Loper Bright’s Effects on the § 6751(b) Regulations (Herein Difference Between Regulations and Interpretations) (8/7/25)

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.

Of course, prior applicable precedents in the Tax Court (its own precedents and Court of Appeals’ precedents under the Golsen Rule) should qualify for statutory stare decisis. E.g., Hancock County Land applied controlling 11^th Circuit authority without discussing whether the § 6751(b) regulations stated the best interpretation. In those cases, the courts might acknowledge the § 6751(b) regulations and state that they are nevertheless bound by precedent whether or not, absent the precedent, the § 6751(b) regulations were best interpretations. But would that analysis still apply for those post-effective date cases where there are pre-effective date precedential “best” interpretations different from the regulations? This is like a Brand X problem but not Brand X.

So long as the cases for pre-effective date periods are resolved under the mish-mash of cases, then the first encounter for the Tax Court will come with cases involving post-effective date periods. Then, presumably, except for the application of statutory stare decisis, the courts will have to determine the best interpretation of § 6751(b) and apply it. That is, unless the agency interpretation is given the type of line-drawing oomph (I hesitate to use deference) given in Correll, the statute will be ambiguous with no best interpretation despite the Loper Bright claim, a false one, of no statutory ambiguity.

This brings up another issue with statutory ambiguity. When there is statutory ambiguity (where a best or not best interpretation can be discerned, a state of statutory interpretive equipoise), does APA § 706 require that the agency interpretation apply? APA § 706(2)(A) states that courts should “hold unlawful and set aside” an agency interpretation that is “not in accordance with law.” Textually, that requires an affirmative holding that the agency interpretation is "not in accordance with law." That means that a court in interpretive equipoise (textual ambiguity) cannot hold unlawful or set aside the agency interpretation. (That phenomenon was the domain of Chevron deference, not because of Chevron's fiction of delegation from ambiguity, but because of the phenomenon of interpretive equipoise, requiring (like factual equipoise) a default rule. That default rule for the agency where the court is in statutory equipoise is not deference to the not best agency interpretation because the state of interpretive equipoise does not permit a court to determine the best or not best interpretation.