     Case: 18-11398       Document: 00515316589         Page: 1    Date Filed: 02/20/2020




           IN THE UNITED STATES COURT OF APPEALS
                    FOR THE FIFTH CIRCUIT
                                       ___________                    United States Court of Appeals
                                                                               Fifth Circuit


                                      No. 18-11398                           FILED
                                                                     February 20, 2020
                                      ____________
                                                                        Lyle W. Cayce
                                                                             Clerk
WILLIAM R. CANADA, JR.,

               Plaintiff – Appellant

v.

UNITED STATES OF AMERICA (INTERNAL REVENUE SERVICE);
MICHAEL HALPERT, Individually and not in his official capacity; ROBERT
MEYER, Individually and not in his official capacity; DENISE MCCASKILL,
Individually and not in her official capacity,

               Defendants – Appellees
                                  ___________

                   Appeal from the United States District Court
                       For the Northern District of Texas
                                  ____________

Before HAYNES and OLDHAM, Circuit Judges, and HANEN, * District Judge.
ANDREW S. HANEN, District Judge:
       Appellant, William Canada, Jr., successfully challenged in bankruptcy
court a tax penalty assessed against him by the Internal Revenue Service (the
“IRS”) that exceeded $40 million. A few months after a district court affirmed
the bankruptcy court’s decision on the tax liability issue, Canada filed an
independent lawsuit against the IRS and three IRS agents in their individual
capacities (the “Individual Defendants”) (collectively, the “Defendants”). 1

       *District Judge of the Southern District of Texas sitting by designation.
       1For purposes of clarity, this court will refer to the district court that handled the
IRS’s appeal on the Bankruptcy Court’s order disallowing the assessed penalties as the
     Case: 18-11398       Document: 00515316589         Page: 2    Date Filed: 02/20/2020



                                       No. 18-11398
Canada pleaded a claim for damages against the Individual Defendants under
Bivens v. Six Unknown Fed. Narcotics Agents, 403 U.S. 388 (1971), for
allegedly violating his Fifth Amendment right to procedural due process, and
further sought from the IRS the attorney’s fees he incurred litigating the
penalty issue in his Chapter 11 bankruptcy case under 26 U.S.C. § 7430 and
the Equal Access to Justice Act, 28 U.S.C. § 2412.
       The district court below granted the Defendants’ Rule 12(b)(6) motion
and dismissed the lawsuit with prejudice because: (1) special factors counselled
against extending a Bivens action to this new context; (2) the Individual
Defendants were protected by qualified immunity; and (3) Canada’s request
for attorney’s fees under the Internal Revenue Code was untimely. Canada
timely appealed those rulings to this court.
       We affirm.
                                  I.    Background
       Canada is a lawyer who primarily worked as a commercial litigator from
1979 through 1995. At that point, he joined the Heritage Organization, LLC
(“Heritage”), which specialized in personal finance and estate planning
strategies for high-net-worth individuals. Canada was Heritage’s President
from 1995 to 2002 and Chief Operating Officer between 1995 and 2000.
       In 1998, an outside law firm informed Heritage of a new strategy
designed to reduce capital gains taxes for Heritage’s clients. Although the
strategy varied depending on the specific situation, generally Heritage would
advise a client to open an individual brokerage account, short-sell Treasury
securities through that account, and reinvest the short-sale proceeds in reverse




“initial district court.” The district court that dismissed Canada’s lawsuit at issue in this
appeal will be called the “district court below.”
                                             2
     Case: 18-11398          Document: 00515316589         Page: 3     Date Filed: 02/20/2020



                                        No. 18-11398
repurchase agreements. 2 The client would then contribute the brokerage
account (including the obligation to repurchase the Treasury securities) to a
newly-formed pass-through entity. This strategy allowed Heritage’s clients to
reduce large capital gains by generating artificial losses, and thus reduce the
taxpayer’s overall capital gains tax.
       Heritage successfully suggested the artificial loss strategy (the
“Transactions”) to multiple clients between 1998 and 2002. Canada left
Heritage in 2002 because of a compensation dispute. Two years later, he won
a large arbitration award against the company, which apparently compelled it
to file for bankruptcy. In 2007, during Heritage’s bankruptcy case, Canada
received notice letters informing him of an IRS investigation regarding
possible penalties under 26 U.S.C. §§ 6707 and 6108 for failing to report tax
shelter transactions as required by 26 U.S.C. § 6111. 3 In April 2015, the IRS
notified    Canada      of    its   intention       to   impose   penalties      as   high     as
$49,108,452 against him under 26 U.S.C. § 6707. 4 According to Canada, the
IRS ignored his protests on the merits of the penalties and would only discuss
his ability to actually pay them. Additionally, one of the Individual Defendants
allegedly told Canada’s attorney that “all of the IRS’s proposed promoter
penalties like the penalties to be assessed against Canada had been sustained
by the IRS Appeals division 100% of the time.” After reviewing Canada’s


       2  The description of the tax strategy is taken from the initial district court’s published
opinion affirming the bankruptcy court’s disallowance of the assessed penalties. See United
States v. Canada (In re Canada), 574 B.R. 620, 623 (N.D. Tex. 2017).
        3 The Transactions were eventually characterized as “Son of BOSS” tax shelter

transactions and were ultimately disallowed by the IRS and the courts. See, e.g., Kornman
& Assocs. v. United States, 527 F.3d 443, 446–48 (5th Cir. 2008) (describing one of the
Transactions conducted by a Heritage client).
        4 Section 6707 imposes a penalty on any person fails to disclose to the IRS a “reportable

transaction” as required under 26 U.S.C. § 6111. Both provisions have been amended since
Canada left Heritage. There is no dispute that the language of 26 U.S.C. § 6111, at the
relevant time, required a “tax shelter organizer” to register a “tax shelter,” which meant “any
investment” that met certain criteria not relevant to this appeal. See In re Canada, 574 B.R.
at 629.
                                                3
     Case: 18-11398       Document: 00515316589          Page: 4     Date Filed: 02/20/2020



                                       No. 18-11398
financial situation, the IRS proposed he pay it $5 million, a sum which he
claims was substantially in excess of his net worth. Feeling like he had no other
option, on September 15, 2015, Canada filed a voluntary Chapter
11 bankruptcy petition.
       On Canada’s Schedule B (disclosure of personal property), he listed
$1 million for contingent and unliquidated “[c]laims against the IRS and
individual IRS Agents,” among others. 5 The IRS filed a proof of claim for
$40,346,167.87, all but approximately $58,000 of that amount represented the
26 U.S.C. § 6707 penalties. Canada timely objected to the claim. The
bankruptcy court held a two-day trial and ultimately sustained Canada’s
objections and disallowed the IRS’s claim for the penalties because: (1) the
Transactions were not “tax shelters” under 26 U.S.C. § 6111(c); and (2) even if
they were, Canada had “reasonable cause” for not registering them. In re
Canada, No. 15–33757–BJH, 2016 Bankr. LEXIS 2234 (Bankr. N.D. Tex. June
7, 2016).
       On May 8, 2017, the initial district court affirmed the bankruptcy court
on both points. 6 See In re Canada, 574 B.R. at 641. The IRS did not appeal that
district court’s decision. It is now a final order and not at issue in this case. In
the meantime, the bankruptcy court confirmed Canada’s Chapter 11 plan of
reorganization in March 2017. Canada also fully administered his plan,
received a discharge, and his bankruptcy case was closed on May 9, 2017.

       5  Canada’s Schedule B did not describe these contingent and unliquidated claims he
allegedly had against the Defendants; specifically, it did not mention a Bivens cause of action
or a claim for attorney’s fees.
        6 Both courts determined the Transactions did not satisfy 26 U.S.C. § 6111(c)’s

definition of a tax shelter because a shelter must be an “investment” and the courts found
that the Transactions did not satisfy the ordinary meaning of that term. See In re Canada,
574 B.R. at 627–37; In re Canada, 2016 Bankr. LEXIS 2234 at *33–46. Specifically, they
determined “[a]ll that [the] clients purchased from Heritage was the idea[,]” and “Heritage
did not sell the client the Treasury securities or the business entities to implement the
strategy; it merely gave the client the idea.” In re Canada, 574 B.R. at 631–32; see also In re
Canada, 2016 Bankr. LEXIS 2234, at *35 (“[T]he Heritage Transactions are more properly
thought of as ideas or . . . strategies.”).
                                              4
    Case: 18-11398     Document: 00515316589      Page: 5    Date Filed: 02/20/2020



                                  No. 18-11398
                         II.   Procedural History
      Canada filed the underlying lawsuit against the Defendants on
September 14, 2017. His Amended Complaint seeks damages under Bivens
against the Individual Defendants for abridging his rights under the Due
Process Clause of the Fifth Amendment when they knowingly and
intentionally subjected him to a baseless penalty pegged at an amount so high
that he could not seek judicial review. Canada also pleaded for recovery of the
attorney’s fees he incurred in the bankruptcy litigation pursuant to either the
Equal Access for Justice Act or 26 U.S.C. § 7430. The Defendants moved to
dismiss Canada’s Amended Complaint.
      The case was referred to a Magistrate Judge, who recommended that
Defendants’ motion be granted, and that Canada’s case be dismissed with
prejudice. Specifically, the Magistrate Judge found that an action under Bivens
cannot be brought in this case since: (1) Canada’s claims are a new Bivens
context under Ziglar v. Abbasi, 137 S. Ct. 1843 (2017), and as such are
discouraged; and (2) special factors counsel hesitation to imply a claim for
damages against the Individual Defendants. Moreover, the Magistrate Judge
determined that the Individual Defendants were protected by qualified
immunity. Lastly, the recommendation suggested Canada’s claim for
attorney’s fees be dismissed. In particular, the recommendation noted that
26 U.S.C. § 7430 precludes Canada’s recovery of fees under the Equal Access
to Justice Act. See 28 U.S.C. § 2412(e); Info. Res., Inc. v. United States, 996 F.2d
780, 785 n.5 (5th Cir. 1993). The Magistrate Judge also agreed with the
Defendants that Plaintiff’s application for fees under 26 U.S.C. § 7430 was
untimely and not tolled by 11 U.S.C. § 108(a).




                                         5
     Case: 18-11398      Document: 00515316589         Page: 6    Date Filed: 02/20/2020



                                        No. 18-11398
       The district court below adopted the Magistrate Judge’s findings,
conclusions, and recommendation over Canada’s objections and dismissed the
case with prejudice. Canada timely appealed. 7
                           III.    Standard of Review
       The court reviews dismissals under Rule 12(b)(6) de novo. Causey
v. Sewell Cadillac-Chevrolet, Inc., 394 F.3d 285, 288 (5th Cir. 2004). “[A]
complaint must contain sufficient factual matter, accepted as true, to state a
claim to relief that is plausible on its face.” Ashcroft v. Iqbal, 556 U.S. 662,
678 (2009) (citation and internal quotation marks omitted).
       The court also reviews the grant of qualified immunity de novo. Brown
v. Miller, 519 F.3d 231, 236 (5th Cir. 2008). “Our jurisdiction over qualified
immunity appeals extends to ‘elements of the asserted cause of action’ that are
‘directly implicated by the defense of qualified immunity[,]’ including whether
to recognize new Bivens claims.” De La Paz v. Coy, 786 F.3d 367, 371 (5th Cir.
2015) (internal citation and quotation omitted).
                                  IV.    Discussion
A.     Extending Bivens Under the Ziglar Test
       In Bivens, the Supreme Court recognized an implied cause of action for
damages against federal officers for violating the Fourth Amendment’s
prohibition against unreasonable searches and seizures. See 403 U.S. at 397.
“In the next nine years, the Court recognized two more implied causes of action
under Bivens: a Fifth Amendment equal protection claim for employment
discrimination by a congressman . . . and an Eighth Amendment claim for
inadequate medical care by federal jailers . . . .” Cantú v. Moody, 933 F.3d 414,
421 (5th Cir. 2019) (first citing Davis v. Passman, 442 U.S. 228 (1979); and
then citing Carlson v. Green, 446 U.S. 14 (1980)).

       7 Canada does not contest on appeal the district court below’s dismissal of his claim
for attorney’s fees under the Equal Access to Justice Act. Accordingly, the court shall not
address that claim further.
                                             6
     Case: 18-11398       Document: 00515316589         Page: 7     Date Filed: 02/20/2020



                                       No. 18-11398
       In the 40 years since Carlson, the Supreme Court has not approved of
any other implied damages remedy under the Constitution. See Ziglar,
137 S. Ct. at 1855; see also id. at 1857 (collecting cases). Indeed, the Supreme
Court acknowledged that its analysis in Bivens, Davis, and Carlson “might be
different if they were decided today.” Id. at 1856. Although those three cases
remain “good law,” the Supreme Court “has made clear that expanding the
Bivens remedy is now a ‘disfavored’ judicial activity.” Id. at 1856–57 (quoting
Ashcroft v. Iqbal, 556 U.S. 662, 675 (2009)).
       Ziglar also dictates, “with an exacting description[,]” the two-part
analysis for implying Bivens claims. Hernandez v. Mesa, 885 F.3d 811, 816 (5th
Cir. 2018) (en banc), cert. granted, 139 S. Ct. 2636 (No. 17–1678). 8 First, the
court must decide if the case before it involves a “new context” that is distinct
from Bivens, Davis, and Carlson. Ziglar, 137 S. Ct. at 1859; see also, e.g.,
Cantú, 933 F.3d at 422. If so, the court must then assess whether there are
“special factors” counselling hesitation to extending a Bivens claim to this
context. Ziglar, 137 S. Ct. at 1857; see also, e.g., Maria S. v. Garza, 912 F.3d
778, 784 (5th Cir. 2019), cert. denied, 140 S. Ct. 81 (2019).
       Canada’s Bivens claims are based on his allegations that the Individual
Defendants’ actions in assessing and calculating a tax penalty against him
were malicious and effectively deprived him of a means of judicial review. To
fully understand this accusation, a brief summary of the tax adjudication
system is necessary.
       Generally, a taxpayer has several options to challenge an IRS tax or
penalty assessment. First, after a tax liability is assessed, the taxpayer can
appeal to the IRS Appeals Office; this administrative review does not require
the taxpayer to first pay the assessed amount. See 26 C.F.R. §§ 601.105,

       8 At oral argument, counsel from both parties agreed that the appeal in Hernandez
was not likely to affect the outcome here and that this court need not to wait for the Supreme
Court to issue its opinion in Hernandez before deciding this case.
                                              7
     Case: 18-11398        Document: 00515316589          Page: 8     Date Filed: 02/20/2020



                                        No. 18-11398
601.106; see also Diversified Grp. Inc. v. United States, 841 F.3d 975, 980–
81 (Fed. Cir. 2016). The taxpayer may also “pay the [full amount of tax or]
penalty, request a refund from the IRS, and, if unsuccessful, sue to recover a
refund[]” in district court or federal claims court. Diversified Grp., 841 F.3d at
981 (citations omitted); see also Smith v. United States, 495 F. App’x 44,
48 (Fed. Cir. 2012). Alternatively, the tax court provides a forum to challenge
an assessed amount “without first paying the tax.” Id. at n.3 (citing Flora v.
United States (Flora II), 362 U.S. 145, 163 (1960)).
       The Internal Revenue Code also provides an opportunity to be heard
after a tax or penalty is assessed but before a tax levy is imposed by the IRS
Appeals Office (“Collection Due Process hearings”), at which time a taxpayer
can challenge, among other things, “the existence or amount of the underlying
tax liability” if he or she “did not otherwise have an opportunity to dispute such
tax liability.” 26 U.S.C. § 6330(c)(2)(B). Lastly, a taxpayer can wait until the
IRS brings an action to enforce a tax lien or subject property to payment of tax,
where he or she can litigate the merits of tax liability. See id. § 7403. 9
       The desirability of the tax court and the ability to sue “without paying a
cent[]” first is apparent. Flora II, 362 U.S. at 176. Congress, however, “has
generally declined to authorize [tax court] jurisdiction over assessed penalties,
such as the [26 U.S.C.] § 6707 penalties at issue here.” Diversified Grp., 841
F.3d at 981 n.3 (citations omitted); accord Keller Tank Servs. II v. Comm’r, 854
F.3d 1178, 1117 (10th Cir. 2017). Thus, typically the “only judicial recourse [for
penalties imposed under 26 U.S.C. § 6707] is a refund action in the District
Court (or the Court of Claims).” Larson v. United States, 888 F.3d 578, 581 (2d
Cir. 2018).



       9Taxpayers who prevail in any administrative or court proceeding involving the IRS’s
determination, collection, or refund of any tax, interest, or penalty can generally recover their
costs and attorney’s fees related to that proceeding. See 26 U.S.C. § 7430.
                                               8
    Case: 18-11398     Document: 00515316589      Page: 9    Date Filed: 02/20/2020



                                  No. 18-11398
      1.    New Context
      “The proper test for determining whether a case presents a new Bivens
context is” whether it is “different in a meaningful way from previous Bivens
cases decided by” the Supreme Court. Ziglar, 137 S. Ct. at 1859. A meaningful
difference may include the Constitutional right at issue, the statutory or other
legal mandate under which the officer was operating, or the presence of
potential special factors that previous Bivens cases did not consider. Id. at
1860. “[E]ven a modest extension is still an extension.” Id. at 1864.
      Canada contends that the Supreme Court recognized a Bivens claim for
Fifth Amendment Due Process violations in Davis, and thus his claims do not
present a new Constitutional context. His reliance on Davis is misplaced. The
Supreme Court has made clear that claims for violations of Fifth Amendment
rights can still be brought in a new context. See, e.g., Ziglar, 137 S. Ct. at 1860;
Iqbal, 556 U.S. at 675 (“For while we have allowed a Bivens action to redress
a violation of the equal protection component of the Due Process Clause of the
Fifth Amendment . . . we have not found an implied damages remedy under
the Free Exercise Clause.”) (citation omitted); Wilkie v. Robbins, 551 U.S. 537,
547–48 (2007); FDIC v. Meyer, 510 U.S. 471, 473–74 (1994). To be sure,
      [n]o one thinks Davis—which permitted a congressional employee
      to sue for unlawful termination in violation of the Due Process
      Clause—means the entirety of the Fifth Amendment’s Due Process
      Clause is fair game in a Bivens action.

Cantú, 933 F.3d at 422.
      Instead, the proper test is whether the case differs in a meaningful way
from Bivens, Davis, or Carlson. Ziglar, 137 S. Ct. at 1859; see also Loumiet v.
United States, __ F.3d __, No. 18-5020, 2020 U.S. App. LEXIS 2681, 2020 WL
424919, at *4 (D.C. Cir. Jan. 28, 2020). Canada’s claims that IRS agents
intentionally manipulated a penalty assessment to ensure he could not pay the
amount and sue for a refund “bear little resemblance to the three Bivens claims
                                         9
   Case: 18-11398     Document: 00515316589      Page: 10   Date Filed: 02/20/2020



                                  No. 18-11398
the Court has approved in the past.” Id. at 1860 (citations omitted). Thus,
contrary to Canada’s argument, the facts of this case clearly present a new
context for a Bivens remedy.
      Canada also asserts that this court in Rutherford v. United States,
702 F.2d 580 (5th Cir. 1983), recognized the possibility of a taxpayer’s Bivens
claims against IRS agents on very similar facts. In that case, the plaintiffs
accused two IRS agents of inventing additional gross income, intentionally
assessing duplicative penalties, making repeated demands for useless
documentation, charging the plaintiffs with hiding money, and arranging an
audit report be delivered on the night of Christmas Eve. Rutherford, 702 F.2d
at 581. The district court in that case dismissed their case because “post-
deprivation process existed in the form of available administrative and judicial
proceedings for recovery of taxes over-assessed . . . and [those] remedies had
been held constitutionally adequate.” Id. (citations omitted).
      This court reversed because it read the plaintiffs’ complaint as alleging
a deprivation of a liberty interest, not a property interest as the district court
had held. Id. While discussing remand, the court noted that the “district court
may wish to consider in this connection the several suggestions, albiet in dicta,
that abuse in tax collection might lay the foundation for a Bivens action.” Id.
at 585.
      While Rutherford initially appears to help Canada because its dicta
suggests that a Bivens claim against IRS agents might be cognizable, upon in-
depth consideration it proves to be less helpful than one might think. First and
foremost, this court did not actually recognize a Bivens claim. See Rutherford,
702 F.2d at 584–85. Indeed, the sentence quoted above is merely a suggested
point of consideration for the district court on remand. To say that this
sentence recognized a Bivens claim is too broad of an interpretation.



                                       10
    Case: 18-11398    Document: 00515316589     Page: 11   Date Filed: 02/20/2020



                                 No. 18-11398
      Even if Rutherford implied a Bivens remedy for abusive tax collection
practices, that fact is immaterial under the Ziglar test. The “new context”
analysis focuses on whether the case differs in a meaningful way from previous
Bivens cases decided by the Supreme Court, not a three-judge court of appeals
panel. Ziglar, 137 S. Ct. at 1859; see also Cantú, 933 F.3d at 422 (“[D]o [the]
claims fall into one of the three existing Bivens actions?”); Loumiet, 2020 WL
424919, at *4 (explaining that opinions where the D.C. Circuit has recognized
a Bivens claim have been “overtaken” by Ziglar’s “holding that the new-context
analysis may consider only Supreme Court decisions approving Bivens
actions.”) (citation omitted).
      Moreover, even assuming arguendo that Rutherford “recognized” a
Bivens remedy and that such a holding was material under the Ziglar test,
Canada’s case is still a “modest extension” of that case. See Ziglar, 137 S. Ct.
at 1864. Rutherford involved a violation of the plaintiffs’ liberty interests in
being free from harassing tax collection practices. See 702 F.2d at 584–85.
Canada’s claims allege abusive assessment of penalties that result in the
deprivation of procedural due process. There are enough distinguishing factors
and circumstances between the two cases to qualify Canada’s case as a modest
extension of Rutherford.
      Most importantly, Rutherford was decided during the “ancien regime”
when implying a cause of action for Constitutional violations was not explicitly
a “disfavored” judicial activity. See Ziglar, 137 S. Ct. at 1855, 1857. It also
preceded substantial changes to the tax adjudication process, such as the
codification of the IRS Appeals Office review and Collection Due Process
hearings. See Internal Revenue Service Restructuring and Reform Act of 1988,
Pub. L. 105–206, 112 Stat. 746 (1988) (codified as 26 U.S.C. § 6330); see also
Lewis v. Comm’r, 128 T.C. 48, 51–61 (2007).



                                      11
    Case: 18-11398        Document: 00515316589           Page: 12     Date Filed: 02/20/2020



                                        No. 18-11398
       All of these reasons confirm that the district court below properly
concluded that this case is a new Bivens context under Ziglar. 10
       2.      Special Factors
       “[A] Bivens remedy will not be available if there are ‘special factors
counselling hesitation in the absence of affirmative action by Congress.’”
Ziglar, 137 S. Ct. 1857 (quoting Carlson, 446 U.S. at 18). A special factor is a
sound reason to think Congress might doubt the efficacy or necessity of a
damages remedy as part of the system for enforcing the law and correcting a
wrong. 11 Id. at 1858. The court’s focus is on maintaining the separation of
powers: “separation-of-powers principles are or should be center to the
analysis.” Hernandez, 885 F.3d at 818 (quoting Ziglar, 137 S. Ct. at 1857). The
only relevant threshold—that a factor “counsels hesitation”—is remarkably
low. See id. at 822. If any special factors do exist, then “‘courts must refrain
from creating’” an implied cause of action in that case. Maria S., 912 F.3d at
784 (quoting Ziglar, 137 S. Ct. at 1858).
               i.     Procedural Points of Error
       Canada identifies several alleged procedural points of error in the
district court below’s finding of special factors. First, he complains that the

       10    Canada takes issue with the district court below’s “conclusion” that a case which
presents a new Bivens context mandates dismissal. The district court below merely stated
what this court wrote in Hernandez. See ROA at 453–54 (“[W]hile . . . Hernandez suggested
that . . . ‘the newness of this ‘new context’ should alone require dismissal of the plaintiffs’
damage claims,’ 885 F.3d at 818, the Supreme Court’s decisions . . . appear to require a court
to analyze whether any ‘special factors’” exist “in any case that presents a ‘new context’ for
Bivens purposes . . . .”) (citations omitted). Nevertheless, the district court below did analyze
the “special factors” prong of Ziglar’s two-part test. Therefore, even if the district court below
erred in “concluding” that a new context mandates dismissal, such an error was harmless.
         11 Canada argues that the district court below improperly considered the special

factors by applying a “sound reason” standard rather than a “convincing reason” one. Canada
asserts the latter is what Ziglar requires. See Appellant’s Br. at 23–24. Not so. Canada’s brief
quotes Justice Breyer’s dissent in Ziglar, not the majority opinion. Id. (citing Ziglar, 137 S.
Ct. at 1876 (Breyer, J., dissent)); see also Ziglar, 137 S. Ct. at 1858 (majority opinion) (“[I]f
there are sound reasons to think Congress might doubt the efficacy or necessity of a damages
remedy as part of the system for enforcing the law and correcting a wrong, the courts must
refrain from creating the remedy . . . .”) (emphasis added).
                                               12
    Case: 18-11398       Document: 00515316589         Page: 13     Date Filed: 02/20/2020



                                      No. 18-11398
district court below impermissibly shifted the burden to establish the special
factors. Canada believes the burden should lie with the Individual Defendants
based on the Supreme Court’s opinion in Carlson. See 446 U.S at 18 (“[A
Bivens] cause of action may be defeated in a particular case, however, in two
situations. The first is when defendants demonstrate special factors counselling
hesitation in the absence of affirmative action by Congress.”) (emphasis added)
(internal citations and quotations omitted). Defendants disagree and argue
that the existence of special factors are determined in “quasi-jurisdictional
terms” (i.e., without regard to the burden of proof). Appellees’ Br. at 32.
Although recent cases like Ziglar and Hernandez support Defendants’ position,
it is unnecessary for this court to decide that issue because the Defendants
raised the three special factors that the district court below addressed. 12
       Additionally, Canada argues that the district court below erred by not
performing its special factors analysis at a “high level of specificity” rather
than an “abstract level.” See Rodriguez v. Swartz, 899 F.3d 719, 738 (9th Cir.
2018), petition for cert. filed, __ U.S __ (U.S. Sept. 7, 2018) (No. 18–309). In
Rodriguez, the Ninth Circuit suggested that a “high level of specificity” means
looking for “special factors in terms of the specific facts alleged in the
complaint,” not broad generalities or hypothetical cases. 899 F.3d at 744. The
district court below’s analysis was sufficiently tied to the facts alleged in
Canada’s Amended Complaint and did not overly concentrate on hypothetical
penalty assessment cases. To be sure, Canada identifies no specific factor that
the district court below found that was analyzed at an “abstract level.”




       12 In fact, the Supreme Court as early as 1983 seemingly disposed of placing the
burden on the defendants; instead, placing the onus on the courts. See Bush v. Lucas,
462 U.S. 367, 378 (1983) (“[T]he federal courts must make the kind of remedial determination
that is appropriate for a common-law tribunal, paying particular heed, however to any special
factors counselling hesitation before authorizing a new kind of federal litigation.”).
                                             13
    Case: 18-11398         Document: 00515316589        Page: 14     Date Filed: 02/20/2020



                                       No. 18-11398
Therefore, assuming the Ninth Circuit’s high level of specificity requirement
applied to the district court below, it still complied.
                     ii.     Substantive Points of Error
       Turning to the substance of the special factors analysis, the district court
below discussed three special factors raised by the Defendants: (1) the risk of
disruptive intrusion by the courts into the executive tax collection efforts;
(2) the alternative remedies available; and (3) Congress’ repeated failure to
enact a damages remedy. While it did not expressly accept or reject the first
two factors, on the third factor the district court below found “there are sound
reasons to think Congress might doubt the efficacy or necessity of a damages
remedy” for the Constitutional violation alleged. This court will address these
factors in reverse order.
       First, the district court below is undoubtedly correct that Congress chose
to omit a damages remedy as to tax penalties assessed and to limit judicial
review to post-payment and bankruptcy review. This is significant considering
Congress has enacted statutes that provide taxpayers a damage remedy for
other actions taken by IRS agents. See 26 U.S.C. §§ 7431–7433A, 7435.
Notably, these statutes do not include a cause of action for wrongfully assessed
penalties.
       Congress’ failure to include a damages remedy for malicious assessment
of penalties, despite enacting statutes that provide for damages when IRS
agents commit other tortious actions, counsels hesitation in extending a Bivens
remedy for that conduct. Indeed, Congress’ decision to consistently preclude a
recovery for damages for taxpayers in Canada’s position strongly suggests
Congress doubts the efficacy or necessity of such a remedy. 13 See Ziglar, 137 S.
Ct. at 1858.

       13 Congress also could have, but chose not to, make an exception to the full payment
rule for penalties under 26 U.S.C. § 6707. Cf. 26 U.S.C. § 6703(c) (permitting partial payment
for penalties assessed under 26 U.S.C. §§ 6700 and 6701).
                                             14
    Case: 18-11398       Document: 00515316589          Page: 15     Date Filed: 02/20/2020



                                       No. 18-11398
       In addition, as discussed above, Congress has enacted a complex
statutory system for taxpayers to challenge penalties assessed against them
and to recover certain costs and fees. Similar statutory systems have been held
to be an adequate alternative remedy in lieu of a Bivens claim. See Schweiker
v. Chilicky, 487 U.S. 425–26 (1988); Bush, 462 U.S. at 386–88. In those cases,
the Supreme Court rejected arguments (similar to Canada’s) that less than
“complete relief” is not a Congressional failure to provide meaningful
safeguards and remedies. See Bush, 462 U.S. at 388; Schweiker, 487 U.S. at
425; cf. Baddour, 802 F.2d at 808–09 (stating neither “the Constitution nor the
Internal Revenue Code requires more relief than” refunding erroneously
collected taxes with interest and awarding attorney’s fees for taxpayers who
successfully challenge tax assessments).
       The complex statutory system also supports the Defendants’ position
that courts implying a cause of action would risk disrupting the IRS’s agency
decisions and collection efforts. Indeed, creating a non-legislative avenue of
relief that would impose personal liability on IRS agents would hamper the
ability of IRS agents to perform the difficult and vital task of determining and
collecting taxes. See Baddour, 802 F.2d at 808. Put differently, “Congress has
given taxpayers all sorts of rights against an overzealous officialdom, . . . and
it would make the collection of taxes chaotic if a taxpayer could bypass the
remedies provided by Congress simply by bringing” a Bivens action against
IRS employees. Id. (quoting Cameron v. Internal Revenue Serv., 733 F.2d 126,
129 (7th Cir. 1985)).
       Therefore, all three of the special factors suggested by Defendants are
sound reasons that counsel the court’s hesitation to extend a Bivens claim in
this case. 14 Canada’s arguments to the contrary are not persuasive. He asserts

       14 Canada appears to argue that special factors only include the type of facts and
circumstances found in Ziglar and Hernandez. In other words, he contends to be a special
factor the situation must involve issues of national security or actions taken by a high-level
                                             15
    Case: 18-11398        Document: 00515316589          Page: 16      Date Filed: 02/20/2020



                                        No. 18-11398
there is no reason to believe that Congress’ failure to provide a damages
remedy for the “constitutional torts inflicted on [him]” are more than a “mere
oversight”, and its silence more than “inadvertent.” To support that contention,
he points to the 1987 IRS Commissioner’s testimony before a Senate
Subcommittee in April 1987. The Commissioner was testifying about, in
relevant part, a proposed cause of action against IRS employees for “the
deprivation of any rights, privileges, or immunities secured by the
Constitution.” See Taxpayers’ Bill of Rights Act, S. 579, 100th Cong. (1987). He
said:
        A right of action against [IRS] employees currently exists. The
        Supreme Court recognized a cause of action directly under the
        Constitution in [Bivens.] Bivens suits are an available remedy for
        those whose Constitutional rights have been violated by Federal
        employees acting under the color of Federal law. In fact, more than
        1,000 Bivens suits were filed against [IRS] employees during the
        fiscal years 1980 through 1986. It should be noted, however, that
        none of these suits has been ultimately successful.”

Taxpayers’ Bill of Rights, Part 1: Hearings on S. 579 and S. 604 Before the
Subcomm. on Private Retirement Plans and Oversight of the IRS, 100th Cong.
243 (1987). A year and a half later, Congress passed the Technical and
Miscellaneous Revenue Act of 1988, which enacted certain causes of actions for
taxpayers to collect damages against the IRS but omitted a claim for
Constitutional violations. See Pub. L. No. 101–647, 102 Stat. 3747 (1988)
(codified as 26 U.S.C. §§ 7432, 7433).

official in response to a crisis. To support this proposition, he cites the D.C. district court’s
opinion in Loumiet v. United States, 292 F. Supp. 3d 222, 229 (D.D.C. 2017). That holding,
however, was reversed by the D.C. Circuit Court of Appeals. See Loumiet, 2020 WL 424919.
As recognized by the D.C. Circuit in that reversal, Ziglar itself mentions alternative remedial
structures and alternative methods of relief as potential special factors. Id. at *5 (citing
Ziglar, 137 S. Ct. at 1858, 1863). In addition, that court noted, just as this court discussed
above, “[t]wo Supreme Court cases—Bush and Chilicky—illustrate these special factors.” Id.;
see also id. at *6 (discussing the administrative enforcement scheme as a special factor).
Consequently, the absence of action taken by a high-ranking official in a crisis or matters of
national security does not alter this court’s finding that special factors exist here.
                                              16
   Case: 18-11398     Document: 00515316589      Page: 17   Date Filed: 02/20/2020



                                  No. 18-11398
      Canada believes that the proposed cause of action was ultimately
omitted because of the Commissioner’s testimony and, thus, Congress acted
“with the explicit understanding that taxpayers already enjoyed a remedy for
such injuries under Bivens[,]” not because “Congress’ intent [was] that
taxpayers be denied any remedy for those violations or injuries.” Based upon
these premises, Canada suggests this court must interpret Congress’ decision
to “enact a statutory remedy which it views as fully adequate only in
combination with the Bivens remedy.” Carlson, 446 U.S. at 19 n.5.
      To the extent legislative history is even relevant, Canada’s legislative
history argument completely ignores the testimony that none of the over
1,000 Bivens suits filed between 1980 and 1986 resulted in a money judgment
for the taxpayer. Moreover, Canada would have the court believe that at least
the majority of Congress chose to eliminate a statutory cause of action for
Constitutional violations because of one executive employee’s conclusory
opinion as to the application of Bivens.
      Finally, Canada’s reliance on the 1987 testimony overlooks the fact that
Congress has enacted statutes that provide taxpayers with a claim for damages
concerning the actions of IRS agents in the intervening 33 years. See 26 U.S.C.
§§ 7431–7433A, 7435. Not to mention, the Supreme Court has made clear that
it has never recognized a Bivens remedy for taxpayers who allege IRS agents
violated their Constitutional rights. See Ziglar, 137 S. Ct. at 1855 (“These three
cases—Bivens, Davis, and Carlson—represent the only instances in which the
Court has approved of an implied damages remedy under the Constitution
itself.”) (emphasis added). Canada’s reliance on the footnote in Carlson is
inconsistent with the Supreme Court’s later opinion to the effect that
legislative inaction is not inadvertent when Congress repeatedly enacts
legislation to reform an administrative process, but at no point chose to extend
the kind of remedies sought. See Schweiker, 487 U.S. at 426.

                                       17
     Case: 18-11398      Document: 00515316589         Page: 18     Date Filed: 02/20/2020



                                      No. 18-11398
       Simply put, Congress has passed several statutes concerning the system
for adjudicating tax disputes and damage remedies for taxpayers. Absent from
this system, however, is a claim for damages for taxpayers who, like Canada,
accuse IRS agents of intentionally imposing a tax penalty too high to pay before
seeking judicial review. Congress’ silence strongly suggests this is more than
a mere oversight. In any event, this court cannot recognize an implied Bivens
claim without violating the separation-of-powers principles that are at the core
of the special factors analysis. See Hernandez, 885 F.3d at 818 (quoting Ziglar,
137 S. Ct. at 1857); cf. Schweiker, 487 U.S. at 429 (“Whether or not we believe
that its response was the best response, Congress is the body charged with
making the inevitable compromises required in the design of a massive and
complex welfare benefits program . . . .”) (citation omitted).
       The district court below properly found that Canada’s claims against the
Individual Defendants alleged a new Bivens context and that special factors
exist under Ziglar. We therefore affirm the dismissal of those claims. 15
B.     Canada’s Claim for Attorney’s Fees Under 26 U.S.C. § 7430
       Canada’s Amended Complaint also sought to recover attorney’s fees from
the IRS under 26 U.S.C. § 7430 for the fees he incurred litigating the assessed
penalties in his bankruptcy case. Specifically, he pleaded he “is eligible and
entitled to recover from the IRS reasonable attorney’s fees, costs, and expenses
incurred in [his objection to the IRS’s proof of claim] in his Chapter
11 bankruptcy case.” Further, he explained that the amount of attorney’s fees
“are contained in the First and Final Fee Application” that Canada’s attorney
filed with, and was approved by, the bankruptcy court. That fee application
demonstrates that Canada’s bankruptcy attorney incurred “$99,975.00 for his
professional services rendered from September 15, 2017 [sic], through April 3,

        Since Canada failed to plead a cognizable Bivens cause of action, this court need not
       15

address whether the Individual Defendants are entitled to qualified immunity as to that
claim.
                                             18
    Case: 18-11398       Document: 00515316589          Page: 19     Date Filed: 02/20/2020



                                       No. 18-11398
2017” and “$2,256.59 for actual disbursements and expenses incurred in
representing Debtor in” the bankruptcy case. See Case No. 15–33757–bjh11,
Doc. No. 204 at 6; see also id. at 1 (showing the time period as September 15,
2015 through April 3, 2017). 16
       Title 26, Section 7430 provides:
       In any administrative or court proceeding which is brought by or
       against the United States in connection with the determination,
       collection, or refund of any tax, interest, or penalty under [the
       Internal Revenue Code], the prevailing party may be awarded a
       judgment or settlement for—

            (1) reasonable administrative costs incurred in
                connection with such administrative proceeding
                within the [IRS], and

            (2) reasonable litigation costs incurred in connection with
                such court proceeding.

26 U.S.C. § 7430(a). The statute also makes clear that “costs” includes
reasonable attorney’s fees related to the court or administrative proceeding.
Id. § 7430(c)(1)(B)(iii), (c)(2)(B).
       There is no question that Canada prevailed on the tax penalty issue;
however, to qualify as a “prevailing party,” Canada had to submit an
application for fees and other expenses to the court within thirty days of final
judgment in the action. See id. § 7430(c)(4)(A)(ii) (“The term ‘prevailing party’
means any party in any proceeding . . . which meets the requirements of the
1st sentence of” 28 U.S.C. § 2412(d)(1)(B) . . . .”); see also 28 U.S.C.
§ 2412(d)(1)(B) (prescribing a 30-day deadline following a final judgment).




       16The fee application in the bankruptcy court was not included in the record on appeal,
but we “may take judicial notice of the record in prior related proceedings and draw
reasonable inferences therefrom.” CitiFinancial Corp. v. Harrison, 453 F.3d 245, 249 n.3 (5th
Cir. 2006) (internal citation and quotation omitted).
                                             19
    Case: 18-11398        Document: 00515316589          Page: 20     Date Filed: 02/20/2020



                                       No. 18-11398
       In this case, the bankruptcy court sustained Canada’s claim objection
and disallowed the IRS’s penalties in June 2016. The initial district court
affirmed that order on May 8, 2017. It is undisputed that the IRS’s deadline to
appeal to this court was July 7, 2017. See FED. R. APP. P. 4(a)(1)(B). Since the
IRS declined to initiate such an appeal, the initial district court’s order became
final (at the latest) on July 8, 2017. Accordingly, viewed most favorably to him,
Canada had until August 7, 2017 to file an application for fees under 26 U.S.C.
§ 7430(c)(4)(A)(ii). He did not file an application in the bankruptcy or district
court involved in the actual resolution of the penalty issue; nor did he file this
lawsuit with the district court below until September 14, 2017. 17
       Canada contends that the ordinary 30-day limitations period was tolled
by the bankruptcy case under 11 U.S.C. § 108(a), which provides:
       If applicable nonbankrutpcy law . . . fixes a period within which
       the debtor may commence an action, and such period has not
       expired before the date of the filing of the petition, the trustee [or
       debtor-in-possession] may commence such action only before the
       later of—

            (1) the end of such period, including such suspension of
                such period occurring on or after the commencement
                of the case; or


       17 It is unclear why Canada did not simply file an application for fees in the bankruptcy
court or in the initial district court. Canada states the IRS’s appeal to the district court
deprived the bankruptcy court of jurisdiction to consider his fee request. Canada also
contends that the appeal forecloses the IRS’s untimeliness argument or is a compelling
reason to extend the 26 U.S.C. § 7430’s 30-day period. These arguments make little sense.
He could have filed a motion for the recovery of fees at any time during the pendency of the
case in the bankruptcy court. Canada also had the option of moving to reopen the bankruptcy
case once the initial district court’s ruling on appeal became unappealable. See 11 U.S.C. §
350(b) (“A case may be reopened in the court in which such case was closed to administer
assets, to accord relief to the debtor, or for other cause.”). Similarly, Canada had the ability
to ask the initial district court to award him fees anytime between the start of the appeal and
30-days after the IRS could no longer appeal the district court’s order. There is no convincing
reason why Canada could not have filed an application for fees under 26 U.S.C. § 7430 in one
of those two courts before August 2017 because of an appeal that ended on May 8, 2017.
Nevertheless, assuming arguendo that his proposition is accurate, he still could have filed
this lawsuit before the 30-day time period lapsed.
                                              20
    Case: 18-11398      Document: 00515316589       Page: 21    Date Filed: 02/20/2020



                                    No. 18-11398
           (2) two years after the order for relief.

11 U.S.C. § 108(a); see also id. § 1107.
      Canada’s “order for relief” (i.e., the date he filed his bankruptcy petition)
was September 15, 2015. See id. § 301(b). He thus contends that his September
14, 2017 filing of this case falls within 11 U.S.C. § 108(a)(2)’s two-year tolling
provision and was therefore timely filed. The Defendants argued, and the
district court below agreed, that Canada’s 30-day limitations period was not
tolled and thus his fee application was untimely. 18
      The court notes that all of the fees Canada seeks to recover were incurred
during the pendency of the bankruptcy and they became recoverable when he
prevailed in the bankruptcy court and was thereafter affirmed by the initial
district court. The tolling provision (11 U.S.C. § 108(a)) is designed to impact
or apply to claims whose statute of limitations are already running as of the
date of the filing of the bankruptcy petition. See In re Phillip, 948 F.2d 985,
987 (5th Cir. 1991); 2 COLLIER ON BANKRUPTCY ¶ 108.02 (Alan N. Resnick &
Henry J. Sommer eds., 16th ed. 2019) (citations omitted).
      Critically, here, Canada’s claim for fees is based upon 26 U.S.C. § 7430.
That provision entitles him to recover attorney’s fees in connection with a court
proceeding brought by or against the IRS. No such proceeding occurred until
after Canada filed for bankruptcy. Indeed, the relevant controversy was not
initiated until the IRS filed its proof of claim in Canada’s Chapter 11 case and
Canada disputed it. There can be no dispute that Canada could not recover fees
as the prevailing party before a final determination that he had actually
prevailed on the penalty dispute; that occurred almost two years post-petition.




      18 The Defendants also argue that Canada’s lawsuit must be dismissed because of
sovereign immunity. Because this court rejects Canada’s claims against the Government on
other grounds, it does not reach that argument.
                                           21
   Case: 18-11398     Document: 00515316589       Page: 22   Date Filed: 02/20/2020



                                   No. 18-11398
      Canada’s 26 U.S.C. § 7430 claim for attorney’s fees in the bankruptcy
case accrued no earlier than when the IRS filed its claim in the bankruptcy
court and no later than July 7, 2017, when the IRS could no longer appeal the
initial district court’s order affirming the bankruptcy court. Accordingly, that
claim is a post-petition claim. Consequently, 11 U.S.C. § 108(a) did not toll the
30-day deadline to request fees. Canada did not file this lawsuit until
September 14, 2017, nearly 70 days after the final judgment was entered on
the tax penalty claim objection. As such, Canada’s request was untimely under
28 U.S.C. § 2412(d)(1)(B) and Canada is not a “prevailing party” pursuant to
26 U.S.C. § 7430(c)(4)(A)(ii). Canada therefore is not entitled to recover
attorney’s fees from the IRS and the district court below properly dismissed
his claim.
                              V.    Conclusion
      For the foregoing reasons, the ruling of the district court below is
AFFIRMED.




                                       22
