Today I filed an amicus brief supporting the cert petition in CIC Services, LLC v. Internal Revenue Service, No. 19-930. I was not the only one. A variety of voices also filed brief supporting cert in this case, including Harvard Law School’s Low Income Taxpayer Clinic, the Chamber of Commerce, the Cato Institute, and the American College of Tax Counsel (of which I am a member, though I was not involved at all in their brief). (All of the briefs can be found here.)
The case concerns the proper interpretation of the Internal Revenue Code’s Anti-Injunction Act and whether it cuts off pre-enforcement judicial review of APA challenges against Treasury and IRS rules and regulations — specifically in this case IRS Notice 2016-16. I have long advocated in favor of pre-enforcement review, at greatest length in a 2017 Virginia Law Review article co-authored with Jerry Kerska. A divided Sixth Circuit panel rejected this position last May, and then an even more sharply divided en banc Sixth Circuit denied rehearing, with Judge Amul Thapar on behalf of seven judges dissenting from the denial, and Judge Jeff Sutton concurring in the denial but largely on the basis that existing judicial opinions gave the Supreme Court all the perspective it needed to resolve the issue.
As the brief makes clear, I think the Sixth Circuit got this issue spectacularly wrong. In fact, the Sixth Circuit largely followed the D.C. Circuit’s 2015 opinion in Florida Bankers Ass’n v. U.S. Dep’t of the Treasury, which I argued at the time was wrong as well. The following paraphrases closely the introduction and summary of the argument from my amicus brief, albeit with fewer citations and more hyperlinks.
The Anti-Injunction Act (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, whether or not such person is the person against whom such tax was assessed.” By comparison, since Abbott Labs v. Gardner in 1967, the Supreme Court has maintained that the Administrative Procedure Act (APA) “embodies a basic presumption” of pre-enforcement review of agency regulatory actions that courts should disregard “only upon a showing of ‘clear and convincing evidence’ of a contrary legislative intent.”
In this case, with no regard for the APA or Abbott Labs, the Sixth Circuit adopted an expansive interpretation of the AIA that would preclude not just the Petitioner’s claims but virtually any pre-enforcement APA challenge to Treasury and IRS rules and regulations. The Sixth Circuit also disregarded entirely the AIA’s origins, its textual context, and its role in the larger scheme of tax administration, from the AIA’s adoption in 1867 as part of the Civil War income tax to today.
The Supreme Court has never addressed the interaction of the AIA and the APA, and the Court’s past interpretations of the AIA fail to offer a clear path for resolving the AIA’s relationship with the APA. But the Court has embraced a doctrine of administrative law uniformity and rejected tax exceptionalism from general administrative law doctrines, requirements, and norms absent clear justification. In Direct Marketing Ass’n v. Brohl, the Court adopted an interpretation of the almost-identically-worded Tax Injunction Act (TIA) that, if extended to the AIA, would go a long way toward harmonizing the AIA and the APA. And the Court has emphasized interpreting the AIA and the TIA consistently, as the latter was modeled on the former. The Sixth Circuit either cursorily dismissed or outright ignored most of this guidance.
The implications for tax administration are substantial. Treasury and the IRS have a poor track record of complying with APA procedural and process requirements. Those requirements, and pre-enforcement judicial review of agency actions to enforce agency compliance therewith, ensure that agencies act reasonably and that the public perceives agency actions as fair and legitimate. By precluding pre-enforcement judicial review of Treasury and IRS rules and regulations so sweepingly, the Sixth Circuit’s interpretation of the AIA threatens to undermine the public’s faith in the integrity of federal tax administration, and thus to discourage compliance with the tax laws.
The full brief can be found here. Since I filed my brief in support of cert in Florida Bankers back in 2016, the amount of judicial and scholarly attention paid to the question of the AIA and pre-enforcement judicial review under the APA has grown substantially. Even if the Supreme Court is disinclined to take this case, given that lower court judges continue to disagree over how to interpret the AIA in relation to the APA, I expect the Supreme Court will be unable to avoid the issue indefinitely. I hope they recognize that fact and grant cert sooner (e.g., in this case) rather than later.