Public Law & Legal Theory
In the coming months, the Internal Revenue Service is likely to issue a slew of new regulations interpreting the December 2017 federal tax reform legislation. These regulations are likely to define the scope of the new deduction for pass-through entities; determine the reach of the new base erosion tax on multinational enterprises; fill in the details of the new “opportunity zone” program aimed at encouraging investment in low-income communities; and address a wide range of other important matters.1 Inevitably, some taxpayers will object to these regulations and will seek to challenge the new rules in court. When, where, and how they can do so will depend upon the way courts construe the 150-yearold Anti-Injunction Act (AIA).
For decades, individuals and entities wishing to contest their tax liabilities have had a choice among three paths: (1) file a prepayment petition in the U.S. Tax Court; (2) pay the tax and then sue for a refund in federal district court; or (3) pay the tax and then sue for a refund in the U.S. Court of Federal Claims.2 What they could not do is seek an injunction preventing the Internal Revenue Service from assessing or collecting the tax in question. Standing in their way would be the AIA, which provides, in relevant part, that “no suit for the purpose of restraining the assessment or collection of any tax shall be maintained in any court by any person.”3
All that is now in doubt. In 2016, the U.S. Chamber of Commerce sued the IRS in the U.S. District Court for the Western District of Texas, seeking to set aside a Treasury tax regulation4 that determines the circumstances under which a domestic entity that switches its legal domicile to a foreign country becomes subject to a special tax.5 The IRS argued that the AIA clearly barred the chamber’s action. In a decision that surprised many observers (including me6), the district court said last fall that the AIA presented no barrier to the chamber’s claim for equitable relief. According to the court, the regulation “is not a tax,” but instead “determin[es] who is subject to taxation.”7 The court then proceeded to the merits and agreed with the chamber that the regulation should be set aside.
As far as judicial decisions on matters of tax procedure go, this one was a bombshell. A headline in the trade publication Tax Notes announced that the ruling “throws [the] door open” to more challenges to IRS rules.8 Tax scholar Andy Grewal noted that the district court’s decision “breaks from the common (though not necessarily correct) understanding” of the AIA.9 Fellow tax scholar Bryan Camp went one step further and argued that the decision was not only a departure from precedent but also a clear misinterpretation of the AIA. In his view, “[t]his is exactly the kind of suit that the Anti-Injunction Act is supposed to stop.”10 The IRS has appealed from the district court’s ruling to the U.S. Court of Appeals for the Fifth Circuit.11
With the fate of the AIA hanging in the balance, now is the perfect moment for a thoughtful and thorough treatment of the statute that traces the law’s evolution from its origins to the present day. And in Restoring the Lost Anti-Injunction Act, Professor Kristin Hickman and Gerald Kerska provide exactly that.12 Indeed, their new article on the AIA is quite possibly the most comprehensive analysis of the Act ever written. “Timing matters,” Hickman and Kerska write in their opening sentence,13 and while the authors are referring to the timing of judicial review, their own timing is impeccable.
Hickman and Kerska’s analysis also provides a thought-provoking counterweight to the conventional wisdom that Chamber of Commerce v. IRS marks a sharp break from the past. The narrow interpretation of the AIA adopted by the district court in the Chamber of Commerce case is, in their view, largely consistent with the “lost” history of the Act.14 According to Hickman and Kerska, the AIA historically applied only after a taxpayer filed a return and federal tax officials began their assessment and collection efforts. Pre-enforcement judicial review of a tax regulation would, on this reading, fall outside the statute’s scope.15
Whether or not one ultimately agrees with Hickman and Kerska’s conclusion, their article is likely to become the jumping-off point for future debates about the AIA. I, for one, was impressed by Hickman and Kerska’s historical and doctrinal heavy lifting but was unpersuaded by their bottom line. This essay briefly summarizes Hickman and Kerska’s case for a narrower reading of the AIA and then responds with three criticisms of the authors’ argument. Specifically, I argue (1) that the history of the AIA is at best inconclusive as to whether the statute should be construed broadly or narrowly; (2) that developments in federal tax and administrative law since 1867 do not weigh decisively in favor of a narrow interpretation of the statute; and (3) that the AIA has come to play an important role—unacknowledged in Hickman and Kerska’s otherwise comprehensive analysis—in protecting an underresourced IRS from an onslaught of administrative law challenges across a wide range of litigation forums. I end by arguing that any further narrowing of the AIA should be done by Congress—not by the courts— and should be accompanied by an increase in IRS resources and additional limits on taxpayer forum shopping.
Daniel J. Hemel, "The Living Anti-Injunction Act". Public Law and Legal Theory Working Papers, no. 662 (2018).