Following the Supreme Court decision in CIC Services, the matter was remanded back to the district court. Last month the district court granted CIC Services’ motion for preliminary injunction, finding that the Notice 2016-66 was a legislative rule and its issuance violates the notice-and-comment provisions of the APA. Following CIC Services’ victory, however, it filed a motion to reconsider.
Why would CIC file a motion for reconsideration? Last month’s district court’s opinion narrowly enjoined the IRS from enforcing the Notice against CIC Services. In its motion, CIC Services has requested that the court broaden the relief and issue a national outright injunction that would prevent the IRS from enforcing it against anyone.
Readers may recall that in CIC Services: Now that AIA Issue Resolved, On to Some Meaty Administrative Law Issues I discussed the lurking issue as to the extent of any relief that a court could grant if it were to find that the IRS issuance of the notice violated the APA. In that piece I pointed to an excellent Notice & Comment blog post, Do you C what I C? – CIC Services v. IRS and Remedies Under the APA. In the post Professor Mila Sohoni provides context on the debate within administrative law. She argues that a district court has the power to set aside the Notice for everyone and should not be constrained to focus only on the application of the Notice to the plaintiff.
In the motion CIC Services acknowledges that there is uncertainty as to the scope of relief but argues that the court’s power to vacate the notice is broad (citing to the Notice & Comment blog). It also discusses the particular harm that CIC Services faces in the absence of a national injunction, including how it must incur costs to assist its nationwide clients who still have to comply and how the order “does not explicitly relieve CIC Services of the on-going and compulsory record-keeping that Notice 2016-66 requires.”
This is an important issue not only for tax administration. It has wide implications for administrative law.
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This should be open and shut. The Supreme Court found that the regulation is invalid. The IRS should announce, on that basis, that it will not enforce the regulation. If it will not do so, a nationwide injunction is called for.
Well the Supreme Court found that the suit was not barred by the AIA. The district court held that the IRS, in issuing the Notice,failed to comply with the APA. But many agree that the proper remedy is a nationwide injunction. See the blog I link in the post.