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01/13/87 Foodservice and Lodging v. Donald T. Regan

January 13, 1987

CORPORATION, APPELLANT

v.

DONALD T. REGAN, U.S. SECRETARY OF THE TREASURY, ET AL; FOODSERVICE AND LODGING INSTITUTE, INC., A NONPROFIT

D.C. CORPORATION

v.

DONALD T. REGAN, U.S. SECRETARY OF THE TREASURY, ET AL., APPELLANTS 1987.CDC.12



Before: ROBINSON, EDWARDS and SCALIA,* Circuit Judges.

UNITED STATES COURT OF APPEALS FOR THE DISTRICT OF COLUMBIA CIRCUIT

FOODSERVICE AND LODGING INSTITUTE, INC., a nonprofit D.C.

Appeals from the United States District Court for the District of Columbia, Civil Action No. 84-00184

APPELLATE PANEL:

Opinion for the Court PER CURIAM.

PER CURIAM:

The appellant, the Foodservice and Lodging Institute, Inc. (the "Institute"), brought this action against the Secretary of the Treasury and the Commissioner of Internal Revenue on behalf of employers in the restaurant, food and beverage industry, requesting the District Court to declare invalid and enjoin the enforcement of four tax regulations dealing with tip income reporting and withholding requirements. The District Court upheld the regulations as "not arbitrary, irrational, unconstitutional, contrary to or in excess of statutory directive," *fn1 and granted summary judgment for the defendants. The appellant seeks review of the District Court's decision on the merits, and the appellees cross-appeal on the question of subject matter jurisdiction.

We find that the District Court was barred from considering the challenge to at least two of these regulations by the Anti-Injunction Act, 26 U.S.C. § 7421(a) (1982) and the Declaratory Judgment Act, 28 U.S.C. § 2201 (Supp. III. 1985). We therefore vacate and remand that portion of the District court's decision with instructions to dismiss these challenges for lack of subject matter jurisdiction. On the two remaining claims, we affirm the District Court's grant of summary judgment. I. BACKGROUND

Section 314 of the Tax Equity and Fiscal Responsibility Act of 1982 , Pub. L. No. 97-248, 96 Stat. 324, 603, instituted new tip income reporting requirements which are codified in section 6053(c) of the Internal Revenue Code (the "Code"), 26 U.S.C. § 6053 (c) (1982), and the IRS published proposed regulations concerning the new provisions. After the Institute and other interested parties filed comments raising certain objections to the proposed regulations, the IRS published the final regulations together with an explanation of its reasons. 48 Fed. Reg. 36,807 (1983).

The appellant raises one challenge to a regulation promulgated in 1969 that governs an employer's liability for federal taxes due on an employee's reported tips, and three challenges to regulations promulgated in 1982 under the TEFRA. II. REGULATIONS CONCERNING THE ASSESSMENT OR COLLECTION OF FEDERAL TAXES

The first of the 1982 regulations challenged here requires that, in making the tip income allocation required by section 6053(c)(3) of the Code, *fn2 an employer must make allocations only among directly tipped employees, and not among indirectly tipped employees. 26 C.F.R. 31.6053-3(f)(1) (1986). The second challenged regulation promulgated under section 6053(c)(4) of the Code, *fn3 specifies that, in determining whether a food or beverage establishment employs "more than 10 employees" so as to be subject to section 6053(c) and its implementing regulations,

the employees of an employer shall include all employees at all food or beverage operations who, along with the employees of such employer, would be treated as employees of a single employer under section 52(a) or (b) (as in effect on September 3, 1982) and the regulations thereunder.

26 C.F.R. § 31.6053-3T(j) (9) (1986). *fn4 The appellant's third challenge is to 26 C.F.R. § 31.3402(k)-1(c) (1986), promulgated in 1969 pursuant to 26 U.S.C. § 3402(k) (1982). This regulation provides that, in withholding federal income and social security taxes from employee wages, the employer must give priority to federal taxes on an employee's reported tips over any other claims on the employee's salary.

Because at least two of these regulations plainly concern the assessment or collection of federal taxes, the appellant's challenges to them are barred by the Anti-Injunction Act and the Declaratory Judgment Act. The Anti-Injunction Act provides that "no suit for the purpose of restraining the assessment or collection of any tax shall be maintained in any court by any person." 26 U.S.C. § 7421(a) (1982). The Declaratory Judgment Act provides that "[i]n a case of actual controversy within its jurisdiction, except with respect to Federal taxes . . . any court of the United States . . . may declare the rights and other legal relations of any interested party seeking such declaration, whether or not further relief is or could be sought." 28 U.S.C. § ...


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