Tax Court Sustains Regulation's Filling Gap in Statute on Factors Other than Ambiguity (2/26/25/ 2/27/25)

In Hamel v. Commmissioner, T.C. Memo. 2025-19 (Hamel II), TN here, GD here * and GS here **, decided 2/25/25, upon reconsideration of its prior opinion in Hamel v. Commissioner, 2024 T.C. Memo. 62 (Hamel I), GS here, the Court rejected Hamel’s argument that the regulation failed the Loper Bright requirement of the best interpretation of the statute. The regulation in question interpreted the requirement in TEFRA §6229(e) to furnish notice of an otherwise unidentified partner in a specific way in order to avoid the extended statute of limitations. Basically, Hamel argued that the IRS otherwise knew of the unidentified partner even though the notice required by the regulation was not furnished as the regulation required.

Loper Bright Enterprises v. Raimondo, 603 U. S. ____, 144 S.Ct. 2244 (2024) overruled Chevron deference based on statutory ambiguity. In overruling Chevron deference, the Court noted that Congress might confer discretionary authority to the agency to fill gaps but such authority will not be assumed from statutory ambiguity alone. The Supreme Court also cautioned that prior authority relying upon Chevron deference was not necessarily overruled.

The principal authority relied upon in Hamel I was Gaughf Props., L.P. v. Commissioner, 139 T.C. 219 (2012), aff'd, 738 F.3d 415 (D.C. Cir. 2013). Gaughf  relied upon Chevron deference to sustain the regulation. Hence, Hamel I was based upon a Chevron deference holding. Hamel filed the motion for reconsideration urging that Loper Bright required reconsideration of the Gaughf precedent applied in Hamel I. As I understand Hamel II (I did not find it easy to understand), the Court held that the statutory provisions were sufficient to authorize the Treasury to fill in those details by regulation. In other words, although the statutory provision was ambiguous (i.e., did not permit resolution of the issue by textual interpretation alone), the Treasury was given the discretion to fill in the details. Hence, the resolution was not based on ambiguity alone, and the manner chosen by Treasury in the regulation was not arbitrary and capricious.

The Court relied in part upon Nat’l Muffler Dealers Ass’n v. United States, 440 U.S. 472 (1979) for the following which it apparently felt was unaffected by Loper Bright (Slip Op. 7-8):

After considering Loper Bright, we find no reason to alter our conclusion here in this case. For the Supreme Court has noted that courts should generally defer to and uphold Treasury regulations which implement a congressional mandate in some reasonable manner. Nat’l Muffler Dealers Ass’n v. United States, 440 U.S. 472, 476–77 (1979). We are to “look to see whether the regulation harmonizes with the plain language of the statute, its origin, and its purpose.” Id. at 477.

Nat’l Muffler considered factors other than ambiguity, so technically it might not be affected by Loper Bright which ended deference based only on ambiguity. Others had expressed the concern of where Nat’l Muffler stood, noting it as an open issue. E.g., Thomas W. Merrell, The Demise of Deference — And the Rise of Delegation to Interpret?, 138 Harv. L. Rev. 227, 269-270 (2024), here (under the caption “1. Does Loper Bright Revive Pre-Chevron Standards of Review?”); I discuss Merrell’s article in Does Loper Bright Revive Pre-Chevron Standards of Review? (Federal Tax Procedure Blog 11/28/24), here. The suggestion in Hamel II is that Nat’l Muffler deference survives Loper Bright. And projecting that notion, any pre-Chevron deference that did not rely upon ambiguity for deference might survive.

ADDED 2/7/25 4:45pm:

I am trying to synthesize what I know about the current state of deference and am toying with the following:

Under Loper Bright, a court can only defer if it, through statutory interpretation, finds that Congress explicitly or implicitly gave discretion to the agency. In all other cases, the court must apply the best interpretation which under Skidmore may be influenced by the agency interpretation. In other words, Skidmore is not a deferral tool but a tool that may be applied in determining the best interpretation. That is the role that Skidmore could have played under Chevron (I think the conventional wisdom was that Skidmore applied at Chevron Step One to make the best interpretation without Chevron deference. Then to the extent Loper Bright is correct that there is now no ambiguity in statutes for deference purposes, there is no role for deference. No ambiguity, no deference. The unambiguous statutory text is the best interpretation.

As respects Hamel II's reliance on Nat’l Muffler Dealers Ass’n v. United States, although it was formerly characterized as a deference concept, I think the consideration of the factors should be a Skidmore-type tool to determine the best interpretation. I don't think that is what Hamel II did, in effect, holding that the best interpretation (including Skidmore type factors) was that Congress gave the Treasury discretion to adopt those gap filler rules. Loper Bright held that deference could apply to such conferred discretion.

Claude 3.7 (AI tool)

Also, I got an email saying that a new version of Claude was available, so I asked it: 

Question: "Can a court defer to agency statutory interpretations for reasons other than ambiguity in the statute."

Claude 3.7 Answer: 

Yes, courts can defer to agency statutory interpretations for reasons other than ambiguity in the statute. While statutory ambiguity is the primary basis for Chevron deference, there are several other rationales for judicial deference to agency interpretations:

1. Agency expertise: Courts recognize that agencies often possess specialized technical knowledge and experience in their regulatory domains that judges lack.

2, Political accountability: Unlike courts, agencies are accountable to the elected branches of government, potentially providing democratic legitimacy to their interpretations.

3. Congressional intent: Courts may infer that Congress intended to delegate interpretive authority to an agency based on the statutory scheme, even without explicit ambiguity.

4. Skidmore deference: Under Skidmore v. Swift & Co. (1944), courts may defer to agency interpretations based on their "power to persuade," considering factors like thoroughness, validity of reasoning, consistency, and specialized expertise.

5. Longstanding interpretations: Courts sometimes defer to agency interpretations that have been consistently maintained over many years, reflecting a principle of stability.

6. Practical considerations: Courts may defer to avoid disrupting complex regulatory schemes or creating inconsistencies across jurisdictions.

7. Interstitial rulemaking: Where agencies are filling gaps in detailed statutory schemes rather than interpreting ambiguous provisions. It's worth noting that the Supreme Court's jurisprudence on agency deference has evolved significantly in recent years, with some justices questioning the foundations of administrative deference doctrines generally.

JAT Note: This answer does not seem to reflect Loper Bright and seems to be based on the state of Chevron deference prior to Loper Bright. This is a reminder that users of AI must be careful in using AI for important analyses.

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* The reference to GD is to Google Docs. I downloaded the opinion and uploaded it to my Google Docs because DAWSON offers no direct permalink to the opinion until it is incorporated in pamphlets (see here) which are in pdf format with the appropriate pagination in the final T.C. reports. By uploading to my GD, I can make appropriate references to Slip Op. pages. When Google Scholar first picks up the case (sometime in the next few days, I will provide the Google Scholar link (which offers slip opinion pagination) and delete the Google Docs Link.

** GS is Google Scholar. For Tax Court Memorandum decisions, the GS version is posted a few days after the decision and is a permanent link.