Florida Bankers Ass'n v. United States Department of Treasury
419 U.S. App. D.C. 31
| D.C. Cir. | 2015Background
- IRS adopted a 2012 regulation requiring U.S. banks to report interest paid to certain nonresident aliens (Forms 1099-INT / 1042-S). Noncompliance triggers a penalty under 26 U.S.C. § 6721.
- The Florida and Texas Bankers Associations brought a pre-enforcement APA and RFA challenge seeking declaratory and injunctive relief; no member has violated the rule or paid the penalty.
- The government invoked the Anti‑Injunction Act (AIA), 26 U.S.C. § 7421(a), arguing the suit is barred because the § 6721 penalty is treated as a “tax” under the Tax Code (26 U.S.C. § 6671(a)).
- The D.C. Circuit majority (Kavanaugh) held the AIA bars the suit because (1) the penalty lies in Chapter 68, Subchapter B and is therefore treated as a tax for AIA purposes, and (2) invalidating the regulation would directly prevent assessment/collection of that tax.
- Dissent (Henderson) argued AIA does not bar pre-enforcement challenges to tax‑reporting requirements (even those enforced by tax penalties), relying on Direct Marketing, Seven‑Sky, and Foodservice; she warned forcing litigants to break the law to obtain review raises due‑process and policy concerns.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether AIA bars pre‑enforcement challenge to reporting regulation enforced by § 6721 penalty | Challenge targets the regulatory mandate, not a tax; reporting is a step removed from assessment/collection (Direct Marketing, Seven‑Sky, Foodservice) | § 6721 is in Chapter 68 Subchapter B and § 6671(a) treats those penalties as "taxes"; invalidating the regulation would restrain assessment/collection | AIA bars the suit; dismiss for lack of jurisdiction (pre‑enforcement challenge premature) |
| Whether labeling/placement of the penalty in Chapter 68 makes the AIA apply even if plaintiff seeks only regulatory relief | Plaintiffs can seek review of the regulation without being treated as seeking to restrain tax collection; courts should allow pre‑enforcement review of reporting mandates | Courts cannot be evaded by pleading; Supreme Court in NFIB treated subchapter 68B penalties as taxes for AIA purposes | Placement in Subchapter 68B controls: penalties there are treated as taxes and AIA applies |
| Whether precedent like Direct Marketing and Foodservice control | Reporting requirements do not "restrain" assessment/collection; those cases permit pre‑enforcement challenges | Those precedents are distinguishable when the enforcement mechanism is a Chapter 68 penalty treated as a tax | Majority: NFIB supersedes for Chapter 68 penalties; AIA applies despite Direct Marketing/Foodservice distinctions |
| Whether plaintiff must violate the regulation and pay penalty to obtain review | Requiring violation and payment is unconstitutional and poor policy; Seven‑Sky allows pre‑enforcement challenge to regulatory mandates even when a penalty exists | AIA’s protection of uninterrupted revenue collection requires refund/deficiency route when Chapter 68 tax is implicated | Majority: Courts must follow AIA; plaintiffs must seek refund/deficiency proceedings to obtain judicial review; dissent: this result is problematic and unnecessary |
Key Cases Cited
- Abbott Labs. v. Gardner, 387 U.S. 136 (recognizes availability of pre‑enforcement review of agency regulations generally)
- Nat’l Fed’n of Indep. Bus. v. Sebelius, 567 U.S. 519 (2012) (penalties in subchapter 68B are treated as taxes under Title 26 for AIA purposes)
- Alexander v. Americans United, 416 U.S. 752 (1974) (regulatory challenges that would necessarily reduce tax collection are barred by AIA)
- Bob Jones Univ. v. Simon, 416 U.S. 725 (1974) (challenge to IRS action closely linked to tax collection barred by AIA)
- Direct Mktg. Ass’n v. Brohl, 575 U.S. 1 (2015) (challenge to a tax‑reporting requirement does not necessarily restrain assessment or collection; reporting is a pre‑assessment step)
- Food‑Service & Lodging Inst. v. Regan, 809 F.2d 842 (D.C. Cir. 1987) (pre‑enforcement challenge to tip‑reporting regulation permitted; regulation on its face did not relate to assessment/collection)
- Seven‑Sky v. Holder, 661 F.3d 1 (D.C. Cir. 2011) (panel held AIA did not bar pre‑enforcement challenge to ACA mandate; discussed tax vs. penalty distinction)
- Z St. v. Koskinen, 791 F.3d 24 (D.C. Cir. 2015) (discusses AIA exceptions and limits on treating all regulatory suits as tax litigation)