Related to:
Administrative Procedure

Administrative Procedure AP 632: Other Court Actions

Date: 01/31/2018
Organization: Massachusetts Department of Revenue
Referenced Sources: Massachusetts General Laws

Administrative

Procedures

632.1. Declaratory Judgment.

632.2. Injunction.

          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 SJC, the Superior Court and the 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. However, as a general rule, where an administrative procedure is available, Courts require a party seeking declaratory relief first to 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 of the General Laws. 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”).

 

 “[E]”xceptions to the general “rule occur most often when important novel, or recurrent issues are at stake,” when the decision will have “public significance” affecting the interests of many beside the immediate litigants or “when the case reduces to a question of law” without a dispute as to the facts. 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 strenuously oppose an action for declaratory judgment except where a case comes within a “narrow set of circumstances” that excuses the failure to exhaust administrative remedies. ACE Property & Casualty Insurance Company v. Commissioner of Revenue, 437 Mass. 241, 243-244 (2002). Even where a declaratory judgment action has been accepted by a Court, a taxpayer seeking an abatement of assessed tax must also follow required administrative abatement and appeal procedures as provided by Chapter 62C of the General Laws. Perini Corp. v. Commissioner of Revenue, 419 Mass. 763, 764 n.1 (1995); Space Bldg. Corp. v. Commissioner of Revenue, 413 Mass. at 446 n.1.

 

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

 

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 will typically oppose 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., Rule 4(d)(3).

Reference for 632.1

G.L. c. 62C

G.L. c. 231A, § 1 et seq.

Massachusetts Rules of Civil Procedure 4(d)(3)

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)

 

Reference for 632.1
  1. The Tax Injunction Act, 28 U.S.C. § 1341 (1988), 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.”

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)

Referenced Sources:

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