Supreme Court will hear CIC Services’ case against IRS over application of Anti Injunction Act

The Supreme Court of the US has agreed to hear CIC Services’ case against the Internal Revenue Service (IRS), in what CIC described as “a major victory today for taxpayers and those opposing administrative state overreach.”

The case will consider the application of the Anti-Injunction Act (AIA), which prevents courts from restraining the IRS’s attempts to assess or collect taxes against taxpayers. The Act states that “no suit for the purpose of restraining the assessment or collection of any tax shall be maintained in any court by any person.”

CIC characterised the case as determining “whether or not the IRS can continue to systematically enforce obviously illegal regulations against taxpayers merely because those regulations are enforced by an illegal penalty tax.”

Sean King, general counsel for CIC Services, said: “The IRS interprets [the AIA] to mean that it is free to issue even obviously illegal regulations and that by simply subjecting those taxpayers who fail to comply with that illegal rule to an also illegal penalty tax, courts are magically prohibited from enjoining enforcement of the illegal rule because doing so would have the effect of prohibiting the IRS from collecting the illegal penalty tax from those who fail to comply.”

CIC Services asserts that exempting an obviously illegal regulation from judicial review simply because it’s enforced by an equally illegal penalty tax is both tyrannical and unconstitutional.

King said the plain language of the AIA does not lend itself to the IRS’s interpretation. “Reading it the IRS’s way creates an unnecessary constitutional problem. For that reason and others, we are confident of victory,” he said.

Randy Sadler, leader of CIC Services’ marketing and client empowerment business, said administrative state overreach is a threat to all Americans and to constitutional principles in general, meaning the outcome of the case “has significance far beyond just the immediate issue at hand.”

However, one captive industry commentator said the real issue that the industry wants to see ruled on in court relates to risk pooling and the coverage of exotic risks.

“The IRS cases on risk pooling are so narrowly drafted as to practically only apply to those cases,” he said.

He predicted the current IRS case will “take up a lot of oxygen and end up with very little to show for it.”