Pat Smith’s Tax Notes Article on the D.C. Circuit Decision in Florida Bankers Cited in the Dissent in Sixth Circuit Decision in CIC Services; Smith Also Quoted in Tax Notes Story on the Sixth Circuit DecisionPDF
The Sixth Circuit issued its decision yesterday in the CIC Services case. The majority opinion affirmed the district court’s holding that the Anti-Injunction Act barred the challenge to the validity of an IRS notice designating certain micro-captive insurance transactions as transactions of interest and as a result subjecting these transactions to various reporting requirements. The district court and the Sixth Circuit majority relied on the D.C. Circuit’s 2015 decision in Florida Bankers, in which the majority opinion was written by now-Supreme Court Justice Brett Kavanaugh. However, there was a very strong dissent in the Sixth Circuit decision, written by recent appointee Judge John Nalbandian, which argued that the Florida Bankers decision had not given proper weight to the Supreme Court’s 2015 decision in Direct Marketing. In partial support of that position, Judge Nalbandian cited several articles that had criticized the Florida Bankers decision on that basis, including IPB attorney Pat Smith’s 2015 Tax Notes article D.C. Circuit in Florida Bankers Mis-Applies Anti-Injunction Act. Pat further elaborated on the relevant points in a later Tax Notes article, Pre-Enforcement Challenges and the Anti-Injunction Act.
In addition, Pat was quoted in the Tax Notes story on the Sixth Circuit decision, Court Nips Pre-Enforcement Challenge of Microcaptive Notice.
Patrick J. Smith of Ivins, Phillips & Barker Chtd. told Tax Notes that while he was disappointed the Sixth Circuit affirmed the district court, “it is heartening that the dissent in this case expresses very cogently why the majority opinion is wrong.”
A key point in Nalbandian’s dissent is that the mere existence of the notice does not impose a tax in the form of a penalty, Smith said.
“Instead, it is only a violation of the notice that would result in imposition of the penalty, and the plaintiffs in this case have not violated the notice, just as the plaintiffs in Florida Bankers had not violated the regulations in that case,” Smith continued. “This is the very important point that was ignored by then-Judge Kavanaugh in the Florida Bankers decision and by the majority here.”
Smith said he hopes the strong dissent will prompt CIC Services to file a petition for rehearing or for rehearing en banc.
“The death of one of the original judges on the panel might provide further ammunition for a petition for rehearing,” Smith said, adding that while the Sixth Circuit properly appointed a replacement judge, that judge didn’t have the benefit of participating in the oral arguments.