The Supreme Court’s recent decision in CIC Services, LLC v. Internal Revenue Service may have significantly expanded taxpayers’ ability to obtain immediate injunctive relief against onerous tax reporting requirement.
The Anti-Injunction Act bars any “suit for the purpose of restraining the assessment or collection of any tax.” Civil penalties are usually considered to be “taxes” for purposes of the Anti-Injunction Act. But in CIC Services, the Supreme Court sustained a suit to enjoin the enforcement of IRS Notice 2016–66 which provides that micro-captive insurance arrangements are “listed transactions” which must be disclosed (regardless of the ultimate validity of the transaction) upon pain of a civil monetary penalty under IRC § 6707A – as well as potential criminal sanctions under § 7203 for the willful failure to make a return or supply information required by law or regulation. The IRS’ problem in CIC Services was that in issuing Notice 2016-66, it had failed to comply with the Administrative Procedures Act (APA) which requires that a rule with the force and effect of law may be issued only after an opportunity for public notice and comment. No public notice, no enforceable rule, the Court held. The Anti-Injunction Act did not deprive the courts of jurisdiction.
Continue Reading Recent Supreme Court Case Provides Possible Pre-Assessment Judicial Review for Onerous Penalties