United States v. American Friends Service Committee

1974-10-29

Headline: Court blocks religious employees' bid to stop payroll tax withholding, reversing an injunction and leaving mandatory employer withholding in place while taxpayers must seek refunds.

Holding: The Court reversed the injunction, holding that the Anti-Injunction Act bars pre-enforcement challenges to payroll withholding under §3402, so employees must pursue refund suits rather than stopping withholding.

Real World Impact:

Bars pre-enforcement challenges to payroll withholding based on religious objections.
Requires religious objectors to pursue tax refund suits instead of stopping withholding.
Allows employers to continue mandatory withholding while refund lawsuits proceed.

Topics: religious freedom, payroll tax withholding, tax lawsuits, First Amendment

Summary

Background

A religious nonprofit employer (the American Friends Service Committee) employed Quakers who objected to war spending. In 1969 two employees asked their employer not to withhold 51.6% of the usual payroll withholding because they believed that portion supported military expenditures. The employer stopped withholding that share from their pay but nevertheless paid the full withheld amount to the Government and sued to recover the money; the employees joined and sought an injunction to prevent enforcement of the withholding law for that 51.6%.

Reasoning

The Court addressed whether a judge may block enforcement of the payroll-withholding law before taxes are assessed or collected. It relied on the Anti-Injunction Act (26 U.S.C. §7421(a)) and recent decisions (including Bob Jones University and Commissioner v. "Americans United") that allow pre-enforcement injunctions only in very narrow circumstances. The Court concluded the employees did not meet that narrow exception, that the District Court’s order effectively restrained tax collection by withholding, and therefore that the Anti-Injunction Act barred the requested injunction; the Court reversed the portion of the judgment that enjoined withholding. The employer’s refund for double payment was left intact and was not contested by the Government.

Real world impact

Practically, people who object to how tax money is used cannot generally stop employers from withholding income tax by winning a pre-enforcement injunction. Instead, they must go forward with collection or assessment and then seek a refund or litigate the claim later. The decision preserves the Government’s ability to rely on withholding as an efficient collection method while constitutional claims are resolved in later proceedings.

Dissents or concurrances

Justice Douglas dissented, arguing that withholding uniquely deprived these employees of the ability to bear witness to their beliefs and that the Anti-Injunction Act should not bar their First Amendment claim.