THE GREEN SOLUTION RETAIL, INC., a Colorado corporation; KYLE SPEIDELL, Plaintiffs - Appellants,
UNITED STATES OF AMERICA; INTERNAL REVENUE SERVICE; JOHN KOSKINEN, Internal Revenue Service Commissioner; DAVID HEWLETT, [*] in his official capacity, Auditor for the Internal Revenue Service, Defendants-Appellees.
from the United States District Court for the District of
Colorado (D.C. No. 1:16-CV-00257-RPM)
D. Thorburn, Thorburn Walker, LLC, Greenwood Village,
Colorado (Richard Walker, with him on the briefs), for
Patrick J. Urda, Attorney, Tax Division (Caroline D. Ciraolo,
Principal Deputy Assistant Attorney General; Diana L. Erbsen,
Deputy Assistant Attorney General; Gilbert S. Rothenberg,
Attorney; Richard Farber, Attorney; and Robert C. Troyer,
Acting United States Attorney, with him on the brief), United
States Department of Justice, Washington, D.C., for
HARTZ, MATHESON, and McHUGH, Circuit Judges.
McHUGH, CIRCUIT JUDGE.
Green Solution Retail, Inc. and one of its owners, Kyle
Speidell (collectively, Green Solution), sued to enjoin the
Internal Revenue Service (IRS) and related parties from
investigating Green Solution's business records. The
district court dismissed Green Solution's complaint for
lack of subject matter jurisdiction, concluding the
Anti-Injunction Act and the Declaratory Judgment Act bar this
action. The court relied on our decision in Lowrie v.
United States, where we held that lawsuits challenging
"activities leading up to and culminating in" an
assessment are barred. 824 F.2d 827, 830 (10th Cir. 1987). On
appeal, Green Solution contends the district court had
jurisdiction to hear its claims because the Supreme Court has
implicitly overruled Lowrie in its recent decision
Direct Marketing Association v. Brohl, 135 S.Ct.
1124 (2015). We conclude we are still bound by
Lowrie and affirm.
Solution is a Colorado-based marijuana dispensary with
several locations across the state. The IRS is currently
auditing Green Solution's tax returns for the 2013 and
2014 tax years to determine whether it should apply 26 U.S.C.
§ 280E (I.R.C. § 280E), which forbids federal tax
deductions and credits to companies trafficking in a
"controlled substance" as defined by the Controlled
Substances Act (CSA). The IRS made initial findings that
Green Solution trafficked in a controlled substance and is
criminally culpable under the CSA. The IRS then requested
that Green Solution turn over documents and answer questions
related to whether Green Solution is disqualified from taking
credits and deductions under § 280E. It is undisputed
the IRS has not made an assessment or begun collection
Solution sued the IRS and related parties in the United
States District Court for the District of Colorado, seeking
to enjoin the IRS from investigating whether it trafficked in
a controlled substance in violation of federal law, and
seeking a declaratory judgment that the IRS is acting outside
its statutory authority when it makes findings that a
taxpayer has trafficked in a controlled substance. Green
Solution claimed it would suffer irreparable harm if the IRS
were allowed to continue its investigation because a denial
of deductions would (1) deprive it of income, (2) constitute
a penalty that would effect a forfeiture of all of its income
and capital, and (3) violate its Fifth Amendment rights.
moved to dismiss for lack of subject matter jurisdiction
under Federal Rule of Civil Procedure 12(b)(1). According to
the IRS, Green Solution's claim for injunctive relief is
foreclosed by the Anti-Injunction Act (AIA), which bars suits
"for the purpose of restraining the assessment or
collection of any tax." I.R.C. § 7421(a).
Similarly, the IRS asserted that the claim for declaratory
relief violated the Declaratory Judgment Act (DJA), which
prohibits declaratory judgments in certain federal tax
matters. 28 U.S.C. § 2201.
district court agreed with the IRS that the AIA and DJA
barred Green Solution's claims, relying on Lowrie v.
United States, where we held that the AIA applies
"not only to the actual assessment or collection of a
tax, but [also] to activities leading up to, and culminating
in, such assessment and collection." 824 F.2d 827, 830
(10th Cir. 1987). The court further concluded that Green
Solution's request for declaratory relief on the ground
the IRS was acting outside of its authority was similarly
barred by the DJA. Accordingly, the court dismissed the
action with prejudice for lack of subject matter
jurisdiction. Green Solution timely appealed. We have
jurisdiction under 28 U.S.C. § 1291.
Controlled Substances Act (CSA) makes it unlawful to
knowingly or intentionally "manufacture, distribute, or
dispense . . . a controlled substance." 21 U.S.C. §
841(a)(1). Despite its legalization in twenty-eight states
(and Washington, D.C.) for medical use and in eight states
(and Washington, D.C.) for recreational use, marijuana is
still classified as a federal "controlled
substance" under schedule I of the CSA. Id.
§ 812(c)(10); 21 C.F.R. § 1308.11 (Schedule I);
see also Denial of Petition to Initiate Proceedings
to Reschedule Marijuana, 81 Fed. Reg. 53, 688, 53, 688 (Aug.
12, 2016) ("[M]arijuana continues to meet the criteria
for Schedule I."). Schedule I drugs have "a high
potential for abuse" and are classified as those for
which there is "no currently accepted medical use in
treatment in the United States." 21 U.S.C. §
still illegal federally, the Justice Department has declined
to enforce § 841 when a person or company buys or sells
marijuana in accordance with state law. In 2015 and 2016,
Congress reinforced this arrangement by defunding the Justice
Department's prosecution of the exchange of medical
marijuana where it is legal under state law. Consolidated and
Further Continuing Appropriations Act, 2015 Pub. L. No.
113-235, § 538, 128 Stat. 2130, 2217 (2014);
Consolidated Appropriations Act, 2016, Pub. L. No. 114-113,
§ 542, 129 Stat. 2242, 2332-33 (2015); see also
United States v. McIntosh, 833 F.3d 1163, 1169-70 (9th
while "today prosecutors will almost always overlook
federal marijuana distribution crimes in Colorado, " it
does not mean the "tax man" is willing to turn a
blind eye. Feinberg v. C.I.R., 808 F.3d 813, 814
(10th Cir. 2015). Section 280E of the Internal Revenue Code
No deduction or credit shall be allowed for any amount paid
or incurred during the taxable year in carrying on any trade
or business if such trade or business . . . consists of
trafficking in controlled substances (within the meaning of
schedule I and II of the Controlled Substances Act) which is
prohibited by Federal law . . . .
discussed, marijuana is still a controlled substance under
the CSA, and the IRS has pursued numerous marijuana
dispensaries in Colorado and elsewhere to recoup unlawful
business deductions. See, e.g., Feinberg,
808 F.3d at 814; Olive v. C.I.R., 792 F.3d 1146,
1147 (9th Cir. 2015).
Solution's lawsuit seeks to enjoin the IRS from obtaining
information related to its initial findings that Green
Solution is dispensing marijuana in violation of the CSA and
is thus ineligible for deductions under § 280E. But
under the AIA, a litigant may not bring a "suit for the
purpose of restraining the assessment or collection of any
tax . . . in any court by any person, whether or not such
person is the person against whom such tax was
assessed." I.R.C. § 7421(a). The Supreme Court has
long held the AIA is jurisdictional.See Enochs v. Williams
Packing & Navigation Co., 370 U.S. 1, 5 (1962)
(AIA's purpose "is to withdraw jurisdiction from the
state and federal courts to entertain suits seeking
injunctions prohibiting the ...