Tax Court Applies Statutory Stare Decisis for Chevron Cases (7/3/25)

In Moxon Corporation v. Commissioner, 165 T.C. ___, No. 2 (2025), TC here dkt # 59 and GS [to come], the Court held that (from the headnote):

          Held: The I.R.C. § 6662(h) penalties at issue are not subject to deficiency procedures pursuant to I.R.C. § 6230(a)(2)(A)(i).

          Held, further, the fact that the relevant deficiencies were improperly assessed does not affect R’s assessments regarding, and ability to collect, the I.R.C. § 6662(h) penalties.

 (I use the headnote because I think it fairly summarizes the opinion and introduces the subject I want to discuss—statutory stare decisis.)

In respect to the second holding above, the Tax Court invoked statutory stare decisis to apply a prior precedent relying on Chevron deference, saying rather cryptically (see Slip Op. 12-13):

          In addition the Supreme Court cautioned that by overruling Chevron it did not “call into question prior cases that relied on the Chevron framework. The holdings of those cases . . . are still subject to statutory stare decisis despite [the Supreme Court’s] change in interpretive methodology.” Loper Bright, 144 S. Ct. at 2273. Regardless  of the extent to which the holding in Thompson [Thompson v. Commissioner, 137 T.C. 220, 239  (2011)] relies on the standard of review set forth in Chevron, that holding is entitled to stare decisis.

          We again hold that penalties determined in a partnership-level proceeding are not subject to deficiency procedures pursuant to section 6230(a)(2)(A)(i). Rather, such penalties are assessable by the Commissioner. Taxpayers may raise any partner-level defenses to the penalties in a refund action or in a CDP case. § 6230(c)(1)(C), (4); McNeill, 148 T.C. at 489.

           Moxon arrived after I had already made substantial changes to the statutory stare decisis discussion in working draft for the 2025 Federal Tax Procedure (Practitioner and Student Editions). I have further revised that discussion to include Moxon. For readers who may have an interest in the issue, I include below a copy and paste of the text of the revisions without footnotes as of today and link here the revisions (red-lined) with footnotes (note that the footnotes, page numbers and cross-references will change in the final, although as I note below the final will be significantly shortened).

                          (10)   Stare Decisis for Past Chevron Deference Holdings.

           Loper Bright is explicit that stare decisis may require courts to carry forward the interpretations receiving deference in pre-Loper Bright cases.  The Court says (693 U.S. at 412, 144 S.Ct. at ___,  cleaned up but bold-face supplied by JAT):

           By doing so [leaving deference behind in Loper Bright], however, we do not call into question prior cases that relied on the Chevron framework. The holdings of those cases that specific agency actions are lawful—including the Clean Air Act holding of Chevron itself—are still subject to statutory stare decisis despite our change in interpretive methodology. Mere reliance on Chevron cannot constitute a “special justification” for overruling such a holding, because to say a precedent relied on Chevron is, at best, just an argument that the precedent was wrongly decided.” That is not enough to justify overruling a statutory precedent.

           At the outset, I discuss what stare decisis means generally and what statutory stare decisis means specifically. All students and practitioners reading this book have already encountered the general concept of stare decisis so I will not attempt a definitive statement of the meaning of stare decisis. In the current context, it means that previous decisions resolving an issue by a higher court (vertical stare decisis) or by a court of the same level (horizontal stare decisis, e.g., a federal court of appeals in the same circuit) will control the outcomes of similar cases that arise before the court. The Tax Court applies stare decisis (also called precedential weight) to prior reviewed and division opinions (i.e., opinions reported as “T.C.” opinions). There are exceptions where stare decisis should not control. Given the ubiquity of Chevron deference for agency interpretations, Loper Bright (which itself reversed a prior holding) requires consideration of the effect of statutory stare decisis.

           Statutory stare decisis has especial force because Congress can change the statute. The notion is that stare decisis for constitutional interpretations is less compelling because, practically, only the Supreme Court can correct erroneous constitutional interpretations, given the difficulty in changing the Constitution. Statutory stare decisis is thus said to be a “superpowered form of stare decisis,” requiring “superspecial justification to warrant reversing” the statutory interpretation precedent. Since Chevron applied to statutory interpretations, this strong form of stare decisis applied to the interpretations, hence Chief Justice Roberts’ comment that a mere claim of error in the interpretation based on Chevron is not enough to avoid stare decisis after the demise of Chevron deference.

          Indeed, some have noted that once the Supreme Court makes an authoritative statutory interpretation, that interpretation is the law until Congress changes the interpretation. That fundamental judicial concept calls into question the Trump administration’s claim that it can unilaterally and without further ado revoke such  interpretive regulations that the Supreme Court has approved based solely on an agency claim that the interpretation is not the best interpretation. Of course, the agency has the power to eliminate interpretive regulations subject to statutory stare decisis, but eliminating the regulations alone cannot eliminate the statutory stare decisis effect of the interpretation subject to statutory stare decisis; only the Supreme Court with the precedent subject to statutory stare decisis can change the interpretation. As Loper Bright explicitly says, statutory stare decisis cautions courts against adopting different interpretations on best interpretation grounds. Following the logic, eliminating an interpretation from a regulation subject to statutory stare decisis should have no effect on the interpretation subject to statutory stare decisis. That is simply to say that an interpretation in a regulation subject to statutory stare decisis remains the law until Congress or the court rendering the precedent subject to statutory stare decisis changes it.

           A more subtle and controversial application of statutory stare decisis might apply to precedents at the Circuit Court level. I just identify the issue and cite some authority in the footnote. An even more subtle issue is whether statutory stare decisis should apply in post-Loper Bright Tax Court cases where Chevron deference controlled the outcome of the earlier Tax Court case. I think that can be argued both ways, but the Tax Court has applied statutory stare decisis, without discussion of any subtlety, for previous cases invoking Chevron. And to extend that concept, should statutory stare decisis apply to district court or Court of Federal Claims trial or appellate cases post-Loper Bright? I don’t know.

           Further, a court with the power to change a prior precedential interpretation potentially involving Chevron deference to a reasonable interpretation must focus on what the precedent actually did. The precedent, by finding the agency interpretation reasonable, is not a holding that the agency interpretation was not the best interpretation. Where statutory stare decisis will be outcome determinative is in those cases where the prior Chevron holding adopted a not best, but reasonable, agency interpretation. Will a court then statutory apply stare decisis to adopt a “not best” agency interpretation or will it default to a new “best” interpretation? And, how will the courts determine which “not best but reasonable” agency interpretations qualify for statutory stare decisis and which do not? Only time and cases will tell.

          Finally, prior precedents must be viewed critically, because they may have trotted out Chevron in the opinion but the holding was really dealing with delegated discretion, which, as noted above (p. 109), is not deference based on statutory ambiguity, the sole domain of Chevron deference. Where that is the gravamen of the precedent, Loper Bright’s overruling of Chevron is irrelevant and the precedent should stand.

          I assume that, in all cases that are not finally closed, affected nongovernment parties will routinely file petitions for rehearing, appeals, or petitions for certiorari in the hopes that the results can be overturned. As I said, where Chevron was commoted about in the opinions where the agency interpretation was the best interpretation, nothing should come from these graspings at the Loper Bright straw. And, if my insight noted above is correct that this describes most of the Chevron cases, the overall results will not be materially affected, but the court time and effort to process such cases will be quite significant even when the courts decide that statutory stare decisis applies.

          Finally, I ask the analogous question as to what is the precedential effect of pre-Chevron deference, which was not based on ambiguity, Loper Bright’s focused target. Can a now party litigate the statutory interpretation issues resolved in those pre-Chevron cases by deference? Consider the regulations involved in Correll and National Muffler. Are they settled interpretations now or not? Moreover, will this lessen the compliance force of various tax penalties? For example, § 6662(a) & (b)(2) impose a 20% accuracy related penalty for “Negligence or disregard of rules or regulations;” can the demise of Chevron deference mean that, until the interpretive issue is definitively litigated post-Loper Bright, the IRS should not be able to impose the penalty? Perhaps the courts would impose the penalty where the taxpayer adopted an unreasonable position not credibly asserting a contrary interpretation; but where the taxpayer asserts a reasonable but unpersuasive interpretation, can the penalty apply under § 6662(b)(2) for conduct before a court holds that pre-Chevron deference does or does not apply to the interpretation?

Another note: I plan to substantially shorten the Chevron-Loper Bright discussion in the final Federal Tax Procedure 2025 Editions (due by early August 2025) because it is way too long for an introductory tax procedure book. I will put the longer discussion in a separate article, probably on SSRN.