I recently updated a post on Corner Post. See Does Corner Post Permit § 2401(a)’s 6-year Statute of Limitation to Apply from Date of Regulation for Procedural Challenges? (Federal Tax Procedure Blog 7/10/24; 7/11/24), here. In the update (in red), I argued that the Corner Post holding was meaningless because Loper Bright compels that the best interpretation controls whether or not incorporated in a regulation (previously required for deference) and whether or not such a regulation was procedurally or substantively valid. So, whenever a court adjudicates, the best interpretation should now be applied from the effective date of the enacted statute.
One consequence of that for tax is that § 7805(b), here, is rendered meaningless unless, as I note here, there is a continuing role for deference. A reminder on what § 7805(b) does. From my Federal Tax Procedure Book 71 (2023.2 Practitioner Edition) (footnotes omitted and emphasis supplied), here:
(1) if issued within 18 months of the date of the statute, then to “the date of the enactment” of the statute;
(2) if issued later than 18 months, then the earliest of the following dates: (a) the date the final regulation was published; (b) the date on which any Proposed or Temporary Regulation was published; and (c) the date on which any notice substantially describes the contents of the expected Proposed, Temporary or Final Regulation;
(3) if necessary “to prevent abuse,” with no limitation as to the date of retroactivity;
(4) “to correct a procedural defect in the issuance of any prior regulation,” with no indication as to the date of retroactivity;
(5) if “relating to internal Treasury Department policies, practices, or procedures,” with no limitation as to the date of retroactivity.
These are limitations on the regulations but not the interpretation. If the [Treasury] interpretation is the best interpretation of the statutory text, then perforce the interpretation will apply from the effective date of the statute (whether or not the interpretation is in a regulation). In other words, if the IRS [Treasury] were to include the interpretation in a regulation which violated the time limitations, that would not invalidate the interpretation or prevent the interpretation from applying from the effective date of the statute; it would just invalidate the regulation.
As further background, important for the discussion in this blog, prior to 1996, in recognition that agency statutory interpretations just as court interpretations were generally retroactive to the effective date of the interpreted statute, § 7805(b) gave the Treasury discretionary authority to apply a more limited retroactive effective date. What was the concern in giving that authority? The concern was deference—an agency interpretation might achieve deference when it chose among competing possible interpretations and there would be a period between the effective date of the statute and the date the interpretation was promulgated in which there would be uncertainty as to the applicable interpretation. Section 7805(b) as amended in 1986 reflects that same concern. There would be a period of uncertainty, so there should be a limited period of retroactivity which was previously discretionary with Treasury but now is set in statutory concrete. Note the reason for the concern—that an agency interpretation may apply when it chooses among reasonable interpretations during a period of uncertainty. Congress legislated on the belief that deference did exist in both the pre-1996 and post-1996 iterations of § 7805(b) to limit retroactivity during a period of interpretive uncertainty.
Viewed in that light, § 7805(b) may offer some insight into the Loper Bright interpretive regime requiring only best interpretations. Loper Bright Enterprises v. Raimondo, 603 U. S. ____, 144 S. Ct. 2244 (2024), SC here and GS here. Loper Bright expressly recognizes that Congress may delegate interpretive authority to agencies that could require deference. (Slip Op. pp. 17-18, here (“When the best reading of a statute is that it delegates discretionary authority to an agency, the role of the reviewing court under the APA is, as always, to independently interpret the statute and effectuate the will of Congress subject to constitutional limits.”).) The delegation may be express or implied, so long as it is the best reading of the statute to delegate interpretive authority. (This recognition of implied delegation echoes the interpretation of APA 5 U.S.C.§ 559, here, that exceptions to the APA requirements be expressly stated, which has been interpreted to include implied exceptions; see also Adrian Vermeule, Implied Delegations After Loper (Yale J. Reg. Notice & Comment 7/9/24), here.) With deference being the clear assumption to avoid § 7805(b) being meaningless, might § 7805(a) & (b) be considered implied delegation of authority to Treasury to interpret by choosing among reasonable possible interpretations of the statute?
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