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Our Federal Tax Group examines a U.S. Supreme Court ruling that could give taxpayers greater leeway to challenge IRS regulatory schemes before the IRS takes enforcement action.
CIC Services v. IRS narrows the reach of the Anti-Injunction Act
Three features of Notice 2016-66 helped the Court overturn lower courts’ rulings in favor of the IRS
The IRS’s rule-making process now open to more Administrative Procedure Act challenges
Taxpayers and those subject to IRS enforcement are often stymied in their efforts to prospectively challenge IRS regulatory actions. The Anti-Injunction Act (AIA), originally enacted in 1867, generally restricts any suit “for the purpose of restraining the assessment or collection of any tax.” Case law has historically applied this broad prohibition to effectively restrict legal challenges to a federal tax unless the taxpayer pays the tax and sues the government for a refund.
US Supreme Court 831 (b) Micro-captives - Surprising Unanimous Decision workerscompensation.com - get the latest breaking news, showbiz & celebrity photos, sport news & rumours, viral videos and top stories from workerscompensation.com Daily Mail and Mail on Sunday newspapers.
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The Supreme Court held that a company may bring a pre-enforcement challenge under the Administrative Procedure Act ( APA ) to an IRS reporting requirement backed by a tax penalty.
On May 17, 2021, the U.S. Supreme Court unanimously reversed the Sixth Circuit and permitted a company s challenge to an IRS reporting requirement to proceed, notwithstanding the Anti-Injunction Act ( AIA ).
The reporting requirement, imposed in 2016 regulatory guidance, mandates that certain micro-captive insurance transactions be reported to the IRS. Micro-captive transactions are an arrangement in which a parent company establishes a subsidiary insurance company to receive more favorable tax treatment. Under the guidance, taxpayers and advisors that do not report micro-captive transactions may face statutory tax penalties and even criminal penalties.
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Justices Clear Path For More Challenges To IRS Regulations
Law360 (May 21, 2021, 12:25 PM EDT) By carving out an exception to the Anti-Injunction Act in a landmark decision this month, the U.S. Supreme Court has opened the door to potentially considerable numbers of challenges to IRS guidance that wouldn t have been possible previously.
In the Supreme Court s majority opinion, Justice Elena Kagan said the decision will not open the floodgates to pre-enforcement litigation, or suits that challenge guidance before it is violated, contrary to what the government argued. Above, Justice Kagan participates in a 2017 Q&A session about her time sitting on the high court. (AP Photo/Charles Rex Arbogast) The central crux of the court s unanimous decision.
SCOTUS: Jones v Mississippi; Niz-Chavez v Garland; Edwards v Vannoy; Caniglia v Strom natlawreview.com - get the latest breaking news, showbiz & celebrity photos, sport news & rumours, viral videos and top stories from natlawreview.com Daily Mail and Mail on Sunday newspapers.