Argument recap: US v. Clintwood Elkhorn Mining Company
Arguing for the United States as petitioner, Assistant to the Solicitor General William M. Jay began by emphasizing that the respondents sought and obtained a refund for the most recent three years of taxes they paid on coal exports. He then spent several minutes clarifying the government's position that any recovery for additional years (whether for interest or principal) was foreclosed by the administrative refund scheme. When asked why a purely constitutional claim should be brought directly to the IRS, Mr. Jay answered that the unconstitutionality of the tax may hinge on factual findings about the status of the goods in the stream of export, and so the IRS should be allowed to resolve those factual issues in the first instance.
The Justices pressed Mr. Jay on the scope of the government's proposed rule, asking if there is any limit to the extent to which Congress may restrict the right to recover refunds for unconstitutional exactions. Mr. Jay noted that before the Tucker Act, taxpayers had to pay their taxes under protest to preserve their right to a refund, and that was effectively a statute of limitations of zero days. Similarly, inverse condemnation actions under the Fifth Amendment were previously handled in Congress by private bills rather than by causes of actions in federal court. Therefore, Mr. Jay argued, the administrative refund scheme is an adequate remedy for Export Clause violations.
Arguing for respondents, Patricia Millett began by stating that the government must assert a plausible basis for tax liability in order to invoke the special protections of the administrative refund scheme. That, Ms. Millett argued, is how the Court had previously interpreted the tax code in Enochs v. Williams Packing. Because the government did not defend its export tax on the merits, it could not limit respondents to the more restrictive administrative remedy. The reason respondents did not challenge such an obviously unconstitutional tax until decades after its enactment, Ms. Millett explained, was that respondents are unsophisticated businesses with no in-house counsel.
The Justices seemed concerned about extending the "plausible basis" rule under Enochs. When Justice Scalia asked why the Export Clause should be "any more sacrosanct" than other tax refund claims, Ms. Millett argued that respondents' claims are different because no administrative process is necessary to determine the unlawfulness of the tax. Ms. Millett then spent several minutes explaining to the Court why the interest provision applies to any tax refund claim and not just those filed with the IRS. She concluded by emphasizing that Congress had implicitly ratified the Court's decision in Enochs, which should allow respondents to prevail.
Before Mr. Jay could begin his rebuttal, Justice Ginsburg asked him to respond to the argument that Enochs controlled this case. Mr. Jay first argued that Enochs"”which interpreted the tax code's injunctive relief provision"”should not be applied to claims for refunds. But he went on to argue that even if Enochs applied, it would not allow respondents to prevail because the coal excise tax was facially constitutional and the government had a plausible basis for defending it until 1997, when a federal court invalidated the tax and the IRS chose not to appeal. Therefore, the excise taxes on coal were not exactions "in the guise of a tax" which the Court addressed in Enochs. After Justice Breyer asked a few more questions about the statutory scheme, the Justices had no further questions and the case was submitted.