Administrative Procedure  AP 632: Other Court Actions

Date:	02/11/2022
Organization:	Massachusetts Department of Revenue
Referenced Sources:	Massachusetts General Laws

In addition to the appeal process within DOR and to the ATB, taxpayers have brought other civil actions to determine the propriety of or prevent the assessment or collection of tax.

632.1. Declaratory Judgment

Within their respective jurisdictions, the Massachusetts Supreme Judicial Court (the “SJC”), Superior Court and Probate Court (“Courts”) may make binding declarations of right, duty, status and other legal relations (“declaratory relief”) between the parties to an actual controversy.  See G.L. c. 231A, § 1 et seq.  The declaratory judgment procedure is discretionary with the Court, and the circumstances attending the dispute must “plainly indicate that unless the matter is adjusted such antagonistic claims will almost immediately and inevitably lead to litigation.”  School Comm. of Cambridge v. Superintendent of Sch. of Cambridge, 320 Mass. 516, 518 (1946); see Cognition Fin. Corp. v. Commissioner of Revenue, 2019 Mass. App. Unpub. LEXIS 482 (Rule 1:28). 

As a general rule, where an administrative procedure is available, Courts require a party seeking declaratory relief to first exhaust the opportunities for an administrative remedy.  See Space Bldg. Corp. v. Commissioner of Revenue, 413 Mass. 445, 448 (1992).

For Massachusetts tax purposes, Chapter 62C of the General Laws provides abatement and appeals procedures to resolve tax controversies.  As a consequence, Courts are generally “reluctant” to make binding declarations of relief involving tax controversies and require a party seeking declaratory relief first to exhaust the opportunities for an administrative remedy as provided by Chapter 62C. DeMoranville v. Commissioner of Revenue, 457 Mass. 30, 34 (2010); see also DiStefano v. Commissioner of Revenue, 394 Mass. 315, 321 (1985) (“[T]he Appellate Tax Board is the preferred forum for resolving questions of this type because of its special expertise in tax matters”).

Exceptions to that general rule occur most often when the issue is novel, recurrent, of wide public significance and reduces to a question of law (without a dispute as to the underlying facts). See Space Bldg. Corp., 413 Mass. at 448.  “Unless the administrative remedy is ‘seriously inadequate’, it should not be displaced by an action for a declaration.” DeMoranville v. Commissioner of Revenue, 457 Mass. at 34, quoting Sydney v. Commissioner of Corporations and Taxation, 371 Mass. 289, 294 (1976).  “[C]are must be taken lest allowance of a judicial substitute disrupt unduly the orderly collection of tax.” Sydney v. Commissioner of Corporations and Taxation, 371 Mass. 289, 294-295 (1976).    

Due to the existence of statutory abatement and appeals procedures under Chapter 62C, it is DOR’s practice to oppose an action for declaratory judgment except where a case comes within the “narrow set of circumstances” that warrant exception to the general rule requiring the preliminary exhaustion of administrative remedies. ACE Property & Casualty Insurance Company v. Commissioner of Revenue, 437 Mass. 241, 243-244 (2002).  Even where a court exercises its discretion to entertain a declaratory judgment action regarding a tax matter, a taxpayer seeking an abatement of assessed tax must also follow required administrative abatement and appeal procedures as provided by Chapter 62C.  Perini Corp. v. Commissioner of Revenue, 419 Mass. 763, 764 n.2 (1995); Space Bldg. Corp. v. Commissioner of Revenue, 413 Mass. at 446 n.1; DeMoranville v. Commonwealth, 25 Mass. L Rep 317 (2009). 

A complaint for declaratory relief is governed by the Massachusetts Rules of Civil Procedure which instructs the taxpayer to serve the summons and complaint on both the Commissioner of Revenue and the Boston Office of the Attorney General.  See Mass. R. Civ. P. 4(d)(3).

 

REFERENCES:
G.L. c. 62C
G.L. c. 231A, § 1 et seq.
Massachusetts Rules of Civil Procedure 4(d)(3)
Cognition Fin. Corp. v. Commissioner of Revenue, 2019 Mass. App. Unpub. LEXIS 482 (Rule 1:28)
DeMoranville v. Commissioner of Revenue, 457 Mass. 30 (2010)
ACE Property & Casualty Insurance Company v. Commissioner of Revenue, 437 Mass. 241 (2002)
Perini Corp. v. Commissioner of Revenue, 419 Mass. 763 (1995)
Space Bldg. Corp. v. Commissioner of Revenue, 413 Mass. 445 (1992)
DiStefano v. Commissioner of Revenue, 394 Mass. 315 (1985)
Sydney v. Commissioner of Corporations and Taxation, 371 Mass. 289 (1976)
School Comm. of Cambridge v. Superintendent of Sch. of Cambridge, 320 Mass. 516 (1946)

632.2. Injunction

Under the Massachusetts Rules of Civil Procedure (Mass.R.Civ.P. 65), taxpayers have sought temporary restraining orders (TRO) or preliminary injunctions in the Superior or Probate Court in an effort to stop some action undertaken by DOR.[1]  In general, a TRO or preliminary injunction, if granted, will preserve the status quo while an underlying or related case is being decided on its merits.  Taxpayers have also sought preliminary and final injunctive relief as part of declaratory judgment actions.

To prevail on a motion for a preliminary injunction, a taxpayer must show (1) a substantial likelihood of winning the underlying dispute, (2) a substantial threat of irreparable injury if the injunction is not granted, (3) that the threatened injury to the taxpayer outweighs the harm an injunction may cause to the Commonwealth, and (4) that a preliminary injunction will not be against the public interest.  Because of the public interest involved in the integrity of the system for collection of taxes and the various administrative procedures available to taxpayers, however, TROs and preliminary injunctions are rarely granted in tax cases.[2]  "Injunctions delaying the collection of tax are not a necessary part of declaratory procedure and caution should be exercised in granting them."  Meenes v. Goldberg, 331 Mass. 688, 691 (1954).  DOR typically opposes actions for injunctions.

A filing for an injunction is governed by the Massachusetts Rules of Civil Procedure. The taxpayer must serve the summons, complaint and motion on both the Commissioner of Revenue and the Boston Office of the Attorney General.  See Mass. R. Civ. P. 4(d)(3).

 

REFERENCES:
28 U.S.C. § 1341
G.L. c. 62C, § 32
Massachusetts Rules of Civil Procedure 4(d)(3), 65
Meenes v. Goldberg, 331 Mass. 688, 691 (1954)

[1] The Tax Injunction Act, 28 U.S.C. § 1341 (1988), generally prevents a Federal court from enjoining, suspending or restraining the assessment, levy or collection of any tax under State law where a plain, speedy and efficient remedy may be had in the courts of such State.

[2] Per G.L. c. 62C, § 32(e), most taxes are not required to be paid during the period a taxpayer is contesting a tax before DOR, the Appellate Tax Board or the probate court, under the procedures set forth in G.L. 62C. With respect to cases decided by the Appellate Tax Board or Probate Court in favor of the Commissioner, under § 32(e)(3), taxpayers are only required to pay the amount of tax in dispute, after the thirtieth day following the date of the decision. For cases decided by the Appellate Tax Board, the date of decision “shall be determined without reference to any later issuance of findings of facts and report by the board or to any request for a finding of facts and report.”