Justices Clear Path For More Challenges To IRS Regulations

Public Policy & Regulation attorney Nicole Elliott was quoted in a Law360 article discussing a landmark U.S. Supreme Court decision carving out an exception to the Anti-Injunction Act. The ruling opens the door to potentially considerable numbers of challenges to IRS guidance that wouldn't have been possible previously. The court held that regulatory requirements — in this case, a requirement to disclose microcaptive insurance transactions to the IRS — are discrete from tax penalties, even if the requirements themselves may be enforced by tax penalties. Suits challenging those regulatory requirements are not a possible constraint on tax collection that is prohibited by the AIA , the high court said.

"There will be some plaintiffs out there who will be able to leverage the decision here to make a legitimate challenge to an IRS notice or otherwise that was not promulgated properly under" the Administrative Procedure Act, said Ms. Elliott.

Much like the microcaptive notice at the center of this case, the conservation easement notice, known as IRS Notice 2017-10 , imposes information reporting requirements that are backed up by tax penalties. Likewise, there are reams of guidance that require the disclosure of transactions the IRS has labeled as potentially abusive that may also be viable candidates for challenge as a result of the ruling, Ms. Elliott continued.

READ: Justices Clear Path For More Challenges To IRS Regulations