district of columbia circuit. west headnotes (8) u.s.c.a ......2020/07/23 · florida bankers ass'n...

Florida Bankers Ass'n v. U.S. Dept. of the Treasury, 799 F.3d 1065 (2015)419 U.S.App.D.C. 31, 116 A.F.T.R.2d 2015-5623, 2015-2 USTC P 50,436

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799 F.3d 1065United States Court of Appeals,

District of Columbia Circuit.

FLORIDA BANKERS ASSOCIATION andTexas Bankers Association, Appellants.

v.UNITED STATES DEPARTMENT OF

THE TREASURY, et al., Appellees.

No. 14–5036.|

Argued Feb. 13, 2015.|

Decided Aug. 14, 2015.|

Rehearing En Banc Denied Nov. 5, 2015.

SynopsisBackground: Organizations representing member banksbrought suit challenging interest-income reporting regulationpromulgated by the Internal Revenue Service (IRS), asallegedly promulgated in violation of requirements imposedby the Administrative Procedure Act (APA) and theRegulatory Flexibility Act (RFA). The United States DistrictCourt for the District of Columbia, James E. Boasberg, J.,

19 F.Supp.3d 111, granted summary judgment for thegovernment. Organizations appealed.

Holdings: The Court of Appeals, Kavanaugh, Circuit Judge,held that:

[1] Anti–Injunction Act and tax exception to DeclaratoryJudgment Act barred the suit, and

[2] organizations could not evade Anti–Injunction Actby purporting to challenge only the regulatory aspect ofregulatory tax.

Vacated and remanded.

Randolph, Senior Circuit Judge, filed concurring opinion.

Karen LeCraft Henderson, Circuit Judge, filed dissentingopinion.

Procedural Posture(s): On Appeal; Motion for SummaryJudgment.

West Headnotes (8)

[1] Internal Revenue Taxes and Suits WithinStatutory Prohibition

The Anti–Injunction Act, among other things,generally bars pre-enforcement challenges tocertain tax statutes and regulations and requiresplaintiffs to instead raise such challenges inrefund suits after the tax has been paid, or indeficiency proceedings; thus, the Act creates anarrow exception to the general administrativelaw principle that pre-enforcement review ofagency regulations is available in federal courtand thereby protects the Government's abilityto collect a consistent stream of revenue. 26U.S.C.A. § 7421(a).

5 Cases that cite this headnote

[2] Declaratory Judgment Federal taxes

Internal Revenue Taxes and Suits WithinStatutory Prohibition

Anti–Injunction Act and tax exception toDeclaratory Judgment Act barred suit broughtby organizations representing member bankschallenging nonresident alien interest-incomereporting regulation, as allegedly promulgatedin violation of requirements imposed byAdministrative Procedure Act (APA) andRegulatory Flexibility Act (RFA); althoughregulation imposed penalty for failing to complywith reporting requirement, it was deemed tax bythe Tax Code, and suit, if successful, would haveinvalidated reporting requirement and eliminated

assessment and collection of tax. 5 U.S.C.A.

§ 551 et seq.; 5 U.S.C.A. § 601 et seq.;26 U.S.C.A. §§ 6671(a); 6721(a), 7421(a);

28 U.S.C.A. § 2201; 26 C.F.R. §§ 1.6049–4;1.6049–8.


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The Anti–Injunction Act is jurisdictional;however, that label has practical significanceonly when the Government waives or forfeitsits argument that the Anti–Injunction Act bars aclaim. 26 U.S.C.A. § 7421(a).


[4] Federal Courts State taxes

The Tax Injunction Act, in essence, bars aspremature those suits targeting state tax schemes.28 U.S.C.A. § 1341.



Anti–Injunction Act ordinarily does not bar achallenge to a reporting requirement when thepenalty that enforces the reporting requirementis not itself treated as a tax under the Code. 26U.S.C.A. § 7421(a).



Organizations representing member bankschallenging nonresident alien interest-incomereporting regulation, as allegedly promulgatedin violation of requirements imposed byAdministrative Procedure Act (APA) andRegulatory Flexibility Act (RFA), could notevade Anti–Injunction Act by purportingto challenge only the regulatory aspectof regulatory tax; challenge to reportingrequirement necessarily was challenge to taximposed for failure to comply with reportingrequirement. 26 U.S.C.A. § 7421(a).



A challenge to a regulatory tax comes withinthe scope of the Anti–Injunction Act, even ifthe plaintiff claims to be targeting the regulatoryaspect of the regulatory tax; invalidating theregulation would directly prevent collection ofthe tax, in violation of the Anti–Injunction Act.26 U.S.C.A. § 7421(a).



A party may not avoid the Anti–Injunction Actby purporting to challenge only the regulatoryaspect of a regulatory tax. 26 U.S.C.A. § 7421(a).


*1066 Appeal from the United States District Court for theDistrict of Columbia (No. 1:13–cv–00529).

Attorneys and Law Firms

Stephen C. Leckar argued the cause for appellants. With himon the briefs were James J. Butera and Ryan D. Israel.

Andrew M. Weiner, Attorney, U.S. Department of Justice,argued the cause for appellees. With him on the brief wereGilbert S. Rothenberg and Teresa E. McLaughlin, Attorneys.

Before: HENDERSON and KAVANAUGH, Circuit Judges,and RANDOLPH, Senior Circuit Judge.

Opinion

Opinion for the Court filed by Circuit Judge KAVANAUGH,with whom Senior Circuit Judge RANDOLPH joins.

Concurring opinion filed by Senior Circuit JudgeRANDOLPH.

Dissenting opinion filed by Circuit Judge HENDERSON.

KAVANAUGH, Circuit Judge:

**32 [1] We again confront the Anti–Injunction Act. TheAct says that “no suit for the purpose of restraining theassessment or collection of any tax shall be maintained inany court by any person.” 26 U.S.C. § 7421(a). Among other

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things, the Act generally bars pre-enforcement challenges tocertain tax statutes and regulations. The Act requires plaintiffsto instead raise such challenges in refund suits after the taxhas been paid, or in deficiency proceedings. The Act thuscreates a narrow exception to the general administrative lawprinciple that pre-enforcement review of agency regulations

is available in federal court. See **33 *1067 AbbottLaboratories v. Gardner, 387 U.S. 136, 152–53, 87 S.Ct.1507, 18 L.Ed.2d 681 (1967). The Act thereby “protectsthe Government's ability to collect a consistent stream of

revenue.” National Federation of Independent Business v.Sebelius, –––U.S. ––––, 132 S.Ct. 2566, 2582, 183 L.Ed.2d450 (2012).

[2] This case concerns an IRS regulation that imposes a“penalty” on U.S. banks that fail to report interest paid tocertain foreign account-holders. See 26 C.F.R. §§ 1.6049–4, 1.6049–8 (reporting requirement); 26 U.S.C. § 6721(a)(penalty). Two Bankers Associations—the Florida BankersAssociation and the Texas Bankers Association—challengethe legality of the regulation. The Government argues thattheir suit is premature at this time because of the Anti–Injunction Act.

The question before us is straightforward: Is a challengeto a tax-related statutory or regulatory requirement that isenforced by a “penalty”—as opposed to a challenge to astatute or regulation that imposes a tax—covered by theAnti–Injunction Act? The answer to that question is oftenno. But the Tax Code defines some penalties as taxesfor purposes of the Anti–Injunction Act. In those cases,the Anti–Injunction Act ordinarily applies because the suit,if successful, would invalidate the regulation and therebydirectly prevent collection of the tax.

[3] This is just such a case. The penalty at issue here islocated in Chapter 68, Subchapter B of the Tax Code. See26 U.S.C. § 6721. The Tax Code provides that penalties inChapter 68, Subchapter B are treated as taxes under the Anti–

Injunction Act. See id. § 6671(a); NFIB, 132 S.Ct. at 2583.The Supreme Court explicitly confirmed as much in NFIB,stating: “Penalties in subchapter 68B” are “treated as taxes

under Title 26, which includes the Anti–Injunction Act.”NFIB, 132 S.Ct. at 2583. Plaintiffs' suit, if successful, wouldinvalidate the reporting requirement and restrain (indeedeliminate) the assessment and collection of the tax paid for notcomplying with the reporting requirement. For that reason,the Anti–Injunction Act bars this suit as premature. We vacate

the judgment of the District Court and remand with directions

to dismiss the case on those grounds. 1

To be clear, our ruling does not prevent a bank from obtainingjudicial review of the challenged regulation. A bank maydecline to submit a required report, pay the penalty, and thensue for a refund. At that time, a court may consider thelegality of the regulation. The issue here is when—not if—thebank may challenge the regulation. Indeed, a bank that hadfollowed that path from the time this litigation began severalyears ago would likely have already obtained judicial reviewof the challenged regulation.

I

The Anti–Injunction Act provides that “no suit for the purposeof restraining the assessment or collection of any tax shallbe maintained in any court by any person.” 26 U.S.C. §7421(a). The Declaratory Judgment Act likewise prohibits

most declaratory suits “with respect to Federal taxes.” 28U.S.C. § 2201(a). This Court has interpreted the two Acts

to be “coterminous.” Cohen v. United States, 650 F.3d717, 730–31 (D.C.Cir.2011) (en banc). **34 *1068 Forsimplicity, we will refer only to the Anti–Injunction Act.

The IRS regulation at issue here requires banks to reportinterest paid “to a nonresident alien individual who is aresident of a country ... with which the United States hasin effect an income tax or other convention or bilateralagreement relating to the exchange of tax information.” 26C.F.R. § 1.6049–8; see also id. § 1.6049–4 (requiring thereporting of interest, as defined in Section 1.6049–8). Banksfile those reports using Forms 1096 and 1099–INT.

If a bank fails to file the required report, that bank is subject toa “penalty” under 26 U.S.C. § 6721(a). Because of its locationin the U.S.Code, that penalty is treated as a tax for purposes ofthe Anti–Injunction Act. We know that for two good reasons:The text of the Tax Code says so, and the Supreme Court saysso.

The Tax Code is located in Title 26 of the U.S.Code. Title26 is subdivided into chapters numbered 1 through 100.Chapter 68, Subchapter B provides that the penalties inthat Subchapter are considered taxes: “Except as otherwiseprovided, any reference in this title to ‘tax’ imposed bythis title shall be deemed also to refer to the penalties and

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liabilities provided by this subchapter.” 26 U.S.C. § 6671(a)(emphasis added). In other words, under Section 6671(a),any provision in Title 26 that refers to a “tax” imposedby that title applies to penalties imposed under Chapter 68,Subchapter B. The Anti–Injunction Act, which bars suitsto restrain the assessment or collection of taxes, is part ofTitle 26. Therefore, the Anti–Injunction Act also bars suitsto restrain the assessment or collection of penalties imposedunder Chapter 68, Subchapter B.

The penalty provision at issue in this case—Section6721(a)—is located in Chapter 68, Subchapter B. UnderSection 6671(a), the penalty is therefore treated as a taxfor purposes of Title 26—including the Anti–Injunction Act.Because this suit would have the effect of restraining (indeedeliminating) the assessment and collection of that tax, theAnti–Injunction Act bars this suit.

The key Supreme Court precedent confirms as much.In NFIB, the Supreme Court stated that penalties inChapter 68, Subchapter B are taxes for purposes of theAnti–Injunction Act. The Court's words were clear andunequivocal: “Penalties in subchapter 68B are thus treated astaxes under Title 26, which includes the Anti–Injunction Act.”

National Federation of Independent Business v. Sebelius,––– U.S. ––––, 132 S.Ct. 2566, 2583, 183 L.Ed.2d 450(2012). Had the penalty at issue in NFIB been located inChapter 68, Subchapter B, the Anti–Injunction Act wouldhave applied, according to the Court. See id. But the penaltyat issue in NFIB was located in another portion of the Code(Chapter 48); for that reason, the Anti–Injunction Act did not

apply in that case, the Court said. Id. at 2583–84. TheCourt concluded as follows: “The Affordable Care Act doesnot require that the penalty for failing to comply with theindividual mandate be treated as a tax for purposes of theAnti–Injunction Act. The Anti–Injunction Act therefore doesnot apply to this suit, and we may proceed to the merits.”

Id. at 2584.

In this case, unlike in NFIB, the penalty is located in Chapter68, Subchapter B. Therefore, under the Court's analysis inNFIB, the penalty for failing to comply with the reportingrequirement at issue here is a “tax” under the Anti–InjunctionAct. So the Anti–Injunction Act bars this suit.

II

[4] In response, plaintiffs point to a recent Supreme Courtdecision involving **35 *1069 the Tax Injunction Act,which is often interpreted to be similar in scope to the Anti–

Injunction Act. See Direct Marketing Association v. Brohl,––– U.S. ––––, 135 S.Ct. 1124, 1129, 191 L.Ed.2d 97 (2015).The Tax Injunction Act, in essence, bars as premature those

suits targeting state tax schemes. See id. at 1129. In thatcase, the Court confronted a Colorado tax notice requirement,the violation of which was subject to a $5 penalty provided

by Colorado law. Id. at 1128. The Court held that the TaxInjunction Act did not bar a challenge to that requirement.

Id. at 1127.

In this case, we likewise confront a reporting requirementthat is enforced by a penalty. But in this case, Section6671(a) treats the penalty as a tax for purposes of the Anti–Injunction Act. The penalty in Direct Marketing Associationwas not itself a tax, or at least it was never argued orsuggested that the penalty in that case was itself a tax. TheAnti–Injunction Act therefore applies here, unlike in DirectMarketing Association.

To put it another way: If the penalty here were not itself a tax,the Anti–Injunction Act would not bar this suit. But becausethis penalty is deemed a tax by Section 6671(a), the Anti–Injunction Act bars this suit as premature.

On page 27 of their reply brief, plaintiffs briefly cite this

Court's decision in Foodservice & Lodging Institute, Inc. v.Regan, 809 F.2d 842 (D.C.Cir.1987). One regulation at issuein Foodservice required food and beverage establishments toreport certain amounts that their employees earned in tips.

See id. at 846; see also 26 U.S.C. § 6053(c)(1) (1982).We concluded that on “its face, the regulation does notrelate to the assessment or collection of taxes, but to IRSefforts to determine the extent of tip compliance in the food

and beverage industry.” Foodservice, 809 F.2d at 846.Therefore, the Anti–Injunction Act did not bar petitioner'schallenge to that reporting requirement.

[5] The penalty for non-compliance with the reporting

requirement in Foodservice was a penalty, not a tax. See 26U.S.C. § 6652(a)(1)(B)(iv) (1982). The Foodservice Courtproceeded as if failure to comply with the regulation wouldnot itself require the payment of a tax (or of a penalty deemed

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to be a tax by the Tax Code). See Foodservice, 809 F.2dat 846. The Court therefore analyzed the case along the samelines that the Supreme Court later analyzed Direct MarketingAssociation. As relevant here, all that Foodservice stands foris this settled proposition: The Anti–Injunction Act ordinarilydoes not bar a challenge to a reporting requirement when thepenalty that enforces the reporting requirement is not itselftreated as a tax under the Code.

Here, by contrast, we know that the penalty is a taxfor purposes of the Anti–Injunction Act. The Tax Codeitself provides as much. And in NFIB, the Supreme Courtunequivocally confirmed that these penalties in Chapter 68,Subchapter B are “treated as taxes under Title 26, which

includes the Anti–Injunction Act.” National Federation ofIndependent Business v. Sebelius, ––– U.S. ––––, 132 S.Ct.2566, 2583, 183 L.Ed.2d 450 (2012) (emphasis added).

In sum, Direct Marketing Association and Foodservice do notcontrol this case because the penalty at issue here is itself atax for purposes of the Anti–Injunction Act. Unlike in thosetwo cases, the tax here is not two or three steps removed fromthe regulation in question. Here, because the Code definesthe penalty as a tax, a tax is imposed as a direct consequenceof violating the regulation. Invalidating the regulation woulddirectly bar collection of that tax. This case is therefore **36*1070 at the heartland of the Anti–Injunction Act.

III

[6] Plaintiffs raise an alternative argument. In their view,even if the penalty here is deemed a tax for purposes of theAnti–Injunction Act, the Act still does not apply becauseplaintiffs do not seek to restrain the assessment or collectionof the penalty. They contend instead that they are seeking“relief from a regulatory mandate that exists separate andapart from the assessment or collection of taxes.” Plaintiffs'Reply Br. 26. The Anti–Injunction Act cannot be sidesteppedby such nifty wordplay. The Supreme Court has consistentlyruled—and most recently indicated as well in NFIB—thatplaintiffs cannot evade the Anti–Injunction Act by purportingto challenge only the regulatory aspect of a regulatory tax.

In Alexander v. “Americans United” Inc., 416 U.S. 752,94 S.Ct. 2053, 40 L.Ed.2d 518 (1974), the IRS had revokedthe tax exempt status of Americans United, which affected theorganization's tax liability and the ability of the organization's

donors to deduct contributions from their taxes. In an effort toavoid the Anti–Injunction Act's bar, Americans United styledits suit as an objection to the laws under which its tax-exemptstatus was revoked rather than to its increased tax burden.

Id. at 755–58, 94 S.Ct. 2053. Americans United arguedthat its suit would have “at best a collateral effect” on the

assessment or collection of taxes. Id. at 760, 94 S.Ct. 2053.It therefore contended that the suit was not barred by the Anti–Injunction Act.

The Supreme Court disagreed. The Court explained that ifAmericans United prevailed, its tax exempt status wouldbe reinstated and the United States would necessarilycollect fewer taxes from the organization and its charitablecontributors. A “suit to enjoin the assessment or collectionof anyone's taxes triggers the literal terms” of the Act. Id.The Supreme Court said it would be “circular” to concludethat a regulatory challenge that would preclude the collectionof taxes was not a suit for the purpose of restraining the

collection of those taxes. Id. at 761, 94 S.Ct. 2053.

In another case that same year, the Court similarly found thata challenge to the IRS's revocation of tax exempt status wasbarred by the Anti–Injunction Act. As the Court explainedthere, if the relief plaintiffs seek “would necessarily precludethe collection” of “taxes” within the meaning of the Act, “asuit seeking such relief falls squarely within the literal scope

of the Act.” Bob Jones University v. Simon, 416 U.S. 725,

732, 94 S.Ct. 2038, 40 L.Ed.2d 496 (1974); see id. at 738–39, 94 S.Ct. 2038.

Those two cases built on Bailey v. George, 259 U.S. 16,42 S.Ct. 419, 66 L.Ed. 816 (1922). There, the Supreme Courtheld that the Anti–Injunction Act blocked a pre-enforcement

suit to enjoin collection of the federal Child Labor Tax. Id.at 19–20, 42 S.Ct. 419. The suit targeted the regulatory aspectof the tax, but the Court still held that the Anti–Injunction Actapplied and barred the suit. Id.

[7] As the Supreme Court's case law reveals, the Courthas “abandoned” any distinction between “regulatory andrevenue-raising taxes” for purposes of the Anti–Injunction

Act. Bob Jones, 416 U.S. at 741 n. 12, 94 S.Ct. 2038; see

United States v. Sanchez, 340 U.S. 42, 44–45, 71 S.Ct. 108,

95 L.Ed. 47 (1950); Sonzinsky v. United States, 300 U.S.

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506, 513, 57 S.Ct. 554, 81 L.Ed. 772 (1937). A challenge to aregulatory tax comes within the scope of the Anti–InjunctionAct, even if the plaintiff claims to be targeting the regulatoryaspect of the regulatory tax. That is because **37 *1071invalidating the regulation would directly prevent collectionof the tax, in violation of the Anti–Injunction Act. See also

Z Street v. Koskinen, 791 F.3d 24, at 28–29 (D.C.Cir.2015)(describing “Americans United ” and Bob Jones as sayingthat notwithstanding the plaintiffs' claims in those cases, the“obvious purpose” of their suits was to reduce payment of

taxes). 2

Consistent with that line of cases, NFIB itself further refutesplaintiffs' argument. In that case, in an alternative argument,the plaintiffs contended that the Anti–Injunction Act did notapply because they were challenging not the penalty but ratherthe underlying regulatory mandate that they purchase healthinsurance. The Government, while agreeing with the plaintiffsthat the Anti–Injunction Act did not apply for other reasons,vigorously disputed that particular argument. Citing decadesof Supreme Court case law, the Government explained:“Private respondents err in suggesting that they can avoid theAIA, if otherwise applicable, by characterizing their suit asa challenge to the statutory predicate for imposition of theminimum coverage penalty rather than the penalty itself.”NFIB Government's Br. at 38.

In concluding that the Anti–Injunction Act did not bar thesuit, the Supreme Court hewed to the line advanced by theGovernment. The Supreme Court concluded that the penaltyat issue there was not a tax under the Anti–Injunction Act.Had the Court ended there, NFIB perhaps would not tell usmuch one way or the other about the regulatory tax issue.But NFIB also made clear that the Anti–Injunction Act wouldhave applied if the penalty were a tax under the Act. TheCourt unequivocally stated: “Penalties in subchapter 68Bare ... treated as taxes under Title 26, which includes the

Anti–Injunction Act.” National Federation of IndependentBusiness v. Sebelius, ––– U.S. ––––, 132 S.Ct. 2566, 2583,183 L.Ed.2d 450 (2012). And the Court concluded that sectionof its opinion by saying: “The Affordable Care Act doesnot require that the penalty for failing to comply with theindividual mandate be treated as a tax for purposes of theAnti–Injunction Act. The Anti–Injunction Act therefore doesnot apply to this suit, and we may proceed to the merits.”

Id. at 2584 (emphasis added).

In saying as much, the Supreme Court did not recognize orcarve out a new exception to the Anti–Injunction Act for casestargeting taxes used to enforce regulatory mandates. Nor didthe Court even suggest that was an open question. And it is allbut impossible to deem the Court's words inadvertent, giventhe extensive briefing and argument focused on that precisequestion.

The repercussions of plaintiffs' argument on this point show,moreover, why the Supreme Court has consistently rejectedit. A taxpayer could almost always characterize a challengeto a regulatory tax as a challenge to the regulatory componentof the tax. That would reduce the Anti–Injunction Act todust in the context of challenges to regulatory taxes. But theAnti–Injunction Act is more than a pleading exercise, as theSupreme Court has explained time and again in concludingthat it bars premature challenges to regulatory taxes.

[8] Under Bailey, Alexander, Bob Jones, and NFIB,plaintiffs' challenge to the reporting requirement isnecessarily also a challenge to the tax imposed for failureto comply with that reporting requirement **38 *1072 Ifplaintiffs' challenge were successful, the IRS would be unableto assess or collect that tax for failure to comply with thereporting requirement. Invalidating the reporting requirementwould necessarily “restrain” the assessment and collection of

the tax. This we cannot do. 3

In sum, the Banking Associations' challenge to the reportingrequirements in Sections 1.6049–4 and 1.6049–8 is barredby the Anti–Injunction Act and the tax exception to theDeclaratory Judgment Act. We vacate the judgment of theDistrict Court and remand with directions to dismiss the caseon those grounds.

So ordered.

RANDOLPH, Senior Circuit Judge, concurring:I join the court's opinion, in part because I do not agree that

Seven–Sky v. Holder, 661 F.3d 1 (D.C.Cir.2011), stands forthe “alternative holding” the dissent describes. See Dissentat 1077–78, 1079–81, 1080–81 n. 7. The majority opinionin Seven–Sky never said, much less held, that the Anti–Injunction Act would not apply even if the penalty in that casewere a tax within the meaning of the Act, which it was not.

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KAREN LECRAFT HENDERSON, Circuit Judge,dissenting:The Florida and Texas Bankers Associations (Associations)challenge a 2012 IRS regulation (2012 Rule) that requiresbanks to report the interest they pay to non-resident aliens—a regulation with major economic consequences for theirmember banks. Although their challenge raises severaldifficult questions, the Anti–Injunction Act (AIA) is not oneof them. Supreme Court and Circuit precedent makes plainthat the AIA does not apply here: the 2012 Rule is a tax-reporting requirement with a tax penalty attached and the AIAdoes not bar a challenge to a tax-reporting requirement, see

Direct Mktg. Ass'n v. Brohl, ––– U.S. ––––, 135 S.Ct. 1124,1131, 1133, 191 L.Ed.2d 97 (2015), to a regulation with a tax

penalty attached, see Seven–Sky v. Holder, 661 F.3d 1, 8–

10 (D.C.Cir.2011), abrogated on other grounds by Nat'lFed'n of Indep. Bus. (NFIB) v. Sebelius, ––– U.S. ––––, 132S.Ct. 2566, 183 L.Ed.2d 450 (2012), or to a tax-reporting

requirement with a tax penalty attached, see Foodserviceand Lodging Inst., Inc. v. Regan, 809 F.2d 842, 846 & n. 10(D.C.Cir.1987). My colleagues conclude that a few sentencesfrom NFIB somehow overrule our decisions in Seven–Skyand Foodservice—a conclusion that drastically overreadsNFIB and ignores **39 *1073 the Supreme Court's morerecent pronouncement in Direct Marketing. Because theaforementioned decisions are neither distinguishable nor have

they been overruled, we should follow them. See LaShawnA. v. Barry, 87 F.3d 1389, 1395 (D.C.Cir.1996) (en banc)(“One three-judge panel ... does not have the authority tooverrule another three-judge panel of the court.”); Winslow v.FERC, 587 F.3d 1133, 1135 (D.C.Cir.2009) (“Vertical staredecisis—both in letter and in spirit—is a critical aspect ofour hierarchical Judiciary headed by ‘one supreme Court.’” (quoting U.S. CONST., art. III, § 1)). Even if they didnot bind us, I believe our precedent charts the right coursehere. According to my colleagues, no party can obtain pre-enforcement review of a regulation that is enforced by a taxpenalty; instead, he must violate the regulation (i.e., breakthe law) and be assessed a tax penalty before he can havehis day in court. I shudder at the government-empoweringconsequences of their decision. I therefore dissent from mycolleagues' dismissal under the AIA. Given the significanceand closeness of the merits, however, I withhold judgment onthe Associations' underlying challenge to the 2012 Rule.

I.

A.

The IRS enacted the 2012 Rule to narrow the “tax gap”—the difference between the taxes the IRS is owed and thetaxes it actually collects. See generally Tax Gap for Tax Year2006, IRS (Jan. 6, 2012), http://www.irs.gov/pub/newsroom/overview_tax_gap_2006.pdf (estimating net tax gap of $385billion per year, or 14% of total taxes owed). The 2012 Rulerequires U.S. banks to report the interest they pay to non-resident aliens. See 26 C.F.R. §§ 1.6049–4(b)(5); 1.6049–8.Banks must report this information on Form 1042–S, id. §1.6049–4(b)(5), and, if they fail to do so, they are subjectto a tax penalty, see 26 U.S.C. § 6721. The IRS does nottax the interest earned by non-resident aliens. See id. §§871(i)(2)(A); 6049(b)(2)(B)(ii), (iv). Instead, it gives thisinformation to other countries in exchange for informationabout the interest U.S. citizens earn in foreign banks. See77 Fed.Reg. 23,391, 23,391 (Apr. 19, 2012). The IRS doestax that interest. See Form 1099–INT. The problem, however,is that the U.S. tax system is “based on a system of self-reporting” whereby “the Government depends upon the goodfaith and integrity of each potential taxpayer to disclose

honestly all information relevant to tax liability.” UnitedStates v. Bisceglia, 420 U.S. 141, 145, 95 S.Ct. 915, 43L.Ed.2d 88 (1975). Unfortunately, some Americans try tohide income by depositing it in foreign banks—the infamous“Swiss bank account.” See generally Sen. Carl Levin, Letterto Cmm'r Douglas H. Shulman at 2 (Apr. 12, 2011), reprintedin Supplemental Appendix 107 (estimating that offshore taxabuse causes annual loss of $100 billion in tax revenue).The idea behind the 2012 Rule is that, if U.S. citizensknow foreign banks report the interest they earn abroad, theyare more likely to self-report that income to the IRS. SeeFactCoalition, Comments and Request to Speak at Hearing(no date), reprinted in Appendix 403 (comparing 98.8% self-reporting rate for income subject to third-party reporting with46% self-reporting rate for income that is not). Increased self-reporting, in turn, helps to narrow the tax gap.

U.S. banks do not like the 2012 Rule. They fear it willcause “capital flight” because non-resident aliens will nolonger view the United States as a safe place to keep theirmoney. See Compl. ¶ 37. The Associations filed suit onbehalf of their members, challenging the 2012 Rule under theAdministrative Procedure Act and the Regulatory Flexibility

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