A recent internal revenue service lawsuit involves CIC Services, a material advisor to micro-captive transactions. The CIC asserted that the Notice violated the APA, but the IRS countered that the CIC failed to violate the Notice and, given the consequences, would never have done so. Therefore, the lawsuit was unsuccessful. The IRS is appealing. If you have similar circumstances, we recommend reading our CIC Services v. IRS article.
CIC Services
An important victory for taxpayers was gained in the recent Supreme Court case, CIC Services v. Internal Revenue Service. CIC Services argued that the IRS does not have a “special privilege” to sue them. The case will now go to the Sixth Circuit for judicial review. But the question remains: Does the Anti-Injunction Act prevent CIC Services from challenging the notice? It will depend on how much information the IRS is seeking and whether or not the plaintiff owes taxes at the time of the lawsuit.
EPIC
The lawsuit was filed by EPIC against the Internal Revenue Service on April 17, 2018. The suit was filed after the IRS failed to issue a final determination on the request within 50 days. EPIC filed its suit in the U.S. District Court for the District of Columbia. The IRS moved to dismiss the case on February 11 but was denied, because the agency had tried to retroactively reverse a decision it had made to process the request.
IRS
This Internal Revenue Service lawsuit has some interesting aspects. The government can use a judgment to collect debt for decades. If you are not careful, you can be stuck paying your debts forever. A lawsuit may not be the best solution, but there are some steps you can take to limit the amount of time that the IRS can collect debt from you. Read on for some information on the IRS lawsuit and your rights in this context. The IRS lawsuit is one of the most common lawsuits filed by taxpayers.
Anti-Injunction Act
The IRS lost the latest case challenging its ability to compel taxpayers to submit record-keeping information. In CIC Services v. Internal Revenue Service, LLC, the IRS sought to enforce a new rule, Notice 2016-22, by denying taxpayers the right to challenge it. The suit argued that the IRS had violated the Administrative Procedure Act (APA) by issuing the rule without rulemaking. Moreover, the IRS failed to vigorously challenge the CIC argument that the Notice was unconstitutional. Ultimately, the district court dismissed the case, and the Sixth Circuit affirmed, and the Supreme Court granted certiorari.
Jurisdiction
The Department of Justice discusses the principles of sovereign immunity in IRM 5.17.4. This document explains the common types of lawsuits that the government may be sued in. Sovereign immunity is a general rule that prohibits citizens from suing the government without its consent. Sovereign immunity protects the Treasury and other discretionary governmental functions. However, in some instances, it may be waived.
Purpose of the lawsuit
What is the purpose of a tax shelter? The IRS should be able to take on tax shelters, not just individual taxpayers. This lawsuit would be an attempt to prevent the collection of the relevant tax. But the question is, can the IRS sue to do so? The answer is “yes,” if Congress meant it to prevent the collection of such taxes. The lawsuit is filed against an individual who allegedly has evaded taxes and does not pay.
Applicability of AIA
There is a thorny legal question pertaining to the applicability of the Administrative Impact Act (AIA) in an internal revenue service lawsuit. The IRS maintains that the AIA applies even when the taxpayer owes no taxes. However, the AIA’s language doesn’t preclude it from applying in other cases, and Congress probably intended for the AIA to be applied in every situation.