Interesting points from ABA Tax Online Presentation on Loper Bright (4/29/26)

I just attended online an ABA Tax Section Program titled: “Navigating Tax Guidance in a Post-Loper Bright World.” The ABA page on the program is here. The panel participants were very knowledgeable.

Early in the program, I asked the following question via the Q&A tool:

Under Loper Bright, if, after using all the tools of statutory interpretation, a judge still cannot determine whether the IRS interpretation or the opposing interpretation is the best interpretation (a state of equipoise on the interpretation), what does the judge do? Should the judge flip a coin, consult, his ouija board, follow his own preferred outcome, etc.?

I have asked a similar question in previous ABA programs, but the question was never answered. In today’s program, the question was answered—that is, at least an answer was proffered. I am not sure it is the right answer but it certainly echoed Loper Bright’s reasoning, such as it is.

So what was the answer? Basically, the answer given by the judge on the panel was that, with good statutory interpretation, the judge will always have something to tilt the judge to the best interpretation. (That is my paraphrasing and advanced apologies if I did not get it exactly right.) Actually, as the question was answered, I think the answer was hedged saying that he did not think it would happen very often (although that is from memory, I may be misremembering, and my notes don’t confirm that).

I think the essence of the answer was an echo of Loper Bright which is just flat-out wrong on the point of continuing possibility of ambiguity (equipoise). Loper Bright claimed by fiat that a judge should always be able to reach a single best interpretation with no need for a default rule such as Chevron deference to the agency interpretation. (For this, one must remember that a condition of Chevron deference was that the statute be ambiguous, meaning that the judge could not determine whether the agency interpretation or an opposing interpretation was the single best interpretation; if the court could determine the best interpretation, Chevron required the court to stop at Step One without any deference.)

Loper Bright did not by judicial fiat eliminate the phenomenon of ambiguity where a judge who is honest with himself or herself simply cannot determine which interpretation is best. I have engaged with one article author on this issue in the comments to this blog: Comments on Highly Recommended Article Extending Skidmore "Deference" Approved in Loper Bright (3/7/26; 3/8/26), here (our discussion was over whether the range of ambiguity (equipoise) was 50-50, which is not a range or even a real possibility in my mind, 49-51,65-35 or some other). Bluntly speaking, for many interpretive issues there will always be a range and Loper Bright cannot by fiat make statutory ambiguity disappear. So what to do if a judge is within that range? I still don’t have the answer. Even to say that ambiguity does not happen very often, is to leave us without guidance when it does happen.

I have argued before that APA § 706(2)(C)(2)(A) supplies that rule—the agency interpretation can be held unlawful and set aside only if “not in accordance with law” which on its face requires that the court be able to find that the opposing interpretation is the best interpretation; if both the agency interpretation and the opposing interpretation are in equipoise as to the best interpretation, the agency interpretation must apply; this is like a burden of persuasion on the party seeking to avoid the agency interpretation. This is simply Chevron baked into the APA. (Indeed, the precise text of § 706(2)(C)(2)(A) was drawn from the statute text interpreted in Dobson v. Commissioner, 320 U.S. 489 (1943) to require deference. (I and some others have called this Dobson deference.)

Other points in the discussion may be interesting for readers. I simply raise these as potential items for consideration and do not address them in any detail:

1. In terms of how regulations are written, Mayo Foundation for Med. Educ. v. United States, 562 U.S. 44 (2011) has been more important in terms of the IRS drafting regulations, certainly in terms of length. The regulations statement of statutory authority emphasized by Loper Bright is relatively short.

2, Does Loper Bright mean subregulatory guidance is as authoritative as regulation guidance?

3. Does Loper Bright affect the phantom regulation issue? As I understand the phantom regulation, the statute requires Treasury to adopt a regulation to implement something in the statute but, by the time the interpretation of the statute is in court in a tax case, Treasury has not adopted the regulation. What does a court do? I think, in broad strokes, in resolving the immediate case, the court can determine what result should apply given the guidance in the statute (even though authority was delegated to Treasury). Does that judicial interpretation then bind the IRS since it is supposed ot be the best interpretation? Remember that, by delegation, Congress intended the IRS to make the interpretation.

4. One participant raised the issue of whether the 750 hour regulations requirement for material participation in a real property business is the best interpretation in the Loper Bright sense. § 469(c)(7)(B)(ii). It is hard to read that as the “best” interpretation of the statute—e.g., how does it differ materially from 751 hours or 749 hours, and so forth. Although it did not come up, I think the answer to that is United States v. Correll, 389 U.S. 299 (1967), a pre-Chevron case approving by deference to the regulations interpretation of away from home to require sleep or rest. That sleep or rest rule was a reasonable interpretation of the statute where other variants could have been chosen, but § 7805(a) delegates to the Treasury the authority to make such choices. (BTW, Loper Bright is not clear about whether pre-Chevron deference which did not rely upon the fiction of delegation from ambiguity continues in effect.)