. See also Better Government Ass'n v. Dep't of State, 780 F.2d 86, 91-92 (D.C. Cir. 1986) (facial challenges entertained when regulation remained effective, despite mootness of specific applications). Indeed, a comprehensive (rather than selective) reading of the D.C. Circuit's opinion in this case reveals two reasons for rejecting the assertion that Plaintiffs' challenges to the regulatory provisions are moot: (1) some Plaintiffs have pending applications and (2) these challenges "are amply supported by the allegations in the complaint." True the Vote, 831 F.3d at 563. See also id. (noting further that the fundamental concept of mootness is quite straight forward: if there remains conduct to be enjoined, then there is relief to be granted, and claims are not moot). In other words, at the very least, those Plaintiffs with pending applications still have valid as-applied challenges, and both they and those Plaintiffs that have received tax-exemption maintain valid facial challenges.

In any event, as set forth in Plaintiffs' Rule 56(d) Declaration, a grant of summary judgment on these claims would be improper prior to Plaintiffs' opportunity to obtain discovery on the issue of whether and to what extent these provisions were applied in denying the applications of any Plaintiffs. The Government has acknowledged that the (c)(4) Regulation was applied in the denials, but has merely stated, without citation to any evidence, that the (c)(3) Revenue Procedure was not applied. Govt. MSJ, at 17, 20. Any evidence on this issue (which should be contained in the organizations' administrative files) is solely in the possession of the Government. Contrary to the Government's assertion, as explained more fully below, see infra, Parts III.C.2 & IV, this proceeding is the proper vehicle for Plaintiffs to obtain a remedy for any such application, as they have properly challenged the constitutionality of these provisions, and neither Section 74286 nor Section 7422 provides a remedy for the harm alleged here.

B. Plaintiffs' Equitable Claims in Counts IV through VII Are Not Based on Speculative Future Harm But Instead on the Ongoing Effects of the IRS's Targeting Scheme.

In order to establish standing, a plaintiff must show "(1) an injury in fact (2) fairly traceable to the alleged conduct of the defendant (3) that is likely to be redressed by the relief the plaintiff seeks." Halbig v. Burwell, 758 F.3d 390, 396 (D.C. Cir. 2014) (quoting Sprint Commc'ns Co. v. APCC Servs., Inc., 554 U.S. 269, 273-74 (2008) (quoting Lujan v. Defs. of Wildlife, 504 U.S. 555, 560-61 (1992)). Plaintiffs have alleged clear injury -- violation, including chilling, of theirs and others' First and Fifth Amendment rights -- from the IRS's discriminatory conduct, including its disparate treatment of Plaintiffs based on their viewpoints and/or associations. The declaratory and injunctive relief Plaintiffs have requested is the only means of redressing Plaintiffs' injuries, particularly since the Government maintains its recalcitrance, refusing to acknowledge the extent of its mistreatment of these Plaintiffs.

 

1. Counts IV and V

 

The Government's position that Plaintiffs lack standing to pursue their claims for equitable relief in Counts IV and V of their SAC, like its mootness argument, is based on the Government's misguided notion that those claims encompass IRS conduct only within the tax-exempt application process, as well as its misapplication of the relevant legal standards. To support its position, the Government has conflated the principles of mootness and standing. Rather than addressing the effects of the alleged violations (including whether and to what extent they are still affecting Plaintiffs), as required to satisfy the second prong of the voluntary cessation analysis, the Government twists the analysis and claims that Plaintiffs are complaining about speculative future harm, which they lack standing to do.

As explained above, Plaintiffs alleged that the Targeting Scheme is ongoing, including, at a minimum, monitoring of targeted organizations by the IRS (outside of the application process) for the same unlawful reasons that the targeting occurred in the first place. Pls. Stmt. Add'l Facts, ¶ 3 (citing SAC, ¶ 4). Additionally, they have identified herewith evidence to support this allegation, and which the Government has failed even to acknowledge. Consequently, Plaintiffs' complaints are hardly speculative in nature. Rather, Plaintiffs' claims clearly articulate present harm, for which the IRS is responsible, that can be redressed by this Court, to wit: as a direct result of having been discriminatorily targeted in the application process, Plaintiffs can expect to suffer (and in fact are in some cases currently suffering) additional harmful effects (i.e., not only the delay and heightened scrutiny to which they were previously subjected in the application process but also harm beyond that process). Whether such effects include that they will once again be subjected to a discriminatory application process, that they have been placed on a list for ongoing monitoring of their operations, that they have been grouped with other tax-exempt organizations that will automatically undergo audits at some future time, or that they will endure some other discriminatory treatment at the hands of the IRS, Plaintiffs do not yet fully know, and the Government has failed to address. Again, it is for this reason that the Government's motion should be denied, and, at the very least, Plaintiffs must be permitted to obtain necessary discovery to respond to the Government's mootness argument, but there can be no serious doubt that they have standing to do so.

The Government, in attempting to bolster its "absence of jurisdiction" arguments, cites to the D.C. Circuit's opinion remanding Plaintiffs' claims for equitable relief, but utterly ignores that court's express concerns about the effects of the alleged violation and the Government's failure to demonstrate that they have been completely and irrevocably eradicated. Thus, it is a blatant misreading of that opinion to suggest that the D.C. Circuit "understood Plaintiffs' Complaint to be limited to alleged harm that occurred during the application process." Gov. MSJ, at 34. Rather, the appellate court (1) clearly understood that Plaintiffs' allegations encompass ongoing harm flowing from the initial targeting and (2) expressly held that the Government's heavy burden in establishing mootness requires a showing that such ongoing harm, i.e., "the effects of the alleged violation," has been "completely and irrevocably eradicated." For all the reasons provided herein, the Government still has not done so.

Moreover, because Plaintiff PECAN is re-submitting its application seeking tax exemption (under 501(c)(3)), see Kent Decl., ¶ 3, PECAN undoubtedly has standing to pursue its claims concerning the treatment it can expect from the IRS in the application process.7See Halbig, 758 F.3d at 396 (explaining that so long as one plaintiff has standing for a claim, thecourt "need not consider the standing of the other plaintiffs to raise that claim") (quoting Mountain States Legal Found. v. Glickman, 92 F.3d 1228, 1232 (D.C. Cir. 1996)).

 

2. Counts VI and VII.

 

The Government's standing argument as to Counts VI and VII fails for much the same reasons as discussed above. The success of the Government's argument relies upon two erroneous, and entirely unsupported, assumptions: (1) that none of the Plaintiffs face imminent harm from application of the challenged regulation or procedure, see Gov't MSJ, at 20 (arguing that those plaintiffs whose applications have been granted face no harm from application of the provisions and that, for those 501(c)(3) Plaintiffs who have received proposed denials, the procedure was not applied in issuing their proposed denials), and (2) the 501(c)(4) Plaintiffs who have received proposed denials based on application of the challenged regulation have other remedies at law. The second argument is addressed below. See infra Sections III.C.2 & IV.

The Government's first position fails for obvious reasons. First, one Plaintiff is re-submitting its application for tax exemption. This Plaintiff's standing to challenge the procedure (Rev. Proc. 86-43) is indisputable. Second, the Government admits that the challenged § 501(c)(4) regulation was indeed applied in denying applicants seeking (c)(4) status, Gov't MSJ, at 21, such that these Plaintiffs unmistakably have standing to challenge the application of the regulation to their detriment. Third, the Government's contention that the procedure was not applied to Plaintiffs who have received proposed (c)(3) denials is unsupported by citation to any evidence. 8 Fourth, all Plaintiffs have clearly and sufficiently alleged past, present and future harm. As the allegations in the SAC make clear, much of the harm and injuries suffered by Plaintiffs have already occurred -- regardless of the status of their applications. See SAC ¶¶ 399-404 (asserting injuries suffered by all 501(c)(3) Plaintiffs -- those that have already been granted exemption, as well as those still awaiting a determination because all have been, or will be, subjected to heightened scrutiny as a result of the unclear standards set forth in 86-43, which permits, and even invites, arbitrary treatment and viewpoint -- discrimination); id. at ¶ 390 (asserting injuries suffered by all 501(c)(4) Plaintiffs -- those that have already been granted exemption, as well as those still awaiting a final determination). Accordingly, Plaintiffs have already suffered injury sufficient to confer standing. See United Presbyterian Church v. Reagan, 739 F.2d 1375, 1378 (D.C. Cir. 1984) (quoting Valley Forge Christian Coll. v. Americans United for Separation of Church & State, Inc., 454 U.S. 464, 472 (1982) (Article III standing requires a showing that the plaintiff "personally has suffered some actual or threated injury as a result of the illegal conduct of the defendant.")). Plaintiffs have unmistakably alleged, and Defendants have failed to dispute with any properly supported evidence, past harm through viewpoint-based targeting, heightened scrutiny, intrusive questioning, and exorbitant processing delays, which resulted in harm to both their economic and expressive interests. Plaintiffs have also alleged imminent harm through such things as having to re-apply for tax-exemption and thus be subjected to an allegedly discriminatory process, the IRS's continued monitoring of their operations for discriminatory reasons, and ongoing chilling effects from the Government's unconstitutional conduct. See Pls. Stmt. Add'l Facts, ¶¶ 1-3. See also, 2013 TIGTA Report, p. 12 (identifying same harms).

Much of this conduct is directly intertwined with the IRS's (erroneous) application of the vague regulation and revenue procedure. See, e.g., id. at 14-15 (noting that the (c)(4) regulations "do not clearly define how to measure whether social welfare is an organization's 'primary activity'" and linking this vagueness to some of the harms suffered by targeted organizations). See also 2015 TIGTA Report, at "Highlights" (noting that under the current (c)(4) regulations, "the IRS does not have a clearly defined test for determining whether an organization's request for exemption as a social welfare organization should be approved").

As the court in Reagan explained, a "chilling effect" constitutes actionable injury where "the plaintiff has unquestionably suffered some concrete harm (past or immediately threatened) apart from the 'chill' itself." 738 F.2d at 1378. Plaintiffs have demonstrated such harm. Additionally, Plaintiffs have clearly articulated ongoing harm from the challenged regulation and revenue procedure. See Pls. Stmt. Add'l Facts, ¶ 3; SAC, ¶¶ 385-87; 399-401 (alleging that 1.501(c)(4), et seq., and Revenue Procedure 86-43 violate the First and Fifth Amendment rights of Plaintiffs and others similarly situated 9 "by causing them to steer far wider of the zone of prohibited speech and expressive activity than if the boundaries were clearly marked"). While the regulatory provisions continue to affect Plaintiffs that have been granted tax exemption -- as they serve as the guidance used by the IRS to determine whether those organizations continue to qualify for exemption -- they also undeniably affect Plaintiff PECAN, as it is re-submitting its application and is in immediate jeopardy of having the vague procedure applied to it during the application process, clearly conferring standing to challenge these provisions.

C. Plaintiffs' Claims in Counts VI and VII Are Ripe For Review.

The Government's argument regarding ripeness, or lack thereof, is meritless. The two-pronged test for ripeness "requires a court to evaluate 'both the fitness of the issues for judicial decision and the hardship to the parties of withholding court consideration.'" Better Gov't Ass'n, 780 F.2d at 92 (quoting Abbott Labs. v. Gardner, 387 U.S. 136, 149 (1967)).

 

1. Plaintiffs' facial challenges

 

As the D.C. Circuit's opinion in Better Government Association clearly establishes, Plaintiffs' facial challenges to both the regulation and procedure are fit for judicial decision, and the hardship necessary to establish ripeness is present. In that case, the court explained that a facial challenge to a government regulation typically raises a purely legal question and is, thus, presumed suitable for judicial review, especially where (1) no further factual development would facilitate the court's determination, 780 F.2d at 92 (explaining such is the case with a facial challenge to a regulation), and (2) the agency action in question has taken its "final form." Id. at 93 (explaining that where agency regulations have been in effect well over two years and it is clear the agency will continue to utilize the regulations (even informal regulations), they "must be viewed as final in our analysis of ripeness"). These requirements are met where, as here, absolutely no further factual development is necessary for the Court to determine whether these regulations -- clearly in their final form10 -- are unconstitutionally vague.

Similarly, the hardship suffered by Plaintiffs absent adjudication on this issue is "direct" and continues "to affect the day-to-day business of [Plaintiffs,]" i.e., those that had the rules applied to them to their detriment (i.e., resulting in a denial or proposed denial of tax exempt status), those re-applying, and those required to attempt to conform their activities to these requirements to ensure continued tax-exempt status. See id. at 93 (finding hardship where the statutory provision would have effect on day-to-day business of appellants). See also Munsell v. Dep't of Agric., 509 F.3d 572, 586 (D.C. Cir. 2007) (recognizing concrete hardship where party "is required to engage in, or to refrain from, any conduct") (internal quotation and citations omitted). The hardship here thus includes, but also comprises much more than, the "mere attach[ment of] tax consequences." See Gov't MSJ, at 23.

 

2. Plaintiffs' as-applied challenges.

 

For much the same reasons, Plaintiffs bringing as-applied challenges, including those that have received a proposed denial, have a ripe claim. Once again, ignoring recent precedent, see Z Street v. Koskinen, 791 F.3d 24, 31 (D.C. Cir. 2015) (recognizing that the harm alleged and suffered by Plaintiffs in experiencing an unfair process is distinctly different from and cannot be remedied by Sections 7428 and 7422), the Government argues that Plaintiffs must now file such an action in order to satisfy the finality and hardship requirements for ripeness. See Gov't MSJ at 23 (arguing that only after a final denial of tax exempt status and a suit under 7428 would Plaintiffs' claims be final and "hardship" established). See also infra Section IV for further discussion. But, as in Z Street, it is not the denial (i.e., end result) that Plaintiffs seek to redress in challenging the regulations. Rather, it is the process -- i.e., arbitrary and discriminatory considerations by the Government made possible, in part, by the challenged regulations -- Plaintiffs seek to address and correct. See SAC, ¶¶ 385-391, 399-404. Accordingly, a concrete denial is not necessary to demonstrate hardship. As the courts in Better Government Association and American Federation of Government Employees v. Federal Labor Relations Authority explained, where, as here, Plaintiffs claim that the unconstitutional regulations have been applied, and continue to be applied, to them by the IRS, there is a current "impairment of rights." Better Gov't Ass'n, 780 F.2d at 93-94; American Fed'n of Gov't Emps., 750 F.2d 143, 145(1984). For this reason, the Government's argument that no hardship is suffered by Plaintiffs unless and until they pay a tax, see Gov't MSJ, at 23, is simply incorrect.

 

IV. COUNTS VI AND VII STATE VIABLE APA CLAIMS.

 

 

The Government's argument that Plaintiffs have other adequate remedies in court to address their challenges to the regulations (Counts VI and VII), such that they are barred by the APA, is erroneous and relies, once again, upon a mischaracterization of Plaintiffs' claims. "The court must give the APA hospitable interpretation such that only upon a showing of clear and convincing evidence of a contrary legislative intent should the courts restrict access to judicial review." Garcia v. Vilsack, 563 F.3d 519, 522 (D.C. Cir. 2009). Applicable precedent confirms that the requirement of "final agency action for which there is no adequate remedy in a court," see Gov't MSJ, at 24 (quoting 5 U.S.C. § 704), has been met here with regard to all Plaintiffs andserves as no bar to the broad grant of judicial review under the APA. There is no adequate legal remedy "of the 'same genre,'" see Garcia, 563 F.3d at 522, available to any category of Plaintiffs, i.e., (1) those who have received a favorable determination, but still wish to challenge the unconstitutional process to which they were subjected and, crucially, the continued application of the challenged provisions to which their organizational activities are required to conform, (2) Plaintiff PECAN with its re-submitted application for exemption, (3) those whose applications for exemption have been denied (or have received a proposed denial), and (4) those who withdrew their applications specifically because of the IRS's misconduct, which included application of the challenged provisions.

The first category of Plaintiffs -- those whose applications have been granted but who still wish to challenge the unconstitutional process of the determination and the ongoing application of the provisions to their operational activities -- have no alternative remedy. This point is seemingly conceded by the Government (see generally, Gov't MSJ, at 23-25) (devoid of any such argument regarding this category of Plaintiffs), and is confirmed by case law. Just as in South Carolina v. Regan, 465 U.S. 367 (1984), and Z Street, these Plaintiffs have no statutory procedure to contest the constitutionality of the regulations. See Regan, 465 U.S. at 380 (concluding the AIA was no bar to the state's action where it was clearly unable to utilize any statutory procedure to contest the constitutionality of an amendment to the Internal Revenue Code because it had paid no taxes); Z Street, 791 F.3d 24 (concluding the same where Z Street sought to challenge the unconstitutional process and delay caused by the IRS "Special Israel Policy" not the determination itself).

Additionally, Z Street has rejected the very argument the Government seeks to make regarding all other Plaintiffs. As the court in Z Street clarified, the remedies offered by sections 6213 (deficiency petition) and 7422 (refund suit) are insufficient because under either provision, the court would be limited to reviewing the taxpayer's liability, not the allegedly unconstitutional process or delay in processing Z Street's application. 791 F.3d at 31. Further, the mere fact that a Plaintiff could bring a 7428 action, does not disqualify it from pursuing a constitutional challenge here to address the processing of applications, rather than the determination itself. Z Street, 791 F.3d at 32. And, like the Z Street court, see id. at 31, the Government itself acknowledges the limitations of such a proceeding as merely one for "a declaration of . . . tax status." Gov't MSJ, at 16, n.13; id. at 24.11

Another problem with, and fatal flaw of, the Government's argument and proposed "alternative remedies" is that they would all require a Plaintiff to appeal and/or reject the ultimate determination. Any of the three actions proposed by the Government would only provide a select group of Plaintiffs -- those whose applications were denied -- with the opportunity to challenge the regulations. Even then, those Plaintiffs' challenges would be limited. As the Supreme Court has noted, "the Tax Court is a court of limited jurisdiction and lacks general equitable powers." Commission v. McCoy, 484 U.S. 3, 7 (1987) (per curiam). See also, Cohen v. United States, 650 F.3d 717, 732 (D.C. Cir. 2011) (en banc) (explaining that tax refund suit would provide only individualized, retroactive relief, and not the ability to challenge prospective application of a regulation or policy); Halbig, 758 F.3d at 394 (explaining that a tax refund suit is "inadequate as an alternative remedy: it is 'doubtful' that it offers prospective relief at all, and the monetary relief it does offer is clearly not "of the same genre" as the relief available to appellants under the APA"). The court's decision in Cohen forecloses any remaining doubt on this issue. There, the court rejected the IRS's argument that a suit challenging administrative procedures could be properly challenged in a 7422 action:

 

§ 7422 does not apply. This is not a suit 'for the recovery of any internal revenue tax alleged to have been erroneously or illegally assess or collected. . . . This suit is an APA action; it questions the administrative procedure by which the IRS allows taxpayers to request refunds for the wrongfully collected excise tax. Moreover, § 7422 would not provide Appellants the equitable relief they seek. Section 7422 . . . does not, at least explicitly, allow for prospective relief.

 

650 F.3d at 732.

Finally, under any of the three actions proposed by the Government, the Government could moot Plaintiffs' claims before Plaintiffs had an opportunity to obtain adjudication on the constitutional challenges -- effectively preventing Plaintiffs, as it has sought to do at every turn in this case, from ever challenging the Government's illegal conduct.12

 

V. THE RELIEF SOUGHT IN COUNTS VI AND VII IS NOT PRECLUDED BY THE

 

AIA OR DJA.

 

 

The Government's argument that the Declaratory Judgment Act ("DJA") and the Anti-Injunction Act ("AIA") preclude review of Treasury Regulation Section 1.501(c)(4)-1 and Revenue Procedure 86-43 reflects overly-broad, outdated interpretations of the DJA and AIA, and hinges upon the faulty premise that Plaintiffs' requests to enjoin application of the challenged regulations "go directly to the determination of Plaintiffs' tax exempt status -- and thus whether they owe federal taxes." Gov't MSJ, at 26.

The IRS's application of discriminatory criteria and its attendant delay and demands for unnecessary confidential information are inconsequential to whether Plaintiffs owe federal taxes. Undisputedly, Plaintiffs' political beliefs are irrelevant to their tax statuses. Accordingly, enjoining the IRS from engaging in these activities and/or declaring the criteria used in that process as unconstitutional would in no way restrain the assessment or collection of any tax.

While the DJA by its terms prohibits a federal court from entering a declaratory judgment "with respect to Federal taxes other than actions brought under section 7428 of the Internal Revenue Code," the AIA more narrowly prohibits suits "for the purpose of restraining the assessment or collection of any tax." Because the two statutes ultimately serve similar functions, the jurisdictional bars of the provisions are read "coterminously," such that the more narrow prohibition in the AIA governs the interpretation of both statutes. Cohen, 650 F.3d at 727. By its terms, the AIA only applies if a suit seeks to "restrain[ ] the assessment or collection" of a "tax. The word "restrain" modifies "assessment or collection," not "tax." 13 Accordingly, the AIA does not bar every suit that "will ultimately affect the money Treasury retains." Id. at 726. Instead, "[t]he AIA has almost literal effect: It prohibits only those suits seeking to restrain the assessment or collection of taxes." Id. at 724 (quotation marks omitted).

The invalidation of either the revenue procedure or regulation challenged by Plaintiffs in this case would in no way "restrain" the assessment or collection of any tax. The IRS determines tax-exempt status pursuant to 26 U.S.C. §§ 501(a) and (c)(3)-(4). The statutes to which the challenged procedure and regulation relate are self-executing. Accordingly, the invalidation of the regulation or procedure would have no effect on whether the IRS could assess or collect any tax; it would merely prevent the IRS from continuing to deny or revoke tax-exempt status through an unconstitutional process. See Z St., 791 F.3d at 29 (explaining that the AIA is not an obstacle to claims seeking to enjoin the IRS simply because of an attenuated connection to the broader regulatory scheme); Seven-Sky v. Holder, 661 F.3d 1, 9 (D.C. Cir. 2011), cert. denied, 133 S. Ct. 63 (2012) (the AIA does not bar suits to enjoin regulatory requirements that bear no relation to tax revenues or enforcement).

In Cohen, the D.C. Circuit rejected the IRS's contention that the "assessment or collection of any tax" should be read to broadly encompass anything tangentially related to the "single mechanism" of tax assessment or collection that ultimately determines the amount of revenue the Treasury retains. Id. at 726 (explaining that "the Supreme Court rejected" the IRS's "'single mechanism' theory of assessment and collection . . . choosing instead to define 'assessment and collection'" more narrowly "as is done in the Internal Revenue Code"). The court emphasized that "'[a]ssessment' is not 'synonymous with the entire plan of taxation,' but rather with 'the trigger for levy and collection efforts,'" and that "'collection' is the actual imposition of a tax against a plaintiff." Id. at 726 (emphasis added). On this basis, the court explained that the AIA is no obstacle to other claims seeking to enjoin the IRS, regardless of any attenuated connection to the broader regulatory scheme." Id. at 727.

The D.C. Circuit's decision in Cohen was not the first time the court had held that a claim against the IRS is not barred by the AIA when it seeks relief that would not restrain the assessment or collection of any tax. As the D.C. Circuit observed in Cohen, id. at 726-27, it had previously so held in We the People Foundation, Inc. v. United States, 485 F.3d 140, 143 (D.C. Cir. 2007), a case concerning First Amendment claims. In We the People, the plaintiffs had submitted extensive lists of inquiries to various government agencies seeking answers to, among other subjects, what the plaintiffs perceived as the government's "violation of the taxing clauses of the Constitution." 485 F.3d at 141. After the plaintiffs' inquiries went unanswered, some of the plaintiffs protested by refusing to pay their income taxes. Id. Based on their view that the Government did not sufficiently respond to their petitions, the plaintiffs filed suit in the United States District Court for the District of Columbia, raising two claims. Id.

First, the plaintiffs argued that the Government violated their First Amendment right to petition the government for a redress of grievances by failing to adequately respond to their petitions. Id. at 141. As relief, the plaintiffs sought to require the government to provide "documented and specific answers" to the questions posed in the petitions. Id. 141-42. Second, the plaintiffs alleged that the government, by seeking to collect the plaintiffs' unpaid taxes, had retaliated against the plaintiffs' exercise of their First Amendment rights. Id. at 142. In connection with the second claim, the plaintiffs sought to prevent the government from collecting taxes from them. Id.

In analyzing whether the AIA deprived the court of jurisdiction, the D.C. Circuit noted the distinction between the relief sought in each claim. The court characterized the first claim as a "straight" First Amendment Claim because it sought only to vindicate First Amendment rights and did not seek relief that would restrain the assessment or collection of any tax. See id. at 143. Conversely, the D.C. Circuit characterized the plaintiffs' second claim as merely a tax collection claim "couched" in "constitutional terms" because it directly sought to restrain the collection of the plaintiffs' taxes. Id. at 142-43. On these grounds, the D.C. Circuit held that the "straight" First Amendment claim was not barred by the AIA, while the tax claim merely couched in constitutional terms was. Id. In expounding on the analysis in We the People, the Cohen court explained that, to determine whether a claim constitutes a true First Amendment claim or a tax collection claim "merely couched in constitutional terms," a court must engage in "a careful inquiry into the remedy sought, the statutory basis for that remedy, and any implication the remedy may have on assessment and collection." Cohen, 650 F.3d at 727; Z St., 791 F.3d at 29.

The cases relied upon by the Government -- Bob Jones University v. Simon, 416 U.S. 725 (1974) and the companion case of Alexander v. Americans United Inc., 416 U.S. 752 (1974), for its proposition that the AIA bars the relief sought in this case -- are inapposite here. 14 In Bob Jones and Americans United, the plaintiffs filed preemptive suits seeking declaratory and injunctive relief to prevent the IRS from revoking their tax-exempt statuses. Appropriately, the Court determined that the "primary purpose" of the lawsuits was to "prevent the Service from assessing and collecting income taxes." 416 U.S. at 738. 15 With respect to the plaintiffs' constitutional claims, the Court found "no evidence" that the IRS position was other than a "good-faith effort to enforce the technical requirements of the tax laws. . . ." Id. at 740.16

The facts in this case are distinguishable for obvious reasons. Plaintiffs have alleged that the Government perpetrated a politically-motivated Targeting Scheme that violated Plaintiffs' First and Fifth Amendment rights. In pursuing its Targeting Scheme, the IRS deployed criteria clearly not relevant to the assessment or collection of any taxes owed by Plaintiffs. The SAC and the 2013 TIGTA Report state that the criteria applied in the IRS Targeting Scheme focused on Plaintiffs' names, missions and perceived political and philosophical positions and associations. See generally, SAC. See also Pls. Stmt. Add'l Facts, ¶¶ 5-6, 9. Furthermore, the SAC alleges that pursuant to the IRS Targeting Scheme, the IRS demanded that Plaintiffs produce information and confidential materials that in no way relate to the determination of their eligibility for tax-exempt status or, thereby, the assessment or collection of taxes. See id. at ¶¶ 5-6. These factual allegations demonstrate that the IRS's actions in adopting and implementing the Targeting Scheme did not represent "a good-faith effort" to enforce the tax laws. Enjoining the IRS from further employing the IRS Targeting Scheme and declaring the criteria used, including the challenged regulatory provisions, as unconstitutional would provide Plaintiffs a remedy for the harm caused by Defendants' constitutional violations but would -- by definition -- in no way interfere with the assessment or collection of any taxes.

Moreover, even if Counts VI and VII sought relief that would restrain the assessment or collection of a tax, such claims against the IRS would not be precluded because they qualify under the judicially-created exception to the AIA, set forth in Enochs v. Williams Packing & Navigation Company, 370 U.S. 1, 7 (1962). Under the Williams Packing exception, an injunction that would restrain the assessment or collection of a tax will not be barred by the AIA if the plaintiff 1) has alleged the threat of irreparable harm and 2) lacks an adequate remedy at law. Id. at 7; see also Regan, 465 U.S. at 374; Nat'l Taxpayers Union v. United States, 68 F.3d 1428, 1436 (D.C. Cir. 1995); Z Street, 791 F.3d at 31. Both factors exist here.

Despite the Government's attempts to disavow any mistreatment of these Plaintiffs, see generally, Answer (Doc. 119) and Gov't MSJ filings (Docs. 113, 113-2, 113-4), the evidence confirms that the IRS targeted conservative organizations, which included Plaintiffs, in the context of their applications for tax-exempt status based solely on their perceived political viewpoints. See, e.g., 2013 TIGTA Report; 2015 Bipartisan Investigative Report. Because such blatant viewpoint discrimination constitutes a plain violation of Plaintiffs' First and Fifth Amendment rights, and the IRS's discriminatory scheme included application of the regulatory provisions (challenged both as a part of the overall Targeting Scheme, as well as for their own constitutional deficiencies and consequent violation of First Amendment rights), it is clear that under no circumstances could the Government ultimately prevail against Counts VI and VII on the merits. See, e.g., Lamb's Chapel v. Ctr. Moriches Union Free Sch. Dist., 508 U.S. 384, 394 (1993) ("The principle that has emerged from our cases 'is that the First Amendment forbids the government to regulate speech in ways that favor some viewpoints or ideas at the expense of others.'") (citation omitted).

The Government also does not contest the fact that Plaintiffs have sufficiently pleaded the threat of irreparable harm in Counts VI and VII. The Government would be hard pressed to advance any argument to the contrary, since it is well settled that "[t]he loss of First Amendment freedoms, for even minimal periods of time, unquestionably constitutes irreparable injury." Elrod v. Burns, 427 U.S. 347, 373 (1976).

The Government's only possible defense to the Williams Packing exception hinges on its contention that Plaintiffs have other adequate remedies at law -- a possibility which Plaintiffs have demonstrated above is foreclosed. See supra Section IV. See also Bob Jones Univ., 416 U.S. at 740 (finding that the tax system provided an adequate remedy in that case only because there was "no evidence" that the IRS acted other than in "good faith"). In other words, Bob Jones stands for the proposition that the Internal Revenue Code provides an adequate remedy at law only when the tax system is being administered by the IRS fairly and in good faith. 17 In this case, Plaintiffs have brought forth ample evidence of bad faith. The bad faith was so apparent that the IRS itself publicly apologized. Under these circumstances, the Internal Revenue Code does not provide an adequate remedy at law, Z Street, 791 F.3d at 31-32, and the Government can find no refuge in the AIA or DJA, as it has no hope of defending its conduct on the merits.

 

VI. THIS COURT HAS JURISDICTION TO CONSIDER PLAINTIFFS'

 

CLAIMS REGARDING ONGOING AND/OR FUTURE HARM.

 

 

As explained supra Part III.B, Plaintiffs' complaints about so-called future harm (i.e., post-application discrimination, such as ongoing monitoring, audits, etc., based on their viewpoints and/or associations) are actually complaints about the ongoing effects of the Targeting Scheme, the permanent cessation of which the Government has failed to confirm. Even if Plaintiffs' claims were deemed to seek relief for future harm, however, contrary to the Government's contentions, such harms are adequately pleaded and constitute far more than simply "unfounded conjectures." A threatened injury is sufficient to establish standing so long as the "injury is not too speculative." Clapper, 133 S. Ct. at 1147 (citing Lujan, 504 U.S. at 560-51)). Allegations of future harm meet standing requirements where the injury alleged is "certainly impending" or there is a "substantial risk" that it will occur. Id.

Indeed, unlike any of the cases relied upon by the Government, the harms alleged by Plaintiffs have been acknowledged by Congress, TIGTA and the Government Accounting Office (GAO) to be valid and, in many cases, "imminent." See Pls. Stmt. Add'l Facts, ¶ 8 (IRS then-Director of EO Rulings & Agreements affirmed that even after granting tax-exempt status to organizations, because of their names and policy positions, the IRS intends to continue surveillance and scrutiny of the activities of these organizations); ¶¶ 10-13 (highlighting evidence contained in government investigative reports identifying deficiencies that continue to allow the IRS to review and examine exempt organizations based on the criteria of viewpoint); ¶ 27 (noting as recently as the end of last year that, following "a series of [six] nonpartisan reviews" conducted by the GAO, "the IRS [still] has not taken sufficient steps to prevent targeting Americans based on their personal beliefs").

The Lujan decision offers no help to the Government here because Plaintiffs -- unlike the respondents in Lujan -- are the very parties who have been injured, see 504 U.S. at 555 (noting the party himself must be among the injured), and have clearly alleged much more than "past exposure to illegal conduct." See supra, Section III.B (full discussion of harms alleged and how these harms constitute "continuing, present adverse effects," Lujan, 504 U.S. at 564, including the chilling of First Amendment rights, sufficient to establish standing).

Similarly, unlike in Clapper, Plaintiffs have amply demonstrated that they were (and likely still are) the targets of IRS discrimination. Cf. 133 S. Ct. 1148 (finding prospect of future harm too remote because respondents/plaintiffs failed to offer evidence that their communications had been monitored, and "had no actual knowledge of targeting practices"). Indeed, the IRS has admitted to at least some of the discriminatory conduct of which Plaintiffs complain, and the Government (Congress, TIGTA and the GAO) has confirmed not only that the unlawful conduct (both pre and post-application) did occur, but also that the likelihood it is still occurring, far from being speculative, is actually supported by investigative evidence. Plaintiffs have thus unequivocally demonstrated "actual knowledge of targeting practices," id., and are not merely "predicting future events," see Gov't MSJ at 31 (quoting Arpaio v. Obama, 797 F.3d 11, 14 (D.C. Cir. 2015)).

Accordingly, until the Government has satisfied its burden to demonstrate that all viewpoint-and/or association-based discriminatory conduct against Plaintiffs has permanently ceased and cannot reasonably be expected to recur -- a task it has utterly failed thus far -- the harm is certain and ongoing, Plaintiffs' claims are ripe (as the identified harms are not "too attenuated," Gov't MSJ, at 33, and the hardship to Plaintiffs absent this Court's intervention -- i.e., ongoing discriminatory treatment by the IRS -- is readily apparent for the Plaintiff re-submitting its application for tax exemption, those Plaintiffs still in the administrative process, and the remaining Plaintiffs threatened with the types of post-application discrimination identified by Congress and the GAO, including continuing application of the vague regulatory provisions), and they have standing to pursue them.

 

CONCLUSION

 

 

The Government's attempt to moot this case by admitting only to the conduct identified in the 2013 TIGTA Report yet failing to address (1) the discriminatory treatment any specific Plaintiff herein received at the hands of the IRS, (2) any ways in which it has cured the deficiencies that remained as of the 2015 TIGTA Report, the 2015 GAO Report, and the 2015 Senate Finance Committee Bipartisan Investigative Report, or (3) the discriminatory treatment Plaintiffs can reasonably expect to receive in the absence of clear prohibitions against the very conduct of which they have complained and for which they have now introduced supporting evidence, necessitates denial of its motion for summary judgment based on mootness. The facts set forth in Plaintiffs' Statement of Additional Material Facts dictate the same result, as they demonstrate genuine disputes as to material facts precluding summary judgment.

At a minimum, this Court should withhold its ruling on the Government's motion as to mootness and permit Plaintiffs to obtain the discovery set forth in the accompanying Rule 56(d) Declaration in order to dispute many of the material facts related to the Government's mootness argument.

The Government's additional arguments are without merit and its motion should be denied to the extent it relies on a purported lack of standing, lack of ripeness, or failure to state a viable claim.

Dated: January 9, 2017

Respectfully submitted,

 

 

Jay Alan Sekulow, Counsel of Record

 

(D.C. Bar No. 496335)

 

Stuart J. Roth (D.C. Bar No. 475937)

 

Andrew J. Ekonomou*

 

Jordan A. Sekulow (D.C. Bar No. 991680)

 

Robert W. Ash*

 

Carly F. Gammill (D.C. Bar No. 982663)*

 

Abigail A. Southerland*

 

Miles L. Terry (D.C. Bar No. 1011546)*

 

AMERICAN CENTER FOR LAW & JUSTICE

 

201 Maryland Avenue, NE

 

Washington, DC 20002

 

Tel. (202) 546-8890

 

Fax (202) 546-9309

 

sekulow@aclj.org

 

Julian A. Fortuna*

 

Taylor English & Duma, LLP

 

1600 Parkwood Circle, Suite 200

 

Atlanta, GA 30339

 

Tel. (770) 434-6868

 

Fax (770) 434-7376

 

Jfortuna@taylorenglish.com

 

 

Counsel for Plaintiffs

 

*Admitted pro hac vice

 

FOOTNOTES

 

 

1 The term "Government," as used herein, includes all federal defendants, including the United States and all agencies and officers thereof, sued in their official capacities in this litigation, all of whom are named defendants and should remain so. See, 5 U.S.C. § 702 ("[A]ny . . . injunctive decree shall specify the federal officer or officers (by name and title), and their successors in office, personally responsible for compliance.").

2 Plaintiffs also requested "a mandatory injunction compelling Defendant Secretary of the Treasury to immediately issue a determination regarding the qualification of [Plaintiffs with outstanding 501(c)(4) applications] . . . for exemption from taxation." SAC, Prayer for Relief, ¶ D(iii). This Court granted Plaintiffs this relief in its Order of October 14, 2016 (Doc. 108).

3 The Government has said only that "the ROO [Review of Operations] will no longer accept referrals from EO Determinations" and that "the former ROO employees' only responsibility is the review of hospital organizations' compliance with the Affordable Care Act." Ripperda Decl., ¶ 18. It has failed to confirm whether any Plaintiff was previously referred for a review of its operations, whether there is any other group within the IRS that is receiving referrals from EO Determinations for operational reviews, and whether any Plaintiff organization is, or can be expected to be, subject to such review based on its name, policy position(s), and/or associations.

4 Specifically, Plaintiffs allege that the undefined terms "primary activity" and "intervention" fail to provide the necessary guidance to Plaintiffs and similarly situated organizations, as well as to government officials tasked with enforcing and applying these provisions. The failure to define these terms causes Plaintiffs and similarly situated organizations "to steer far wider of the zone of prohibited speech and expressive activity than if the boundaries were clearly marked," SAC, ¶ 387, and "invites arbitrary and discriminatory application and enforcement by government officials." Id. at ¶ 388.

5 Specifically, Plaintiffs allege that the challenged Revenue Procedure is unconstitutionally vague in its description of circumstances that will render an organization unqualified for tax-exempt status as an educational organization under section 501(c)(3), also chilling the expressive activities of Plaintiffs and others similarly situated. SAC, ¶¶ 399-401.

6 The Government has conceded that Section 7428 limits a plaintiff to bringing only "a suit for a declaration of its tax status. . . ." Gov't MSJ, at 16, n.13. See also id. at 24 (same).

7See Clapper v. Amnesty Int'l USA, 133 S. Ct. 1138, 1147 (2013) (noting that injury in fact requirement is met so long as harm is "certainly impending" or not "too speculative") (citing Lujan, 504 U.S. at 560-51). See Kent Decl., ¶ 3 (stating that PECAN is currently preparing tax-exempt application to be filed imminently).

8 While the Government asserts that the 501(c)(3) Plaintiffs face no threat of imminent harm from Rev. Proc. 86-43 because it was not applied by the IRS in issuing proposed denials, the record is completely devoid of any such proof. See Gov't SUMF (Doc. 113-2) (completely lacking citation to evidence to support position that Rev. Proc. 86-43 was never applied to 501(c)(3) Plaintiffs). See also Ripperda Decl. (Doc. 113-4) (same).

9 Because Plaintiffs have alleged that these regulatory provisions violate the First Amendment rights of both Plaintiffs and "others similarly situated" in that they "cause them to steer far wider of the zone of prohibited speech and expressive activity than if the boundaries were clearly marked," SAC, ¶¶ 387, 400, Plaintiffs have properly alleged facial overbreadth and have standing to pursue these claims on behalf of third parties. See, e.g., Broadrick v. Oklahoma, 413 U.S. 601, 612 (1973) (explaining that in First Amendment context, "[l]itigants . . . are permitted to challenge a statute not [only] because their own rights of free expression are violated, but [also] because of a judicial prediction or assumption that the statute's very existence may cause others not before the court to refrain from constitutionally protected speech or expression." (Emphasis added). See also New York Republican State Comm. & Tenn. Republican Party v. SEC, 799 F.3d 1126, 1135-1136 (D.C. Cir. 2015) ("We recognize the importance of the right tobring pre-enforcement First Amendment claims. For many decades, the courts have shown special solicitude to pre-enforcement challenges brought under the First Amendment, relaxing standing requirements and fashioning doctrines, such as overbreadth and vagueness, meant to avoid the chilling effects that come from unnecessarily expansive proscriptions on speech.").

10 While the Government asserts that "[p]roposed regulations under § 501(c) relating to political campaign intervention are on the IRS's priority guidance plan," but the project has been halted due to congressional instruction, see Ripperda Decl., ¶ 21(c), this only serves to confirm that (1) the challenged regulation remains in its longstanding "final form," and (2) it is the regulation currently being applied to applicants and to which tax-exempt (c)(4) organizations (which includes Plaintiffs granted (c)(4) status) must conform their conduct. For these reasons, it is of paramount importance that this Court determine the constitutional validity of the currently operative regulation at issue here.

11 For this reason, the IRS's reliance on Big Mama Rag, Inc. v. United States, 631 F.2d 1030 (D.C. Cir. 1980), see Gov't MSJ, at 21, 25, to suggest that Plaintiffs may pursue an action under section 7428 and challenge the unconstitutionally vague regulations at that time, is also misplaced.

12 For example, in a 7428 action, the Government can effectively moot Plaintiffs' constitutional challenges to the regulations simply by conceding the qualification issue. Thus, if Albuquerque Tea Party and/or Tri-Cities Tea Party decide to bring Section 7428 actions, the Government may concede their tax exempt status and seek to avoid the constitutional and other statutory claims presented by these two Plaintiffs by arguing that their cases are moot just as it has done with respect to the other Plaintiffs in this case. Similarly, the IRS can prevent Plaintiffs entitled to relief under 7422 or 6212 from proceeding with their challenges to the regulations simply by refunding the taxes paid within six months, or refunding the taxes at any time during a 7422 action. See 26 U.S.C. § 6332 ("[n]o suit or proceeding under section 7422(a) for the recovery of any internal revenue tax, penalty, or other sum, shall be begun before the expiration of 6 months from the date of filing the claim required under such section unless the Secretary renders a decision thereon within that time"); Christian Coalition of Florida, Inc. v. United States, 662 F. 3d 1182, 1193 (11th Cir. 2011) (dismissing plaintiff's tax refund suit involving requests for declaratory and injunctive relief, in addition to a favorable determination under Section 501(c)(4), as moot following the IRS's refund of taxes after suit was filed -- even though the IRS continued to deny Plaintiff tax-exempt status).

13See, Hibbs v. Winn, 542 U.S. 88, 100 (2004) (adopting narrow interpretation of the phrase"assessment and collection" as used in the Tax Injunction Act (TIA), which was patterned after the AIA); Direct Marketing Ass'n v. Brohl, 135 S. Ct. 1124, 1132 (2015) (the word "restrain" modifies "assessment or collection," not "tax" in the TIA); Z St., 791 F.3d 24, 31 (TIA cases are applicable in interpreting the AIA because, as in Direct Marketing Ass'n, the Court "assume[s] that words used in both Acts are generally used in the same way").

14 The Government also relies upon Florida Bankers Ass'n v. U.S. Dep't of Treasury, 799 F.3d 1065 (D.C. Cir. 2015), cert. denied, 136 S. Ct. 2429 (2016), for the proposition that the AIA bars the relief sought in this case. However, that decision is not controlling because it was rendered by a divided panel in which neither the concurring nor the dissenting judges supported the proposition for which the Government cites the case. In fact, in her dissenting opinion Judge Henderson concluded that the Supreme Court's narrow interpretation in Direct Marketing Ass'n should have controlled the D.C Circuit's decision in Florida Bankers Ass'n, 799 F.3d. at 1076 (Henderson, J., dissenting).

15See Pendleton v. Heard, 824 F.2d 448, 451-52 (5th Cir. 1987) (restraining the assessment or collection of a tax must be the primary purpose of the lawsuit, not an incidental effect of it, for the AIA to apply) (emphasis added); Linn v. Chivatero, 714 F.2d 1278, 1282 (5th Cir. 1983) (same); Sorenson v. Sec'y of the Treasury, 752 F. 2d 1433 (9th Cir. 1985), aff'd, 475 U.S. 851 (1986) (AIA no bar to injunctive relief since taxpayers did not seek restraint on assessment or collection of tax); Oatman v. Dep't of Treasury, 34 F.3d 787 (9th Cir. 1994) (same).

16 As the D.C Circuit recently stated in Seven-Sky, the arguments in Bob Jones and Americans United to the effect that the AIA did not apply because their lawsuits were not brought for the purpose of impeding tax revenues were "defeated by [their] own pleadings, since the only injuries plaintiffs identified involved tax liability. It does not follow from those cases that plaintiffs can never bring a pre-enforcement challenge to a discrete regulatory requirement that imposes obligations unrelated to tax revenues. . . ." 661 F.3d at 10 (citations omitted).

17 Justice Blackmun, both in his concurring opinion in Bob Jones, 416 U.S. at 751, and in his dissenting opinion in the companion case of Americans United, Inc., 416 U.S. at 780 & 781 n. 16 (1974) (Blackmun, J., dissenting), went even further stating that the IRC did not provide an adequate remedy at law because of the "mere possibility" that "bad faith" on the part of the IRS could preclude an organization seeking recognition of its tax-exempt status from gaining access to the courts in a subsequent refund suit. Id. at 780. That "mere possibility" has sadly become a reality in this case.

 

END OF FOOTNOTES
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