Government Files Brief Opposing Supreme Court Review of Bankers Associations’ Challenge to FATCA Reporting Requirements

The government filed its brief in opposition to a petition for certiorari seeking Supreme Court review of a decision holding that the Anti-Injunction Act prevents two banking associations from challenging a Treasury regulation requiring banks to report the amount of interest earned by nonresident alien account holders.  The banks are concerned with the substantial numbers of nonresident customers that have closed their accounts out of fear that the banks will disclose their information to the customers’ home governments.  As discussed in greater detail in a previous post, the bankers associations have gained support in the form of three amicus briefs, which generally highlight the tendency of the IRS to overstep its statutory authority and the unfairness that would result if banks are required to violate the rule and expose themselves to possible civil and criminal penalties in order to legally challenge the substance of the rule.

The government’s brief in opposition argues that the Court of Appeals for the D.C. Circuit was correct to deny the challenge on the grounds that the Anti-Injunction Act prevents the suit, stating that the holding does not conflict with any existing court of appeals decision.  However, the government had to address a new argument raised by the bankers associations in its petition for certiorari—that the Anti-Injunction Act does not apply because the alternative method of judicial review, to pay the penalty and then sue for a refund, is inadequate.  The government argued that this position was not raised until the petition for rehearing, and thus the position is time-barred.