Argued: October 19, 2018
from the United States District Court for the Eastern
District of Tennessee at Knoxville. No. 3:17-cv-00110-Travis
R. McDonough, District Judge.
R. Webber, FALKE & DUNPHY, LLC, Dayton, Ohio, for
E. McLaughlin, UNITED STATES DEPARTMENT OF JUSTICE,
Washington, D.C., for Appellees.
R. Webber, FALKE & DUNPHY, LLC, Dayton, Ohio, for
E. McLaughlin, Gilbert S. Rothenberg, Bethany B. Hauser,
UNITED STATES DEPARTMENT OF JUSTICE, Washington, D.C., for
J. Vecchione, CAUSE OF ACTION INSTITUTE, Washington, D.C.,
for Amicus Curiae.
SUHRHEINRICH, CLAY, and NALBANDIAN, Circuit Judges.
CIC Services, LLC appeals the district court's November
2, 2017 order granting Defendants' motion to dismiss
Plaintiff's complaint for lack of subject matter
jurisdiction. Plaintiff's complaint alleges that
Defendants' Notice 2016-66, 2016-47 I.R.B. 745 was
promulgated in violation of the Administrative Procedure Act,
5 U.S.C. § 500 et seq. and the Congressional
Review Act, 5 U.S.C. § 801 et seq., and seeks
to enjoin its enforcement. For the reasons that follow, we
AFFIRM the district court's dismissal.
part of the American Jobs Creation Act of 2004, Congress
delegated authority to the Internal Revenue Service
("IRS") to identify and gather information about
potential tax shelters. See 26 U.S.C. § 6707A.
In exercising that authority, the IRS requires taxpayers and
certain third parties to maintain and submit records
pertaining to any "reportable transaction[s]."
Id. § 6707A(c). Reportable transactions are
those transactions deemed as such by IRS regulations.
to adhere to these IRS requirements can result in significant
penalties. For instance, a taxpayer who fails to submit to
the IRS a return listing his or her reportable transactions
faces a penalty of 75% of his or her tax savings resulting
from those transactions, from a minimum of $5, 000 to a
maximum of $200, 000. Id. §§ 6011,
6707A(b). A "material advisor"-one who provides
material aid to a taxpayer in his or her carrying out
reportable transactions and who derives a threshold amount of
gross income from that aid, see id. §
6111(b)-faces similar penalties. For instance, a material
advisor who fails to submit to the IRS a return listing the
reportable transactions in which he or she aided faces a
penalty of between $50, 000 and $200, 000. Id.
§§ 6111(a), 6707(b). And a material advisor who
fails to maintain a list of the taxpayers that he or she
aided in carrying out reportable transactions faces a penalty
of $10, 000 per day if the list is not produced within 20
business days of a request from the IRS. Id.
§§ 6112(a), 6708(a).
November 21, 2016, Defendants published Notice 2016-66 (the
"Notice"). See 2016-47 I.R.B. 745.The Notice
identified certain "micro-captive transactions" as
"transactions of interest," a subset of reportable
transactions. Id.; see also 26 C.F.R.
§ 1.6011-4(b). The Notice explained that these
transactions have "a potential for tax avoidance or
evasion," but that the IRS "lack[s] sufficient
information" to distinguish between those that are
lawful and those that are unlawful. 2016-47 I.R.B.
745. By deeming these transactions to be reportable
transactions, the Notice imposed the requirements and
potential penalties noted above on taxpayers engaging in
them, and on material advisors aiding in them. Id.
March 27, 2017, Plaintiff, a material advisor to taxpayers
engaging in micro-captive transactions, filed a complaint in
the United States District Court for the Eastern District of
Tennessee. Plaintiff's complaint alleges that Defendants
promulgated Notice 2016-66 in violation of the Administrative
Procedure Act ("APA"), 5 U.S.C. § 500 et
seq. and the Congressional Review Act ("CRA"),
5 U.S.C. § 801 et seq., and seeks to enjoin its
enforcement. Specifically, Plaintiff alleges that the Notice
(1) is a legislative rule that required notice-and-comment
rulemaking, (2) is arbitrary and capricious, and therefore
ultra vires, and (3) is a rule that required
submission for congressional review before it could go into
effect. Plaintiff also filed a motion for a preliminary
April 21, 2017, the district court denied Plaintiff's
motion for a preliminary injunction, reasoning that it would
not be in the public interest and that Plaintiff was unlikely
to succeed on the merits. Defendants then moved to dismiss
Plaintiff's complaint for lack of subject matter
jurisdiction. Defendants asserted that Plaintiff's
complaint was barred by the Anti-Injunction Act, 26 U.S.C.
§ 7421(a) and the tax exception to the Declaratory
Judgment Act, 28 U.S.C. § 2201 (collectively, the
"AIA"),  which divest federal district courts of
jurisdiction over suits "for the purpose of restraining
the assessment or collection of any tax." On November 2,
2017, the district court granted Defendants' motion to
dismiss for lack of subject matter jurisdiction.
Standard of Review
review de novo questions of subject matter
jurisdiction, including whether a complaint is barred by the
AIA. Lorillard Tobacco Co. v. Chester, Wilcox &
Saxbe, 589 F.3d 835, 843 (6th Cir. 2009). In reviewing a
district court's grant of a motion to dismiss pursuant to
Federal Rule of Civil Procedure 12(b)(1), we accept all
material allegations in the complaint as true and construe
the complaint in the light most favorable to the nonmoving
party. United States v. Ritchie, 15 F.3d 592, 598
(6th Cir. 1994).
provides that "no suit for the purpose of restraining
the assessment or collection of any tax shall be maintained
in any court by any person." 26 U.S.C. § 7421(a).
While there exist some statutory and judicial exceptions to
this prohibition, they are few and circumscribed. See RYO
Mach., LLC v. U.S. Dep't of Treasury, 696 F.3d 467,
470 (6th Cir. 2012) ("With few exceptions, no court has
jurisdiction over a suit to preemptively challenge a
tax."). Thus, "whether an injunction can legally
issue under the AIA" requires only two inquiries.
Id. at 471. "First, we must consider whether
the . . . complaint [is] within the purview of the AIA as a
'suit for the purpose of restraining the assessment or
collection of any tax.'" Id. (quoting 26
U.S.C. § 7421(a)). Second, "[i]f so, we must
[consider] whether [the] case falls into an exception to the
AIA that would [nevertheless] allow us to [reach] the
problem with these ostensibly straightforward inquiries is
that "courts lack an overarching theory of the AIA's
meaning and scope against which to evaluate individual
[complaints]." Kristin E. Hickman & Gerald Kerska,
Restoring the Lost Anti-Injunction Act, 103
Va.L.Rev. 1683, 1686 (2017). At times, the Supreme Court has
given the AIA "literal force," without regard to
the character of the tax, the characterization of the
preemptive challenge to it, or other non-textual factors.
Bob Jones Univ. v. Simon, 416 U.S. 725, 742 (1974).
At other times, it has given the AIA "almost
literal" force, considering such factors with an eye
towards furthering the AIA's underlying purposes.
Id. at 737, 742. The result, according to some
commentators, has been "jurisprudential chaos."
Hickman & Kerska, supra, at 1686.
attempt to find some order amidst the chaos, addressing each
of the AIA inquiries in turn.
Whether Plaintiff's complaint is within the purview of
a complaint is within the purview of the AIA depends,
commonsensically, on whether it is properly characterized as
a "suit for the purpose of restraining the assessment or
collection of any tax." RYO, 696 F.3d at 471
(quoting 26 U.S.C. § 7421(a)). Plaintiff argues that its
complaint is not a suit for the purpose of restraining the
assessment or collection of taxes. Defendants argue that it
is. Reducing the briefs to their cores, Plaintiff asserts
that the Supreme Court's recent decision in Direct
Marketing Ass'n v. Brohl, 575 U.S., 135 S.Ct. 1124
(2015) controls this issue, while Defendants assert that the
D.C. Circuit's subsequent decision in Florida Bankers
Ass'n v. U.S. Dep't of the Treasury, 799 F.3d
1065 (D.C. Cir. 2015), distinguishing Direct
Marketing, is more persuasive. We agree with Defendants
and hold that Plaintiff's complaint is within the purview
of the AIA.
Direct Marketing, the Supreme Court analyzed the
scope of the Tax Injunction Act ("TIA"), which
provides that no federal district court shall "enjoin,
suspend, or restrain the assessment, levy or collection of
any tax under State law where a plain, speedy and efficient
remedy may be had in the court of such State." 28 U.S.C.
§ 1341. Although the TIA concerns state as opposed to
federal taxes, it was "modeled on" the AIA and the
Supreme Court has long looked to one in construing the other.
Direct Marketing, 135 S.Ct. at 1129; see also
Enochs v. Williams Packing & Nav. Co., 370 U.S. 1, 6
(1962) ("The enactment of the comparable [TIA] . . .
throws light on the proper construction to be given [to the
AIA]."). The Court began its opinion in Direct
Marketing by reaffirming this close connection between
the two Acts, and making clear that "[it] assume[s] that
words used in both Acts are generally used in the same
way." 135 S.Ct. at 1129.
issue in Direct Marketing were the meanings of
"levy," and "collection," all words,
apart from "levy," used in both the TIA and the
AIA. See 28 U.S.C. § 1341; 26 U.S.C. §
regard to "restrain," the Court explained that
"standing alone [it] can have several meanings."
Direct Marketing, 135 S.Ct. at 1132. One is a
"broad meaning" that "captures orders that
merely inhibit acts of assessment, levy and
collection." Id. "Another, narrower
meaning, however, is 'to prohibit from action; to put
compulsion upon . . . [or] to enjoin, '" and this
meaning "captures only those orders that stop (or
perhaps compel) acts of assessment, levy and
collection." Id. (quotation omitted). The Court
held that the TIA uses "restrain" in the latter,
narrower sense. Id. And in doing so, it relied on
two contextual clues: the words preceding
"restrain" in the TIA-"enjoin" and
"suspend," both of which are "terms of art in
equity"-and the "carefully selected list of
technical terms" on which "restrain" acts-
"assessment," "levy," and
"collection." Id. The Court explained that
to give "restrain" the broad meaning would
"defeat the precision" of these contextual clues,
and would render several of the terms superfluous.
Id. Thus, the question that the TIA asks is
"whether the relief [sought] to ...