The Supreme Court of the United States will be hearing oral arguments in the case of CIC Services Vs. IRS. Oral arguments will be broadcast live on C-Span. For information on viewing the oral arguments on C-Span, click here.
CIC Services brought a lawsuit against the IRS for its unlawful Notice 2016-66. Support for this lawsuit has been a true groundswell with dozens of respected institutions taking notice of IRS administrative overreach and its harmful effects. Such widespread support has been humbling and deeply encouraging.
The issue at hand is 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.”
Under the Anti-Injunction Act, courts are not permitted to restrain the IRS’s attempts to assess or collect taxes against taxpayers,” said Sean King, General Counsel for CIC Services. “The IRS interprets this 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.”
And this, the IRS contends, would violate the Anti-Injunction Act. By contrast, 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.
“The plain language of the Anti-Injunction Act does not lend itself to the IRS’s interpretation,” said King. “And reading it the IRS’s way creates an unnecessary constitutional problem. For that reason and others, we are confident of victory.”
Administrative state overreach is a threat to all Americans and to constitutional principles in general. So this case has significance far beyond just the immediate issue at hand.