OPERATION CLAMBAKE: SCIENTOLOGY COURT FILES

Part of a public library containing court papers related to lawsuits involving Scientology in some way. Collected to help lawyers and critics of Scientology in future lawsuits from or against this cult. Please report back if this has been of help, or send new contributions to the collection. Thanks. Andreas Heldal-Lund (heldal@online.no)




            CHURCH OF SCIENTOLOGY OF CALIFORNIA, Plaintiff-Appellant,
                                       v.
     UNITED STATES of America and Sandra Baker, Revenue Officer, Defendants-
                                   Appellees.
                                  No. 90-55514.
                         United States Court of Appeals,
                                 Ninth Circuit.
                       Argued and Submitted Oct. 5, 1990.
                             Decided Dec. 12, 1990.
  Church filed suit seeking an injunction against attempts by the Internal
 Revenue Service (IRS) to collect deficiencies in employee withholding taxes
 after revocation of the church's tax-exempt status.  The United States District
 Court for the Central District of California, James M. Ideman, J., denied the
 request.  Church appealed.  The Court of Appeals, Alarcon, Circuit Judge, held
 that:  (1) the church's claim of allegedly unlawful or unconstitutional levies
 did not fall within the judicial exception to the Anti-Injunction Act;  (2) the
 church failed to show that the Government had no possibility of prevailing or
 that the church would suffer irreparable injury;  and (3) the opportunity to
 sue for relief was an adequate remedy at law, precluding injunctive relief.
  Affirmed.

 [1] INTERNAL REVENUE
 Anti-Injunction Act contains no exception for allegedly unlawful or
 unconstitutional levies.  26 U.S.C.A. s 7421(a).

 [2] INTERNAL REVENUE
 To fall within judicial exception to Anti-Injunction Act, taxpayer must show
 that Government's claim is baseless and that taxpayer is entitled to equitable
 relief;  both prongs of test must be met or suit for injunctive relief must be
 dismissed.  26 U.S.C.A. s 7421(a).

 [3] INTERNAL REVENUE
 Limitations imposed by Anti-Injunction Act on suits to enjoin collection of
 taxes also apply to attempts to enjoin "wrongful disclosures" in form of bank
 levies and individual assessments that could result in unauthorized disclosure
 of taxpayer's returns or return information.  26 U.S.C.A. ss 6103,
 6103(a), 7421(a).

 [4] INTERNAL REVENUE
 Existence of factual dispute over whether Internal Revenue Service (IRS) would
 forebear collecting asserted deficiencies in withholding of employment taxes
 for church employees deprived district court of jurisdiction to grant
 injunction.  26 U.S.C.A. ss 7421(a), 7421 et seq.

 [5] INTERNAL REVENUE
 Church failed to show that any representation by Internal Revenue Service (IRS)
 to forebear from collecting disputed deficiencies in employee withholding taxes
 coerced or defrauded church in any manner and, therefore, church was not
 entitled to injunction against collection of deficiencies after revocation of
 church's tax-exempt status.  26 U.S.C.A. ss 7421(a), 7421 et seq.

 [6] INTERNAL REVENUE
 Internal Revenue Service (IRS) internal operating procedures to be used when
 taxpayer raised question and presented information creating reasonable doubt
 about accuracy or validity of assessments were not promulgated for express
 benefit of taxpayers and, therefore, IRS's failure to comply with those
 procedures did not form basis for injunction sought by church against
 collection of deficiencies in employee withholding taxes after revocation of
 church's tax-exempt status.  26 U.S.C.A. ss 7421(a), 7421 et seq.

 [6] INTERNAL REVENUE
 proceedings thereunder.
 Internal Revenue Service (IRS) internal operating procedures to be used when
 taxpayer raised question and presented information creating reasonable doubt
 about accuracy or validity of assessments were not promulgated for express
 benefit of taxpayers and, therefore, IRS's failure to comply with those
 procedures did not form basis for injunction sought by church against
 collection of deficiencies in employee withholding taxes after revocation of
 church's tax-exempt status.  26 U.S.C.A. ss 7421(a), 7421 et seq.

 [7] INTERNAL REVENUE
 Church failed to show that First Amendment barred Government's attempts to
 collect employee withholding taxes after revocation of church's tax-exempt
 status and, therefore, church failed to meet "no possibility of success" prong
 of judicial exception to Anti-Injunction Act.  26 U.S.C.A. ss 7421(a),
 7421 et seq.;  U.S.C.A. Const.Amend. 1.

 [8] INTERNAL REVENUE
 Church's claim that Internal Revenue Service (IRS) violated due process clause
 when it sought to collect employee withholding taxes after revocation of
 church's tax-exempt status did not show that Government had no possibility of
 prevailing, for purposes of judicial exception to Anti-Injunction Act.  26
 U.S.C.A. ss 7421(a), 7421 et seq.;  U.S.C.A. Const.Amend. 5.

 [9] INTERNAL REVENUE
 Church's claim that assessment for deficiencies in employee withholding taxes
 exceeded $9 million was insufficient to show irreparable harm, for purposes of
 determining whether Anti-Injunction Act barred attempt to enjoin collection of
 deficiencies after revocation of church's tax-exempt status.  26 U.S.C.A. ss
 7421(a), 7421 et seq.

 [10] INTERNAL REVENUE
 Church's opportunity to sue for refund of allegedly wrongfully collected
 employee withholding taxes was adequate remedy at law which barred injunction
 against attempt to collect deficiencies after revocation of church's tax-exempt
 status.  26 U.S.C.A. ss 7421(a), 7421 et seq.

 [11] INTERNAL REVENUE
 Church had adequate remedy at law for allegedly wrongful disclosure of tax
 returns or return information and, therefore, any allegedly wrongful disclosure
 in connection with attempts to collect deficiencies in employee withholding
 taxes after revocation of church's tax-exempt status did not rise to level of
 irreparable injury necessary to satisfy judicial exception to Anti-Injunction
 Act.  26 U.S.C.A. ss 6103, 6672, 7421(a), 7431(a).

 [12] FEDERAL COURTS
 Church was not prejudiced by district court's allegedly erroneous refusal to
 allow church to file reply to Government's response before court dissolved
 temporary restraining order and denied preliminary injunction against attempt
 to collect taxes where district court correctly ruled that Anti-Injunction Act
 deprived court of jurisdiction;  even if church was not allowed to reply to
 Government's response to church's order to show cause, church had raised its
 contentions about Anti-Injunction Act in its memorandum in support of
 application for temporary restraining order.  26 U.S.C.A. s 7421(a).
  *1483 William T. Drescher, Calabasas, Cal., and Kendrick L. Moxon, Bowles &
 Moxon, Hollywood, Cal., for plaintiff-appellant.
  Shirley D. Peterson, Asst. Atty. Gen., Gary R. Allen, William A. Whitledge,
 and Teresa E. McLaughlin, Tax Div., U.S. Dept. of Justice, Washington, D.C.,
 for defendants-appellees.
  Appeal from the United States District Court for the Central District of
 California.

  Before ALARCON and NORRIS, Circuit Judges, and GEORGE, [FN*] District Judge.

      FN* Honorable Lloyd D. George, United States District Judge for the
     District of Nevada, sitting by designation.

  ALARCON, Circuit Judge:
  The Church of Scientology of California (Church) appeals from the denial
 of its request for a preliminary injunction against the Internal Revenue
 Service (IRS).  The district court concluded it lacked subject matter

 jurisdiction and, therefore, was precluded from granting this relief by the
 Anti-Injunction Act, 26 U.S.C. s 7421.  The Church contends that the record
 demonstrates that the district court has the jurisdiction to grant equitable
 relief pursuant to the judicial exception to the Anti-Injunction Act.  We
 disagree and affirm.
                                        I
  This case arises from an action filed by the Church against the IRS in which
 it alleged:
  1. Wrongful disclosure of taxpayer information under 26 U.S.C. s 6103 by
 improperly issuing bank levies and individual assessments.
  2. Violation of the First Amendment of the United States Constitution by
 engaging in unlawful and arbitrary actions against the Church motivated "by an
 impermissible hostility to the scientology religion."
  3. Violation of the due process clause of the Fifth Amendment by treating the
 Church and its parishioners differently from other religions.
  4. Violation of the due process clause by failing to follow established IRS
 policy.
  5. Violation of the "Taxpayers Bill of Rights" by improperly assessing the
 bank levies and individual assessments.
  The Church presented the following version of the facts in its complaint and
 supporting declarations:  On March 9, 1989 the IRS issued a notice of proposed
 adjustment of Federal Insurance Contribution Act (FICA) and Federal
 Unemployment Tax Act (FUTA) taxes for the tax years of 1976-1986 based upon a
 disallowance of the Church's tax exempt status. [FN1]  On April 7, 1989, the
 Church filed a protest with the IRS challenging each proposed adjustment.  The
 IRS rejected the protest.  A supplemental protest filed on May 22, 1989, was
 also rejected.

      FN1. In 1987, in Church of Scientology of California v. Commissioner of
     Internal Revenue, 823 F.2d 1310 (9th Cir.1987), cert. denied, 486 U.S.
     1015, 108 S.Ct. 1752, 100 L.Ed.2d 214 (1988), we upheld a revocation of the
     Church's tax exempt status for the years 1970-1972.  Among the factual
     findings in that case were that significant sums of Church money had inured
     to the benefit of the Church's founder L. Ron Hubbard and his family during
     the years in question.  These benefits included the transfer of several
     million dollars in Church funds to a sham corporation controlled by Hubbard
     and a plan by which 10% of the gross income of all Scientology
     congregations, franchises and organizations were to be paid directly to
     Hubbard as "debt repayments."  Id. at 1318-19.

  Assessments were made by the IRS in July and August of 1989.  Thereafter, the
 Church entered into discussions with Stanley Kong, IRS Examinations Branch
 Chief.  Kong told the Church that if it made a token payment of the FICA and
 FUTA taxes for one employee for the period in question and submitted claims for
 refund and abatement the IRS would forbear attempting *1484 to collect the
 balance of the assessment while such claims were being considered.  On
 September 22, 1989, the Church made payment of the FICA and FUTA taxes for one
 employee for the period in question and submitted claims for refund and
 abatement.
  On October 23, 1989, Revenue Officer Sandra Baker contacted Church
 representatives in order to commence collection of the claimed deficiency.  The
 Church alleges that Baker agreed that pursuant to IRS policy P-5-16, as set
 forth in the Internal Revenue Manual, she would forbear from attempting to
 collect additional funds while the administrative refund claims were pending.
 On January 5, 1990, Baker wrote the Church's counsel and requested a list of
 the Church's officers so that the IRS could make assessments for the asserted
 tax deficiencies directly against the responsible Church officials as
 authorized by 26 U.S.C. s 6672. [FN2]  The Church informed Baker that it
 challenged both the legitimacy of the individual assessments, and the
 appropriateness of any other tax collection activities while its refund claim
 was under consideration.

      FN2. "Any person required to collect, truthfully account for, and pay over
     any tax imposed by this title who willfully fails to collect any such
     tax, ... or willfully attempts in any manner to evade or defeat any such
     tax or payment thereof, shall ... be liable to a penalty equal to the total
     amount of the tax evaded, or not collected, or not accounted for and paid
     over."

  On April 4, 1990, Baker served seven notices of levy to selected banks.  On
 April 6, 1990, the IRS mailed assessments against twenty-four individuals,
 including the late L. Ron Hubbard, for the purported tax deficiencies.  The
 Church requested that the IRS release the levies.  The IRS refused to do so.
  On April 24, 1990, the Church filed this action in the district court.  On the
 same date, the district court granted the Church's ex parte request and issued
 a temporary restraining order (TRO) to maintain the status quo of the parties
 and an order to show cause (OSC).  On May 5, 1990, the Government filed its
 response to the OSC.  The Government asserted that the district court lacked
 subject matter jurisdiction to grant injunctive relief under the Anti-
 Injunction Act, 26 U.S.C. s 7421.  In support of its claim the Government
 submitted a declaration signed by Baker.  Baker declared that all applicable
 IRS regulations were complied with in making the assessment against the
 Church.  She also declared that the Church was challenging only a part of the
 asserted deficiency.  She declared further that the Church did not dispute that
 it owed $6,500,000 in taxes and interest to the Government.  Baker's
 declaration also sets forth the factual basis for levying on each bank and how
 the identities of the individuals to be assessed were determined.  The
 declaration did not include any discussion of Baker's representations to the
 Church concerning forbearance.  The district court denied the Church's request
 for injunctive relief before the date set for filing of the Church's reply to
 the IRS's response to the OSC.
                                       II
  The Church contends that the Anti-Injunction Act does not apply when the
 record shows an unlawful or unconstitutional levy and extraordinary
 circumstances.  The Church also asserts that it has met the judicial exception
 to the Anti-Injunction Act.
  [1] The Anti-Injunction Act, 26 U.S.C. s 7421(a) 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, whether or not such person is the person
 against whom such tax was assessed."  The Anti-Injunction Act sets forth
 specific exceptions which, if present, will support the granting of equitable
 relief.  The Church does not contend that the statutory exceptions are
 applicable to this case.
  The Supreme Court has explained that the principal purpose of the Anti-
 Injunction Act is to preserve the Government's ability to assess and collect
 taxes expeditiously with "a minimum of preenforcement judicial interference"
 and "to require that the legal right to the disputed sums be
 *1485 determined in a suit for refund."  Bob Jones Univ. v. Simon, 416
 U.S. 725, 736, 94 S.Ct. 2038, 2045, 40 L.Ed.2d 496 (1974) (citing, Enochs v.
 Williams Packing & Navigation Co., 370 U.S. 1, 82 S.Ct. 1125, 8 L.Ed.2d 292
 (1962)).
  We review de novo the denial of a motion for preliminary injunction for lack
 of subject matter jurisdiction.  Elias v. Connett, 908 F.2d 521, 523 (9th
 Cir.1990) (citing Jensen v. IRS, 835 F.2d 196, 198 (9th Cir.1987).  The
 district court's factual findings on jurisdictional issues must be accepted
 unless clearly erroneous.  Id.
  The Church relies upon Singleton v. Mathis, 284 F.2d 616, 618-19 (8th
 Cir.1960), Lassoff v. Gray, 266 F.2d 745, 747 (6th Cir.1959), and Monge
 v. Smyth, 229 F.2d 361, 366 (9th Cir.), cert. denied, 351 U.S. 976, 76 S.Ct.
 1055, 100 L.Ed. 1493 (1956) in support of the proposition that an injunction
 may be ordered if the court finds that an unlawful or unconstitutional levy has
 been issued and if extraordinary circumstances are shown.  The Church's
 reliance on the continued vitality of these decisions is misplaced.  Each of
 these cases was decided prior to the 1962 Supreme Court decision in Enochs
 v. Williams Packing & Navigation Co., 370 U.S. 1, 82 S.Ct. 1125, 8 L.Ed.2d 292
 (1962).  Rather than providing a separate and independent exception to the
 Anti-Injunction Act, the Supreme Court has instructed that these decisions are
 part of an earlier generation of dissonant case law which was harmonized in
 the Williams Packing decision.  In Bob Jones University, the Supreme
 Court stated that:
   the Court's unanimous opinion in Williams Packing indicates that the case
 was meant to be the capstone to the judicial construction of the Act.  It
 spells an end to a cyclical pattern of allegiance to the plain meaning of the
 Act, followed by periods of uncertainty caused by a judicial departure from
 that meaning, and followed in turn by the Court's rediscovery of the Act's
 purpose.
  416 U.S. at 742, 94 S.Ct. at 2048.  The Court's decision in Bob Jones
 forecloses any reliance on the pre-Williams Packing decisions cited by the
 Church.  In 1964, the Sixth Circuit disavowed its decision in Lassoff v.
 Gray as being in conflict with the Williams Packing test.  Vuin v.
 Burton, 327 F.2d 967, 970 (6th Cir.1964).  Similarly, in United States v.
 Dema, 544 F.2d 1373, 1376 (7th Cir.1976), cert. denied, 429 U.S. 1093, 97
 S.Ct. 1106, 51 L.Ed.2d 539 (1977), the Singleton case was only cited within
 the context of requirements of the Williams Packing test.  We have not
 applied that portion of the Monge decision that recognized an exception to
 the Anti-Injunction Act based on unusual and extraordinary circumstances since
 the Williams Packing decision was published. [FN3]

      FN3. In Monge, we followed the line of cases which stated that an
     injunction may be granted where "unusual and extraordinary circumstances
     appear."  229 F.2d at 366.  While Monge has been cited four times by
     this court since Williams Packing, it has never been for that
     proposition.  See, Whitney v. United States, 826 F.2d 896, 897 (9th
     Cir.1987) (whether Form 870-AD standing alone estops taxpayer from seeking
     a refund);  Meridian Wood Prod. Co. v. United States, 725 F.2d 1183,
     1186 (9th Cir.1984) (waiver obviated need for sending formal deficiency
     notice);  Wood v. Sargeant, 694 F.2d 1159, 1161 (9th
     Cir.1982) (inability to pay tax is not a basis for invoking equity
     jurisdiction);  Richmond v. Weiner, 353 F.2d 41, 45 (9th
     Cir.1965) (court cannot consider issue concerning pleadings that had not
     been raised in district court), cert. denied, 384 U.S. 928, 86 S.Ct.
     1447, 16 L.Ed.2d 531 (1966).

  The Supreme Court now recognizes a single, narrow judicial exception to
 the Anti-Injunction Act.
   [A]n injunction may be obtained against the collection of any tax if (1) it
 is "clear that under no circumstances could the government ultimately prevail"
 and (2) "equity jurisdiction" otherwise exists, i.e., the taxpayer shows that
 he would otherwise suffer irreparable injury.
  Commissioner v. Shapiro, 424 U.S. 614, 627, 96 S.Ct. 1062, 1070, 47 L.Ed.2d
 278 (1976) (quoting Enochs v. Williams Packing & Navigation Co., 370 U.S. 1,
 7, 82 S.Ct. 1125, 1129, 8 L.Ed.2d 292 (1962)).
  [2] Under the first prong of the Williams Packing test, the district
 court must determine the possibility of success of the Government's assessment
 based upon the information available to the court *1486 at the time of the
 filing of the action.  "Only if it is then manifest, under the most liberal
 view of the law and the facts, that the government cannot prove its claim" is
 the first part of the test satisfied.  Thrower v. Miller, 440 F.2d 1186,
 1187 (9th Cir.1971).  The burden of showing that the Government's claim is
 baseless is on the taxpayer.  Schildcrout v. McKeever, 580 F.2d 994, 997
 (9th Cir.1978) (citing Shapiro, 424 U.S. at 627-29, 96 S.Ct. at 1070-72.)
  To meet the second prong of the Williams Packing test, the taxpayer must
 demonstrate that it is entitled to equitable relief.  "The taxpayer must show
 that he has no adequate remedy at law and that the denial of injunctive relief
 would cause him immediate, irreparable harm."  Jensen v. IRS, 835 F.2d 196,
 198 (9th Cir.1987) (citing Cool Fuel, Inc. v. Connett, 685 F.2d 309, 313-14
 (9th Cir.1982)).  Both prongs of the test must be met or a suit for injunctive
 relief must be dismissed.  Alexander v. "Americans United" Inc., 416 U.S.
 752, 758, 94 S.Ct. 2053, 2057, 40 L.Ed.2d 518 (1974).
  [3] The limitations imposed by the Anti-Injunction Act also apply to the
 Church's attempt to enjoin "wrongful disclosures" in the form of the bank
 levies and individual assessments claimed to be made in violation of 26
 U.S.C. s 6103. [FN4]  In Blech v. United States, 595 F.2d 462 (9th
 Cir.1979), we stated that where the underlying action was one to enjoin
 assessment and collection activities, it fell within the scope of the Anti-
 Injunction Act's prohibitions.  Id. at 466.

      FN4. Section 6103(a) states that returns and return information are
     confidential, "and except as authorized by this title-(1) no officer or
     employee of the United States, ... shall disclose any return or return
     information."  It is not disputed that "return information" can include the
     fact that a taxpayer's liability is or has been under investigation.

   To hold otherwise would enable ingenious counsel to so frame complaints as to
 frustrate the policy or purpose behind the Anti-Injunction Statute....
 Likewise, this statutory ban against judicial interference with the assessment
 and collection of taxes "is equally applicable to activities which are intended
 to or may culminate in the assessment or collection of taxes."
  Id. (quoting United States v. Dema, 544 F.2d 1373, 1376 (7th Cir.1976),
 cert. denied, 429 U.S. 1093, 97 S.Ct. 1106, 51 L.Ed.2d 539 (1977)).
 Accord, Lowrie v. United States, 824 F.2d 827, 830 (10th Cir.1987).  The
 Fifth Circuit has also held that an injunction sought under s 6103 was
 barred by the Anti-Injunction Act.  Kemlon Products & Development Co. v.
 United States, 638 F.2d 1315, 1320 (5th Cir.), modified, 646 F.2d 223 (5th
 Cir.), cert. denied, 454 U.S. 863, 102 S.Ct. 320, 70 L.Ed.2d 162 (1981).
  The Church relies on Husby v. United States, 672 F.Supp. 442
 (N.D.Cal.1987) for the proposition that an injunction may issue to prevent
 further disclosure of tax return information through collection activities.
 In Husby however, the Government agreed with the taxpayer that no taxes were
 in fact owing.  The Government further admitted in court, prior to the issuance
 of the injunction, that the assessment and all collection activity pursuant to
 it were due to computer error.  Id. at 444.  No challenge under the Anti-
 Injunction Act was made, and the court expressly stated that "[t]he case at
 hand presents no problem as to collateral attack of a levy or assessment."
 Id. at 445.  The only issue before the district court was whether the
 statutory remedies of 26 U.S.C. s 7431 applied to the erroneous levy.
 Id. at 442.
  [4] To avoid the bar of the Anti-Injunction Act, the Church has the burden
 of establishing that "under the most liberal view of the law and the facts, the
 United States cannot establish its claim...."  Schildcrout v. McKeever, 580
 F.2d 994, 998 (9th Cir.1978) (quoting Enochs v. Williams Packing &
 Navigation Co., 370 U.S. 1, 7, 82 S.Ct. 1125, 1129, 8 L.Ed.2d 292 (1962)).  As
 noted above, the declaration of Baker is in conflict with that relied upon by
 the Church concerning the appropriateness of the levy, and whether wrongful
 disclosures were made, as well as the circumstances surrounding the issuance of
 the individual *1487 assessments.  Baker declared that since $6,500,000 in
 assessed taxes were not challenged by the Church, it was determined that
 efforts to collect the amount were thought to be appropriate.
  Where the record presents "material issues of disputed fact" the district
 court lacks jurisdiction to grant an injunction.  Kaestner v. Schmidt, 473
 F.2d 1294, 1296 (9th Cir.1973) (Anti-Injunction Act bars jurisdiction where
 evidence in Government affidavits established material issues of disputed
 fact.)  Accord, Thrower v. Miller, 440 F.2d 1186, 1187-88 (9th
 Cir.1971) (Anti-Injunction Act barred relief where affidavits of appellee and
 his attorney conflicted with affidavit of IRS officer.)
  [5] The Church asserts that because the IRS represented that it would
 forbear collecting the asserted deficiencies pending IRS determination of the
 Church's refund claim, the Government's attempts to levy an assessment
 thereafter constituted "fraudulent coercion" or "fraudulent representations" as
 a means of tax collection.  This contention cannot be supported under the most
 liberal view of the record in favor of the Government.
  The cases cited by the Church in which injunctive relief was granted based on
 proof of coercion or fraud are distinguishable from the facts in the record
 before us.  In Mitsukiyo Yoshimura v. Alsup, 167 F.2d 104 (9th Cir.1948) the
 taxpayer was coerced into signing incriminating documents and falsely
 threatened with internment.  Id. at 105.  No showing of similar misconduct
 appears in the record.  The Church has not demonstrated how the representation
 that the IRS would temporarily forbear collecting the disputed deficiencies
 coerced or defrauded the Church in any manner.
  In Miller v. Standard Nut Margarine Co., 284 U.S. 498, 52 S.Ct. 260,
 76 L.Ed. 422 (1932), the taxpayer commenced its business acting in reliance
 upon assurances from the Commissioner of Internal Revenue of the nontaxable
 nature of its product.  Id. at 510, 52 S.Ct. at 263.  No showing has been
 made that the IRS assured the Church that no taxes were owing.  Likewise, there
 has been no showing that the Church relied on the claimed assurance to its
 detriment.  Viewing the facts and law in the most liberal light as required by
 Williams Packing, the Church has failed to demonstrate that the Government
 cannot succeed on its claim on the basis of the cited authority.
  The Church next argues that it has met the first prong of the Williams
 Packing test because the Government has conceded that it could not prevail on
 the merits regarding the alleged violations of the rule set forth in United
 States ex rel. Accardi v. Shaughnessy, 347 U.S. 260, 74 S.Ct. 499, 98 L.Ed.
 681 (1954).  We find no such concession by the Government in its brief before
 this court or in the record of the proceedings before the district court.
  [6] Pursuant to the Accardi doctrine, an administrative agency is
 required to adhere to its own internal operating procedures.  Id. at 268, 74
 S.Ct. at 504.  The Church alleges that the IRS violated Policy Statement P-5-
 16, Policies of the IRS Handbook, reprinted in 1 Administration Internal
 Revenue Manual (CCH) at 1305-11, which states that when a taxpayer raises a
 question or presents information creating reasonable doubt about the accuracy
 or validity of an assessment "reasonable forbearance will be exercised with
 respect to collection provided (1) adjustment of the taxpayers claim is within
 the control of the service, and (2) the interests of the Government will not be
 jeopardized."  Id.
  The Church argues that United States v. Heffner, 420 F.2d 809 (4th
 Cir.1969) provides that when the IRS publicizes a policy that it has
 promulgated for the express benefit of taxpayers, the Government must act in
 compliance with that policy.  The Church's reliance on Heffner is
 misplaced.  Heffner is a criminal case.  It does not involve an application
 of the Anti-Injunction Act.  Id. at 810.  The IRS regulation applied in
 Heffner concerned the requirement that Miranda warnings be given to
 suspects in criminal tax fraud investigations.  Id. at 811.  The remedy
 invoked in Heffner was reversal of the criminal conviction.  Id. at 814.
  *1488 The Church asserts that it is undisputed that IRS Policy Statement P-
 5-16, is a "procedural safeguard" which bars any collection activities until
 its claims for refund are resolved.  The Government argues that P-5-16
 indicates on its face that collection will be made if it is in the Government's
 interest.  Accordingly, the policy was not promulgated for the express benefit
 of taxpayers.  The Government further argues that it has not violated the
 forbearance policy.  It is the Government's position that IRS Policy Statement
 P-5-16 does not require it to forbear collection of approximately $6,500,000 as
 to which there is no dispute.  These conflicting contentions readily
 demonstrate that the Church's representation that the Government has made a
 concession concerning the application of the Accardi doctrine is without
 merit.
  Viewing this conflict of law in the most liberal light, it cannot be
 said that there is no possibility that the Government will prevail on this
 issue.  Thus, the Church has failed to demonstrate that it has met the burden
 imposed by the Williams Packing test.
                                       III
  The Church argues that the levies violate the establishment clause of the
 First Amendment and the due process clause of the Fifth Amendment, and that
 therefore irreparable injury to the Church is presumed as a matter of law.
  [7] The Church relies on Elrod v. Burns, 427 U.S. 347, 96 S.Ct. 2673, 49
 L.Ed.2d 547 (1976) in support of this argument.  In Elrod, the Supreme Court
 stated that the "loss of First Amendment freedoms, for even minimal periods of
 time, unquestionably constitutes irreparable injury."  Id. at 373, 96 S.Ct.
 at 2689.  Elrod did not involve an attempt to restrain tax assessments.
 Instead, the court was concerned with the free speech rights of public
 employees threatened with discharge because of political party affiliation.
 Id. at 349, 96 S.Ct. at 2678.  A more important distinction, however, is the
 different standard that is applicable in granting injunctive relief in cases
 where that remedy is not barred by the Anti-Injunction Act.  The test
 applicable in Elrod was "probability of success on the merits."  Id. at
 374, 96 S.Ct. at 2690.  As noted above, under Williams Packing, a person
 seeking injunctive relief must demonstrate "under the most liberal view of the
 law and the facts, [that] the United States cannot establish its claim."
 Enochs v. Williams Packing & Navigation Co., 370 U.S. 1, 7, 82 S.Ct. 1125,
 1129, 8 L.Ed.2d 292 (1962).
  [8] The Church also argues that it has established violations of the due
 process clause of the Fifth Amendment.  The Church asserts that when "an
 alleged deprivation of a constitutional right is involved, most courts hold
 that no further showing of irreparable injury is necessary."  Mitchell v.
 Cuomo, 748 F.2d 804, 806 (2nd Cir.1984).
  In Mitchell, in affirming an order granting an injunction preventing a
 prison closure, the Second Circuit stated:  "[g]iven the evidence of increasing
 overcrowding ... which constitute[s] the alleged threat to plaintiffs' eighth
 amendment rights, the district judge's finding of irreparable harm is not
 clearly erroneous."  Id. at 806.  The issuance of an injunction to prevent
 the closure of a prison is not expressly barred by the Anti-Injunction Act.
 Furthermore, the Second Circuit concluded an award of damages would be
 inadequate to remedy the harm that would flow from the closure of a 1000-bed
 facility and the transfer of its 475 inmates to other over-crowded prisons.
 Id. at 805.  As discussed below, the Church has adequate remedies at law for
 all of its tax related claims.
  In Bob Jones University v. Simon, 416 U.S. 725, 94 S.Ct. 2038, 40 L.Ed.2d
 496 (1974), the Supreme Court stated that the Williams-Packing test was
 applicable to First Amendment and Due Process claims raised by the taxpayer.
 Id. at 749, 94 S.Ct. at 2052.  The Court held that the taxpayer had an
 adequate remedy at law in an action for a refund.  Id. at 746, 94 S.Ct. at
 2050.  No special consideration is granted to injunctions against tax
 collection sought on constitutional grounds.  "[D]ecisions of *1489 this
 Court make it unmistakably clear that the constitutional nature of a taxpayer's
 claim, as distinct from its probability of success, is of no consequence under
 the Anti-Injunction Act."  Alexander v. "Americans United" Inc., 416 U.S.
 752, 759, 94 S.Ct. 2053, 2058, 40 L.Ed.2d 518 (1974) (claim that statutory
 prohibition against lobbying by tax exempt organization is unconstitutional);
 accord, United States v. American Friends Serv. Comm., 419 U.S. 7, 11, 95
 S.Ct. 13, 15, 42 L.Ed.2d 7 (1974) (claim that withholding tax interfered with
 Quaker's free exercise of religion).
  [9] The Church also argues that the fact that the assessment exceeds
 $9,000,000 demonstrates irreparable harm.  Mere allegations of financial
 hardship are insufficient to support a finding of irreparable harm.  Bob
 Jones Univ., 416 U.S. at 745, 94 S.Ct. at 2050.  See, Cool Fuel, Inc. v.
 Connett, 685 F.2d 309, 314 (9th Cir.1981).
  The Church further argues that the levies and assessments constitute injuries
 to the Church's privacy and reputational interests.  The only case cited in
 support of this proposition is Husby v. United States, 672 F.Supp 442
 (N.D.Cal.1987).  As discussed above, the applicability of the Anti-Injunction
 Act was not an issue in Husby.  The district court stated in Husby that
 the "sole question" before it was whether the statutory remedies of 26
 U.S.C. s 7431 applied to the erroneous levy.  Id. at 442.
  In Kemlon Products & Development Co. v. United States, 638 F.2d 1315
 (5th Cir.), modified, 646 F.2d 223 (5th Cir.), cert. denied, 454 U.S.
 863, 102 S.Ct. 320, 70 L.Ed.2d 162 (1981), the taxpayer also claimed that an
 injunction should issue because, without that remedy, it would suffer a "loss
 of business reputation."  Id. at 1318.  The Fifth Circuit rejected the
 taxpayer's argument that a mere conclusory allegation of reputational harm
 demonstrates irreparable harm.  Id. at 1322-23.  The same result was reached
 in Church of Scientology Celebrity Centre v. Egger, 539 F.Supp 491
 (D.D.C.1982).  "As is well settled in the tax field, irreparable injury cannot
 be established by an allegation of injury to reputation....  [T]o establish
 irreparable injury, plaintiffs must allege that the financial penalties likely
 would cause Scientology ministers, churches or members financial ruin or other
 serious consequences."  Id. at 496 (citations omitted).
  [10] The courts have repeatedly held that the opportunity to sue for a
 refund is an adequate remedy at law which bars the granting of an injunction.
   [P]etitioner may pay income taxes, or, in the their absence, an installment
 of FICA or FUTA taxes, exhaust the Service's internal refund procedures, and
 then bring suit for a refund.  These review procedures offer petitioner a full,
 albeit delayed, opportunity to litigate the legality of the Service's
 revocation of tax-exempt status and withdrawal of advance assurance of
 deductibility.
  Bob Jones Univ., 416 U.S. at 746, 94 S.Ct. at 2050;  see also Americans
 United, 416 U.S. at 762, 94 S.Ct. at 2059 (taxpayer has adequate remedy in a
 refund suit following FUTA payment);  American Friend Serv. Comm., 419 U.S.
 at 11, 95 S.Ct. at 15 (full opportunity to litigate tax liability in a refund
 suit bars equitable relief);  Zimmer v. Connett, 640 F.2d 208, 210 (9th
 Cir.1981) ("Tax assessments must be contested ... in an action for a refund in
 the Federal District Courts....  Absent a clear and explicit congressional
 mandate, we shall not depart from these well marked pathways.") (citations
 omitted);  Cool Fuel, Inc. v. Connett, 685 F.2d 309, 314 (9th Cir.1981) (
 "Since the Supreme Court decision in Bailey v. George, 259 U.S. 16, 42 S.Ct.
 419, 66 L.Ed. 816 (1922), it has been established law that payment of the tax
 followed by a suit for refund constitutes an adequate remedy at law.")
  The Government challenges the Church's standing to seek relief for the Church
 officials who have been assessed under 26 U.S.C. s 6672.  The Church argues
 that the section 6672 claims are derivative from the Government's main claim
 against the Church for the FICA and FUTA taxes since the Government may only
 satisfy the tax liability once.  Wollman v. United States, 571 F.Supp. 824,
 826 (S.D.Fla.1983).  *1490 The Church further asserts that, since the
 individuals assessed can seek indemnity from the Church, standing exists.
 Reid v. United States, 558 F.Supp. 686, 688-89 (N.D.Miss.1983).  Inasmuch as
 one of the injuries claimed by the Church is the wrongful disclosure of
 taxpayer information to the third parties who received the assessments, the
 Church has asserted a direct injury from the issuance of the assessments.
 Likewise, to the extent that an individual who pays a penalty assessment may be
 indemnified by the Church, the Church has standing to challenge the validity of
 the claim because it will be injured economically, albeit indirectly.  However,
 as discussed supra, the fact that the Church or the individuals may challenge
 the correctness of the assessment in a court action for refund provides an
 adequate remedy as a matter of law.  Bob Jones Univ. v. Simon, 416 U.S. at
 746, 94 S.Ct. at 2050;  Cool Fuel, 685 F.2d at 314.
  [11] Remedies at law for wrongful disclosure in violation of 26
 U.S.C. s 6103 are found in 26 U.S.C. s 7431(a).  Section 7431(a) provides
 for damages for knowing or negligent disclosure of tax return information.  We
 have previously stated our "reluctance to imply a judicial remedy for
 violations of s 6103 given Congress' explicit provision of a remedy."
 United State v. Michaelian, 803 F.2d 1042, 1049 (9th Cir.1986).  See also,
 South Carolina v. Regan, 465 U.S. 367, 374, 104 S.Ct. 1107, 1112, 79 L.Ed.2d
 372 (1984) (the Anti-Injunction Act prohibits injunctions in the context of a
 statutory scheme which provides an alternative remedy).
  The Church has not met its burden under Williams Packing to demonstrate
 that it will suffer irreparable injury unless an injunction is issued.  Thus,
 neither prong of the Williams Packing test has been satisfied.
                                       IV
  [12] The Church argues that the district court violated its right to due
 process of law by dissolving the TRO and denying the preliminary injunction
 before the Church had the opportunity to file its reply to the Government's
 response as permitted by the local rules.  The Government argues that there was
 no violation of due process as the district court must dismiss an action sua
 sponte if it lacks subject matter jurisdiction, even if the parties do not
 raise the issue.  Bender v. Williamsport Area School Dist., 475 U.S. 534,
 541, 106 S.Ct. 1326, 1331, 89 L.Ed.2d 501 (1986).
  The district court granted the Church's request for a TRO on April 24, 1990
 and issued a minute order setting a hearing date for the OSC for May 21, 1990.
 The parties were directed to follow the local rules regarding the timely filing
 of their documents.  Simultaneously, the district court ordered that no
 appearance would be necessary.  The Church alleges, and the Government does not
 contest, that the briefing schedule established by these dates under Local Rule
 7 required that the Government file its response to the OSC by May 7, 1990.
 The Church's reply was due on May 14, 1990.  The district court received the
 Government's response to the Order to Show Cause on May 7, 1990.  Prior to the
 filing of the Church's reply, the district court issued its order on May 10,
 1990, vacating the TRO and dismissing the request for a preliminary injunction.
  Whether the district court had subject matter jurisdiction is a question of
 law which this court considers de novo.  Kruso v. International Tel. & Tel.
 Corp., 872 F.2d 1416, 1421 (9th Cir.1989), cert. denied, 496 U.S. 937, 110
 S.Ct. 3217, 110 L.Ed.2d 664 (1990).  The Church has had a full opportunity to
 present its legal arguments in the briefs filed in this court.  The Church does
 not contend that it was denied the opportunity to present facts showing that
 the court had subject matter jurisdiction under the Williams Packing test,
 but rather that, to "the extent that the District Court's denial of the
 preliminary injunction was based on 'the reasons and legal authorities cited in
 the Government's response to OSC,' it relied upon erroneous legal premises."
 Appellants Op.Br. at 20.
  Assuming arguendo that the district court erred in not allowing the
 Church an opportunity to file a reply to the Government's response to the OSC,
 the Church must show that it has been prejudiced.  Patel v. I.N.S., 790 F.2d
 786, 789 (9th Cir.1986) ("Because the petitioners can demonstrate *1491 no
 prejudice, we reject their due process claim.")  The Church presented its
 contention that the Anti-Injunction Act was inapplicable in its Memorandum of
 Points and Authorities in Support of Application for Temporary Restraining
 Order and Order to Show Cause Re Preliminary Injunction.  It does not claim
 before this court that a remand is required so that it may present additional
 facts in response to the issues raised by the Government.  Because the district
 court was correct in ruling that it lacked subject matter jurisdiction, the
 rights of the Church were not prejudiced by the dismissal of the action without
 permitting it to file its reply to the Government's response to the OSC.
                                   CONCLUSION
  The Anti-Injunction Act precludes the granting of an injunctive relief unless
 the requirements of the Williams Packing test are met.  The Church has not
 demonstrated that under no circumstances could the Government prevail.  The
 Church has also failed to establish that it will suffer irreparable harm unless
 an injunction is issued.  Thus, the district court correctly determined that it
 lacked subject matter jurisdiction to restrain the tax assessments in issue.
  AFFIRMED.

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