Case 1:13-cv-00732-JDB Document 11 Filed 09/01/13 Page 1 of 20 IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA CITIZENS FOR RESPONSIBILITY AND ) ETHICS IN WASHINGTON ) ) Plaintiff, ) ) v. ) No. 1:13-cv-732-JDB ) U.S. DEPARTMENT OF THE TREASURY ) INTERNAL REVENUE SERVICE, et al. ) ) Defendants. ) POINTS AND AUTHORITIES IN SUPPORT OF THE UNITED STATES MOTION TO DISMISS CONTENTS I. OVERVIEW... 1 II. CREW S VAGUE ALLEGATIONS... 3 III. ARGUMENT... 3 A. CREW Must Establish Standing to Sue... 5 B. Merely Submitting a Rulemaking Petition Does Not Confer Standing... 6 C. CREW Has Not Established Article III Standing... 7 1. CREW Lacks Informational Standing... 8 2. CREW Has Not Shown Causation and Redressability... 11 D. CREW Does Not Have Prudential Standing... 14
Case 1:13-cv-00732-JDB Document 11 Filed 09/01/13 Page 2 of 20 AUTHORITIES Asterisked authorities are those on which the United States chiefly relies. Constitutional Provisions * U.S. Const. Art. III... passim Statutes 2 U.S.C. 431... 9 * 2 U.S.C. 434... 9 5 U.S.C. 553(e)... 6 * 5 U.S.C. 702... 15 26 U.S.C. 501(c)(3)... 13 26 U.S.C. 501(c)(4)... passim 26 U.S.C. 527(f)... 1 * 26 U.S.C. 6104... 10-11 26 U.S.C. 7401... 16 * 26 U.S.C. 7801(a)(1)... 15 Procedural Rules Fed. R. Civ. P. 12(b)(1)... 5 Fed. R. Civ. P. 12(b)(6)... 5 Cases Allen v. Wright,468 U.S. 737... 7 Am. Soc. for Prev. of Cruelty to Animals v. Feld, 659 F.3d 13 (D.C. Cir. 2011)... 11 * Am. Sports Council v. United States Dep't of Educ., 850 F. Supp. 2d 288 (D.D.C. 2012)... 2, 6 * Animal Legal Defense Fund, Inc. v. Espy, 23 F.3d 496 (D.C. Cir. 1994)... 9, 15 Clarke v. Securities lndus. Assn., 479 U.S. 388 (1987)... 14 Bennett v. Spear, 520 U.S. 154 (1997)... 5 * Buckley v. Valeo, 424 U.S. 1 (1976)... 10 * Chiron Corp. v. NTSB, 198 F.3d 935 (D.C. Cir. 1999)... 9, 11 * City of Orrville v. FERC, 147 F.3d 979 (D.C. Cir. 1998)... 4, 6 * Clapper v. Amnesty Int'l USA, --- U.S. ---, 133 S. Ct. 1138 (2013)... 5, 12 DaimlerChrysler Corp. v. Cuno, 547 U.S. 332 (2006)... 6 Elk Grove Unified Sch. Dist. v. Newdow, 542 U.S. 1 (2004)... 4 FEC v. Akins, 524 U.S. 11 (1998)... 8 First Nat'l Bank & Trust Co., 522 U.S. 479 (1998)... 15 * Fulani v. Brady, 935 F.2d 1324 (1991)... 16 ii
Case 1:13-cv-00732-JDB Document 11 Filed 09/01/13 Page 3 of 20 * Fund Democracy, LLC v. SEC, 278 F.3d 21 (D.C. Cir. 2002)... 6 * Gettman v. DEA, 290 F.3d 430 (D.C. Cir. 2003)... 4, 6, 7 Grocery Mfrs. Ass'n v. EPA, 693 F.3d 169 (D.C. Cir. 2012)... 14 Hydro Investors, Inc. v. FERC, 351 F.3d 1192 (D.C. Cir. 2003)... 6 * Int'l Primate Protection League v. Inst. for Behavioral Research, 799 F.2d 934 (4th Cir. 1986)... 15 Lewis v. Schafer, 571 F.Supp.2d 54 (D.D.C. 2008)... 6 * Lujan v. Defenders of Wildlife, 504 U.S. 555 (1985)... 3, 5, 14 Nat'l Fed'n of Fed. Employees v. Cheney, 883 F.2d 1038 (D.C. Cir. 1989)... 15 Nat'l Taxpayers Union v. United States, 68 F.3d 1428 (D.C. Cir. 1995)... 5 Ord v. District of Columbia, 587 F.3d 1136 (D.C. Cir. 2009)... 5 Sea Shore Corp. v. Sullivan, 158 F.3d 51 (1st Cir. 1998)... 5 * Simon v. E. Ky. Welfare Rights Org., 426 U.S. 26 (1976)... 12, 13, 14 * Twp. of Lyndhurst v. Priceline.com Inc., 657 F.3d 148 (3d Cir. 2011)... 16 United States v. AVX Corp., 962 F.2d 108 (1st Cir. 1992)... 6 * Wertheimer v. FEC, 268 F.3d 1070 (D.C. Cir. 2001)... 9 Administrative Materials * Federal Election Commission Notice 2007-3, Political Committee Status, 72 Fed. Reg. 5595, 5596 97 (Feb. 7, 2007).... 10 Treas. Reg. 1.501(c)(4)-(1), 26 C.F.R. 1.501(c)(4)-(1)... 1 iii
Case 1:13-cv-00732-JDB Document 11 Filed 09/01/13 Page 4 of 20 I. OVERVIEW Plaintiff, Citizens for Responsibility and Ethics in Washington [ CREW ], filed this suit after petitioning the Internal Revenue Service [the Service ] to amend Treas. Reg. 1.501(c)(4)-(1), 26 C.F.R. 1.501(c)(4)-(1), which explains the requirements for exemption from tax under Internal Revenue Code section 501(c)(4), 26 U.S.C. 501(c)(4). CREW asserts that section 501(c)(4), which exempts groups operating exclusively for the promotion of social welfare, does not apply to organizations that fund political campaigns. It claims the regulation improperly defines exclusively to mean primarily engaged in promoting in some way the common good and general welfare. 26 C.F.R. 1.501(c)(4)- (1)(a)(2). CREW asserts that the regulation allows groups to claim tax exempt status despite intervening in campaigns if such intervention is not their primary activity. 1 CREW contends that the regulation has enabled affected organizations to pour vast amounts of money into campaigns, and that this activity makes it difficult for CREW to disclose who is funding campaigns. (Compl. 6-10.) CREW petitioned the Service on April 9, 2013 to amend the regulation, and filed this suit 45 days later, claiming that the Service s failure to act by that date effectively constitutes a denial of that petition. (Compl. 31, 48.) It seeks an injunction against implementation of the regulation, and a writ of mandamus to the Service to modify the regulation. 1 By participating in political activities, groups that are exempt under section 501(c)(4) become partially subject to income tax. See 26 U.S.C. 527(f). 1
Case 1:13-cv-00732-JDB Document 11 Filed 09/01/13 Page 5 of 20 Because CREW lacks standing to litigate other organizations tax exempt status, it cannot obtain judicial review of the Service s treatment of its petition. 2 Even if the Service took adverse action on its petition, this procedural act does not grant CREW standing. Rather, CREW must prove it has Article III standing by showing that it suffered a concrete injury fairly traceable to the regulation and redressable by a favorable ruling. It also must demonstrate prudential standing by showing that its suit is contemplated by the Internal Revenue Code, which it seeks to enforce. It has failed to do so here. CREW has not alleged an informational injury, since its allegations do not identify any legal right to information that is burdened under any reading of section 501(c)(4). Further, its conclusory assertion that the regulation enables organizations to pour money into the political system does not show, beyond mere speculation, that that these organizations would act differently absent the regulation. Lastly, CREW lacks prudential standing to a suit seeking to impose tax on organizations that would otherwise be exempt, because the Internal Revenue Code vests exclusive enforcement authority in the Executive. The Court should therefore dismiss this suit for lack of subject matter jurisdiction. 2 Defendants also contend that the suit was premature, and that the Service s treatment of the rulemaking petition was not arbitrary or capricious, particularly given the deferential standard of review relating to rulemaking petitions, see Am. Sports Council v. United States Dep't of Educ., 850 F. Supp. 2d 288, 296 (D.D.C. 2012). Since CREW lacks standing, we do not address these issues any further here, but reserve our right to do so should the Court hold, contrary to our contention, that CREW has standing to bring this action. 2
Case 1:13-cv-00732-JDB Document 11 Filed 09/01/13 Page 6 of 20 II. CREW S VAGUE ALLEGATIONS Despite arguing at length about the alleged defects in the regulation, the complaint only gives a summary description of how the regulation allegedly impacts CREW. It makes a conclusory assertion that organizations relying on this regulation were able to pour vast amounts of anonymous money into the political system, but does not allege that they could not have done so if they were subject to income tax. (Compl 7.) It further contends that due to these groups involvement in politics, CREW was deprived of information critical to advancing its ongoing mission of educating the public. Id. Specifically, CREW alleges that these organizations are not subject to the disclosure requirements imposed on political committees by the Federal Election Campaign Act (FECA), but tellingly, CREW never alleges that the same organizations would be subject to these requirements if they were taxable entities. (Comp. 9.) III. ARGUMENT CREW, which bears the burden of establishing subject matter jurisdiction, including standing, has not demonstrated that it has constitutional and prudential standing to bring this suit. To have standing under U.S. Const. Art. III, a plaintiff must allege an injury in fact that is caused by the defendant s conduct at issue and can be redressed by a favorable decision. Lujan v. Defenders of Wildlife, 504 U.S. 555, 560-61 (1985). In addition, the plaintiff must demonstrate prudential standing to challenge the government action at issue by, inter alia, showing that its grievance fall[s] within the zone of interests 3
Case 1:13-cv-00732-JDB Document 11 Filed 09/01/13 Page 7 of 20 protected or regulated by the statute it seeks to enforce. Elk Grove Unified Sch. Dist. v. Newdow, 542 U.S. 1, 12 (2004). The grant of a procedural right to petition for rulemaking does not, in itself, provide standing to obtain judicial review of such petition; rather, CREW must demonstrate that it has constitutional and prudential standing. Gettman v. DEA, 290 F.3d 430, 434-35 (D.C. Cir. 2003); City of Orrville v. FERC, 147 F.3d 979, 985 (D.C. Cir. 1998). However, CREW fails to demonstrate that it has Article III and prudential standing. Its complaint does not establish Article III standing, which requires alleging a concrete injury fairly traceable to the regulation at issue and redressable by a favorable ruling. The only injury CREW alleges of is difficulty identifying contributors to organizations exempt under section 501(c)(4). But this allegation is not sufficient to demonstrate a cognizable informational injury to CREW that would grant it standing. Specifically, CREW fails to show that under any reading of section 501(c)(4), the regulation deprives it of information that it has a legal right to obtain. Further, to the extent CREW contends that the very involvement of organizations exempted under the regulation in the political process is the source of its injury, its allegations are too speculative to establish causation and redressability; they do not demonstrate that these organizations would cease their political activity if they lost their tax-exempt status. 4
Case 1:13-cv-00732-JDB Document 11 Filed 09/01/13 Page 8 of 20 A. CREW Must Establish Standing to Sue This Court s subject matter jurisdiction is constitutionally limited to cases and controversies, U.S. Const. Art. III cl. 2, an element of which is a plaintiff s standing to bring suit, Defenders of Wildlife, 504 U.S. at 560. [N]o principle is more fundamental to the judiciary s proper role in our system of government than the constitutional limitation of federal-court jurisdiction to actual cases or controversies. Clapper v. Amnesty Int l USA, --- U.S. ---, 133 S. Ct. 1138, 1146 (2013). The question of standing involves both constitutional limitations on federal court jurisdiction and prudential limitations on its exercise. Bennett v. Spear, 520 U.S. 154, 162 (1997) (internal quotation omitted). As the party invoking the Court s jurisdiction, CREW must establish standing. If, as here, the plaintiff is not himself the object of the government action or inaction he challenges, standing is not precluded, but it is ordinarily substantially more difficult to establish. Defenders of Wildlife, 504 U.S. at 562. It is well-recognized that the standing inquiry in tax cases is more restrictive than in other cases. Nat l Taxpayers Union v. United States, 68 F.3d 1428, 1434 (D.C. Cir. 1995). The standard of review on a Fed. R. Civ. P. 12(b)(1) motion is generally similar to the standard under Fed. R. Civ. P. 12(b)(6). Ord v. District of Columbia, 587 F.3d 1136, 1140 (D.C. Cir. 2009). The court accepts the plaintiff s allegations of fact but need not[]... credit bald assertions, subjective characterizations, optimistic predictions, or problematic suppositions. Sea Shore Corp. v. 5
Case 1:13-cv-00732-JDB Document 11 Filed 09/01/13 Page 9 of 20 Sullivan, 158 F.3d 51, 54 (1st Cir. 1998) (quoting United States v. AVX Corp., 962 F.2d 108, 114 (1st Cir. 1992)). Nor can speculative inferences establish standing. DaimlerChrysler Corp. v. Cuno, 547 U.S. 332, 344 (2006). The court need not accept a plaintiff s legal conclusions, A.N.S.W.E.R. Coalition v. Salazar, No. 05-71, 2013 U.S. Dist. LEXIS 5066 at *13 (D.D.C. Jan. 14, 2013), and may consider matters outside the pleadings. Lewis v. Schafer, 571 F.Supp.2d 54, 57-58 (D.D.C. 2008). Under this standard, CREW has not shown that it has standing. B. Merely Submitting a Rulemaking Petition Does Not Confer Standing CREW is purportedly suing over the Service s response to a rulemaking petition, but to have standing to obtain judicial review of the Service s response, it must show more than just an adverse response to its petition. Gettman v. DEA, 290 F.3d 430, 433-35 (D.C. Cir. 2002). See also Hydro Investors, Inc. v. FERC, 351 F.3d 1192, 1197 (D.C. Cir. 2003); Fund Democracy, LLC v. SEC, 278 F.3d 21, 27-28 (D.C. Cir. 2002); Am. Sports Council v. United States Dep't of Educ., 850 F. Supp. 2d 288, 293 (D.D.C. 2012). Although 5 U.S.C. 553(e) allows any interested person to petition an agency for rulemaking, a statute does not confer standing merely by granting a procedural right to petition an agency for a new rule. Gettman, 290 F.3d. at 433. Accord, Fund Democracy, 278 F.3d at 27-28 (grant of procedural right to any interested person at the administrative level does not provide Article III standing to seek judicial review of the agency s action). See also City of Orrville v. FERC, 147 F.3d 979, 985 (D.C. Cir. 1998) ( [A] party does 6
Case 1:13-cv-00732-JDB Document 11 Filed 09/01/13 Page 10 of 20 not acquire such a direct stake in a litigation simply by participating in the antecedent administrative proceedings whence the litigation arises; it must establish its constitutional and prudential standing. ). Thus, the D.C. Circuit has held that a plaintiff who could not demonstrate a concrete injury caused by the agency s response to his rulemaking petition lacked standing to obtain judicial review, even though a statute similar to section 553(e) expressly authorized the petition. Gettman, 290 F.3d at 434-35. Therefore, to obtain judicial review of the Service s response to its petition, CREW must establish its constitutional and prudential standing. Like the plaintiff in Gettman, CREW has not done so here, and therefore lacks standing to obtain judicial review. C. CREW Has Not Established Article III Standing CREW s allegations fail to establish any of the elements of standing under U.S. Const. Art. III. To establish constitutional standing, a plaintiff must allege (1) a concrete and particularized injury to a legally cognizable right (2) that is fairly traceable to the defendant s allegedly unlawful conduct and (3) will likely be redressed by the requested relief. Allen v. Wright, 468 U.S. 737, 750 751 (1984). Here, CREW alleges in a conclusory manner that groups relying on the regulation were able to pour vast amounts of anonymous money into the political system, and that it was therefore frustrated in its ability to disclose the identity of contributors to political campaigns. However, CREW s summary 7
Case 1:13-cv-00732-JDB Document 11 Filed 09/01/13 Page 11 of 20 and speculative allegations are insufficient to confer standing on CREW based on an informational injury. CREW has not shown that it has a legal right to the information that the regulation adversely impacts under any reading of section 501(c)(4). To the extent CREW complains that its injuries arise from the ability of organizations affected by the regulation to participate in the political process, such assertion is too speculative to establish causation and redressability, as CREW s allegations do not establish that these organizations would forego such participation if it would cause them to lose their tax exempt status. Accordingly, CREW has not shown that it has standing to bring this suit. 1. CREW Lacks Informational Standing Although courts have recognized that in certain circumstances, a plaintiff may have informational standing to file a suit that will allow it to obtain access to information, CREW s allegations concerning disclosure of donors do not establish that it has such standing. A plaintiff can demonstrate informational standing by properly alleging that it was denied information that must be disclosed under a statute [that] grants a plaintiff a concrete interest in the information. Nader v. FEC, No. 12-5134, 2013 U.S. App. LEXIS 15932 at *6 (D.C. Cir. Aug. 2, 2013) (citing FEC v. Akins, 524 U.S. 11 (1998)). Here, CREW complains that it cannot obtain disclosure of contributors to organizations that claim tax-exempt status under section 501(c)(4) while participating in political 8
Case 1:13-cv-00732-JDB Document 11 Filed 09/01/13 Page 12 of 20 campaigns. (Compl. 6-10.) It further contends that section 501(c)(4) organizations are not required to disclose their contributors. Id. 7, 22. However, these allegations do not show that CREW has a legal right to the contributor information it seeks, or that such right is impacted by the regulation. CREW has not demonstrated that it has informational standing because it has not demonstrated that it is being deprived of any information in which a statute grants it a concrete interest. CREW cites no statute that (1) imposes a duty to disclose the identity of contributors and (2) is implicated by any reading of section 501(c)(4). Informational standing requires that a statute have explicitly created a right to information. Animal Legal Defense Fund, Inc. v. Espy, 23 F.3d 496, 502 (D.C. Cir. 1994). A plaintiff must identify statutes, regulations, or other sources of law that require the information to be disclosed. Chiron Corp. v. NTSB, 198 F.3d 935, 942 (D.C. Cir. 1999). The plaintiff must then demonstrate that it is directly being deprived of this information. Wertheimer v. FEC, 268 F.3d 1070, 1074 (D.C. Cir. 2001). Here, the only statute requiring disclosure to which CREW cites, the Federal Election Campaign Act (FECA), 2 U.S.C. 431 et seq, does not create a right to information about contributors that is affected by an organization s tax exempt status. FECA requires disclosure of contributors by certain organizations based on the nature of their activities, but not based on their classification as taxable or nontaxable. See 2 U.S.C. 434(a) & (b) (requiring disclosure of 9
Case 1:13-cv-00732-JDB Document 11 Filed 09/01/13 Page 13 of 20 contributors by a political committee ); Buckley v. Valeo, 424 U.S. 1, 79 (1976) (defining political committees as organizations that are under the control of a candidate or the major purpose of which is the nomination or election of a candidate. ). As noted by the Federal Election Commission: [D]etermining political committee status under FECA, as modified by the Supreme Court, requires an analysis of... an organization's overall conduct--whether its major purpose is Federal campaign activity (i.e., the nomination or election of a Federal candidate). Neither FECA, its subsequent amendments, nor any judicial decision interpreting either, has substituted tax status as an acceptable proxy for this conduct-based determination. Federal Election Commission Notice 2007-3, Political Committee Status, 72 Fed.Reg. 5595, 5596 97 (Feb. 7, 2007). Consequently, CREW s allegations do not establish that the regulation at issue is denying it access to information that must be disclosed under FECA. CREW also implies that the Internal Revenue Code itself shields organizations exempted by the regulation from disclosing information on contributors by citing to subsections (b) and (d) of Code Section 6104, 26 U.S.C. 6104(b) & (d)(3). (Comp. 22.) Tellingly, CREW does not actually cite to any statutory right to information that these provisions impact. In fact, this citation is taken out of context, and does not demonstrate that the regulation at issue impedes any a statutory right to information about contributors. The cited provisions serve the limited purpose of narrowing the scope of certain disclosure requirements that are imposed under 26 U.S.C. 6104(a), (b) & 10
Case 1:13-cv-00732-JDB Document 11 Filed 09/01/13 Page 14 of 20 (d)(1) only on tax exempt organizations, including organizations exempt under section 501(c)(4). Specifically, 26 U.S.C. 6104(a)-(b) requires the Internal Revenue Service to make public tax returns and other information relating to tax exempt entities and their activities, while 26 U.S.C. 6104(d)(1) also requires these entities to make similar information available to the public. Thus, to the extent the regulation at issue implicates these exceptions, it is only because the same regulation makes the organizations at issue tax-exempt in the first place and therefore subject to section 6104 s disclosure requirements. In fact, to the extent organizations that qualify for exemption under the disputed regulation were to lose exempt status, they would not need to disclose any information under section 6104; the regulation thus increases, rather than reduces, the amount of informational that affected groups must disclose. Consequently, CREW has not demonstrated that the regulation is depriving it of any information to which it is entitled by statute. It has therefore failed to establish an informational injury, necessary to show an injury in fact. Cf. Am. Soc. for Prev. of Cruelty to Animals v. Feld, 659 F.3d 13, 23-24 (D.C. Cir. 2011); Chiron, 198 F.3d at 942. 2. CREW Has Not Shown Causation and Redressability Alternatively, CREW appears to imply that even if tax-exempt status is not the cause of nondisclosure by the groups exempted under the regulation, the regulation still impacts on CREW s ability to identify political donors because 11
Case 1:13-cv-00732-JDB Document 11 Filed 09/01/13 Page 15 of 20 tax-exempt status somehow enables participation in political campaigns by groups that are not subject to a disclosure requirement. (See Compl. 7.) ( This problem was exacerbated in the 2012 election cycle, when tax-exempt 501(c)(4) organizations, relying on an IRS regulation requiring that they only be primarily engaged in promoting charitable work, were able to pour vast amounts of anonymous money into the political system. ). CREW does not allege that these same groups would be prohibited or otherwise unable to participate in political campaigns if they did not enjoy a tax exemption under section 501(c)(4), and CREW does not otherwise explain how their tax exempt status under section 501(c)(4) enables their political activity. It therefore, has not shown that the regulation, rather than the independent decisions of these groups, has caused this injury, or that a favorable ruling would redress it. The causation and redressability requirements of Article III standing require that a federal court act only to redress injury that fairly can be traced to the challenged action of the defendant, and not injury that results from the independent action of some third party not before the court. Simon v. E. Ky. Welfare Rights Org., 426 U.S. 26, 41-42 (1976). The Supreme Court has recently reiterated that we have been reluctant to endorse standing theories that require guesswork as to how independent decisionmakers will exercise their judgment. Clapper, --- U.S. at ---, 133 S. Ct. at 1141. Here, the alleged harm is caused by the activities of third parties not before the Court namely, organizations claiming 12
Case 1:13-cv-00732-JDB Document 11 Filed 09/01/13 Page 16 of 20 exemption under section 501(c)(4) and CREW therefore cannot establish causation or redressability. CREW s attempt to portray these groups political activity as resulting from the regulation at issue requires speculation as to their actions and underlying motivations. CREW appears to imply that these groups would only participate in politics if they could do so while continuing to enjoying tax exempt status under section 501(c)(4). But these groups could also chose to forego taxexempt status, in which case the scope of their activities would not be subject to regulation under section 501(c)(4). This case is thus analogous to Simon, in which indigent patients sought to contest the Service s advisory ruling that hospitals that did not provide care to indigent patients at less than full cost could still qualify for exemption as a charitable organization under 26 U.S.C. 501(c)(3). They argued that the Service s ruling encouraged hospitals not to treat the indigent. 426 U.S. at 42. But the Court held that it does not follow... that the denial of access to hospital services in fact results from petitioners' new Ruling.... It is purely speculative whether the denials of service specified in the complaint fairly can be traced to petitioners encouragement or instead result from decisions made by the hospitals without regard to the tax implications. Id. at 43. It would be similarly speculative to conclude that the actions of groups claiming exemption under section 501(c)(4) can be fairly traced to the regulation at issue here, rather than 13
Case 1:13-cv-00732-JDB Document 11 Filed 09/01/13 Page 17 of 20 to these groups own independent choices. CREW has therefore not shown that the harm it alleges is fairly traceable to the conduct at issue in their suit. For the same reason, CREW has not demonstrated redressability, which requires that it must be likely, as opposed to merely speculative, that the injury will be 'redressed by a favorable decision.' Defenders of Wildlife, 504 U.S. at 560-561 (citations omitted). If an independent third party who caused the alleged harm need not change its behavior as a result of a favorable ruling, as could occur here if groups currently exempt under the regulation chose to forego exempt status in order to maintain their political activities, redressability is lacking. Cf. Simon, 426 U.S. at 43 ( [I]t is just as plausible that the hospitals to which respondents may apply for service would elect to forgo favorable tax treatment. ). Consequently, CREW would not obtain redress for its injury through a favorable ruling, and thus it lacks Article III standing. D. CREW Does Not Have Prudential Standing Apart from lacking the constitutional standing, CREW lacks prudential standing to sue to limit others claims to a tax exemption. Courts have imposed prudential limitations on their exercise of power, and such limitations are jurisdictional. Grocery Mfrs. Ass'n v. EPA, 693 F.3d 169, 179 (D.C. Cir. 2012). A plaintiff lacks prudential standing if his it cannot reasonably be assumed that Congress intended to permit the suit. Clarke v. Securities lndus. Assn., 479 U.S. 388, 399 (1987). Provisions in a statute expressly providing for agency 14
Case 1:13-cv-00732-JDB Document 11 Filed 09/01/13 Page 18 of 20 enforcement may thus limit others prudential standing to sue. Animal Legal Def. Fund v. Espy, 23 F.3d 496, 503 (D.C. Cir. 1997)(citing Int l Primate Protection League v. Inst. for Behavioral Research, 799 F.2d 934, 939 & n.4 (4th Cir. 1986)). The limitations imposed by prudential standing are expressly applicable to actions brought under the Administrative Procedures Act, under which CREW asserts jurisdiction. NCUA v. First Nat l Bank & Trust Co., 522 U.S. 479, 488 (1998). See also 5 U.S.C. 702 (APA grant of jurisdiction for court review limited to parties adversely affected or aggrieved by agency action within the meaning of a relevant statute. ) (emphasis added); Nat l Fed n of Fed. Employees v. Cheney, 883 F.2d 1038, 1042 (D.C. Cir. 1989) ( Section 702 and the prudential zone of interest test are intimately related. ). Here, Congress expressly and exclusively vested enforcement of the Internal Revenue Code with the Secretary of the Treasury, and therefore it cannot reasonably be assumed that Congress intended to permit a suit seeking to limit others ability to claim a tax exemption. Congress has established a comprehensive enforcement regime relying exclusively on the Executive Branch to enforce the laws against persons who improperly seek to avoid taxation, and such a regime is inconsistent with this private enforcement suit. 26 U.S.C. 7801(a)(1) states that [e]xcept as otherwise expressly provided by law, the administration and enforcement of this title shall be performed by or under the supervision of the Secretary of the Treasury. Other Code provisions also demonstrate Congress intent to limit enforcement to 15
Case 1:13-cv-00732-JDB Document 11 Filed 09/01/13 Page 19 of 20 the executive. See, e.g., 26 U.S.C. 7401 (requiring approval by the Secretary of any suit to recover taxes); Fulani v. Brady, 935 F.2d 1324, 1327 (1991) ( [T]he statutory scheme created by Congress is inconsistent with, if not preclusive of, third party litigation of tax-exempt status. ). Recently, a state law provision analogous to section 7801(a), which vested authority to enforce the tax laws in a state-level official, was found to deprive municipalities of prudential standing to enforce a tax statute. Twp. of Lyndhurst v. Priceline.com Inc., 657 F.3d 148, 157-58 (3d Cir. 2011). Similarly, here, the exclusive authority vested in the Executive to enforce the Internal Revenue Code against taxpayers deprives CREW of prudential standing to bring this suit seeking to defeat other groups claims to a tax exemption. IV. CONCLUSION CREW s allegations fail to demonstrate that it has constitutional or prudential standing. Any adverse impact on CREW s procedural right to petition for a new rule does not, on its own, constitute a cognizable injury that grants CREW standing. And CREW has not demonstrated that the regulation at issue impacts on any concrete legal right to obtain contributor information. Further, to the extent it complains that its activities are impacted by the involvement of groups exempted under the regulation, CREW fails to demonstrate that the regulation is the cause of these groups political involvement, or that such involvement would cease if it obtained a favorable 16
Case 1:13-cv-00732-JDB Document 11 Filed 09/01/13 Page 20 of 20 ruling, since the affected organizations could simply choose to continue their political activity and pay tax on their income. Lastly, CREW lacks prudential standing because its suit seeks to enforce a provision of the Internal Revenue Code against organizations currently claiming exemption under section 501(c)(4), whereas the Code expressly vests enforcement authority in the Executive Branch. For the foregoing reasons, CREW lacks standing, and the Court should dismiss this suit for lack of subject matter jurisdiction. DATE: August 30, 2013 OF COUNSEL: RONALD C. MACHEN, JR. United States Attorney Respectfully submitted, /s/ Yonatan Gelblum YONATAN GELBLUM Trial Attorney, Tax Division U.S. Department of Justice Post Office Box 227 Washington, DC 20044 Phone/Fax: (202) 305-3136/514-6866 Email: Yonatan.Gelblum@usdoj.gov 17