Correcting the Record: Taxes, Penalties, and the Anti-Injunction Act

As a professor, I talk with reporters often. I consider it part of my job, and I like doing it. But occasionally mistakes happen. This week, in reporting about the Supreme Court’s grant of certiorari in CIC Services v. IRS, a reporter misattributed to me an argument that wasn’t mine and with which I disagree. The reporter quickly and graciously admitted error and has fixed the article. But I want to address the argument at stake in a blog post, to be clear about where I stand. I have never argued and do not believe that whether the Anti-Injunction Act bars pre-enforcement judicial review of tax regulatory actions turns on a finding that penalties under the Internal Revenue Code are not taxes as the Anti-Injunction Act uses that term. My arguments for reading the Anti-Injunction Act to allow pre-enforcement judicial review of tax regulatory actions under the Administrative Procedure Act are entirely different and do not depend at all on a distinction between taxes and penalties.

The Anti-Injunction Act, 26 U.S.C. s. 7421(a), provides that, except as provided elsewhere in the Internal Revenue Code, “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.” CIC Services and other cases challenging rules and regulations that impose reporting requirements do not directly concern the computation of anyone’s tax liability. And, at first blush, it might seem reasonable to argue that the penalties that the Code imposes for noncompliance with reporting requirements are not taxes, and thus challenges to those reporting requirements cannot be limited by the Anti-Injunction Act. After all, in NFIB v. Sebelius, the Supreme Court decided that the Anti-Injunction Act did not apply because the “shared responsibility payments” at issue were penalties rather than taxes.

As with many arguments that seem sensible at first, however, just a little digging uncovers substantial weaknesses. Drawing a distinction between taxes and penalties in the Internal Revenue Code has always been tricky. Congress has often used “additions to the tax” and “penalty” more or less interchangeably in imposing civil penalties across various Code provisions, and Congress’s choice of label has not always been outcome determinative before the Supreme Court. For those who are interested in learning more about the history of the tax/penalty distinction and the Anti-Injunction Act, Jerry Kerska and I wrote about it at some length and with extensive footnotes here.

But whether penalties are taxes for Anti-Injunction Act purposes, while perhaps not entirely irrelevant, nevertheless does not decide the question about pre-enforcement judicial review that is before the Court in CIC Services. Whatever one chooses to label the exaction for noncompliance with IRS Notice 2016-66 or other pronouncements like it, as I see things, the issue before the Court is whether pre-enforcement judicial review under the Administrative Procedure Act restrains that exaction’s assessment and collection. My answer, grounded in statutory text, history, and purpose, is no, pre-enforcement review doesn’t do that.

The Anti-Injunction Act was adopted in 1867 as part of a comprehensive statutory scheme for administering the Civil War income tax, with “assessment” and “collection” as functions defined in some detail by the early revenue laws and, later, within the Internal Revenue Code. Proper interpretation of the Anti-Injunction Act requires an understanding of the history of the assessment and collection functions, and tax administration more generally, as they have evolved over the past 150 years, as well as the events that prompted Congress to adopt the Anti-Injunction Act in the first instance and how they compare with contemporary circumstances. In the same article, Jerry Kerska and I painstakingly track the text, history, and purpose of the Anti-Injunction Act as part of the early revenue laws, the Internal Revenue Code, and the system of tax administration they established to demonstrate that Congress intended the word “restraining” in the Anti-Injunction Act to reflect a greater temporal proximity to actual enforcement efforts than one typically sees with pre-enforcement challenges under the Administrative Procedure Act. We also explain how our reading of the Anti-Injunction Act reconciles it with the Administrative Procedure Act and the Supreme Court’s decisions in Abbott Labs v. Gardner and Direct Marketing Ass’n v. Brohl, rather than placing the Anti-Injunction Act at odds with them. My amicus briefs before the Sixth Circuit and the Supreme Court on this issue have made these same arguments.

In law and in academia, people are known for their ideas and arguments. Those who have read my academic work and amicus briefs are familiar with my ideas and arguments regarding Anti-Injunction Act interpretation, but not everyone reads those sources. The Internet being what it is, errors in news articles tend to stick around, despite best efforts to correct them. Hopefully this post will help in this instance.

kristin hickman

Professor Kristin Hickman is a legal scholar working in the fields of tax administration, administrative law, and statutory interpretation. In addition to the Of Interest blog, Professor Hickman authors the Administrative Law Treatise (with co-author Richard J. Pierce, Jr.) and has published scholarly articles in Columbia Law Review, Virginia Law Review, Cornell Law Review, Duke Law Journal, Georgetown Law Journal, Vanderbilt Law Review, and many other prominent U.S. and international publications. She holds the titles of Distinguished McKnight University Professor and Harlan Albert Rogers Professor of Law at the University of Minnesota Law School.