The Volokh Conspiracy

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The Unanimous Supreme Court Favorably Cites NFIB v. Sebelius

Justice Kagan's majority opinion in CIC Services v. IRS was only the second majority opinion to cite NFIB, after King v. Burwell. And do we have a preview of California v. Texas?


NFIB v. Sebelius (2012) is nearly nine years old. In my circles, we refer to the pre-NFIB period as the before times. Some of us still have not gotten over the case. I suspect it remains a sore spot for several members of the Court. It is part of the conservative anti-canon. Unsurprisingly, the Court has largely avoided citing NFIB.

By my count, there have been 10 citations to NFIB over the past 9 years. Only one majority opinion cited the case. Of course, Chief Justice Roberts's opinion in King v. Burwell cited the NFIB joint dissent. The other nine citations were in separate writings. And they almost all came from the Court's progressives: Justice Sotomayor's dissent in Mutual Pharmacies v. Bartlett (2013), Justice Ginsburg's dissent in Shelby County (2013), Justice Breyer's dissent in Jennings v. Rodriguez (2018), and Justice Kagan's concurrence in Seila Law (2020). The lone citation from a conservative came in Justice Thomas's concurrence in Murphy v. NCAA (2018).

Given this history, I chuckled when I read CIC Servs., LLC v. IRS. Justice Kagan wrote the unanimous majority opinion in this case about the Anti-Injunction Act. As I began to read the opinion, I wondered if there would be a citation to NFIB.

Justice Kagan did not disappoint on page 2.

The Act, we have stated, "protects the [Federal] Government's ability to collect a consistent stream of revenue, by barring litigation to enjoin or otherwise obstruct the collection of taxes." National Federation of Independent Business v. Sebelius, 567 U. S. 519, 543 (2012) (NFIB). Because of the Act, a person can typically challenge a federal tax only after he pays it, by suing for a refund. See ibid.

"We have stated." We? Speak for yourself.

And she adds an additional citation on page 7:

And the Code "deem[s]" those civil penalties to be "tax[es]" as the Anti-Injunction Act uses that term. §6671(a); see NFIB, 567 U. S., at 544 ("Congress can, of course," direct that a penalty "be treated as a tax for purposes of the Anti-Injunction Act"). The question thusbecomes whether that added tax penalty changes the analysis. Does its presence—as a sanction for flouting the No-tice—

That citation, and the phrase "tax penalty" gave me some NFIB PTSD. Methinks this analysis is buried for usage in California v. Texas. After all, the Chief did assign this case to Kagan.

A reporting requirement is not a tax; and a suit brought to set aside such a rule is not one to enjoin a tax's assessment or collection. That is so even if the reporting rule will help the IRS bring in future tax revenue—here, by identifying sham insurance transactions.See supra, at 3. 

The ability to "help the IRS bring in future tax revenue" could be relevant to the latest ACA case.

And this passage about a "separate legal mandate" screams NFIB!

The suit contests, and seeks relief from, a separate legal mandate; the tax appears on the scene—as criminal penalties do too—only to sanction that mandate's violation. Or as Judge Nalbandian put the point below: "[T]his is not a dispute over taxes." By contrast, the kind of case the Government invokes in making its floodgates claim is a conflict over taxes, whether on earning income, or selling stock, or entering into a business transaction. In such a case, the legal rule at issue is a tax provision. The tax does not backstop the violation of another law that independently prohibits or commands an action. Instead, the tax imposes a cost on perfectly legal behavior. 

There is even a citation to a companion case of the Child Labor Tax Case (Bailey v. Drexel Furniture Co. (1922)):

A century ago, the Court in Bailey v. George, 259 U. S. 16 (1922), held that the Act barred a pre-enforcement suit challenging a tax intended to discourage the (then lawful) use of child labor.

Such an NFIB vibe.

We may have a preview of California v. Texas here. Imagine if Roberts lets Kagan write the majority opinion finding that the mandate is still unconstitutional, but is completely severable from the ACA.

Still, I delighted in Justice Kagan's sharp opening:

Americans have never had much enthusiasm for paying taxes. The Nation's first income taxes—adopted to financethe Civil War—met with considerable (one might even say"taxing") legal resistance. See Hickman & Kerska, Restoring the Lost Anti-Injunction Act, 103 Va. L. Rev. 1683, 1723–1725 (2017).

I've lost count of how many times I've used the "taxing" pun to describe NFIB. (And props to Kristin Hickman and Gerald Kerska on the citation).

One final note, Judges Thapar, Nalbandian, and Sutton should feel vindicated. And Judge Clay should feel silly. In 2019, the Sixth Circuit denied rehearing en banc in CIC v. IRS. Seven judges dissented from the denial. Judges Thapar wrote a dissent, joined by Kethledge, Budge, Larsen, Nalbandian, Readler, and Murphy:

In this country, people should not have to risk prison time in order to challenge the lawfulness of government action. In this circuit, they now do. Because the law does not condone—let alone require—that result, I respectfully dissent from the denial of rehearing en banc. 

Judge Sutton concurred in the denial of rehearing. He repeated his well-known position: let the Supreme Court clean up the Sixth Circuit's messes:

The key complexity in this case—how to interpret Supreme Court decisions interpreting the statute—poses fewer difficulties for the Supreme Court than it does for us. In a dispute in which the Court's decisions plausibly point in opposite directions, it's worth asking what value we would add to the mix by en-bancing the case in order to create the very thing that generally prompts more review: a circuit split. As is, we have Judge Thapar's dissental and Judge Nalbandian's dissent at the panel stage on one side and Judge Clay's opinion for the court on the other. These three opinions together with then-Judge Kavanaugh's opinion say all there is to say about the issue from a lower court judge's perspective. All of this leaves the Supreme Court in a well-informed position to resolve the point by action or inaction—either by granting review and reversing or by leaving the circuit court decisions in place. 

And Justice Kagan cleaned up the Sixth Circuit's mess.

And then there was Judge Clay. He wrote the original panel opinion, and concurred in the denial of rehearing. He was very much disturbed by his dissenting colleagues.

In their latest attempt to inflict death by distorted originalism on the modern administrative state, some of my colleagues would have this Court directly contravene the Anti-Injunction Act (the "AIA"), which 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).

Yes, there it is. Justice Kagan, that fire-breathing originalist distorted the law, and undermined the administrative state. With that arch-anti-administrativist Justice Breyer in tow. When your panel opinion gets reversed 9-0, it must smart. Especially when you lob such vitriol at the vindicated dissenters. And you wonder why the Sixth Circuit has such toxic history. Kudos to the Sixth Circuit dissenters for getting this case right.