I am today considering the wonders and discontinuities of Loper Bright Ent. v. Raimondo, 603 U.S. 369 (2024)(“Loper Bright”). I do this in the context of updating my Federal Tax Procedure Book editions. For this blog, I zero in on one facet related to Loper Bright’s perceived command that courts apply de novo the best statutory interpretation (whether or not it is the agency interpretation). The general rule is that judicial interpretations apply retroactively to the effective date of the statute. Harper v. Va. Dep't of Taxation, 509 U.S. 86 (1993).
The context is the § 6751(b) regulations. 26 C.F.R. § 301.6751(b)-1, with an effective date of December 23, 2024. Those regulations were promulgated to resolve the inconsistent interpretations of § 6751(b) as courts flailed around, often inconsistently, to apply the textually nonsensical statute. Loper Bright denied Chevron deference from the fiction of statutory ambiguity, but said nothing about a statute that is ambiguous and textually nonsense. That requires that either (i) § 6751(b) is facially invalid with no application or (ii) susceptible to interpretation which will require that lines be drawn similar to the way a line was drawn in United States v. Correll, 389 U.S. 299 (1967) (adopting the agency sleep and rest interpretive line for the statutory “away from home” requirement). In other words, a best interpretation could not be made until some authority draws the line.
At least in theory, in order to pass Loper Bright muster, the § 6751(b) interpretive regulations must state the best interpretation. For purposes of this discussion, I distinguish between the interpretation and the regulation which adopts the interpretation. The best interpretation should apply from the effective date of the statute. That means, for example, that the § 7805(b) limitations on retroactive effective dates for interpretive regulations may still apply to the regulation but are meaningless if the regulations state the best interpretation.
This phenomenon was always true but perhaps was not true for agency interpretations of ambiguous text that had no best interpretation from the effective date of the statute, but with a best interpretation discernible only by some action, such as a regulation interpretation, that permitted a best interpretation to be applied. E.g., United States v. Correll, 389 U.S. 299 (1967) (once the line drawing was approved in Correll, it applied to all pending and future cases).
Thus, the conundrum of effective dates for the § 6751(b) regulations is presented. If the interpretations in the § 6751(b) regulations are best interpretations, they apply from the effective date of the statute and should apply to pending Tax Court cases for periods prior to the regulations’ effective date of December 2024. If that is right, should not the courts in pending cases for periods prior to the December 2024 effective date be considering whether the regulations interpretation (not the regulation) applies. If the § 6751(b) regulations are best interpretations for validity, why should courts for those pre-effective date periods not apply the best interpretations. In other words, why are Tax Court judges applying the mish-mash of interpretations preceding the effective date of the § 6751(b) regulations without considering the § 6751(b) interpretations? See e.g., Hancock County Land Acquisitions LLC v. Commissioner, T.C. Memo. 2025-50.