CIC Servs., LLC v. IRS , 925 F.3d 247 ( 2019 )

RECOMMENDED FOR FULL-TEXT PUBLICATION
Pursuant to Sixth Circuit I.O.P. 32.1(b)
File Name: 19a0100p.06
UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT
CIC SERVICES, LLC, ┐
Plaintiff-Appellant, │
│
> No. 18-5019
v. │
│
│
INTERNAL REVENUE SERVICE; DEPARTMENT OF │
TREASURY; UNITED STATES OF AMERICA, │
Defendants-Appellees. │
┘
Appeal from the United States District Court
for the Eastern District of Tennessee at Knoxville.
No. 3:17-cv-00110—Travis R. McDonough, District Judge.
Argued: October 19, 2018
Decided and Filed: May 22, 2019
Before: SUHRHEINRICH, CLAY, and NALBANDIAN, Circuit Judges.*
_________________
COUNSEL
ARGUED: Adam R. Webber, FALKE & DUNPHY, LLC, Dayton, Ohio, for Appellant. Teresa
E. McLaughlin, UNITED STATES DEPARTMENT OF JUSTICE, Washington, D.C., for
Appellees. ON BRIEF: Adam R. Webber, FALKE & DUNPHY, LLC, Dayton, Ohio, for
Appellant. Teresa E. McLaughlin, Gilbert S. Rothenberg, Bethany B. Hauser, UNITED
STATES DEPARTMENT OF JUSTICE, Washington, D.C., for Appellees. John J. Vecchione,
CAUSE OF ACTION INSTITUTE, Washington, D.C., for Amicus Curiae.
CLAY, J., delivered the opinion of the court in which SUHRHEINRICH, J., joined.
NALBANDIAN, J. (pp. 16–24), delivered a separate dissenting opinion.
*The Honorable Damon J. Keith, who participated in oral argument as a member of the original panel, died
on April 28, 2019. Judge Suhrheinrich replaced Judge Keith on this panel for the consideration and decision of this
case.
No. 18-5019 CIC Servs., LLC v. IRS, et al. Page 2
_________________
OPINION
_________________
CLAY, Circuit Judge. Plaintiff CIC Services, LLC appeals the district court’s November
2, 2017 order granting Defendants’ motion to dismiss Plaintiff’s complaint for lack of subject
matter jurisdiction. Plaintiff’s complaint alleges that Defendants’ Notice 2016-66, 2016-47
I.R.B. 745 was promulgated in violation of the Administrative Procedure Act, 5 U.S.C. § 500 et
seq. and the Congressional Review Act, 5 U.S.C. § 801 et seq., and seeks to enjoin its
enforcement. For the reasons that follow, we AFFIRM the district court’s dismissal.
BACKGROUND
Factual Background
As a part of the American Jobs Creation Act of 2004, Congress delegated authority to the
Internal Revenue Service (“IRS”) to identify and gather information about potential tax shelters.
See 26 U.S.C. § 6707A. In exercising that authority, the IRS requires taxpayers and certain third
parties to maintain and submit records pertaining to any “reportable transaction[s].” Id.
§ 6707A(c). Reportable transactions are those transactions deemed as such by IRS regulations.
Id.
Failure to adhere to these IRS requirements can result in significant penalties. For
instance, a taxpayer who fails to submit to the IRS a return listing his or her reportable
transactions faces a penalty of 75% of his or her tax savings resulting from those transactions,
from a minimum of $5,000 to a maximum of $200,000. Id. §§ 6011, 6707A(b). A “material
advisor”—one who provides material aid to a taxpayer in his or her carrying out reportable
transactions and who derives a threshold amount of gross income from that aid, see id.
§ 6111(b)—faces similar penalties. For instance, a material advisor who fails to submit to the
IRS a return listing the reportable transactions in which he or she aided faces a penalty of
between $50,000 and $200,000. Id. §§ 6111(a), 6707(b). And a material advisor who fails to
maintain a list of the taxpayers that he or she aided in carrying out reportable transactions faces a
No. 18-5019 CIC Servs., LLC v. IRS, et al. Page 3
penalty of $10,000 per day if the list is not produced within 20 business days of a request from
the IRS. Id. §§ 6112(a), 6708(a).
On November 21, 2016, Defendants published Notice 2016-66 (the “Notice”).1 See
2016-47 I.R.B. 745.The Notice identified certain “micro-captive transactions” as “transactions of
interest,” a subset of reportable transactions.2 Id.; see also 26 C.F.R. § 1.6011-4(b). The Notice
explained that these transactions have “a potential for tax avoidance or evasion,” but that the IRS
“lack[s] sufficient information” to distinguish between those that are lawful and those that are
unlawful. 2016-47 I.R.B. 745. By deeming these transactions to be reportable transactions, the
Notice imposed the requirements and potential penalties noted above on taxpayers engaging in
them, and on material advisors aiding in them. Id.
Procedural History
On March 27, 2017, Plaintiff, a material advisor to taxpayers engaging in micro-captive
transactions, filed a complaint in the United States District Court for the Eastern District of
Tennessee. Plaintiff’s complaint alleges that Defendants promulgated Notice 2016-66 in
violation of the Administrative Procedure Act (“APA”), 5 U.S.C. § 500 et seq. and the
Congressional Review Act (“CRA”), 5 U.S.C. § 801 et seq., and seeks to enjoin its enforcement.
Specifically, Plaintiff alleges that the Notice (1) is a legislative rule that required notice-and-
comment rulemaking, (2) is arbitrary and capricious, and therefore ultra vires, and (3) is a rule
that required submission for congressional review before it could go into effect. Plaintiff also
filed a motion for a preliminary injunction.
On April 21, 2017, the district court denied Plaintiff’s motion for a preliminary
injunction, reasoning that it would not be in the public interest and that Plaintiff was unlikely to
succeed on the merits. Defendants then moved to dismiss Plaintiff’s complaint for lack of
1Notice2016-66 was amended by Notice 2017-08, but only with regard to various deadlines. See 2017-3
I.R.B. 423. Accordingly, we refer only to Notice 2016-66.
2Micro-captive transactions are “a type of transaction . . . in which a taxpayer attempts to reduce the
aggregate taxable income of the taxpayer, related persons, or both, using contracts that the parties treat as insurance
contracts and a related company that the parties treat as a captive insurance company.” Id. The details of these
transactions and their tax implications for those that engage in them are not relevant to this appeal. If desired, more
information can be found at 26 U.S.C. § 831(b) and at IRS News Release IR-2018-62 (Mar. 19, 2018).
No. 18-5019 CIC Servs., LLC v. IRS, et al. Page 4
subject matter jurisdiction. Defendants asserted that Plaintiff’s complaint was barred by the
Anti-Injunction Act, 26 U.S.C. § 7421(a) and the tax exception to the Declaratory Judgment Act,
28 U.S.C. § 2201 (collectively, the “AIA”),3 which divest federal district courts of jurisdiction
over suits “for the purpose of restraining the assessment or collection of any tax.” On November
2, 2017, the district court granted Defendants’ motion to dismiss for lack of subject matter
jurisdiction.
This appeal followed.
DISCUSSION
I. Standard of Review
We review de novo questions of subject matter jurisdiction, including whether a
complaint is barred by the AIA. Lorillard Tobacco Co. v. Chester, Wilcox & Saxbe, 589 F.3d
835, 843 (6th Cir. 2009). In reviewing a district court’s grant of a motion to dismiss pursuant to
Federal Rule of Civil Procedure 12(b)(1), we accept all material allegations in the complaint as
true and construe the complaint in the light most favorable to the nonmoving party. United
States v. Ritchie, 15 F.3d 592, 598 (6th Cir. 1994).
II. Analysis
A. The AIA
The AIA provides that “no suit for the purpose of restraining the assessment or collection
of any tax shall be maintained in any court by any person.” 26 U.S.C. § 7421(a). While there
exist some statutory and judicial exceptions to this prohibition, they are few and circumscribed.
See RYO Mach., LLC v. U.S. Dep’t of Treasury, 696 F.3d 467, 470 (6th Cir. 2012) (“With few
exceptions, no court has jurisdiction over a suit to preemptively challenge a tax.”). Thus,
“whether an injunction can legally issue under the AIA” requires only two inquiries. Id. at 471.
“First, we must consider whether the . . . complaint[] [is] within the purview of the AIA as a ‘suit
for the purpose of restraining the assessment or collection of any tax.’” Id. (quoting 26 U.S.C.
3 The Anti-Injunction Act and the tax exception to the Declaratory Judgment Act are “to be interpreted
coterminously.” Ecclesiastical Order of the ISM of AM, Inc. v. Internal Revenue Serv., 725 F.2d 398, 404–05 (6th
Cir. 1984). For simplicity, we refer to both as the “AIA.”
No. 18-5019 CIC Servs., LLC v. IRS, et al. Page 5
§ 7421(a)). Second, “[i]f so, we must [consider] whether [the] case falls into an exception to the
AIA that would [nevertheless] allow us to [reach] the merits.”4 Id.
The problem with these ostensibly straightforward inquiries is that “courts lack an
overarching theory of the AIA’s meaning and scope against which to evaluate individual
[complaints].” Kristin E. Hickman & Gerald Kerska, Restoring the Lost Anti-Injunction Act,
103 Va. L. Rev. 1683, 1686 (2017). At times, the Supreme Court has given the AIA “literal
force,” without regard to the character of the tax, the characterization of the preemptive
challenge to it, or other non-textual factors. Bob Jones Univ. v. Simon, 416 U.S. 725, 742
(1974). At other times, it has given the AIA “almost literal” force, considering such factors with
an eye towards furthering the AIA’s underlying purposes. Id. at 737, 742. The result, according
to some commentators, has been “jurisprudential chaos.” Hickman & Kerska, supra, at 1686.
We attempt to find some order amidst the chaos, addressing each of the AIA inquiries in
turn.
1. Whether Plaintiff’s complaint is within the purview of the AIA
Whether a complaint is within the purview of the AIA depends, commonsensically, on
whether it is properly characterized as a “suit for the purpose of restraining the assessment or
collection of any tax.” RYO, 696 F.3d at 471 (quoting 26 U.S.C. § 7421(a)). Plaintiff argues that
its complaint is not a suit for the purpose of restraining the assessment or collection of taxes.
Defendants argue that it is. Reducing the briefs to their cores, Plaintiff asserts that the Supreme
Court’s recent decision in Direct Marketing Ass’n v. Brohl, 575 U.S. ___, 135 S. Ct. 1124 (2015)
controls this issue, while Defendants assert that the D.C. Circuit’s subsequent decision in Florida
Bankers Ass’n v. U.S. Dep’t of the Treasury, 799 F.3d 1065 (D.C. Cir. 2015), distinguishing
Direct Marketing, is more persuasive. We agree with Defendants and hold that Plaintiff’s
complaint is within the purview of the AIA.
4In this way, the AIA “creates a narrow exception to the general administrative law principle that pre-
enforcement review of agency regulations is available in federal court.” Fla. Bankers Ass’n v. U.S. Dep’t of the
Treasury, 799 F.3d 1065, 1066 (D.C. Cir. 2015); see also Bob Jones Univ. v. Simon, 416 U.S. 725, 736 (1974).
Cf. Abbott Laboratories v. Gardner, 387 U.S. 136, 140–41 (1967).
No. 18-5019 CIC Servs., LLC v. IRS, et al. Page 6
In Direct Marketing, the Supreme Court analyzed the scope of the Tax Injunction Act
(“TIA”), which provides that no federal district court shall “enjoin, suspend, or restrain the
assessment, levy or collection of any tax under State law where a plain, speedy and efficient
remedy may be had in the court of such State.” 28 U.S.C. § 1341. Although the TIA concerns
state as opposed to federal taxes, it was “modeled on” the AIA and the Supreme Court has long
looked to one in construing the other. Direct Marketing, 135 S. Ct. at 1129; see also Enochs v.
Williams Packing & Nav. Co., 370 U.S. 1, 6 (1962) (“The enactment of the comparable
[TIA] . . . throws light on the proper construction to be given [to the AIA].”). The Court began
its opinion in Direct Marketing by reaffirming this close connection between the two Acts, and
making clear that “[it] assume[s] that words used in both Acts are generally used in the same
way.” 135 S. Ct. at 1129.
At issue in Direct Marketing were the meanings of “restrain,” “assessment,” “levy,” and
“collection,” all words, apart from “levy,” used in both the TIA and the AIA. See 28 U.S.C.
§ 1341; 26 U.S.C. § 7421(a).
With regard to “restrain,” the Court explained that “standing alone [it] can have several
meanings.” Direct Marketing, 135 S. Ct. at 1132. One is a “broad meaning” that “captures
orders that merely inhibit acts of assessment, levy and collection.” Id. “Another, narrower
meaning, however, is ‘to prohibit from action; to put compulsion upon . . . [or] to enjoin,’” and
this meaning “captures only those orders that stop (or perhaps compel) acts of assessment, levy
and collection.” Id. (quotation omitted). The Court held that the TIA uses “restrain” in the
latter, narrower sense. Id. And in doing so, it relied on two contextual clues: the words
preceding “restrain” in the TIA—“enjoin” and “suspend,” both of which are “terms of art in
equity”—and the “carefully selected list of technical terms” on which “restrain” acts—
“assessment,” “levy,” and “collection.” Id. The Court explained that to give “restrain” the broad
meaning would “defeat the precision” of these contextual clues, and would render several of the
terms superfluous. Id. Thus, the question that the TIA asks is “whether the relief [sought] to
some degree stops ‘assessment, levy or collection,’ not whether it merely inhibits them.” Id. at
1133 (emphasis added).
No. 18-5019 CIC Servs., LLC v. IRS, et al. Page 7
With regard to “assessment” and “collection,” the Court noted that it need not
“comprehensively define these terms” in order to hold that they did not encompass the reporting
requirements at issue. Id. at 1129. Nevertheless, the Court explained that “assessment” refers to
“the official recording of a taxpayer’s liability.” Id. at 1130. “Collection,” in turn, “is the act of
obtaining payment of taxes due.” Id. While both “might also be understood more broadly,” the
Court held that under either the narrow or the broad definition, each is a “separate step in the
taxation process” that occurs after the step of reporting to the taxing authority information used
to determine tax liability. Id. at 1129–31. (“[T]he Federal Tax Code has long treated
information gathering as a phase of tax administration procedure that occurs before assessment,
levy, or collection.”).
Based on these definitions, the Supreme Court in Direct Marketing ultimately held that
the TIA did not bar the plaintiff’s suit. The plaintiff had sought to enjoin the enforcement of a
Colorado law that required certain retailers to maintain and submit records pertaining to sales on
which the retailers did not collect state sales and use taxes. Id. at 1128, 1134. The Court
reasoned that while enforcement of the law might “improve Colorado’s ability to assess and
ultimately collect its sales and use taxes from consumers,” the law was focused on information
gathering as opposed to the discrete, subsequent acts of assessment, levy, and collection. Id. at
1131. Accordingly, a suit seeking to enjoin its enforcement would, if successful, “merely
inhibit[]” those acts as opposed to “restrain[ing]” them. Id. at 1133. And thus the merits of the
plaintiff’s suit could be reached.
Shortly after Direct Marketing, the D.C. Circuit distinguished it in Florida Bankers with
then-Judge Kavanaugh writing for the majority. 799 F.3d at 1069. At issue in Florida Bankers
were the meanings of “tax” and “for the purpose of” as used in the AIA. See 26 U.S.C.
§ 7421(a).
With regard to “tax,” the court asked whether that term covers a “penalty” imposed to
enforce a “tax-related statutory or regulatory requirement.” Fla. Bankers, 799 F.3d at 1067. The
court explained that while “[t]he answer to that question is often no . . . the Tax Code defines
some penalties as taxes for purposes of the [AIA].” Id. “In those cases, the [AIA] ordinarily
applies because the suit, if successful, would invalidate the regulation and thereby directly
No. 18-5019 CIC Servs., LLC v. IRS, et al. Page 8
prevent [the] collection of [that] tax.” Id. The court held that this is exactly what occurs when
the penalty at issue is located in Chapter 68, Subchapter B of the Tax Code. Id. In 26 U.S.C.
§ 6671(a), the Tax Code explicitly defines such penalties as taxes for the purposes of the AIA,
and that practice has been “clear[ly] and unequivocal[ly]” acknowledged by the Supreme Court.
Id. at 1068. Specifically, in Nat’l Fed’n of Indep. Bus. v. Sebelius, the Court explained:
Congress can, of course, describe something as a penalty but direct that it
nonetheless be treated as a tax for purposes of the [AIA]. For example, 26 U.S.C.
§ 6671(a) provides that “any reference in this title to ‘tax’ imposed by this title
shall be deemed also to refer to the penalties and liabilities provided by”
Subchapter 68B of the [Tax] Code. Penalties in Subchapter 68B are thus treated
as taxes under Title 26, which includes the [AIA].
567 U.S. 519, 544 (2012). Thus, the court in Florida Bankers reasoned that the relevant “tax” in
its AIA analysis was the penalty—located in Chapter 68, Subchapter B—that would be imposed
upon violation of the challenged regulation. 799 F.3d at 1068.
It is on this basis that the court distinguished Direct Marketing. The penalty in that case
“was not itself a tax, or at least it was never argued or suggested that the penalty in that case was
itself a tax.” Id. at 1069. The court explained that “[i]f the penalty here were not itself a tax, the
[AIA] would not bar this suit. But because this penalty is deemed a tax by Section 6671(a), the
[AIA] bars this suit as premature.” Id. In other words, unlike in Direct Marketing, the tax in
Florida Bankers was not “two or three steps removed from the regulation in question.” Id.
Rather, “because the Code define[d] the penalty as a tax, a tax [was] imposed as a direct
consequence of violating the regulation.” Id. And “[i]nvalidating the regulation would directly
bar collection of that tax.” Id. (emphasis added). This distinction put the complaint in Florida
Bankers “at the heartland of the [AIA].” Id. at 1070.
With regard to “for the purpose of,” the court rejected the argument that even if the
penalty were a tax, the case was still not within the purview of the AIA because the plaintiffs
sought relief not from the penalty but from the underlying regulatory mandate. Id. (“[Plaintiffs]
contend instead that they are seeking relief from a regulatory mandate that exists separate and
apart from the assessment or collection of taxes.”). The court held that “plaintiffs cannot evade
the [AIA] by purporting to challenge only the regulatory aspect of a regulatory tax;” the AIA
No. 18-5019 CIC Servs., LLC v. IRS, et al. Page 9
“cannot be sidestepped by such nifty wordplay.” Id. And in doing so, the court relied on (1) a
line of Supreme Court cases describing the “circular” nature of that argument and looking only
to whether the relief sought “would necessarily preclude” the collection of taxes within the
meaning of the AIA, Bob Jones Univ., 416 U.S. 725, 732 (1974); see also Alexander v.
“Americans United” Inc., 416 U.S. 752, 760 (1974); Bailey v. George, 259 U.S. 16, 42 (1922),
(2) the Supreme Court’s “recent[] indicat[ion]” in NFIB that that argument is meritless, see
567 U.S. at 546, and (3) the policy implications of accepting that argument, see Fla. Bankers,
799 F.3d at 1071 (“A taxpayer could almost always characterize a challenge to a regulatory tax
as a challenge to the regulatory component of the tax. That would reduce the [AIA] to dust in
the context of challenges to regulatory taxes.”). Id. at 1070–71. Thus, the court refused to give
any significance to the part of the regulation the plaintiffs purportedly sought to challenge.
Based on these definitions, the court in Florida Bankers held that the AIA barred the
plaintiffs’ suit. The plaintiffs had sought to enjoin the enforcement of an IRS regulation
requiring banks to report certain interest payments made to account holders. Id. at 1067. The
court began with its holding that the relevant tax for its AIA analysis was the penalty that the
banks would have to pay if they violated the reporting requirements, not the account-holder taxes
the collection of which those requirements were designed to facilitate. Id. at 1068. The court
then reasoned that the plaintiffs’ suit would, if successful, “invalidate the reporting requirement
and restrain (indeed eliminate) the assessment and collection of the tax paid for not complying
with [it].” See id. at 1067, 1072. Accordingly, the suit was “for the purpose of restraining the
assessment or collection of a tax,” and the merits could not be reached. Id.
Against this backdrop, Plaintiff asserts that Direct Marketing controls, analogizing the
TIA to the AIA and the Colorado law to the Notice. Defendants assert that Florida Bankers,
distinguishing Direct Marketing, is more persuasive. We agree with Defendants, as Florida
Bankers is directly on point, consistent with Direct Marketing, and in accordance with a broader
survey of Supreme Court and circuit court precedent. Plaintiff’s reply brief provides a useful
structure for illustrating this conclusion.
First, Plaintiff contends that “[t]he purpose of this suit is not to restrain the assessment or
collection of taxes.” (Reply Brief for Appellant at 6.) Plaintiff argues that the penalties imposed
No. 18-5019 CIC Servs., LLC v. IRS, et al. Page 10
for violation of the Notice’s requirements are not taxes for purposes of the AIA, and that the only
remaining taxes that the Notice implicates are the “nebulous down-stream” taxes of third parties.
(Id.) This argument is unpersuasive.
The third-party taxes the collection of which the Notice is designed to facilitate are not
the relevant taxes for this AIA analysis. The relevant taxes are instead the penalties imposed for
violation of the Notice’s requirements. Like the penalty in Florida Bankers, the penalties here
are all located in Chapter 68, Subchapter B of the Tax Code, and as a result are treated as taxes
themselves for purposes of the AIA. The Supreme Court has explained as much. See NFIB,
567 U.S. at 544. We have held as much. See Thomas More Law Ctr. v. Obama, 651 F.3d 529,
540 (6th Cr. 2011), abrogated on other grounds by NFIB, 567 U.S. at 519.5 And other circuits
have consistently held as much. See, e.g., Nuttelman v. Vossberg, 753 F.2d 712, 714 (8th Cir.
1985); Herring v. Moore, 735 F.2d 797, 798 (5th Cir. 1984); Souther v. Mihlbachler, 701 F.2d
131, 132 (10th Cir. 1983); Prof’l Eng’rs, Inc. v. United States, 527 F.2d 597, 599 (4th Cir. 1975).
Second, Plaintiff contends that “[t]he purpose of this suit is not to restrain the assessment
or collection of taxes.” (Rely Brief for Appellant at 11.) Plaintiff argues that the “information
gathering” and “records maintenance” requirements of the Notice are focused on the act of
reporting to the taxing authority information used to determine tax liability, not the discrete,
subsequent acts of assessment or collection of that liability. (Id.) This argument misses the
mark.
5In Thomas More Law Ctr., we explained at length that:
In many contexts, the law treats “taxes” and “penalties” as mutually exclusive. . . . [but] [o]ther
provisions of the Internal Revenue Code, to be sure, show that some “penalties” amount to “taxes”
for purposes of the [AIA]. Not surprisingly, for example, Chapter 68 of the Revenue Code
imposes “penalties” on individuals who fail to pay their “taxes.” Less obviously, but to similar
effect, subchapter B of chapter 68 of the Revenue Code imposes other “penalties” related to the
enforcement of traditional taxes. Under section 6671, “any reference in this title to ‘tax’ imposed
by this title shall be deemed also to refer to the penalties and liabilities provided by [subchapter B
of chapter 68].” All of these “penalties” thus count as “taxes,” including for purposes of the
[AIA]. Otherwise, the recalcitrant tax protester could sue to preempt collection of a substantial
monetary charge (accumulated penalties and interest) but not what will often be a smaller charge
(the tax owed).
651 F.3d at 539 (internal citations omitted).
No. 18-5019 CIC Servs., LLC v. IRS, et al. Page 11
While it is true that information reporting is a separate step in the taxation process that
occurs before assessment or collection, see Direct Marketing, 135 S. Ct. at 1130, Plaintiff’s
argument presupposes that the relevant taxes in this AIA analysis are the third-party taxes the
collection of which the Notice is designed to facilitate. As previously discussed, that is incorrect.
Like the challenged regulation in Florida Bankers, the Notice is indeed “two or three steps
removed” from any third-party taxes. 799 F.3d at 1069. But once it is established that the
relevant tax is the penalty imposed for violation of the Notice’s requirements, it becomes clear
that Plaintiff’s suit is focused on that tax’s assessment or collection. Plaintiff’s suit seeks to
invalidate the Notice, which is the entire basis for that tax. If successful, Plaintiff’s suit would
“restrain (indeed eliminate)” it. Id. at 1067.
Third, Plaintiff contends that “[t]he purpose of this suit is not to restrain the assessment
or collection of taxes. (Reply Brief for Appellant at 15.) Plaintiff argues that under the narrower
definition of “restrain” articulated in Direct Marketing, its suit would not restrain any tax’s
assessment or collection. This argument also misses the mark, for the same reason as Plaintiff’s
prior argument.
If the relevant taxes in this AIA analysis were the third-party taxes, and if we decided that
the Direct Marketing definition of “restrain” should be extended from the TIA to the AIA, then
Plaintiff’s argument would likely have merit. Yet, as previously discussed, the former
proposition is incorrect. And as a result, we need not engage with the latter. Even assuming
arguendo that the Direct Marketing definition should be extended to the AIA,6 Plaintiff’s suit
“would have the effect of restraining—fully stopping” the IRS from collecting the penalties
imposed for violating the Notice’s requirements. See Maze v. Internal Revenue Serv., 862 F.3d
1087, 1092 (D.C. Cir. 2017) (emphasis added) (also assuming extension of the Direct Marketing
6Whether the Direct Marketing definition should be extended from the TIA to the AIA is unclear. The
Tenth Circuit chose not to do so in Green Solution Retail, Inc. v. United States, 855 F.3d 1111, 1118 (10th Cir.
2017). In that case, the court explained that one of the two reasons behind the Supreme Court’s choice of the
narrower definition in Direct Marketing was the fact that it was surrounded by “enjoin” and “suspend,” both of
which are terms of art in equity, and both of which are absent from the AIA. Id. at 1119. In light of that difference,
the court in Green Solution held that Direct Marketing did not implicitly overrule its prior cases applying the broad
definition of “restrain.” Id. at 1116. This circuit has similar precedent. See, e.g., Dickens v. United States, 671 F.2d
969, 971 (6th Cir. 1982) (“The [AIA] is equally applicable to activities which are intended to or may culminate in
the assessment or collection of taxes.”) (internal quotations omitted).
No. 18-5019 CIC Servs., LLC v. IRS, et al. Page 12
definition arguendo). Plaintiff admits as much. (See Rely Brief for Appellant at 7) (“[I]t is true
that the IRS certainly could never collect any penalties . . . for noncompliance if Notice 2016-66
is struck down.”).
Fourth, Plaintiff contends that “[t]he purpose of this suit is not to restrain the assessment
or collection of taxes.” (Reply Brief for Appellant at 18.) Plaintiff argues that its suit is
challenging the Notice’s regulatory requirement and not the penalty. This argument, though
intuitive at first glance, is unpersuasive.
Any distinction that once existed in the Supreme Court’s AIA jurisprudence between
“regulatory” taxes and “revenue-raising” taxes appears to have been “abandoned.” Fla. Bankers,
799 F.3d at 1070; see also Bob Jones, 416 U.S. at 741 n.12. In Bob Jones, the Court instead
emphasized the effect of the plaintiff’s suit. It held that where the relief sought would
“necessarily preclude” the assessment or collection of the relevant tax, the suit “falls squarely
within the literal scope” of the AIA and federal courts lack jurisdiction over it. Bob Jones,
416 U.S. at 731. Yet, the Court has made clear that the purpose of the suit is still a factor in any
AIA analysis. In Bob Jones, the Court noted that there was little doubt that a “primary purpose
of [the suit]” was to prevent assessment or collection of the relevant tax, regardless of how the
challenge was characterized. Id. at 738. And in Alexander, the Court similarly noted that the
“obvious purpose of [the suit]” was to prevent assessment or collection of the relevant tax,
regardless of how the challenge was characterized. 416 U.S. at 761.
The Court thus seems willing to infer a purpose to restrain the assessment or collection of
taxes in instances where it appears that the plaintiff is—in the words of the D.C. Circuit—trying
to “sidestep” the AIA with “nifty wordplay.” Fla. Bankers, 799 F.3d at 1070; see also
Alexander, 416 U.S. at 761 (“The [plaintiff’s purported] goal is merely a restatement of the [the
plaintiff’s actual goal] and can be accomplished only by restraining the assessment and
collection of a tax in contravention of [the AIA].”); Z Street v. Koskinen, 791 F.3d 24, 28–30
(D.C. Cir. 2015) (“In other words, unlike the plaintiffs in Bob Jones and [Alexander], Z Street
does not have the ‘obvious purpose’ of [restraining the assessment of collection of taxes].”).
Relying largely on these cases, the court in Florida Bankers paid even less mind to the subjective
purpose of the suit, holding unequivocally that “[a] challenge to a regulatory tax comes within
No. 18-5019 CIC Servs., LLC v. IRS, et al. Page 13
the scope of the [AIA], even if the plaintiff claims to be targeting the regulatory aspect of the
regulatory tax.” 799 F.3d at 1070–71. The court explained that a challenge to the regulatory
aspect of a regulatory tax is “necessarily” also a challenge to the tax aspect of a regulatory tax
because invalidating the former would “necessarily” invalidate latter. Id. at 1071.
Nevertheless, a panel of this Court recently seemed prepared to recognize the distinction
urged by Plaintiff and subsequently rejected by the Florida Bankers court. See Autocam Corp. v.
Sebelius, 730 F.3d 618, 622 (6th Cir. 2013), vacated by Autocam Corp. v. Burwell, 134 S. Ct.
2901 (2014) (“The plaintiffs seek to enjoin a part of the coverage requirements imposed by the
[ACA] mandate, not the IRS’s mechanism for collecting ‘tax’ from noncompliant employers.
Such suits are common in other regulatory contexts . . . .”). But Autocam was decided before
Florida Bankers, dedicated few words to its AIA analysis, and in any event, having been vacated
by the Supreme Court, is no longer good law. See Hill v. Marshall, 962 F.2d 1209, 1213 (6th
Cir. 1992). Additional cases cited by Plaintiff and by the dissent in Florida Bankers in support
of this distinction are similarly unhelpful.7
Ultimately, especially in light of the Supreme Court’s rule favoring “clear boundaries” in
the interpretation of jurisdictional statutes, see Direct Marketing, 135 S. Ct. at 1131, we find the
D.C. Circuit’s recent, unequivocal pronouncement on this issue in Florida Bankers persuasive.
As the Supreme Court has explained “time and again,” the AIA is “more than a pleading
exercise,” and to allow Plaintiff’s argument to succeed would “reduce the [AIA] to dust in the
context of challenges to regulatory taxes.” Fla. Bankers, 779 F.3d at 1071. A challenge to a
regulatory tax comes within the scope of the AIA, even if the plaintiff claims to be targeting the
regulatory aspect of the regulatory tax, because a challenge to the regulatory aspect of a
regulatory tax is necessarily also a challenge to the tax aspect of a regulatory tax. Id.
Invalidating the former would “necessarily” invalidate the latter. Id.
7In Seven-Sky v. Holder, 661 F.3d 1, 8–9 (D.C. Cir. 2011), abrogated on other grounds by NFIB, 567 U.S.
at 519, the D.C. Circuit noted that “[t]he harms appellants allege . . . exist as a result of the [ACA coverage]
mandate, not the penalty. . . . The individual mandate and the shared responsibility payment create different legal
obligations, for different categories of people, at different times.” But the D.C. Circuit’s more recent decision in
Florida Bankers deemed that passage dicta. See 799 F.3d at 1072 n.3. Additionally, in Korte v. Sebelius, 735 F.3d
654, 669 (7th Cir. 2013) and Hobby Lobby Stores, Inc. v. Sebelius, 723 F.3d 1114, 1127 (10th Cir. 2013), the courts
emphasized that the regulation at issue was a separate provision of the U.S. Code structured not as a predicate to the
imposition of a tax, but as a mandate enforceable by a variety of different mechanisms. That is not the case here.
No. 18-5019 CIC Servs., LLC v. IRS, et al. Page 14
In sum, we hold that Plaintiff’s complaint seeking to enjoin the enforcement of the Notice
is properly characterized as a “suit for the purpose of restraining the assessment or collection of
any tax.” RYO, 696 F.3d at 471 (quoting 26 U.S.C. § 7421(a)). Thus, Plaintiff’s complaint is
within the purview of the AIA and the district court does not have subject matter jurisdiction
over it unless an exception applies.8
2. Whether this case falls into an exception to the AIA
As noted above, the statutory and judicial exceptions to the AIA are few and
circumscribed. See RYO, 696 F.3d at 471. Plaintiff asserts that this case falls into the judicial
exception created by the Supreme Court in South Carolina v. Regan, 465 U.S. 367 (1984). In
that case, South Carolina sought to enjoin a federal law that made interest on state-issued bearer
bonds taxable. Id. at 370. The Court allowed the merits of this challenge to be reached, even
though it was within the purview of the AIA, because there was no “alternative legal avenue” by
which South Carolina could challenge the legality of the tax. Id. at 373. South Carolina did not
bear the tax itself—the bondholders did—and as a result South Carolina lacked the legal avenues
available to the bondholders. Id. at 378. Without a newly crafted exception to the AIA, it had no
way to challenge the law’s constitutionality. Id.
8The dissent poses a hypothetical that it finds problematic in light of our holding: a reporting requirement
discriminatorily imposed upon a protected class and enforced by a penalty located in Chapter 68, Subchapter B of
the Tax Code. See Dis. Op. at 19. According to the dissent, the AIA could not bar a pre-emptive challenge to this
requirement, “without warping the meaning of the statute beyond recognition,” at least in part because the purpose
of the suit plainly would be “to end discriminatory action by the Government,” not to enjoin the assessment or
collection of a tax. Id.
What troubles the dissent about its hypothetical result is not entirely clear. To the extent that it is the clarity
of the purpose of such a suit that troubles the dissent, the same purpose would clearly underlie, for instance, a pre-
emptive challenge to tax investigations discriminatorily targeted at a protected class; yet that challenge would likely
be barred by the AIA. See, e.g., Clavizzazo v. United States, 706 F. Supp. 2d 342, 346 (S.D.N.Y. 2009) (“[U]nder
the [AIA], a plaintiff cannot even seek an injunction preventing the IRS from investigating tax liabilities in an
allegedly discriminatory or harassing fashion.”). To the extent that it is the constitutional nature of such a suit that
troubles the dissent, “decisions of [the Supreme] Court make it unmistakably clear that the constitutional nature of a
taxpayer’s claim . . . is of no consequence” under the AIA; “the taxpayer must succumb to an unconstitutional tax,
and seek recourse only after it has been unlawfully exacted.” United States v. Clintwood Elkhorn Min. Co.,
553 U.S. 1, 10 (2008) (quotation omitted) (alteration in original). And to the extent that it is the treatment of certain
penalties as taxes for purposes of the AIA that troubles the dissent, we are bound by the Supreme Court’s allowance
of that practice, whatever its merits or shortcomings. See NFIB, 567 U.S. at 544 (“Congress can, of course, describe
something as a penalty but direct that it nonetheless be treated as a tax for purposes of the [AIA].”).
No. 18-5019 CIC Servs., LLC v. IRS, et al. Page 15
However, as these facts suggest, and as we have explained, “this exception is very
narrow.” RYO, 696 F.3d at 472. “Because of the strong policy animating the [AIA], and the
sympathetic, almost unique facts in South Carolina, courts have construed the South Carolina
exception very narrowly, undermining [the] plaintiff’s efforts to fit its own claims within the
confines of this exception.” Id. (quotation omitted). As in RYO, this case “is distinguishable
from South Carolina in various ways.” Id.
Most significantly, the Supreme Court contrasted the facts of South Carolina with cases
in which plaintiffs have “the alternative remedy of a suit for a refund.” 465 U.S. at 374–75;
accord RYO, 696 F.3d at 472. Plaintiff does not contest that it has this alterative remedy.
Rather, Plaintiff challenges whether that remedy is sufficiently meaningful. Plaintiff contends
that having to “break the law” by violating the Notice, and then sue for a refund, is “no remedy
at all.” (Brief for Appellant at 38–40.) Contrary to Plaintiff’s contention however, that is
exactly what the AIA is designed to require. The AIA “serves two related purposes,” Dickens v.
United States, 671 F.2d 969, 971 (6th Cir. 1982), “to permit the United States to assess and
collect taxes alleged to be due without judicial intervention, and to require that the legal right to
disputed sums be determined in a suit for refund.” Williams Packing, 370 U.S. 1 at 7. Thus, we
hold that Plaintiff’s complaint does not fall into the South Carolina exception to the AIA.
CONCLUSION
The broader legal context in which this case has been brought is not lost on this Court.
Defendants “do not have a great history of complying with APA procedures, having claimed for
several decades that their rules and regulations are exempt from those requirements.” Hickman
& Gerska, supra, at 1712–13. And despite the jurisdictional nature of this appeal, Plaintiff has
made its thoughts on the merits abundantly clear, emphasizing that “Notice 2016-66’s Issuance
and Enforcement is an Obvious Violation of the APA.” (Reply Brief for Appellant at 4.) But
that does not in and of itself give federal district courts subject matter jurisdiction over suits
seeking to enjoin the assessment or collection of taxes. Absent further instruction from Congress
or the Supreme Court, such suits are barred by the AIA.
For the reasons set forth above, we AFFIRM the district court’s dismissal.
No. 18-5019 CIC Servs., LLC v. IRS, et al. Page 16
_________________
DISSENT
_________________
NALBANDIAN, Circuit Judge, dissenting. Ordinarily, administrative law does not
intend to leave regulated parties caught between a hammer and an anvil. That is why the
Supreme Court has recognized a norm in favor of pre-enforcement judicial review of final
agency action. See, e.g., Abbott Laboratories v. Gardner, 387 U.S. 136, 140 (1967). Judicial
review obviates the dilemma of either complying with potentially unlawful (and onerous)
regulations or “risk[ing] prosecution.” Id. at 152. But that is the choice CIC Services is left with
today. The majority holds that the Anti-Injunction Act bars us from reviewing CIC’s pre-
enforcement challenge of an Internal Revenue Service reporting requirement.1 I disagree.
The Anti-Injunction Act bars all “suit[s] for the purpose of restraining the assessment or
collection of any tax.” 26 U.S.C. § 7421(a). This provision ensures the “prompt collection” of
the Government’s “lawful revenue.” Enochs v. Williams Packing & Nav. Co., 370 U.S. 1, 7
(1962). It allows the Government “to assess and collect taxes alleged to be due without judicial
intervention” by requiring taxpayers to seek relief in a refund suit, after the disputed tax is paid.
Id. The question here is whether CIC’s challenge falls within this statute: Is it a “suit for the
purpose of restraining the assessment or collection of any tax?” 26 U.S.C. § 7421(a).
Perhaps at some level of abstraction, it could be. CIC seeks to enjoin an IRS notice that
requires it to report certain transactions and to maintain a (reportable) list of clients who engage
in those transactions. See Notice 2016-66, 2016-47 I.R.B. 745. CIC contends that the IRS
promulgated the notice in violation of the Administrative Procedure Act and the Congressional
Review Act.
Of course, the reports themselves are not taxes. Nor do they necessarily contain
information showing that CIC or its clients owe taxes. And CIC does not allege tax liability as
its injury. Rather, it takes issue with the hundreds of hours of labor and tens of thousands of
1Here, references to the Anti-Injunction Act also refer to the tax exception to the Declaratory Judgment
Act, both of which are “to be interpreted coterminously.” Ecclesiastical Order of the ISM of AM, Inc. v. Internal
Revenue Serv., 725 F.2d 398, 404–05 (6th Cir. 1984).
No. 18-5019 CIC Servs., LLC v. IRS, et al. Page 17
dollars the requirement will cost to comply with. And all so that, CIC argues, the IRS can
unfairly and publicly portray its “industry as one filled with crooked operatives and tax
scammers.” Put simply, this is not a dispute over taxes.
That said, the IRS promulgated the notice because the agency “lack[s] sufficient
information to identify which” transactions have a potential for tax avoidance and which do not.
2016-47 I.R.B. 745. Presumably, once the IRS uses the reported information to identify which
ones do, there will be tax consequences for some taxpayers. So it is plausible that CIC’s
challenge could eventually hinder the assessment and collection of taxes down the road.
But is that enough to trigger the Anti-Injunction Act? According to Direct Marketing
Ass’n v. Brohl, 135 S. Ct. 1124 (2015), the answer is a resounding “No.” What Direct Marketing
taught us in interpreting the similarly worded Tax-Injunction Act is that the text of the statute is
paramount. And a suit to enjoin the enforcement of a reporting requirement is not a “suit for the
purpose of restraining the assessment or collection of any tax.” 26 U.S.C. § 7421(a) (emphases
added).
As the Supreme Court explained there, “information gathering” (such as the reporting
requirement here) is “a phase of tax administration procedure that occurs before assessment . . .
or collection.” Direct Marketing, 135 S. Ct. at 1129 (emphasis added). “‘Assessment’ is the
next step in the process, and it refers to the official recording of a taxpayer’s liability.” Id. at
1130. But that does not occur until “after information relevant to the calculation of that liability
is reported to the taxing authority.” Id. (emphasis added). And “collection” comes even later.
See id. It is the “act of obtaining payment of taxes due.” Id. To be sure, the Court
acknowledged that “assessment” and “collection” could be understood more broadly. See id. at
1130–31. But no matter how broadly those terms might stretch, they refer to phases in the
process distinct from “information gathering.” See id.
And so, the Court reasoned, the Tax-Injunction Act “is not keyed to all activities that may
improve [the Government’s] ability to assess and collect taxes.” Id. at 1131. “Such a rule would
be inconsistent not only with the text of the statute, but also with our rule favoring clear
boundaries in the interpretation of jurisdictional statutes.” Id. District courts may not
No. 18-5019 CIC Servs., LLC v. IRS, et al. Page 18
“restrain”—i.e., “enjoin,” “stop,” or “prohibit”2—the “assessment” or “collection” of taxes. Id.
at 1132. “[A]nd enforcement of . . . reporting requirements is none of these.” Id. at 1131.
Although Direct Marketing appears to settle the matter, the Government notes a
distinction between that case and this one. In Direct Marketing, the penalty that enforced the
reporting requirement “was not itself a tax”—or at least no one argued that it was. Florida
Bankers Ass’n v. U.S. Dep’t of the Treasury, 799 F.3d 1065, 1069 (D.C. Cir. 2015). Here, in
contrast, the reporting requirement is enforced by penalties in Chapter 68, Subchapter B of the
Tax Code. See 26 U.S.C. §§ 6707, 6707A, 6708. And the Tax Code deems those penalties
“taxes.” 26 U.S.C. § 6671(a).
So the specific issue here is whether a reporting requirement that is enforced by a “tax” is
shielded from pre-enforcement judicial review under the Anti-Injunction Act. The majority
adopts the reasoning of Florida Bankers to answer that question affirmatively.
In Florida Bankers, a divided panel of the D.C. Circuit held that the Anti-Injunction Act
barred a similar suit challenging the legality of a reporting requirement that the IRS enforced
with a tax. See 799 F.3d at 1072. That is because, the court reasoned, the tax is “imposed as a
direct consequence of violating the regulation,” and so “[i]nvalidating the regulation would
directly bar collection of that tax.” Id. at 1069. For the D.C. Circuit majority, this distinguished
the case from Direct Marketing because “the tax . . . is not two or three steps removed from the
regulation in question.” Id. In other words, there was no attenuation between the assessment
and collection of the tax, on the one hand, and invalidating the regulation on the other.
2In Direct Marketing, the Court opted to give “restrain” this narrower meaning as opposed to its broader
meaning, which would apply to suits that “merely inhibit” assessment or collection. 135 S. Ct. at 1132. The
majority nevertheless cautions that it is “unclear” that “restrain” carries the same meaning in the Anti-Injunction Act
that it does in the Tax-Injunction Act. But the Court explained that the words used in both statutes “are generally
used in the same way.” Id. at 1129. It also justified giving “restrain” its narrower meaning, in part, on the fact that,
in the Tax-Injunction Act, “restrain” operates “on a carefully selected list of technical terms—‘assessment, levy,
collection’—not on an all-encompassing term, like ‘taxation.’” Id. at 1132. To give restrain its broader meaning,
the Court reasoned, “would be to defeat the precision of that list, as virtually any court action related to any phase of
taxation might be said to ‘hold back’ ‘collection.’” Id. The only difference between the Anti-Injunction Act and the
Tax-Injunction Act in that respect is that the former omits the word “levy” from its text. Finally, the Court explained
that the “narrower definition is consistent with the rule that ‘[j]urisidictional rules should be clear.’” Id. at 1133
(quoting Grable & Sons Metal Products, Inc. v. Darue Engineering & Mfg., 545 U.S. 308, 321 (2005) (Thomas, J.,
concurring) (alteration in original)). These reasons militate in favor of giving “restrain” its narrower meaning in the
Anti-Injunction Act, too.
No. 18-5019 CIC Servs., LLC v. IRS, et al. Page 19
That misses the mark. Enjoining a reporting requirement enforced by a tax does not
necessarily bar the assessment or collection of that tax. That is because the tax does not result
from the requirement per se. The only way for the IRS to assess and collect the tax is for a party
to violate the requirement. So enjoining the requirement only stops the assessment and
collection of the tax in the sense that a party cannot first violate the requirement and then become
liable for the tax. Surely, this is the kind of attenuated relationship between “restrain,”
“assessment,” and “collection” that Direct Marketing rejected. At best, the difference is one of
degree—there may not be three steps of attenuation here or in Florida Bankers, but there
certainly is attenuation.3
The Florida Bankers court would reject this reasoning as “nifty wordplay.” Id. at 1070.
To show why it is not, consider this hypothetical: Imagine if the IRS notice here unlawfully
discriminated against a group of Americans by subjecting only that group to its reporting
requirement. The logic of Florida Bankers would require us to characterize an Equal Protection
challenge to the discriminatory notice as a “suit for the purpose of restraining the assessment or
collection of [a] tax” simply because it is enforced by a penalty in Chapter 68, Subchapter B of
the Tax Code.4 Intuitively, we know that description cannot stand without warping the meaning
of the statute beyond recognition. No one thinks that the plaintiffs in that hypothetical case
would care about enjoining the collection of a tax. The purpose of the suit would be to end
discriminatory action by the Government. And yet the tax in that hypothetical is no further
removed from the notice there than the tax in this case is removed from the notice here.
3And, unsurprisingly, commentators have recognized the tension between Florida Bankers and Direct
Marketing. See, e.g., Kristin E. Hickman & Gerald Kerska, Restoring the Lost Anti-Injunction Act, 103 Va. L. Rev.
1683, 1685 (2017) (“Florida Bankers also arguably contradicts the Supreme Court’s reading in Direct Marketing
Ass’n v. Brohl of the similarly worded Tax Injunction Act . . . .”); Stephanie Hunter McMahon, Pre-Enforcement
Litigation Needed for Taxing Procedures, 92 Wash. L. Rev. 1317, 1368 (2017) (“Direct Marketing is seemingly at
odds with another case, discussed in the prior Part, Florida Bankers Ass’n v. Department of Treasury.”); Patrick J.
Smith, D.C. Circuit in Florida Bankers Misapplies Anti-Injunction Act, 149 Tax Notes 1493, 1493 (Dec. 21, 2015)
(“This report explains how the majority opinion in Florida Bankers is inconsistent with Direct Marketing, as well as
D.C. Circuit precedent on the AIA.”).
4To be sure, the court in Florida Bankers suggested that the regulation would have to be “tax-related.”
799 F.3d at 1067. But, as the hypothetical demonstrates, one can imagine any number of pernicious regulations that
could be made to fit that description.
No. 18-5019 CIC Servs., LLC v. IRS, et al. Page 20
The Florida Bankers court dismissed an argument based on similar reasoning, stating,
“plaintiffs cannot evade the Anti-Injunction Act by purporting to challenge only the regulatory
aspect of a regulatory tax.” Id. In doing so, the court mainly relied on Bob Jones University v.
Simon, 416 U.S. 725 (1974) and Alexander v. “Americans United” Inc., 416 U.S. 752 (1974).
Both cases involved non-profit organizations that brought constitutional challenges to IRS letter-
rulings revoking their tax-exempt status. See Bob Jones, 416 U.S. at 735–36; Alexander,
416 U.S. at 755–56. And the plaintiffs in both cases argued that the purpose of their suits was
“to ensure that donors seeking tax deductions would continue to contribute to their
organizations,” not to restrain the assessment or collection of taxes. Seven-Sky v. Holder,
661 F.3d 1, 10 (D.C. Cir. 2011), abrogated on other grounds by Nat’l Fed’n of Indep. Bus. v.
Sebelius, 567 U.S. 519 (2012).
But the critical distinction between those cases and this one is that “challenges to IRS
letter-rulings revoking tax-exempt status are inextricably linked to the assessment and collection
of taxes.” Id. The direct consequence of the IRS letter-rulings for both cases was that the
organization became liable for federal unemployment taxes. Bob Jones, 416 U.S. at 730;
Alexander, 416 U.S. at 755. In fact, “the only injuries plaintiffs identified involved tax liability.”
Seven-Sky, 661 F.3d at 10. So the Supreme Court unsurprisingly saw through the plaintiffs’
arguments and held that each suit was barred by the Anti-Injunction Act because, if successful,
each would “necessarily preclude” the collection of taxes. Bob Jones, 416 U.S. at 732; see also
Alexander, 416 U.S. at 761.
That is not the case here. The regulation that CIC seeks to enjoin does not directly result
in any tax liability. Indeed, the IRS cannot even assess the tax unless Plaintiff first violates the
regulation. This attenuation means that, unlike in Bob Jones or Alexander, an injunction does
not “necessarily preclude” an assessment or collection of taxes. This also alleviates any worry
that plaintiffs could avoid the Anti-Injunction Act by always recharacterizing their suits as
challenges to a regulation instead of a tax. Plaintiffs may make those arguments, but as in Bob
Jones and Alexander, they will often fail.
The other case that the Florida Bankers court substantially relied on, NFIB v. Sebelius, is
not to the contrary. There, the plaintiffs argued that the Anti-Injunction Act should not apply
No. 18-5019 CIC Servs., LLC v. IRS, et al. Page 21
since they were challenging a regulatory mandate to purchase health insurance, not the penalty
for failing to purchase the insurance. Florida Bankers, 799 F.3d at 1071. Though the Supreme
Court agreed that the Anti-Injunction Act did not apply, it did so because it held that the penalty
at issue was not a tax under the statute. Id. The Florida Bankers court read the decision to mean
that “the Anti-Injunction Act would have applied if the penalty were a tax under the Act.” Id. It
gave two reasons for reaching that conclusion. First, it relied on the Supreme Court’s statement
that because the penalty was not a tax under the Anti-Injunction Act, the statute did not apply,
and so the Court could go on to reach the merits. Id. Second, the court noted that the Supreme
Court failed to expressly address plaintiffs’ argument despite “the extensive briefing and [oral]
argument focused on [it].” Id.
But as Judge Henderson explained in her dissent, the first reason falls victim to the
fallacy of “denying the antecedent.” Id. at 1080 (Henderson, J., dissenting). Stated abstractly, it
means one is wrong to assume that because a conditional premise is true, so is its inverse. See id.
(citing New England Power Generators Ass’n, Inc. v. FERC, 707 F.3d 364, 370 & n.3 (D.C. Cir.
2013)). Stated in terms of this case, it means one is wrong to assume that a suit implicating a tax
triggers the Anti-Injunction Act simply because a suit not implicating a tax does not trigger the
Anti-Injunction Act.
On top of that, and again as Judge Henderson noted, the first reason is not textually
sound. Id. Even if a suit implicates a tax, that does not mean it is necessarily barred by the Anti-
Injunction Act: “the suit may nonetheless not seek to ‘restrain[] the assessment or collection’ of
said tax.” Id. (alteration in original) (quoting 26 U.S.C. § 7421(a)).
The second reason is inherently speculative and, regardless, cuts in both directions. For it
is just as likely that the Supreme Court intentionally avoided the issue since it was unnecessary
to reach in that case. At bottom, the NFIB Court never said that pre-enforcement review of a
regulatory mandate is barred under the Anti-Injunction Act simply because it is enforced by a
tax. A search for that proposition in the opinion leaves one emptyhanded.
More importantly, the NFIB Court did not have the benefit of its later decision in Direct
Marketing. We do. And there the Court did not mince its words: “[E]nforcement of . . .
No. 18-5019 CIC Servs., LLC v. IRS, et al. Page 22
reporting requirements is” neither “assessment” nor “collection.” 135 S. Ct. at 1131. Nothing in
the Court’s decision causes me to think it would have held differently if someone had argued that
the $5 or $10 penalties in that case were taxes.
Under the majority’s decision, CIC now only has two options: (1) acquiesce to a
potentially unlawful reporting requirement that will cost it significant money and reputational
harm or (2) flout the requirement, i.e., “break the law,” to the tune of $50,000 in penalties for
each transaction it fails to report. See 26. U.S.C. § 6707(a)–(b). Only if it (or someone else)
follows the latter path—and only when (or if) the Government comes to collect the penalty—will
any court be able to pass judgment on the legality of the regulatory action.
Moreover, plaintiffs who do follow that path are not only subject to financial penalties
but also criminal penalties.5 The Tax Code makes it a misdemeanor for any person who
“willfully fails” to “make any return, keep any records, or supply any information” required
under its title and its regulations. 26 U.S.C. § 7203. And it fines that person $25,000 ($100,000
if it’s a corporation). See id.
In other words, the only lawful means a person has of challenging the reporting
requirement here is to violate the law and risk financial ruin and criminal prosecution. That is
probably enough to test the intestinal fortitude of anyone. And it leaves CIC in precisely the
bind that pre-enforcement judicial review was meant to avoid. See, e.g., Free Enter. Fund v.
Pub. Co. Accounting Oversight Bd., 561 U.S. 477, 490 (2010) (“We normally do not require
plaintiffs to ‘bet the farm . . . by taking the violative action’ before ‘testing the validity of the
law.’”) (quoting MedImmune, Inc. v. Genentech, Inc., 549 U.S. 118, 129 (2007)); MedImmune,
Inc., 549 U.S. at 128–29 (“[W]here threatened action by government is concerned, we do not
require a plaintiff to expose himself to liability before bringing suit to challenge the basis for the
threat.”); Gardner v. Toilet Good Ass’n, 387 U.S. 167, 172 (1967) (concluding that a “proposed
avenue of review [] beset with penalties and other impediments [is] inadequate as a satisfactory
alternative to [pre-enforcement review]”).
5If that seems like it must be wrong, think again. The Government’s only response to whether it could
criminally prosecute a person seeking judicial review for failing to supply the required information was that it was
“not clear.” [Government’s Br. at 58.]
No. 18-5019 CIC Servs., LLC v. IRS, et al. Page 23
That might not be so alarming if this predicament was confined to this notice. But at
least two commentators predict that the reasoning of Florida Bankers would apply to “most if
not all Treasury regulations and IRS guidance documents.” Kristin E. Hickman & Gerald Kersa,
Restoring the Lost Anti-Injunction Act, 103 Va. L. Rev. 1683, 1685 (2017). The inevitable
consequence of our decision today is that “many” of those regulations and guidance documents
will be rendered “effectively unreviewable.” Id. at 1686. In the process, something more may
be lost than the private stakes in each meritorious case that would have otherwise been brought.
And that is, “public confidence in the quality and legitimacy of agency action” for which judicial
review was meant to serve as a protective bulwark. Id.
And to what end? The chief “evil[]” the Anti-Injunction Act sought to ward off was
undue judicial “interfere[nce] with the process of collecting the taxes on which the government
depends for its continued existence.” Taylor v. Secor, 92 U.S. 575, 613 (1875). But the
reporting requirement here generates no revenue for the Government. And the point of the
penalty is to incentivize compliance with the requirement—not to incentivize its own assessment
and collection. So it is not at all clear to me that barring CIC’s suit serves the purpose of the
Anti-Injunction Act. Indeed, the opposite appears true.
If all this seems rather anomalous, that is because it is. In the typical Anti-Injunction Act
case, a plaintiff seeks to prevent some imminent process of assessment or collection relating to
the taxes that he owes for a given year. See, e.g., Tatar v. United States, No. 17-2088, 2018 WL
2247497 at *1 (6th Cir. Apr. 24, 2018) (unpublished); Dunlap v. Lew, No. 16-3658, 2017 WL
9496075 at *1 (6th Cir. June 2, 2017) (unpublished). To seek judicial review, all the plaintiff
must do is (leaving aside some procedural hoops) pay the tax and sue for a refund. See Dunlap,
2017 WL 9496075 at *2. In that way, the Anti-Injunction Act’s goal of ensuring the Nation’s
efficient collection of tax revenues is fulfilled, and the plaintiff has every incentive to seek
judicial review if he has a meritorious claim.
Contrast that with the situation here: the path to judicial review is fraught with threats of
penalties, fines, and prosecution—all intended to encourage compliance with a reporting
requirement that collects not a penny for the Government. The anomalous implications of
No. 18-5019 CIC Servs., LLC v. IRS, et al. Page 24
today’s decision should convince us that we have given an anomalous reading to the Anti-
Injunction Act.
For these reasons, I would hold that the Anti-Injunction Act does not bar CIC’s suit.