936 F.3d 501
6th Cir.2019Background
- In 2016 the IRS issued guidance requiring taxpayers and advisers to report specified information; failure to comply can trigger civil penalties (26 U.S.C. §§ 6707–6708) and willful noncompliance can bring criminal penalties (§ 7203).
- CIC Services sued the IRS seeking pre-enforcement relief to enjoin the IRS guidance as unlawful under the Administrative Procedure Act and the Congressional Review Act.
- The central procedural question is whether the Anti‑Injunction Act (AIA), 26 U.S.C. § 7421(a) — which bars suits “for the purpose of restraining the assessment or collection of any tax” — prohibits CIC’s pre-enforcement challenge.
- A panel denied rehearing en banc; Judges Clay and Sutton each wrote concurring opinions endorsing denial, while Judge Thapar dissented from the denial and argued for rehearing en banc.
- The opinions divide on whether a suit that targets an IRS reporting requirement (enforced by statutory penalties classified as “taxes” in Subchapter 68B) is effectively a suit to restrain assessment or collection and thus barred by the AIA.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Does the AIA bar CIC’s pre-enforcement challenge to IRS reporting guidance? | CIC: A suit to enjoin the reporting requirement challenges agency action, not the assessment/collection of a tax, so AIA does not apply. | IRS: The reporting requirement is enforced by statutory penalties treated as taxes; enjoining the requirement would restrain assessment/collection and is barred by AIA. | Panel denied rehearing en banc; majority views (per concurrences) uphold AIA’s application in similar contexts, but dissent would hold AIA inapplicable here. |
| Do reporting/ information‑gathering requirements qualify as “assessment” or “collection” under AIA? | CIC: Following Direct Mktg. Ass’n v. Brohl, reporting is distinct from assessment/collection and thus outside AIA. | IRS: Where penalties enforcing reporting are statutory “taxes,” the enforcement mechanism makes AIA applicable. | Split: Dissent relies on Brohl’s distinction and circuit precedents refusing to treat reporting as assessment/collection; concurrence emphasizes precedent treating some regulatory penalties as the relevant “tax.” |
| Is the plaintiff’s suit for the “purpose” of restraining tax assessment/collection (AIA’s operative test)? | CIC: Purpose is to avoid compliance costs; plaintiff currently has no tax liability and does not seek to restrain collection of a tax. | IRS: Invalidating the regulatory requirement would necessarily eliminate the statutory tax/penalty’s operation, so the suit has the forbidden purpose. | Panel majority (as reflected in concurrences) view past precedent as supporting AIA’s breadth; dissent disagrees, finding plaintiff’s purpose not to restrain tax collection. |
| Must plaintiffs submit to penalties (or risk criminal exposure) before obtaining judicial review when AIA applies? | CIC: Forcing plaintiffs to violate reporting rules could mean risking imprisonment, making pre-enforcement review essential. | IRS: AIA requires pay‑then‑challenge in many contexts; exceptions are limited and precedent supports deferring review. | Dissent emphasizes the injustice and impracticality of requiring plaintiffs to risk criminal sanction; majority declined to expand exceptions. |
Key Cases Cited
- Direct Mktg. Ass’n v. Brohl, 135 S. Ct. 1124 (2015) (state reporting requirement is information gathering distinct from assessment/collection; “restrain” means to prohibit or stop)
- Nat’l Fed’n of Indep. Bus. v. Sebelius, 567 U.S. 519 (2012) (discusses interplay of penalties and taxes in AIA analysis)
- Alexander v. "Americans United" Inc., 416 U.S. 752 (1974) (AIA bars suit when primary purpose is to restrain tax consequences)
- Bob Jones Univ. v. Simon, 416 U.S. 725 (1974) (AIA bars challenges whose primary purpose is to avoid tax liability)
- Fla. Bankers Ass’n v. U.S. Dep’t of the Treasury, 799 F.3d 1065 (D.C. Cir. 2015) (rejects artful pleading to evade AIA; AIA cannot be sidestepped by framing a challenge as regulatory rather than tax)
- Autocam Corp. v. Sebelius, 730 F.3d 618 (6th Cir. 2013) (panel held AIA did not bar pre-enforcement challenge to an ACA mandate enforced by a payment; later vacated on other grounds but persuasive)
- Korte v. Sebelius, 735 F.3d 654 (7th Cir. 2013) (held pre-enforcement challenge to mandate not barred by AIA)
- Hobby Lobby Stores, Inc. v. Sebelius, 723 F.3d 1114 (10th Cir. 2013) (en banc) (similarly held AIA inapplicable to pre-enforcement challenge to mandate)