On Tax Day, May 17, 2021, in a unanimous opinion authored by Justice Kagan, the United States Supreme Court held that the Anti-Injunction Act (“AIA”) does not bar a pre-enforcement challenge to the legality of an IRS-imposed standalone reporting requirement, a violation of which may result in both civil tax penalties and criminal liability. The Court’s decision in CIC Services, LLC v. Internal Revenue Service may open the door to a host of pre-enforcement challenges to IRS reporting requirements brought by taxpayers and others who are affected by such requirements. 

But the decision also means the IRS has lost a battle in its ongoing war against Internal Revenue Code § 831(b) captive insurance companies, or so-called “micro-captive” insurance transactions. For years, the IRS has made its distrust of micro-captives clear. In 2014, the IRS placed micro-captives on its annual “Dirty Dozen List” of tax scams,…

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