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7th Circuit Court of Appeals

Case Name: United States of America v. Bradley Olson

Case No.: 23-1864

Officials: Easterbrook, St. Eve, and Jackson-Akiwumi, Circuit Judges.

Focus: Tax-Injunction

Bradley Olson and Shirley Olson had been conducting their business, Affordable Sewer Service, without paying federal taxes for a decade. The Olsons withheld taxes from employee wages but failed to remit them to the IRS, also neglecting their own income taxes. The district court had previously ordered them to pay over $300,000 but declined to issue an injunction based on its interpretation of United States v. Benson and traditional factors for injunctions, such as demonstrating irreparable harm.

The Seventh Circuit, however, found the district court’s interpretation to be overly restrictive and an abuse of discretion. It emphasized that §7402(a) of the Internal Revenue Code grants district courts broad authority to issue injunctions necessary for enforcing tax laws. The appellate court argued that the traditional injunction factors did indeed favor granting an injunction in this case: (1) The government suffered irreparable harm since future tax collection was unlikely without intervention, (2) monetary damages were inadequate because the Olsons demonstrated both an inability and unwillingness to pay, (3) the balance of hardships favored the government as the Olsons’ non-compliance impacts the public interest by giving them an unfair advantage over competitors who pay their taxes, and (4) the public interest would benefit from ensuring that the Olsons bear the same fiscal responsibilities as their peers.

The Seventh Circuit rejected the district court’s view that the national government does not suffer irreparable harm from non-payment by one taxpayer, emphasizing the broader implications of non-compliance on tax law enforcement. Additionally, the appellate court highlighted that the specific relief sought, including the use of a payroll service to manage and remit taxes directly, was particularly appropriate to ensure compliance and facilitate effective tax collection. Thus, the Seventh Circuit reversed the lower court’s ruling and remanded the case with instructions to grant the proposed injunction, ensuring that the Olsons would be subject to strict oversight in handling their tax obligations.

Reversed and remanded

Decided 04/11/24

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