Recent Supreme Court Decisions Will Facilitate Challenges to Tax Guidance

Pennsylvania Institute of CPA News ^ | Dec 2, 2024 | Mark L. Lubin, CPA, JD, LLM

[tired&retired]

In June 2024, the U.S. Supreme Court issued a decision that almost certainly will have a significant effect on tax planning and controversy practice. The court held that statutory interpretation is a judicial function and that courts may not defer to an agency’s interpretation merely because a statute is unclear. The ultimate impact of the decision is not yet clear, but much tax guidance now seems vulnerable to challenge.

Historically, under the “Chevron doctrine,” federal agencies were given deference in interpreting ambiguous provisions of federal statutes (including the Internal Revenue Code). Under Chevron, when addressing questions arising under federal statutes, courts first determined whether the statute was ambiguous; if so, courts were required to defer to a federal agency if it had adopted a permissible construction of the statute.

In June 2024, the U.S. Supreme Court issued a decision in Loper Bright Enterprises et al v. Raimondo that essentially overrules Chevron. Although Loper Bright did not concern a tax matter, it will almost certainly have a significant effect on tax planning and controversy practice.

Judge's gavel in front of open law books... The Supreme Court held that statutory interpretation is a judicial function and that courts may not defer to an agency’s interpretation merely because a statute is unclear. However, it mentioned that courts should consider agency interpretations and respect permissible delegations of authority by Congress. It also refrained from invalidating prior court decisions applying the Chevron doctrine.

[tired&retired]

Another recent Supreme Court decision, Corner Post Inc. v. Bd. of Governors of Fed. Rsrv. Sys., is also likely to facilitate challenges to tax guidance. Although a discussion of Corner Post is beyond the scope of this blog, that decision holds that the six-year statutory limitations period for certain actions to invalidate governmental guidance under the Administrative Procedure Act13 commences when a particular claimant first suffers injury rather than when the governmental action that led to such injury (e.g., finalization of regulations) occurred. Because of that decision, taxpayers and their advisers should reconsider tax return reporting positions taken for open taxable years, keeping in mind potential opportunities to challenge guidance under Loper Bright.

[tired&retired]

I have won cases in the past by using the congressional committee reports on discussions of intent when a law was passed if the Treasury chose to interpret the law in a different way.

[WildHighlander57]

Hopefully those two decisions (loper and Chevron) can take a sledgehammer to the IRS (and other agencies);

for example the IRS waffling and notification at years end on online sales limit ($20,000, then $600, then no $600, then no $600 again, then $5000, etc) was and is nerve-wracking.

There’s other examples, but that one comes to mind.

[WildHighlander57]

(loper and Chevron) s/b (loper and Corner post)

[Liz]

bkmk

[aimhigh]

The courts should begin invalidating any statute that is unclear in terms of intent and application. It’s time to stop Congress from being lazy when it comes to writing laws.