                                                                   United States Court of Appeals
                                                                            Fifth Circuit
                                                                          F I L E D
                         REVISED FEBRUARY 10, 2005
                                                                          January 26, 2005
                       UNITED STATES COURT OF APPEALS
                            FOR THE FIFTH CIRCUIT                      Charles R. Fulbruge III
                                                                               Clerk
                          _______________________

                                NO. 04-10470
                          _______________________


                         JOHN DOE 1 and JOHN DOE 2,

                                                       Plaintiff-Appellants,


                                     versus


                         UNITED STATES OF AMERICA,

                                            Intervenor Defendant-Appellee.



             Appeal from the United States District Court
                  for the Northern District of Texas



Before GARWOOD, JONES, and PRADO, Circuit Judges.

By EDITH H. JONES:

             This appeal challenges the district court’s jurisdiction

to   apply   equitable    tolling    to    the   statute   of    limitations       of

Internal     Revenue    Code   §   6501,    26   U.S.C.    §    6501    (hereafter

“I.R.C.”).     Because we conclude that equitable tolling may not be

used to extend this provision’s three-year period, we REVERSE the

district court.
                                   Background

            In September 2000, the Internal Revenue Service (“IRS”)

published Notice 2000-44,1 which requires organizers and promoters

of certain tax shelters to maintain lists of participants and to

provide those lists to the IRS upon request.                 The Notice also

states that these shelter transactions are potentially abusive. In

December    2000,    John    Doe   I   and   John   Doe   II2   (collectively

“taxpayers”) purchased one of these Short Option Strategy (“SOS”)

shelters from KPMG to reduce their federal income tax liabilities

for 2000 and 2001.

            In 2001, the IRS investigated KPMG’s compliance with the

registration requirements imposed by Notice 2000-44.                As part of

the inquiry, the IRS propounded summonses that demanded the names

of clients to whom KMPG had sold certain tax shelters, as well as

other documentation relating to the transactions.                In all, KPMG

received twenty-five summonses.          In July 2002, the IRS brought an

action in the United States District Court for the District of

Columbia to enforce nine of the summonses sent to KPMG.3                      In

December 2002, the district court ordered KPMG to comply with the

summonses    and    reveal   the    requested    names    and   transactional

      1
            The IRS issued the notice pursuant to I.R.C. § 6112(b)(2).
      2
            The district court eventually removed the seal on the case. John Doe
I is actually Keith Tucker and John Doe II is Robert Hechler.
      3
            See United States v. KPMG, LLP, 237 F. Supp. 2d 35, 36 (D.D.C. 2002);
316 F. Supp. 2d 30 (D.D.C. 2004). The IRS did not seek enforcement of the Notice
2000-44 summonses in this suit because KPMG had assured the IRS that it had
complied in full with the applicable summons.

                                       2
information to a special master in charge of the case.                      The

remainder of the case was held in abeyance pending the special

master’s report.

            In August 2003, KPMG first informed the IRS and the

taxpayers that the taxpayers’ 2000 SOS transaction was responsive

to one of the summonses (a summons not involved in the D.C.

litigation).      This revelation was contrary to KPMG’s previous

representations to the IRS.          KPMG then turned over information

about the SOS transactions to the IRS but omitted the taxpayer

names from the documents.        The taxpayers notified KPMG that they

wished to invoke the “tax-practitioner privilege” under I.R.C. (26

U.S.C.) § 75254 and instructed KPMG not to take any action that

would waive their privilege.          KPMG promised the taxpayers that

while it would not reveal any information before September 8, 2003,

the firm could not entirely refuse to comply with the summonses now

that KPMG was aware that the SOS transaction was responsive.

            On September 9, 2003, Doe I and Doe II filed the instant

suit   in   federal   court   against       KPMG,   seeking   declaratory   and

injunctive relief to prevent KPMG from disclosing their identities

to the IRS in response to the summonses.             KPMG promptly agreed to

the taxpayers’ Stipulation and Agreed Order preventing KPMG from




      4
            I.R.C. § 7525 applies “to a communication between a taxpayer and any
federally authorized tax practitioner to the extent the communication would be
considered a privileged communication if it were between a taxpayer and an
attorney.”

                                        3
disclosing their identities or any relevant documents until the

court should enter a final judgment on the merits.5

           As of September 8, the IRS learned that KPMG had not

fully complied with the Notice 2000-44 summonses.6             Further, the

instant litigation informed the IRS that taxpayers whose identities

were not yet known had used these tax shelters.          As the litigation

continued, the IRS became concerned that the three-year statute of

limitations to assess additional taxes would expire while the

lawsuit was pending.       On March 19, 2004, the IRS requested the

taxpayers to sign a consent agreement extending the statute of

limitations during litigation.         The taxpayers refused.        The IRS

then filed an emergency motion to intervene under Federal Rule of

Civil Procedure 24(a) to protect its interests and the public fisc.

           The district court granted the motion and ordered the

parties to take all necessary steps to prevent the statute of

limitations from expiring.       When the taxpayers persisted in their

refusal, the IRS sought an order to show cause why they should not

be held in contempt.        The taxpayers asserted, and the district

court agreed, that consent to toll the statue of limitations must

be voluntary.     See I.R.C. § 6501(a)(4).        Nevertheless, the court

issued an order equitably tolling the statute of limitations based



      5
            Nevertheless, defendant KPMG argued that the taxpayers’ identities
were not protected by the tax-practitioner privilege.
      6
            The taxpayers filed on September 8 but then withdrew an emergency
motion to intervene and for protective order in the D.C. litigation.

                                      4
on I.R.C. § 6503(a)(1) and other equitable principles.                    That

decision is the subject of the instant appeal.7

                                 Discussion

            Determinations of law are reviewed de novo.          Gulf Marine

and Indus. Supplies, Inc. v. Golden Prince M/V, 230 F.3d 178, 179

(5th Cir. 2000).     The district court’s decision to apply equitable

tolling is reviewed for abuse of discretion. Fierro v. Cockrell,

294 F.3d 674, 682 (5th Cir. 2002).

            When interpreting a statute, we start with the plain

text, and read all parts of the statute together to produce a

harmonious whole.      See, e.g., Administaff Companies, Inc. v. New

York Joint Bd., Shirt, & Leisurewear Div., 337 F.3d 454, 456 (5th

Cir. 2003).     Section 6501(a) establishes a three-year statute of

limitations “after a return [is] filed” for the assessment of

federal income taxes.      The statute then lists twenty-six specific

exceptions that toll the limitations period.8              The IRS can use

other tools to toll the statute as well.                For example, if a

taxpayer’s identity is unknown to the IRS, the agency may serve a

“John Doe” summons pursuant to Section 7609(a), which then tolls

the statute pursuant to Section 6501.           None of these provisions,

however, explicitly permits equitable tolling.               Taxpayers thus


      7
            The court also rejected the taxpayers’ assertion of privilege under
§ 7525 and ordered the clerk to remove the seal from all documents relating to
the taxpayers’ names. The taxpayers do not appeal this aspect of the decision.
      8
            Tolling provisions are listed in subsections of § 6501, as well as
in additional provisions within I.R.C. § 6503.

                                      5
assert    that   the   district     court      lacked      jurisdiction    to    apply

equitable tolling to Section 6501.

              For other tax disputes, Congress has created exceptions

to a statute of limitations following litigation which determined

that the statute did not allow tolling.                      In United States v.

Brockamp, for example, the United States Supreme Court held that

I.R.C. § 6511, which establishes a three-year (or in some instances

two-year) period during which a taxpayer must request a refund for

overpayment of taxes, was not subject to equitable tolling.                        519

U.S. 347, 117 S. Ct. 849, 136 L.Ed.2d 818 (1997).                    In that case,

the    taxpayers   suffered       from    mental     disability     throughout     the

statutory period; however, in light of the plain statutory language

and existence of numerous tolling provisions, the Supreme Court

held that the statute was not subject to general equitable tolling

by     courts.         Id.   at     352,       117    S.     Ct.    at    852;     see

also    id.   (“[C]ongress    did        not   intend      courts   to   read    other

unmentioned, open-ended ‘equitable’ exceptions into the statute

that it wrote.”).        In 1998, Congress amended this law to permit

tolling when a taxpayer, like those in Brockamp, is prevented by a

disability from seeking a refund.              Congress’s decision to specify

further exceptions to the statute of limitations — without adding

a general equitable tolling provision — further justifies the

Supreme Court’s reading of the statute in Brockamp.                         Because

Congress prefers to provide explicit tolling exceptions to the

limitations periods contained in federal tax law, by implication,

                                           6
it does not intend courts to invoke equitable tolling to alter the

plain text of the statutes at issue.9

            As it did following Brockamp, Congress recently amended

the statute at issue in this case.          In Section 814 of the American

Jobs   Creation    Act   of   2004,    Congress    extended      the   time   for

assessment of taxes and penalties where the taxpayer fails to

include required information on a return or statement regarding a

listed transaction.       Pub. L. No. 108-357, § 814, 118 Stat. 1418,

1421 (2004). Appellants acknowledge that the amendment is aimed at

future   taxpayers     who,   as   they    did,   attempt   to    shield   their

identities from the IRS until the statute of limitations expires.

The dubious distinction of inspiring the passage of a law to

prevent others from following their lead10 does not, however,

detract from the strength of the taxpayers’ argument here.                    “Tax

law, after all, is not normally characterized by case-specific

exceptions reflecting individualized equities.” Brockamp, 519 U.S.

at 352, 117 S. Ct. at 852.




      9
            In fact, before the Seventh Circuit, the IRS took the position that,
pursuant to Brockamp, equitable tolling should not apply to any provision in the
Internal Revenue Code. See Flight Attendants UAL Offset (FAAUO) v. Comm’r, 165
F.3d 572, 577 (7th Cir. 1999).
      10
            See, e.g., H.R. No. 108-548(1), at 267 (June 16, 2004) (“[S]ome
taxpayers and their advisors have been employing dilatory tactics and failing to
cooperate with the IRS in an attempt to avoid liability because of the expiration
of the statute of limitations.”).

                                       7
            The Government argues that I.R.C. § 7402(a),11 broadly

read, gives district courts implied authority to use equitable

tolling to enforce the revenue code.           See United States v. First

Nat’l City Bank, 379 U.S. 378, 380, 85 S. Ct. 528, 529, 13 L.Ed.2d

365 (1965); United States v. Raymond, 228 F.3d 804 (7th Cir. 2000);

United States v. Ernst & Whinney, 735 F.2d 1296, 1300 (11th Cir.

1984).     But the Government cites no authority in which a court

applied Section 7402(a) to Section 6501.             Further, several of the

authorities cited by the Government stand only for the proposition

that district courts have jurisdiction to hear claims made by the

IRS   in    conjunction     with    its    filings     of   intervention     or

interpleader; the issue of equitable tolling played no role in

these holdings.      See, e.g., United States v. Asay, 614 F.2d 655,

662 (9th Cir. 1980); Miller & Miller Auctioneers, Inc. v. G.W.

Murphy Indus., Inc., 472 F.2d 893, 895 (10th Cir. 1973).                We are

unpersuaded that the general enabling language of Section 7402(a)

authorizes a court to inject an equitable tolling provision into a

detailed, highly specific provision (Section 6501).




      11
            The statute provides:
      The district courts of the United States at the instance of the
      United States shall have such jurisdiction to make and issue in
      civil actions, writs and orders of injunction, and of ne exeat
      republica, orders appointing receivers, and such other orders and
      processes, and to render such judgments and decrees as may be
      necessary or appropriate for the enforcement of the internal revenue
      laws.   The remedies hereby provided are in addition to and not
      exclusive of any and all other remedies of the United States in such
      courts or otherwise to enforce such laws.

                                       8
                The Government invokes additional broad principles to

contravene the plain language of Section 6501.                  We agree with the

Government that, as a general matter, the Internal Revenue Code is

to    be        interpreted      broadly        in   the    Government’s    favor.

See Commissioner v. Schleier, 515 U.S. 323, 327-28, 115 S.Ct. 2159,

2162-63 (1995).       We also agree that statutes diminishing sovereign

immunity should be read in the sovereign’s favor.                       See, e.g.,

Library of Congress v. Shaw, 478 U.S. 310, 106 S.Ct. 2957, 92

L.Ed.2d 250 (1986); Soriano v. United States, 352 U.S. 270, 77

S.Ct. 269, 1 L.Ed.2d 306 (1957).                Further, there is some truth in

the Government’s effort to portray the taxpayers as having less

than clean hands in this litigation.                       None of these general

principles and complaints, however, can overcome the specific

intent of Congress as demonstrated by the precise language of

Section     6501.12       Even    an   unsympathetic        litigant   retains   the

protection of the statute of limitations unless the Government can

toll the statute through one of the congressionally prescribed

methods.

                At oral argument, the IRS attempted to stretch the above

issue      to    embody   the    district       judge’s    authority   to   control

proceedings in his own courtroom. We disagree. The district court


      12
            To support this contention, the IRS relies heavily on Young v. United
States, 535 U.S. 43, 122 S. Ct. 1036, 152 L.Ed.2d 79 (2002). This case, which
permitted a bankruptcy court to impose equitable tolling to an aspect of the
Bankruptcy Code, is inapposite. Bankruptcy courts are courts of equity by their
nature. Id. at 50, 122 S. Ct. at 1041. As discussed supra, Brockamp is more
persuasive and more relevant to the instant tax case.

                                            9
had a panoply of tools available to control the proceedings.

Regardless, this argument is beside the point, in that it was the

Government’s    obligation,      not    the   court’s,    to    protect    the

Government’s rights.       The true nature of this dispute is whether

the district court had statutory authority to use equitable tolling

to overcome the statute of limitations. Our reading of the statute

answers that question in the negative.

                                 Conclusion

            The statute here at issue prohibits the imposition of

equitable   tolling   to    prevent     expiration   of   the    statute    of

limitations.    The IRS is unable to rely on general equitable

principles to protect its right to collect taxes from citizens

where the statute does not allow equitable tolling.              The IRS had

three years to pursue the taxpayers using congressionally approved

means. Congress can — and indeed has — remedied the problems posed

by the taxpayers’ tactics in this case.         Since neither retroactive

application    of   the    new   law    nor   equitable   tolling    in    the

Government’s favor is available, the judgment of the district court

is REVERSED.




                                       10
