Brief of Amici Curiae Former Government Officials in Support of Respondents, CIC Services, LLC v. Internal Revenue Service

Abstract

This is a case about tax shelters. It presents a narrow legal question: May people and companies that promote abusive tax shelters sue to block enforcement of monetary penalties for failing to disclose those tax avoidance transactions to the IRS? But the practical question is far broader. At stake is whether the tax-shelter industry will be permitted to use waves of strategic pre-enforcement lawsuits to hobble the IRS’s efforts to combat abusive tax shelters. The narrow legal question can and should be decided based on the plain statutory text. Petitioner seeks to permanently restrain the IRS from imposing penalties for failure to disclose certain “micro-captive insurance” transactions that taxpayers use to claim losses. Petitioner has advertised these transactions as “tax shelters.” Congress has deemed these penalties to be “taxes” for purposes of the Anti-Injunction Act. And that Act expressly bars any “suit for the purpose of restraining the assessment or collection of any tax” by “any person.” Petitioner’s suit therefore seeks to “restrain” the “assessment” of a penalty that Congress has defined as a “tax.” That alone is enough to resolve this case. But, as this brief shows, broader historical context and practical consequences confirm why it is important for this Court to follow the plain statutory text. This case does not arise in a vacuum. It arises against the backdrop of a decades-long struggle between the federal agency charged with responsibility for administering and enforcing the internal revenue laws and an industry consisting of accountants, lawyers, bankers, insurance companies, and others working in concert to defeat those laws. A ruling for petitioner would mark a resounding win for the tax-shelter industry and a significant setback for the government in its ongoing effort to reveal and challenge abusive tax shelters. It could cost the federal treasury billions of dollars annually. Petitioner’s effort to frustrate tax assessment is exactly the kind of demand that the Anti-Injunction Act seeks to prevent. Rather than hand the tax-shelter industry a powerful new tool to thwart the assessment of taxes on a massive scale, this Court should apply the statute as written and affirm. AMICI: Lily Batchelder: Majority Chief Tax Counsel, Senate Committee on Finance (2010–2014) and Deputy Director, National Economic Council (2014–2015). Mark Mazur: Staff Economist, Joint Committee on Taxation (1989–1993); Director of Research, Analysis, and Statistics of Income, IRS (2001–2009); Deputy Assistant Secretary of the Treasury for Tax Analysis (2009–2012); and Assistant Secretary of the Treasury for Tax Policy (2012–2017). Eileen J. O’Connor: Assistant Attorney General of the United States, responsible for the Tax Division of the Department of Justice (2001–2007). Leslie Samuels: Assistant Secretary of the Treasury for Tax Policy (1993–1996). Stephen Shay: International Tax Counsel, U.S. Department of the Treasury (1986–1987) and Deputy Assistant Secretary of the Treasury for International Tax Affairs (2009–2011). George Yin: Chief of Staff, Joint Committee on Taxation (2003–2005).