I am presently drafting an article, the principal point of which is to bring deference in tax cases to the discussion of the original meaning of APA § 10(e) of the original APA in 1946 (now codified at 5 USC § 706, here), which requires court review of agency action, in this case, agency regulations interpretations of ambiguous statutory text. The question is whether de novo review includes or does not include deference. For an example where prominent scholars have agreed upon de novo review including deference, see Conference of the United States (“ACUS”) and the American Bar Association Section of Administrative Practice and Regulatory Practice (“ACUS/ABA Site”), here:
Agency conclusions on questions of law are reviewed de novo. When a court reviews an agency’s construction of the statute it administers, the court is required to uphold Congress’s intent where Congress has directly spoken to the precise statutory question at issue. If the statute is silent or ambiguous with respect to the specific issue, however, the agency’s interpretation of the statute must be upheld if the agency’s construction of the statute is “permissible.” See Chevron USA Inc. v. Nat. Res. Def. Council, Inc., 467 US 837 (1984).
The review of tax cases applying deference before enactment of the APA in 1946 (thus setting the background for the meaning of the words in the APA), ignored or discussed only at the margins by most pundits pontificating. In my article, I will show that the mainstream discussion at the time of enactment of the APA in 1946 treated deference to agency interpretations as a process for interpreting de novo with deference, like tools of interpretation applied during the de novo review of the agency interpretation just as the quote above says it is. I discuss some tax deference cases and articles before 1940 (I peg that date to a claim by UVA Law Professor Bamzai in his acclaimed article, The Origins of Judicial Deference to Executive Interpretation, 126 Yale L.J. 908 (2017), here, that there are 2 key periods to understand the state of deference prior to enactment of the APA in 1946 -- (i) pre 1940 and (1940 (app) to the date of enactment. I read the case authority and scholarly discussion differently than does Professor Bamzai particularly because of the tax case authority and scholarly discussion which he basically ignores.
I pause from attention to that future (if ever article) to write this blog to bring attention to readers a recent Republican legislative initiative to statutorily repeal deference by amending § 706 to require de novo review without deference. (The current brouhaha and misinformation about Chevron and how and when it works is mostly political and ideological emerging from hatred and fear, at least imagined, of the administrative state.) Actually, this Republican legislative initiative goes back several years to other Congresses, all pursued with smoke and mirrors but, thankfully, no legislation.
On June 15, 2023, the House passed an act with the “Short Title” of “This Act may be cited as the ‘Separation of Powers Restoration Act of 2023” or “SOPRA”. (See Congress.gov, here, on the bill and its movement through Congress.) The net effect intended by the Republicans introducing SOPRA in the House and voting to pass it over Democrat opposition is, so Republicans believe, is to eliminate deference. The act thus would amend APA 5 USC 706(a) to read as follows (new language is redlined):
(a)
To the extent necessary to decision and when
presented, the reviewing court shall decide all relevant questions of law,
interpret constitutional and statutory provisions, and determine the meaning or
applicability of the terms of an agency action and
decide de novo all relevant questions of law, including the interpretation of
constitutional and statutory provisions, rules made by agencies, and
interpretative rules, general statements of policy, and all other agency
guidance documents. Notwithstanding any other provision of law, this subsection
shall apply in any action for judicial review of agency action authorized under
any provision of law. No law may exempt any such civil action from the
application of this section except by specific reference to this section.
For the House Committee Report showing the amended entire §
706 with the changes in italics, see here.
This quixotic Republican adventure with no reasonable prospect of being enacted any time soon is a play to their base who Republicans have convinced should hate the administrative state as much as Republican politicians claim they (the Republican politicians) do. They claim that deference is an administrative agency takeover from the courts of a large swath of the interpretive process. See Daniel Goldbeck & Shantanu Kamat, The Administrative State After Chevron (American Action Forum: Insight 8/8/23), here (caveat, this is a screed by an organization, the American Action Forum which as the name implies is a Republican Group not surprisingly anti-deference; why do Republicans consistently wrap their political agendas in things like America First or, in this case, the American Action Forum to imply that those who oppose are unamerican? That’s a rhetorical question.) Why is it when Republicans raise such whipping boys (the IRS is one, but the deference whipping boy goes to all agencies) as this can we assume that there is much hyperbole exceeding the bounds of critical analysis?
I have the following questions:
1. The statute would apply to “all relevant questions of law, including the interpretation of constitutional and statutory provisions, rules made by agencies, and interpretative rules, general statements of policy, and all other agency guidance documents.
Notice that “legislative rules” are not included in the list of affected IRS documents (although they might be included in “all other agency guidance documents”). Readers may recall that I have spent considerable blog entries on the question whether agency (IRS in this case) regulations that do no more than interpret ambiguous statutory text are interpretive or legislative, with the more extreme (and dubious) strain of that discussion by Professor Kristin Hickman that the category of Treasury interpretive regulations no longer exist so that all Treasury regulations are legislative. I think she is wrong and hence the specific reference to interpretive regulations in the proposed bill gets that right. The omission of a specific reference to legislative regulations also gets that right because legislative regulations make the law rather than interpret ambiguous statutory text.
The omission of specific reference to legislative rules is meaningful because many pundits who are of a conservative ideological bent have claimed that Chevron deference applies to legislative rules, with the more extreme such pundits claiming that Chevron deference applies only to legislative rules. (This is probably just a required result of their claim that agency regulations that do no more than interpret the statute are legislative in character.) That is nonsense for the same logical reason that Chevron deference is a test of the reasonableness of an interpretation rather than test of the validity of the law created by a legislative regulation. Example, Chevron deference does not apply to the classic tax legislative rulemaking authority for consolidated return regulations, § 1502. So, although as noted there are some extremists who claim that Chevron deference applies only to legislative rules, the Bill does not specifically mention legislative rules (which must be by notice & comment regulation). Nor does the House Committee Report mention legislative rules or regulations. H. Rept. 118-83, 118th Cong. 1st Sess. Report with Minority Views to accompany H.R. 288, here. That to me is not surprising because the Chevron deference tests the reasonableness of an interpretation, not whether a legislative rule is within the specific statutory delegation of law-making authority. But, I suppose those adamantly claiming that Chevron applies to or only to legislative regulations must be surprised that their own party has ignored their claim. (I am assuming, but have not tested the assumption, that there is significant correlation between deference deniers and conservatives, libertarians, and Republicans in the House caucus.)
2. The bill applies to deference. For clarity, deference has limited application, although pundits (mostly for ideological purposes) noise about it a lot and claim a lot of space for its application (which they hate). Deference has very limited application—only applying when a judge applies a reasonable but not best agency interpretation when the judge affirmatively believes there is another best interpretation. That may be redundant but I wanted to emphasize the fact that a judge determining that there is a not best agency interpretation the judge must apply when there is in reality so many escape hatches from applying a not best interpretation.
Consider the limited deference space in interpretation.
• if the agency interpretation is the best interpretation, there is no deference space;
• if the agency interpretation is not best but reasonable (whatever that means), there is some possibility of deference space;
• if the agency interpretation is not reasonable, there is no deference space.
Notice that deference is only possible if the agency interpretation is not the best but is reasonable. Many astute observers have noted that many deference opinions appearing to be in that middle zone (not best but reasonable) when in reality they are in the first the first zone (best interpretation). See Chevron Step Two Reasonableness and Agency Best Interpretations in Courts of Appeals (Federal Tax Procedure Blog 2/9/23), here. Is Chevron on Life Support; Does It Matter? (Federal Tax Procedure Blog 4/2/22; 4/3/22), here. See also Jon O. Newman, On Reasonableness: The Many Meanings of Law’s Most Ubiquitous Concept, 21 J. App. Prac. & Process 1, 83 (2021), here (emphasis supplied; I assume most readers will be aware of Judge Newman of the Second Circuit, a giant among judges)):
It is difficult to know how the Supreme Court or other federal courts determine whether an agency’s interpretation of an ambiguous statute is “reasonable.” No weighing process appears to be involved. It would probably be too cynical to suggest that the courts are just accepting agency interpretations with which they agree and rejecting those they disfavor, but in some cases that almost seems to be what is happening. Clearly there is no one meaning of “reasonable” in the context of Chevron deference. Perhaps this is simply a context where there is a narrow range of acceptable agency interpretations, on either side of the disputed issue, that courts are willing to uphold, but they are ready to assert the power to reject others that, for stated, or more often unstated, reasons, they deem beyond an amorphous notion of “reasonable.”
3. The Committee Report (p. 2) states “purpose and summary” as follows (footnotes omitted):
H.R. 288, the Separation of Powers Restoration Act of 2023 or ‘‘SOPRA,’’ introduced by Rep. Scott Fitzgerald (R–WI), amends the Administrative Procedure Act to legislatively override the Chevron, U.S.A., Inc. v. Natural Resources Defense Council, Auer v. Robbins, Kisor v. Wilkie, and Skidmore v. Swift & Co. judicial deference doctrines and requires courts to decide de novo all questions of law, including the interpretation of statutes, rules, and guidance.
Skidmore is not a deference doctrine, despite that many refer to it as deference. Skidmore is merely an admonition that a reviewing court respectfully consider the agency interpretation in determining the best interpretation of the statute to the extent the agency interpretation is persuasive as to the best interpretation. Although the Supreme Court has not formally clarified precisely what Skidmore does (other than as a tool of persuasion but not deference), the issue did come up at the oral argument in Kisor v. Willkie. The Justices who spoke on the issue questioned whether Skidmore was deference. See Really, Skidmore "Deference?", (Federal Tax Procedure Blog 5/31/20; 2/14/2), here (where I urged those who assert Skidmore as a deference decision take the time to read Skidmore and then offer quote from Justices during the Kisor oral argument about Skidmore. Suffice it to say that, if the Supreme Court ever speaks more beyond what it said in Skidmore, it will confirm that Skidmore is not deference.
4. There are other problems in the legislation, but it is not my job to educate a bunch of jackleg Congressmen and their ideological staff on legislative drafting which requires that one actually objectively understand the topic that is the subject of the legislation.
5. And a reminder that the Supreme Court is poised to consider and pontificate on Chevron in Loper Bright Enterprises v. Raimondo (SEC) (Dkt 22-451), here, where the issue for consideration is:
Whether the Court should overrule Chevron or, at least clarify that statutory silence concerning controversial powers expressly but narrowly granted elsewhere in the statute does not constitute an ambiguity requiring deference to the agency.
What will the Supreme Court do with its now clear conservative majority. I don't know. But based on my research noted above, I doubt that even eliminating all vestiges of deference, including Chevron deference (but not Skidmore respect), not much difference will be observed in outcomes. (I refer readers to my "to be" published article discussing the deference issue from a tax perspective.)
I also offer for your consideration Justice Jackson's famous quote:
“We are not final because we are infallible, but we are infallible only because we are final.” Brown v. Allen, 344 U.S. 443, 540 (1953) (Jackson, concurring in the result).
The lesson we have recently learned in the face of marauding conservative Justices is that final (or in the colloquialism, "settled" holdings) are not even final (or "settled").
6. My speculation on Loper: I haven't seen the Solicitor General's Brief on the Merits in Loper. Who knows, the SG may concede some ground. I assume the SG puts forward a vigorous defense of Chevron, I hope that it is persuasive to convince the Court to clarify some of the misinformation about deference (e.g. the interpretive/legislative issue, whether interpretive regulations still exist, and more too numerous to mention.) Perhaps, the Court could do something like it did in Kisor, put some parameters (other than ambiguous text and reasonableness) around deference, but I would hope not any substantial barriers to deference as we now know it.
As to the amicus briefs in Loper, I recommend the following briefs by outstanding administrative law scholars in support of neither side (all of them say that but they support Chevron deference with minimal change):
- Professor Bamzai Amicus Brief here.
- Professor Thomas W. Merrell Amicus Brief here.
- Professors Kent Barnett and Christopher J. Walker Amici Brief here.
I should note that I ding the amici briefs of Professors Merrill and Barnett and Walker, because they do not even cite Dobson, unlike Professor Bamzai who, unlike his article, gives Dobson some real exposure. I don't think the other briefs add much to the discussion, often sloganeering rather than tight persuasive legal analysis.
7. Also, I recommend the Minority View in the House Report on SOPRA. The Minority Views starts on page 11 here.
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