The federal courts have recognized that an association, such as a trade association, or other organization with members can represent as a plaintiff as few as one member that has standing to pursue a civil action. The concept originated with organizations such as the NAACP and has migrated to organizations such as chambers of commerce.

As a result, an organization can survive a motion to dismiss for lack of standing when one member was dissuaded from pursuing a business transaction because the IRS issued guidance stating that the transaction would have an unfavorable tax treatment.

But standing is not the only hurdle a plaintiff must jump over to obtain a declaration that the IRS guidance was wrong: it must avoid the Anti-Injunction Act. That statute precludes pre-enforcement injunctions or declaratory judgment on IRS actions that could lead to taxing the plaintiff or others.

But here the association member did not do the transaction and so a lawsuit would not be trying to stop an assessment of taxes from the member. In theory, the IRS guidance might be applied to assess taxes against some other taxpayer that pursued such a transaction, but perhaps it is not known whether anyone did.

At least one court has granted relief to a chamber of commerce with one such interested member in such a case, against the IRS. In a way, the plaintiff threaded its way through a narrow opening. But perhaps it is not so narrow after all.

That is just one of many changes occurring in the case law concerning the right to sue the IRS and the possibility of success. Potential plaintiffs should reconsider the standard assumption that they must pay and sue for refund or wait to be assessed, particularly if they are part of an umbrella association.

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