More on Whether Treasury/IRS Interpretations under § 7805(a) Are Entitled to Loper Bright Deference? (5/29/25; 5/30/25)

I write today to address the issue of whether  § 7805(a) is the type of provision that Loper Bright would treat as a delegation to the Treasury/IRS that qualifies for what I call “Loper Bright deference” (for lack of a better word). By Loper Bright deference, I mean some authoritative gravitas for agency interpretations beyond Skidmore respect (Skidmore requires the Court to be persuaded that the agency interpretation is the best and is not deference, despite some claims otherwise). Some readers of this blog may recall that I have addressed the § 7805(a) issue in two prior blogs:

• Do General Authority Congressional Delegations of Authority to Prescribe Regulations to Carry Out the Provisions of the Statute Qualify for Loper Bright Deference? (Federal Tax Procedure Blog 11/12/24), here.

• Can § 7805(a) & (b) Be Read as Delegating to Treasury/IRS Interpretive Authority with Deference (Federal Tax Procedure Blog 7/14/24), here.

I am prompted to return to the issue by a recent article By Professor Mitchell M. Gans [bio here], Has the Supreme Court Already Resolved How Loper Bright Applies to Section 7805 Regulations?, 187 Tax Notes Fed. 1069 (May 12, 2025), here. Professor Gans argues that, sub silentio, the Supreme Court in Bondi v. VanDerStok, ___ U.S. ___, 145 S. Ct. 857 (2025) effectively decided that § 7805(a) is not entitled to Loper Bright deference by applying the Skidmore factors to a statute under the Gun Control Act that is functionally the same as § 7805(a). For those wishing to read VanDerStok, the Supreme Court slip opinion is here and the GS opinion (paginated to 145 S.Ct.) is here. (Caveat: some refer to the respondent in the case as Vanderstok; the proper name is VanDerStok. See the petition here and the slip opinion where most but not all references are to VanDerStok.)

I do not agree with Professor Gans’ reading of VanDerStok. I don’t read VanDerStok as a Skidmore case where the court gives the agency interpretation some oomph beyond what the statutory text and context would allow. None of the opinions in VanDerStok mention Skidmore or deference. VanDerStok involved the propriety of a facial challenge to the agency interpretation. A facial challenge requires that there is no realistic set of circumstances in which the interpretation could be valid. (By contrast, an as applied challenge claims only that as applied to the plaintiff, the interpretation is not valid.) The Court spends most of its time analyzing the consistency of the interpretation with the statute and its context, a type of classic de novo interpretation. 

Most instructively, the VanDerStok opinion for the Court, in closing, dismisses a lenity argument. Lenity is an interpretive rule for interpretations in a criminal or penalty context that resolves ambiguity in favor of the person subject to the criminal law or penalty. (Something like the now rejected Chevron deference requiring ambiguity.) The Court says (145 S.Ct. at 876; bold face supplied by me):

 The plaintiffs close by asking us to invoke the rule of lenity or the doctrine of constitutional avoidance to resolve in their favor any ambiguities about § 921(a)(3). Brief for Respondent VanDerStok 38; see also post, at 891 (THOMAS, J., dissenting). But neither lenity nor avoidance has any role to play where "text, context, and structure" decide the case. Van Buren v. United States, 593 U.S. 374, 393-394, 141 S.Ct. 1648, 210 L.Ed.2d 26 (2021). And even if ambiguities at the outer boundaries of subsections (A) and (B) emerge in future disputes involving the application of those provisions to particular products, no room for doubt exists about the answer to the question the parties have posed to us. The GCA embraces, and thus permits ATF to regulate, some weapon parts kits and unfinished frames or receivers, including those we have discussed. Because the court of appeals held otherwise, its judgment is reversed, and the case is remanded for further proceedings consistent with this opinion. 

As I read the opinion, I think the Court may have been saying that the interpretation was the best interpretation with no ambiguities in the facial challenge context. Or it may have been saying that, within the range of possible "best" interpretations, the agency had the discretion to pick the one it did.

I am reminded of the IRS interpretive choice of sleep or rest for away from home deductions that the Supreme Court approved in United States v. Correll, 389 U.S. 299 (1967). The sleep or rest rule is not the only "interpretation" that the IRS could have chosen to implement the statute with its inherent ambiguity as to a specific best interpretation. But it was a reasonable choice given the context of the statute. I think that, in those types of circumstances where there really are a range of best interpretations, § 7805(a) might be interpreted as a delegation of interpretive authority under Loper Bright.

A related consideration is whether pre-Chevron deference cases, such as most importantly National Muffler Dealers Assn., Inc. v. United States, 440 US 472 (1979), here, can apply after Loper Bright. National Muffler. National Muffler applied Skidmore like factors but, unlike Skidmore, was a real deference case stronger than Skidmore respect and approaching in effect Chevron deference. (The Supreme Court assumed in Mayo Foundation for Med. Educ. v. United States, 562 U.S. 44 (2011) that National Muffler deference and Chevron deference might be different but courts before indicated that there was no practical difference.). But whether the practical effect was or was not the same, National Muffler did defer to the agency interpretation as previous cases had. National Muffler did not consider ambiguity in the statutory text as an implicit congressional delegation of interpretive authority; ambiguity as delegation, a legal fiction, was the creative fiction for Chevron deference. Hence, in Loper Bright, the Supreme Court expressly overruled Chevron because of that legal fiction. No more can ambiguity be considered delegation or permit an agency interpretation to qualify for deference. But the issue is whether something other than ambiguity can be considered a congressional delegation of interpretive authority, qualifying for Loper Bright deference. That means that there may be some room for pre-Chevron deference, including National Muffler, may survive Loper Bright.

Added 5/30/25 1:30pm: In Hamel v. Commissioner, T.C. Memo. 2025-19, *7-*8, here, the Court said (bold face supplied by JAT):

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.

This suggests that the Tax Court considers National Muffler's deference regime (really incorporating prior deference cases not relying on ambiguity as a basis for deference) to have survived Loper Bright. [End of Addition]

National Muffler also ties into the Loper Bright Court’s recognition of an explicit or fairly implied delegation of interpretive authority. We started the discussion in this blog with the issue of whether § 7805(a) is such a delegation. Consider the following from National Muffler (440 U.S., at 476-477):

The statute's term "business league" has no well-defined meaning or common usage outside the perimeters of § 501 (c) (6). It is a term "so general . . . as to render an interpretive regulation appropriate." Helvering v. Reynolds Co., 306 U. S. 110, 114 (1939). In such a situation, this Court customarily defers to the regulation, which, "if found to `implement the congressional mandate in some reasonable manner,' must be upheld." United States v. Cartwright, 411 U. S. 477*477 546, 550 (1973), quoting United States v. Correll, 389 U. S. 299, 307 (1967).

We do this because "Congress has delegated to the [Secretary of the Treasury and his delegate, the] Commissioner [of Internal Revenue], not to the courts, the task of prescribing `all needful rules and regulations for the enforcement' of the Internal Revenue Code. 26 U. S. C. § 7805 (a)." United States v. Correll, 389 U. S., at 307. That delegation helps ensure that in "this area of limitless factual variations," ibid., like cases will be treated alike. It also helps guarantee that the rules will be written by "masters of the subject," United States v. Moore, 95 U. S. 760, 763 (1878), who will be responsible for putting the rules into effect.

Finally, I note that, unless § 7805(a) is interpreted as explicitly delegating authority beyond merely parroting the statute with no interpretive authority to fill in the details, then § 7805(a) is meaningless. Congress certainly did not intend § 7805(a) to be meaningless.

Added 5/29/25 11:00pm: I thought I would extend the thought on § 7805(a) being meaningless if all the authority granted was to parrot the statute without adding or subtracting or interpreting. If that is all § 7805(a) does, then

• § 7805(a) is a nothingburger. See Wikipedia here.
• § 7805(a) is Congress’ way of “pissing in the wind.” See Wikipedia here (with some alternative versions or synonyms of the thought being "fart in a windstorm," "piss up a rope," and "whistle in the wind.")

Whether or not recent Congresses could fit those descriptions now, when § 7805(a) was initially enacted in 1917 and then re-enacted in successive Internal Revenue Acts and Internal Revenue Codes , it meant something rather than nothing. See my exhaustive (perhaps exhausting) discussion of that history in my SSRN posting, John A. Townsend, The Report of the Death of the Interpretive Regulation Is an Exaggeration 57-62 (December 14, 2021). Available at SSRN: https://ssrn.com/abstract=3400489.

So those who would claim that § 7805(a) is meaningless are just making that up, probably to suit ideological preferences (which, in my mind, were probably the motivation for Loper Bright’s rejection of Chevron deference). See John A. Townsend, Loper Bright Is the Law But Poor Statutory Interpretation (February 18, 2025). Available at SSRN: https://ssrn.com/abstract=5143707.

For those wanting more, I link here the discussion of this and related issues from the working draft of my 2025 Tax Procedure Book (Practitioner Edition, with footnotes).