CIC Services has vowed to continue its fight against Internal Revenue Service (IRS) Notice 2016-66, following the denial of its challenge in the US Sixth Circuit Court of Appeals last week.
By a vote of 2 to 1, the Court of Appeals affirmed the decision made in the district court in November 2017 to dismiss CIC Services complaint against IRS Notice 2016-66 and request for an injunction delay Notice 2016-66 for micro captives.
There was, however, a dissent issued by one of the Court of Appeals’ judges, judge Nalbandian.
Nalbandian suggested that the argument brought by the IRS that the Anti-Injunction Act blocks CIC’s suit was not valid.
Sean King, general counsel at CIC Services, said that the company was “disappointed with the court's decision” but “thrilled by the very compelling dissenting opinion”.
He explained: “The dissenting judge recognised that the majority was simply misapplying the Anti-Injunction Act in contravention of the 9-0 Supreme Court decision in the Direct Marketing case.”
“We, and many others, believe the majority was in error and that the Anti-Injunction Act does not prevent a federal court from enjoining enforcement of this obviously illegal notice, despite that it is enforced by a so-called penalty tax."
King suggested: “The issue at hand–that is, whether or not the IRS can, unlike any other federal agency, continue to systematically enforce obviously illegal regulations just because they are enforced by an illegal ‘penalty tax’–is much larger than just captive insurance or just Notice 2016-66.”
“Indeed, it involves fundamental issues of liberty, fairness, and separation of powers. For those reasons, CIC Services will continue its fight on behalf of taxpayers everywhere. This is not over.”
The path forward for CIC Services remains unclear, however, it expects to file a petition requesting en banc review of its case by all active judges on the Sixth Circuit.
King commented: “We are confident that a majority of the judges on the Sixth Circuit will understand the extreme public importance of this issue and will resolve the matter in a manner consistent with the Supreme Court's 9-0 Direct Marketing decision upon which our case relies.”
