CIC Servs., LLC v. IRS

Whether the Anti-Injunction Act’s bar on lawsuits for the purpose of restraining the assessment or collection of taxes also bars challenges to unlawful regulatory mandates issued by administrative agencies that are not taxes.

The IRS defined “reportable transactions,” which need to accompany tax returns, to include “transactions of interest.”  The IRS publishes guidance documents to be used to identify those transaction. In this case, the IRS published a guidance document, known as Notice 2016-66, that identifies “section 831(b) micro-captive transactions” as “transactions of interest.”  As a result, failure to properly report micro-captive transactions carries penalties, such as civil tax penalties and potential criminal penalties.  Petitioner, a business consultant firm, advises taxpayers engaging in micro-captive transactions.  Petitioner filed a pre-enforcement challenge of Notice 2016-66.  The district court dismissed the case, holding that suits brought to restrain the assessment or collection of any tax is barred by the Anti-Injunction Act. The Sixth Circuit affirmed.  Petitioner argues three main grounds for review.  First, Petitioner argues that the lower court’s decision conflicts with the Court’s holding in Direct Mktg. Ass’n v. Brohl, 575 U.S. 1 (2015).  Petitioner argues that Direct Marketing held that the Anti-Injunction Act did not prohibit internet retailers from enjoining the tax-related notice and reporting requirements of a Colorado law governing internet retailers. Petitioner next argues there is a circuit split on this issue. Finally, Petitioner argues that allowing the decision below to stand could protect agency actions from Administrative Procedure Act (“APA”) challenges and thus destroys the APA.