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May 17, 2021

Supreme Court rules that Anti-Injunction Act does not bar lawsuit challenging reporting obligations

The Supreme Court has held (CIC Services, LLC v. IRS, et al.) that a suit to enjoin Notice 2016–66 does not trigger the Anti-Injunction Act (AIA), even though violating the notice could result in a tax penalty. Notice 2016-66 requires certain taxpayers to report information about micro-captive insurance transactions or risk civil tax penalties and criminal prosecution. Before the first reporting deadline, CIC filed suit arguing the notice was invalid under the Administrative Procedure Act; the district court dismissed, holding the complaint was barred by the AIA, and the appeals court affirmed. The Supreme Court concluded the AIA did not apply because “CIC’s action challenges a reporting mandate separate from any tax. Because the IRS chose to address its concern about micro-captive agreements by imposing a reporting requirement rather than a tax, suits to enjoin that requirement fall outside” the AIA. A Tax Alert is forthcoming.