Captive Insurers’ Take on Reg Policy Statement Is Off Base, DOJ Says

March 19, 2019

 

Deborah S. Hunt, Esquire
Clerk, U.S. Court of Appeals for the Sixth Circuit
540 Potter Stewart U.S. Courthouse
100 E. Fifth Street
Cincinnati, Ohio 45202-3988

Re: CIC Services v. Internal Revenue Service et al. (6th Cir. — No. 18-5019)

Dear Ms. Hunt:

We write pursuant to Fed. R. App. P. 28(j) in response to the letter submitted by CIC Services on March 12, 2019, alerting this Court to a Policy Statement on the Tax Regulatory Process issued by the Treasury Department on March 5, 2019. The issuance of Notice 2016-66, which plaintiff sought to put at issue in this litigation, was consistent with the principles outlined in the policy statement.

The policy statement expressly denies creating any judicial rights or cause of action. Moreover, it is not pertinent to the issues on appeal. The District Court dismissed this case for lack of jurisdiction under the Anti-Injunction Act, 26 U.S.C. § 7421(a). That Act bars suits to enjoin tax collection even when the taxpayer argues that the tax is unconstitutional, as we pointed out in our brief (p. 34). As we further argued in our brief (pp. 52-53), the bar is equally applicable when the plaintiff seeks to enjoin an administrative notice.

In arguing that this policy statement is relevant, plaintiff (at p. 2 of its letter) cites not the body of our brief, but footnote 8 (p. 20), in which we merely recount those issues disputed in, but not decided by, the District Court, and maintain that if this Court were to reverse on the jurisdictional issue, “it would be appropriate to remand the case to the District Court.”

Moreover, the notice that plaintiff here seeks to enjoin was issued as part of a Congressionally-sanctioned procedure for advising the public regarding which transactions fall within the scope of 26 U.S.C. § 6011. It is the Internal Revenue Code itself, and not the notice, that imposes both the reporting requirement, 26 U.S.C. §§ 6111, 6112, and penalties for failure to comply with that requirement, 26 U.S.C. §§ 6707, 6707A, 6708. As the District Court pointed out, plaintiff's efforts to pretend that it seeks to enjoin only the Notice, and not the statutory imposition of penalties, is nothing more than an effort to “sidestep the AIA” (i.e., the Anti-Injunction Act). (Memorandum opinion, RE No. 35, Page ID #595.)

Sincerely yours,

Bethany B. Hauser
Attorney
U.S. Department of Justice
Tax Division
Washington, DC