* This post co-authored with Gerald Kerska.
Most people who follow cases and scholarship at the intersection of tax and administrative law are aware that the Supreme Court has granted certiorari in CIC Services, LLC v. Internal Revenue Service to consider whether the Internal Revenue Code’s Anti-Injunction Act, 26 U.S.C. § 7421(a), precludes pre-enforcement judicial review of Treasury and IRS rules and regulations under the Administrative Procedure Act. In 2017, we published an Article on this issue in the Virginia Law Review, and one of us (Hickman) filed petition-stage and merits-stage amicus briefs supporting the Petitioners in the CIC Services case based on that Article. Our argument in favor of pre-enforcement judicial review is a statutory one, based on the Anti-Injunction Act’s broad textual context as part of a statutory tax assessment and collection process from the time of its adoption in 1867 to today.
An amicus brief supporting the Respondents, filed by Prof. Bryan Camp, relies heavily on a small error we made in labeling provisions of the 1860s revenue acts in questioning our analysis. Specifically, we labeled the Anti-Injunction Act as an amendment to an 1862 collection provision, rather than as an amendment to an 1866 post-collection administrative exhaustion provision. We do not think the mislabeling matters for our analysis, which is more broadly structural and not dependent on any one provision beyond the Anti-Injunction Act itself. But we acknowledge the mistake and thank Prof. Camp for bringing it to our attention. Still, for those who might be following these ground-level details of Anti-Injunction Act interpretation, we thought it might be useful to untangle the details of this complicated bit of legal arcana and resolve any confusion about our argument.
Playing In the Trees
The 1860s was a time of great change in American tax administration, with the imposition of extensive “internal” taxes to finance the Civil War — including the nation’s first income tax as well as a tax on land, an inheritance tax, a gross receipts tax on businesses, excise taxes, license fees, and stamp duties. Congress passed several significant revenue acts over the course of that decade and into the 1870s.
The Act of Aug. 5, 1861, ch. 45, 12 Stat. 292 (the 1861 Act) adopted the land tax and an initial, very rudimentary income tax, but raised little revenue. The more comprehensive Act of July 1, 1862, ch. 119, 12 Stat. 432 (the 1982 Act) introduced the fuller panoply of internal taxes (including a somewhat more sophisticated income tax) and also established a system for administering and collecting those taxes (including a Commissioner of Internal Revenue and assessment and collection functions to be performed by a bevy of assessors, assistant assessors, and collectors assigned to individual districts). Congress enacted the Anti-Injunction Act as part of the Act of March 2, 1867, ch. 169, 14 Stat. 471 (the 1867 Act) to support that system of tax administration.
In our Article (and, correspondingly, in Hickman’s amicus briefs), we discussed at length the system of tax administration established in the 1860s, and particularly the assessment and collection functions at its core, as the origin of contemporary tax administrative provisions and practices. The various revenue acts of the 1860s were not codified; sometimes one revenue act more or less entirely replaced the previous one; and by 1867, the 1862 Act had been repealed and replaced by the Act of June 30, 1864, 13 Stat. 223 (the 1864 Act), as amended by the Act of July 13, 1866, ch. 184, 14 Stat. 98 (the 1866 Act). To be even more precise:
- As we described in our Article , several provisions of the 1862 Act addressed the assessment and collection process, including § 19 governing key aspects of the collection function.
- The 1864 Act formally repealed and replaced the 1862 Act and, in doing so, renumbered and modified slightly the assessment and collection provisions. What had been § 19 of the 1862 Act, describing key aspects of the collection function, became § 28. Despite that and other section shifts, only minor details of the assessment and collection functions changed. The assessment and collection process of 1864 was substantially similar to that of 1862.
- The 1866 Act amended the 1864 Act “and Acts amendatory thereof” (none relevant here). Many of the “amendments” replaced entire provisions of the 1864 Act. For example, § 9 of the 1866 Act amended the aforementioned § 28 (pertaining to collection) of the 1864 Act in this manner. Meanwhile, § 19 of the 1866 Act added a new administrative exhaustion provision for post-collection refunds. (This provision would soon become the home of the Anti-Injunction Act.) Again, however, the amendments of 1866 did not change the assessment and collection process significantly.
- The 1867 Act then amended “existing Laws relating to Internal Revenue,” including both the 1864 Act and the 1866 Act. Section 10 of the 1867 Act adopted the Anti-Injunction Act by “adding” the phrase “And no suit for the purpose of restraining the assessment or collection of tax shall be maintained in any court” to § 19 of “the act amendatory to the act entitled ‘An act to provide internal revenue to support the government, to pay interest on the public debt, and for other purposes,’ approved June thirty, eighteen hundred and sixty-four, approved July thirteen, eighteen hundred and sixty-six.” Still, assessment and collection after 1867 remained substantially similar to the 1862 version of that process.
In writing our article, we reviewed all of this legislation. In reviewing the various revenue acts and interpreting the Anti-Injunction Act’s proper scope, our focus was on understanding the assessment and collection process for internal taxes in the 1860s, and then confirming that those functions did not change materially through that period (and for several decades thereafter).
Seeing the Forest
Building from that analysis, our Article addresses the interpretive question whether the word “restrain” in the Anti-Injunction Act covers lawsuits that stop tax assessment and collection when they are imminent, or whether the Anti-Injunction Act stops lawsuits that merely make those functions more challenging to accomplish in the future. Put another way, does the Anti-Injunction Act block any lawsuit that might affect assessment and collection at some unidentified future time, or does it mean something narrower?
As we documented in the Article, the relevant terms of the Anti-Injunction Act itself have not changed since the 1860s. As a result, the core language of the Anti-Injunction Act means today what it did in 1867. The best way to interpret the Anti-Injunction Act’s meaning and scope in 2020 is by looking at the assessment and collection functions to which the Anti-Injunction Act refers as they existed in 1867, textually and practically in relation to one another, and comparing those functions to their contemporary analogues.
Thus, in Part III of the Article, we proposed an interpretation of “restrain” based on the Anti-Injunction Act’s broad textual context and the structure of the assessment and collection process in 1867 as compared with contemporary tax administration. We laid out how an aggrieved taxpayer in the years immediately prior to 1867 might have filed suit to challenge his or her tax liability in three scenarios: (1) after a tax return was filed or became due but before the assessors posted proposed assessments; (2) after assessors posted proposed assessments but before those assessments were finalized; and (3) after assessments were finalized but before collection. The Article further elaborates these scenarios. But we concluded from the overall structure of the system of assessment and collection established in the 1860s revenue acts that any suit seeking to enjoin the assessment and collection of taxes would necessarily have involved engagement — whether in a pre- or post-assessment posture — between the Government and a specific taxpayer over that taxpayer’s immediate and particularized tax liability. This encompasses the pre-assessment audits and investigations by assistant assessors that are central to Prof. Camp’s critique of our argument. As we discuss in our Article, those pre-assessment investigations by assistant assessors were conducted in the first of those three time periods — i.e., after a tax return became due — either in auditing particular returns that were filed or in evaluating whether specific taxpayers who failed to file should have done so.
For its part, Congress in 1867 did not need to devote extensive legislative history to explaining the Anti-Injunction Act’s meaning because, by embedding the Anti-Injunction Act in the midst of the several provisions detailing the assessment and collection process (and particularly among the collection provisions), Congress conveyed its understanding and intent that the Anti-Injunction Act would operate in a manner temporally proximate to those functions. In context, a reasonable reader would have understood “restrain” to mean lawsuits challenging the Government’s application of the revenue acts to a specific taxpayer’s particular facts and circumstances.
Nothing in this argument turns on whether the Anti-Injunction Act amended the 1862 § 19 collection provision or the 1866 § 19 administrative exhaustion requirement for post-collection refund actions. The interpretation we suggested in our Article was not limited to the commencement of actual collection efforts but rather was defined by a broader scope of engagement of revenue authorities with particular taxpayers to investigate as well as assess and collect particular liabilities, whether or not a return had been filed or a liability had been assessed. Our emphasis on particularized engagements between taxpayers and revenue officials deliberately included the audits and investigations between assistant assessors and individual taxpayers that occurred in the period immediately prior to assessment. And because we based our argument on the entirety of the assessment and collection process — including pre-assessment audits and investigations — our mislabeling of the Anti-Injunction Act as an amendment to the 1862 § 19 collection provision, rather than as an amendment to the 1866 § 19 administrative exhaustion provision, makes little difference to our conclusion that the Anti-Injunction Act’s scope is limited to IRS actions temporally proximate to the enforcement process and does not bar pre-enforcement judicial review of Treasury and IRS rules and regulations under the Administrative Procedure Act.
To be sure, we relied on the Anti-Injunction Act’s placement in the 1862 Act’s § 19 collection provision in observing that the Anti-Injunction Act facilitated revenue collection post-assessment, as it continues to do today. But that observation did not factor into Part III of the Article, where we interpreted the Anti-Injunction Act based on its textual and historical context. Hickman’s briefs before the Court do not deviate from this understanding of the Anti-Injunction Act as described in our Article.
One final note from Hickman alone:
In a footnote, Prof. Camp pointed to another “error” of my petition-stage amicus brief describing the Anti-Injunction Act as “support[ing] the administration of a short-lived income tax” as opposed to “a massive system of mostly internal excise taxation” with the income tax raising only a small amount of revenue comparatively. Now Prof. Camp really is splitting hairs. Both my merits-stage amicus brief, and the Article with Gerald Kerska from which both briefs draw, specify the fuller array of internal taxes imposed in the 1860s. Regardless, Congress employed the same assessment and collection process for most if not all of those taxes, both before and after the Civil War income tax was repealed, and the Anti-Injunction Act supported that process. As a matter of terminology, everyone knows what an income tax is, whereas internal taxation is a technical term of art with which few outside the tax field are familiar. With a tight word limit and a complicated history to describe, I took a small rhetorical short cut in the petition-stage brief that was still correct and made no difference in the argument anyway. It was not an error, and to suggest otherwise was misleading.