Is Consistency the Hobgoblin of Small Minds for Chief Justice Roberts? Herein of Loper Bright and Chevron (7/10/25)

I was just today pointed to Perttu v. Richards, 605 U.S. ___ (6/18/25), SC here, I was interested because, although not a case about Chevron or Loper Bright (citing neither Chevron or Loper Bright or using the word deference in either Chief Justice Roberts’ Opinion of the Court or Justice Barrett’s dissent), Chief Justice Roberts says this (Slip Op. 6, of the Opinion and p. 10 of the pdf (because the Syllabus precedes the Opinion, here):

That usual practice matters for interpreting the statute because “Congress is understood to legislate against a background of common-law adjudicatory principles . . . with an expectation that the principle[s] will apply except ‘when a statutory purpose to the contrary is evident.’”

I am interested in the quote because I am authoring an article on Loper Bright also authored by Chief Justice Roberts. I think it is commonly understood that Chevron deference had achieved the status of a common law adjudicatory principle by the time Loper Bright was decided. So, how could Chief Justice Roberts say with a straight face (or maybe a straight computer keyboard) that the Court should honor common law adjudicatory principles in Richards but not in Loper Bright? Congress was certainly legislating with Chevron as a background common law principle (as Justice Kagan notes in her Loper Bright dissent at pp. 463-464 here and Chief Justice Roberts ignores in his Opinion of the Court in Loper Bright)? (This is my reason for referring to the "small minds" aphorism in the title to this blog.)

If anyone has thoughts on this conundrum, please let me know either by comment to this article or by email to jack@tjtaxlaw.com. If appropriate and the commenter gives permission, I will acknowledge the credit in the article.

* Note that the Loper Bright page numbers and links are to the Preliminary Print (as opposed to the Slip Op.) which has “preliminary” page numbers that may change before the final U.S. volume. And, of course, the Richards quote is from the Slip Opinion not yet incorporated in a Preliminary Print. 

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).

Final Paper on SSRN Titled: Loper Bright Is the Law But Poor Statutory Interpretation (2/28/25)

Today, I finalized a paper which has been posted to SSRN. The posting is here:

John A. Townsend, Loper Bright Is the Law But Poor Statutory Interpretation (February 18, 2025). Available at SSRN: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=5143707

As I understand SSRN, although it is posted and can be publicly accessed, SSRN still has to go through an approval process. I am not sure why that is, but I think that the paper can be accessed through the link above.

I had previously posted to SSRN a draft of the paper (the draft is here).

Readers may also be interested in the updates that I make during the year to the discussion of deference (Chevron, Loper Bright, et al.) in the 2025 Working Draft of the Federal Tax Procedure Book.  I will publish the 2025 Editions on SSRN in early August 2025. In the meantime, because of all the developments in the general subject of deference since the publication of the August 2024 editions, I will periodically post aggregate changes on the page to the right titled Federal Tax Procedure Book 2024 Editions Updates (7/26/24; 1/5/25), here.

Agency Interpretations, Bell Curves, and Skidmore ooomph under Loper Bright (2/12/25)

Professor Christopher Walker, here, a frequent commentator on administrative law and on deference under Chevron and Loper Bright, has offered an interview on the current scene under Loper Bright.  Judicial Constraints on Agency Action (The Regulation Review 2/9/25), here. In that article, he states, based on his study of a large set of Chevron opinions, that “there was nearly a 25 percentage-point difference in agency-win rates when the courts of appeals applied Chevron deference than when they did not.”

I did a similar study of two smaller sets of opinions but enough to feel comfortable that it was a reasonably fair sample set. My conclusion was different from Walker’s and more in line with Second Circuit Judge Jon Newman’s conclusion that courts often invoke Chevron but do what they want to anyway—that is, interpret as they think is right (the best interpretation). Jon O. Newman, On Reasonableness: The Many Meanings of Law’s Most Ubiquitous Concept, 21 J. App. Prac. & Process 1, 83 (2021) (emphasis supplied), here. If that is right, Chevron was not ever as outcome determinative as people imagined from the rhetoric or the apparent win rate such as Professor Walker posits.

The conceptual model I posit is that, when courts defaulted to what appeared to be an agency win because the interpretation was “reasonable,” many of those cases really involved the courts’ determinations or hunches that the agency interpretations were the best interpretations. That’s the observation Judge Newman made. If that observation is true (I think it is), there should be a higher win rate because the indicated 25% difference in win rates in the Chevron era meant that, often, even usually, an agency win was not that just that the interpretation was reasonable but that the court thought it was best. Stated another way, Chevron was only outcome determinative when an agency not best interpretation was approved under Chevron. Judge Newman (and I) conclude that that was likely significantly less than 50% of the time when courts noised about Chevron.

Does Loper Bright Revive Pre-Chevron Standards of Review? (11/28/24)

The key Loper Bright holding is summarized near the end of the opinion addresses Chevron (Loper Bright Ent. v. Raimondo, ___ U.S. ___, 144 S. Ct. 2244, 2273 (2024)):

Chevron is overruled. Courts must exercise their independent judgment in deciding whether an agency has acted within its statutory authority, as the APA requires. Careful attention to the judgment of the Executive Branch may help inform that inquiry. And when a particular statute delegates authority to an agency consistent with constitutional limits, courts must respect the delegation, while ensuring that the agency acts within it. But courts need not and under the APA may not defer to an agency interpretation of the law simply because a statute is ambiguous.

As I understand the holding it is that agency interpretive authority for the states they administer cannot arise from the “fiction” Chevron created that statutory ambiguity is an implicit delegation of interpretive authority that justifies deference to the agency interpretation. Phrased this way, the Court may have left open whether any other form of pre-Chevron deference survives Loper Bright. After all, the Court is careful to base its rejection on deference from ambiguity alone, which is the key innovation of Chevron. Before Chevron, the Court had developed bases other than ambiguity to justify deference. For example, in National Muffler Dealers Ass’n v. United States, 440 U.S. 472 (1979), a tax case, the Court applied traditional features from cases going to the early period of the administrative state to justify deferring to agency interpretations. (Tax and administrative law fans will recall that, in Mayo Found. for Med. Educ. & Rsch. v. United States, 562 U.S. 44, 52 (2011), authored by Chief Justice Roberts (who apparently experienced a Eureka moment in Loper Bright), the Court held that, for consistency among agencies, appellate review of the deference accorded tax interpretations should be tested under Chevron based on statutory ambiguity rather than the traditional features applied in National Muffler.)

In a recent article (highly recommended), Professor Thomas W. Merrill asks under “Matters of Speculation” the following question: “Does Loper Bright Revive Pre-Chevron Standards of Review?” (At pp. 269-270.)  Thomas W. Merrill, The Demise of Deference — And the Rise of Delegation to Interpret?, 138 Harv. L. Rev. 227, 269-279 (2024), here. I don’t want to review the pre-Chevron law of deference, but the key is that is that pre-Chevron deference was not justified on implicit delegation of interpretive authority arising from statutory ambiguity alone. In that pre-Chevron law, such as National Muffler, features such as contemporaneity of the interpretation, long-standingness, and other features might add gravitas to the agency interpretation permitting deference. To be sure, pre-Chevron deference applied only where the statute was ambiguous and the interpretation was reasonable (key features of Chevron deference), but ambiguity alone did not justify deference.

Thus, because the Court in Loper Bright was careful to limit rejection of deference to deference arising from ambiguity, one could craft an argument that the Court’s pre-Chevron jurisprudence survives Loper Bright. Professor Merrill warns (p. 270): “So courts should probably exercise caution in resurrecting pre-Chevron standards of review like National Muffler, but some intrepid litigator will no doubt claim that this has happened.”

I think Loper Bright may be confusing as to its precise holding. Loper Bright might be read as two holdings:

1. The APA requires courts to interpret de novo the statutes the agency has interpreted and defer only where Congress explicitly or implicitly delegated interpretive authority to the agency.

2. Chevron, requiring ambiguity as implicit delegation of interpretive authority, is overruled.

Post Loper Bright Approval of Agency Best Interpretations (12/3/24)

I have previously blogged on my anecdotal analysis of large data sets of cases supposedly applying Chevron deference but really not so because the agency interpretation supposedly deferred to was the best interpretation. In other words, although those cases seemed to apply deference, they really did not. e.g., Chevron Deference: Much Ado About Not Much (Federal Tax Procedure Blog 8/15/21), here; Is Chevron on Life Support; Does It Matter? (Federal Tax Procedure Blog 4/2/22; 4/3/22), here; and Chevron Step Two Reasonableness and Agency Best Interpretations in Courts of Appeals (Federal Tax Procedure Blog 2/9/23), here. I further noted that, observing that phenomenon, a prominent appellate judge said: “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.” Jon O. Newman, On Reasonableness: The Many Meanings of Law’s Most Ubiquitous Concept, 21 J. App. Prac. & Process 1, 83 (2021), here. One of my key points in discussing the phenomena was that the demise of deference, which we now have with Loper Bright, might not produce materially different outcomes.

The post-Loper Bright opinion in Diaz-Arellano v. U.S. Attorney General, ___ F.4th ___ (11th Cir. 2024), CA11 here and GS here, illustrates. In that case, the interpretive issue involved cancellation of removal of an alien for “exceptional and extremely unusual hardship” including a child defined as “an unmarried person under twenty-one years of age.” The question was whether the child’s age status must be met at time of application or at time of the hearing (which often can take many months after application, resulting in the child aging out during the process).

The Diaz-Arrelano majority noted that, in briefing the Government argued that Chevron required differing to the agency interpretation (at hearing) and at oral argument the Government added the argument that the agency interpretation was the best interpretation requiring no deference. Briefing and oral argument preceded Loper Bright. The Diaz-Arrelano opinion was rendered after Loper Bright.  The panel majority noted the Loper Bright demise of deference requiring it to review de novo without deference, but held that the Government interpretation was the best interpretation of the statute. In other words, best interpretations neither need nor require deference to prevail, which is what Loper Bright means. The result is that many pre-Loper Bright cases appeared to apply deference were really masking approval of best interpretations, meaning that the demise of deference will not materially affect outcomes.

 The  panel majority noted (p. 8 n.5 (carrying over to p. 9)):

    n5 The only other circuits to have addressed this issue in published opinions agree that an alien’s child must be under the age of twenty-one as of the final adjudication of the alien’s application for cancellation of removal, though both relied on Chevron. See Mendez-Garcia v. Lynch, 840 F.3d 655, 663–64 (9th Cir. 2016); Rangel-Fuentes v. Garland, 99 F.4th 1191, 1194–97 (10th Cir.), vacated and panel reh’g granted, No. 23-9511, 2024 WL 3405079 (10th Cir. July 10, 2024) (reconsidering in light of Loper Bright).

Has Auer Time Passed? (8/20/24)

A question raised by the demise of deference pronounced in Loper Bright Enterprises v. Raimondo, 603 U. S. ____, 144 S. Ct. 2244 (2024) is the continuing viability or application of Auer/Kisor deference. Recall that Auer/Kisor deference applied Chevron-type deference framework to agency subregulatory guidance interpreting ambiguity in agency regulations. Loper Bright did not speak to the continuing viability of Auer/Kisor deference. The Loper Bright opinion of the Court cited Kisor for other propositions, but did not speak to whether Auer/Kisor was viable after Loper Bright.

Although Loper Bright did not speak directly to the continuing viability of Auer/Kisor deference, I think that the inevitable logic of Loper Bright pronounces the demise of Auer/Kisor deference. Of course, because the Supreme Court did not expressly overrule Auer/Kisor deference, some pundits and courts may still pay homage to it until and unless the Supreme Court speaks to its continuing viability. See e.g., Fourth Circuit Applies Auer/Kisor Deference to Include in Guidelines "Loss" the Commentary Inclusion of "Intended Loss" (Federal Tax Procedure Blog 8/24/24), here; and More on United States v. Boler (Federal Tax Procedure Blog 8/25/24), here.

However, a confident lower court reading Loper Bright as I do might be willing to step out on that issue by holding that Loper Bright is inconsistent with Auer/Kisor deference. Or, alternatively, as happened in Coplan, a Court of Appeals might signal in an opinion that there is a major conceptual problem that the Supreme Court should address. See Is It Too Much to Ask that the Defraud Conspiracy Crime Require Fraud? (Federal Tax Crimes Blog 8/3/24; 8/6/24), discussing United States v. Coplan, 703 F.3d 46 (2d Cir. 2012), cert. den. 571 U.S. 819 (2013).

Now, I will state why I think Auer/Kisor deference is not consistent with the demise of Chevron deference pronounced in Loper Bright.

Fourth Circuit Applies Auer/Kisor Deference to Include in Guidelines "Loss" the Commentary Inclusion of "Intended Loss" (8/24/24)

In United States v. Boler, 115 F.4th 316 (4th Cir. 2024), CA4 here and GS here [to come], the Court held that the term loss included the pecuniary loss that Boler intended from filing false refund claims with the IRS. Boler filed six returns claiming false refunds; the IRS paid refunds on only four of the returns. Boler wanted the loss to be calculated using only the amounts actually refunded and thus to exclude the refund amounts claimed but not refunded. The district court held that Sentencing Guidelines inclusion of loss included intended loss. Since the pecuniary loss is a principal driver of the Sentencing Guidelines calculations, the inclusion of the intended loss increased the advisory Guidelines sentence and factored into the resulting sentence. On appeal, Boler argued that the Guidelines required inclusion of the loss, which facially does not include intended loss and that, the Guidelines Commentary interpretation of “loss” to include intended loss was an invalid interpretation of the Guidelines term “loss.” The Court of Appeals held that loss included the intended loss. (This is perhaps a moot issue in the future, because the definition of loss in the Guidelines was changed effective November 1 to include intended loss.)

The issue, as framed by the majority, turned on the application of Auer/Kisor deference. So, what is Auer/Kisor deference? As interpreted in Kisor v. Wilkie, 588 U.S. 558 (2019), GS here, the Court updated and constricted Auer deference, but, as constricted, held that in some cases courts should defer to agency interpretations of ambiguous agency legislative regulations. The majority in Loper Bright did not mention Auer/Kisor deference, although it cited Kisor several times; the dissent said (S.Ct. at 2306-2307) that Kisor approved Auer deference “which requires judicial deference to agencies' interpretations of their own regulations.” (Hereafter, whenever I use the term regulations, I mean agency notice and comment regulations required for legislative regulations and permitted for interpretive regulations.) The Loper Bright opinions make no statement that Auer/Kisor deference is affected.

I should note that, in my thinking, the Court analogized Auer/Kisor deference to Chevron deference which applied to agency regulations’ interpretations of ambiguous statutory text. The analogy is logical: Chevron deference applied to agency regulations interpretation of law (there statutory law); Auer deference applied to agency interpretations of law (legislative regulations that function like statutes to impose the law); so both forms of deference apply to agency interpretations of law.

Federal Tax Crimes Blog Posting on Interface of Sentencing Guidelines and Loper Bright Interpretive Regime (8/7/24)

I have just posted Sentencing Guidelines under the Loper Bright Non-Deference Regime (Federal Tax Crimes Blog 8/7/24), here. Some readers of the Federal Tax Procedure Blog may be interested since the posting involves the interface of the Sentencing Guidelines and the new Loper Bright interpretive regime (i.e., sans deference).

More Nuance On Loper Bright's Adoption of the Notion that Courts Say What the Law Is (8/6/24)

In the originally posted version of the Federal Tax Procedure Editions (Practitioner and Student), I explained Loper Bright’s rejection of Chevron deference to agency interpretations as follows:

The key notion behind this holding is that, in the words of Justice Marshall’s famous soundbite, “[i]t is emphatically the province and duty  of the judicial department to say what the law is.” Marbury v. Madison,  5 U.S. (1 Cranch) 137, 177 (1803). The balance of the reasoning for Loper Bright is just spinning that notion.

Upon reflection, the explanation was too cryptic for those not deep into the Loper Bright weeds and what came before it. I therefore have revised that paragraph to read as follows (offering here the footnotes in the Practitioner version and noting the changes in red):

          The key notion behind this holding is that, in the words of Justice Marshall’s famous soundbite, “[i]t is emphatically the province and duty of the judicial department to say what the law is.” Marbury v. Madison, 5 U.S. (1 Cranch) 137, 177 (1803). The balance of the reasoning for Loper Bright is just spinning the notion n423a through APA § 706’s supposed command that courts “decide all relevant questions of law.” n423b
      n423a Professor Dorf says that, historically, the “say what the law is” notion in Marbury v. Madison accommodated judicial restraint –deference if you will. See Michael C. Dorf, How Emphatically is it the Province and Duty of the Judiciary to Say What the Law Is? (Dorf on Law 8/2/24), discussing “Thayerism” and judicial restraint to permit judicial intervention only in cases of clear violation of the text, an interpretive exercise compatible with deference, and concluding: 
  Yet neither Thayer nor those who followed in his footsteps thought his clear-incompatibility standard for invalidation of legislation violated Marbury. On the contrary, they understood it as what Marbury entailed. Thayerism thus validates the idea that the judicial province and duty to say what the law is can co-exist with a practice of deferring to non-judicial actors.
      n423b Striving to accommodate the above-quoted APA text to Marbury v. Madison’s “say what the law is” notion, the Supreme Court conveniently ignored the requirement in § 706(2)(A) that agency conclusions of law be set aside if “not in accordance with law.” As I develop in my article, The Tax Contribution to Deference and APA § 706, cited on p. 87 n. 422, the Court interpreted the “not in accordance with law” limitation on court review of Tax Court conclusions of law to require deference. Dobson v. Commissioner, 320 U.S. 489 (1943), reh. den. 321 U.S. 231 (1944). Indeed, the principal actors in the enactment of the APA just 3 years after Dobson would have known that the words “not in accordance with law” had been so interpreted to require deference. In this regard, Justice Robert Jackson’s opinion in Dobson interpreting those words echoes the Thayerism view that restraint (deference) not apply only for clear violations (Justice Jackson’s phrasing was “clear-cut violations”). In short, the Loper Bright Court strained to make the holding appear to be an APA holding on very weak grounds when, in fact, it was far more fundamentally about the majority’s view that courts alone say what the law is.

A pdf with the changes in the 2025 working draft is here (note that the footnotes in the pdf are numbered in order with the working draft).

Bills to Approve Deference - Stop Corporate Capture Act (7/26/24)

The Supreme Court rejected Chevron deference based on implied delegated authority from statutory ambiguity or silence as a matter of statutory interpretation of APA 5 U.S.C. § 706. Loper Bright Enterprises v. Raimondo, 603 U. S. ____, 144 S.Ct. 2244 (2024). I covered that development in a prior blog. The Supreme Court Pronounces the Demise of Deference (Federal Tax Procedure Blog 6/29/24; 7/26/24), here. Loper Bright recognizes that, since the demise of deference is a matter of statutory interpretation of APA 5 U.S.C. § 706, Congress may legislatively delegate interpretive authority to agencies (although some read Chief Justice Roberts’ Loper Bright rhetoric as suggesting constitutional overtones). The delegation may be explicit or implicit, but it can’t be by ambiguity or silence alone. I discuss the possibility an implied delegation of interpretive authority in Can § 7805(a) & (b) Be Read as Delegating to Treasury/IRS Interpretive Authority with Deference (7/14/24), here.

Senator Warren has introduced the Stop Corporate Culture Act in the Senate. See Press Release titled Warren Leads Senate Response to End of Chevron Doctrine (7/23/24), here. The Press Release has links at the top to: Bill Text (PDF), Section-by-Section (PDF), and Bill Two-Pager (PDF). 

The Senate “Stop Corporate Culture Act” is the Senate version of a similar House Bill introduced in the House in 2023, Stop Corporate Capture Act, H.R. 1507, 118th Cong., see links to the bill and related material here.

I haven’t compared the two bills, but suspect that there may have been some tweaking in Senator Warren’s version to address specific issues raised by the recent Supreme Court decisions since the introduction of the House bill. However, below, I compare provisions in the two bills on deference and found no differences.

Both bills go substantially beyond the deference issue to address certain administrative law problems raised by decided cases and otherwise in the public discussion. These are suggested by the following from Senator Warren’s description of the bill in the press release:

The Senate version of the Stop Corporate Capture Act would (copy and paste from Senator Warren's Press Release):

Loper Bright’s Rejection of Deference Moots the Liberty Global Dispute About the Validity of the Temporary Regulation (7/12/24)

I have discussed various suits arising out of Liberty Global’s allegedly sham transactions to avoid tax based on an alleged loophole in the CFC regime as amended by the 2017 TCJA which taxed U.S. shareholders currently on all foreign earnings, except for certain limited categories of income. (For all blog entries mentioning Liberty Global, see here.) Liberty Global’s planning for the transactions was called “Project Soy.” The IRS sought to impose tax on Liberty Global for the Projects Soy transactions under the IRS’s application of the 2017 TCJA change. (The technical details of the statute and the Project Soy planning are complex and not needed for the point I make here.) The Project Soy initiative generated three separate lawsuits (making their contribution to full employment for lawyers, particularly with amici briefs on the inevitable appeal):

• Liberty Global brought a refund suit in the Colorado district court after reporting the liability and paying tax based on its claim that tax was not due,
• The United States brought a collection suit against Liberty Global to reduce the claimed tax to judgment before issuing a notice of deficiency, and
• Responding to a notice of deficiency, Liberty Global brought a Tax Court deficiency suit.

I won’t get into the procedural aspects of these various suits, except to note here that the refund suit requires Liberty Global to prove that it is entitled to a refund. (The other actions are still pending in the district court and Tax Court, respectively.) In the refund suit, the district court rejected Liberty Global’s refund claim, holding that the economic substance doctrine applied to defeat the claim. Liberty Global  appealed the refund suit. (10th Cir. No. 23-1410, see CourtListener Docket Entries, here.) On appeal, the parties fight over the application of the economic substance doctrine, either as a doctrine or its iteration in  §7701(o). None of the parties in their briefs cite Chevron or deference. (Determined by a search on those words in all of the briefs available in CourtListener as of today; my review of the district court order also indicates no reference to those words.) Accordingly, in the Loper Bright paradigm, the Government can prevail if its interpretation of the economic substance doctrine and § 7701(o) is the best interpretation.

Although Chevron deference does not appear to be directly at issue, I infer that the parties and amici for some reason think it may sub silentio because the parties commote at length about the validity Temporary Regulation  § 1.245A-5T. If the case is governed by the best interpretation of the statutory text as Loper Bright commands, what difference does it make whether the Temporary Regulation is valid? As I have explained in several blogs, the only interpretive benefit of a valid Regulation (whether Temporary or Final) was the potential for application of Chevron deference, a potential now denied by Loper Bright.

Does Corner Post Permit § 2401(a)’s 6-year Statute of Limitation to Apply from Date of Regulation for Procedural Challenges? (7/10/24; 8/17/24)

Added 7/11/24 4:00 pm: Caveat: My blog post below was an attempt to hammer Corner Post into the interpretive system as I understood it. Within that parameter, I think I got it right. But, since posting the blog below (after this update in red), I went back to basics to try to understand what this all means in the real world. So, here is another way to think about the interpretive regime we now have as a result of the confluence of Loper Bright (deference gone) and Corner Post. Here are the key bullet points:

• Loper Bright teaches that the best interpretation of the statute controls. The best interpretation gains or loses nothing (i) by being adopted in an agency regulation or (ii) whether the regulation is procedurally valid. 
•  The best interpretation issue is substantive and can be raised at any time (i.e., upon application or enforcement to the particular person).
• Ergo, Corner Post is the proverbial tempest in a teapot.

To extend the analysis:

• The best interpretation (whether or not in a regulation) is the interpretation applicable from the effective date of the interpreted statute. That means that the § 7805(b) constraints on retroactivity are meaningless if the IRS includes the best interpretation in a regulation.
• The adoption of the best interpretation in a regulation adds nothing of interpretive value to the regulation. However, perhaps at the theoretical margins, a procedurally regular notice and comment regulation interpretation might add some Skidmore oomph (whatever that is) to the persuasive value of the agency interpretation in the regulation.

If that makes sense and—dare I say—is persuasive to readers, there is no need to read the older portion of this blog below (but I think if one were to wallow around in the concepts presented below (as have I), one might get to the same point).

___________________________________

In Corner Post, Inc. v. Board of Governors, FRS, 603 U. S. ____ (2024), SC here and GS here, the Court (Justice Barrett) held that cause of action “accrues” for purposes of the fallback 6-year statute of limitations in 28 U. S. C. § 2401(a), here, when the particular plaintiff first suffered injury from an agency action. The agency action was a regulation promulgated well before the 6-year period prescribed by § 2401(a). Corner Post, a new entity, suffered injury once it was created, thus its judicial challenge to the Regulation was timely under § 2401(a).

The gravamen of the Court’s holding is its focus on § 2401(a)’s text starting the statute of limitations when “the right of action first accrues.” That requires that the Court determine “the right of action” in the context.

The majority held that Corner Post’s claim was that the agency acted without statutory authority, an ultra vires claim. A party is injured and can challenge an invalid interpretation when the agency action applies to that party. This permitted the challenge by Corner Post, an entity created within the 6-year period before filing the challenge.

But, there is another type of APA challenge, a procedural challenge, that can be asserted to invalidate a regulation. The procedural challenges arise upon promulgation regardless of whether the regulation is otherwise substantively valid. Procedural challenges include the claim that notice and comment regulations have been promulgated without the agency having engaged in the APA procedural requirements of considering and responding to material comments. In such a procedural foot-fault case, the regulation can be within the authority conferred (e.g., offer the best interpretation of the statute) but might be invalid qua regulation solely for an alleged procedural defect. In such a case, of course, the interpretation (as opposed to the regulation) can still be valid and still be applied in a judicial proceeding despite the procedural invalidity of the regulation.

An aside: Prior to Chevron’s demise, the only effect of a procedurally invalid regulation was that the interpretation did not qualify for Chevron deference, so the court could still apply the best interpretation. See Oakbrook Land Holdings, LLC v. Commissioner, 28 F.4th 700 (6th Cir. 2022), CA6 here and GS here (rejecting Hewitt’s procedural invalidity holding but in any event holding that the agency interpretation was the best interpretation thus valid even without Chevron deference); see also Sixth Circuit Creates Circuit Conflict with Eleventh Circuit on Conservation Easement Regulations (Federal Tax Procedure Blog 3/15/22), here.

Supreme Court Accepts Cert in Deference Case and Remands to D.C. Circuit for Consideration of Loper Bright Chevron Overruling (7/3/24)

 By order dated July 2, 2024, here, the Court ordered (p. 3):

 23-413 LISSACK, MICHAEL V. CIR
 The petition for a writ of certiorari is granted. The judgment is vacated, and the case is remanded to the United States Court of Appeals for the District of Columbia Circuit for further consideration in light of Loper Bright Enterprises v. Raimondo, 603 U. S. ___ (2024),

Loper Bright is the opinion where the Court overruled Chevron deference. See The Supreme Court Pronounces the Demise of Deference (Federal Tax Procedure Blog 6/29/24; 7/2/24), here. The prior Court of Appeals opinion in Lissack is Lissack v. Commissioner, 68 F.4th 1312, 1324, 1327 (D.C. Cir. 2023), here. The Lissack petition for writ of certiorari, here, had one of its 2 questions presented the following:

2. Whether the Court should overrule Chevron or at least clarify that where Congress acts to remove discretion from an agency, regulations promulgated thereunder should not be deferred to.

That question was essentially the same as addressed in Loper Bright, hence the acceptance of cert and remand. (Note in this regard that the D.C. Circuit opinion in Lissack is cited in Justice Kagan’s dissenting opinion in Loper Bright (Kagan dissenting Slip Op. 26), but without the mention that petition for certiorari was pending:

The majority says differently, because this Court has ignored Chevron lately; all that is left of the decision is a “decaying husk with bold pretensions.” Ante, at 33. Tell that to the D. C. Circuit, the court that reviews a large share of agency interpretations, where Chevron remains alive and well. See, e.g., Lissack v. Commissioner, 68 F. 4th 1312, 1321–1322 (2023); Solar Energy Industries Assn. v. FERC, 59 F. 4th 1287, 1291–1294 (2023).

The Supreme Court Pronounces the Demise of Deference (6/29/24; 6/1/25)

Added 8/7/24 and revised 10/28/24: I have published the 2024 editions of the Federal Tax Procedure Book, here. I have substantially revised the section dealing with the Demise of Deference as of 10/28/24; the revised version is viewable and downloadable here. In the FTPB 2024 discussion I have added to and refined some of the points in this blog entry.

In Loper Bright Enterprises v. Raimondo, 603 U. S. ____, 144 S. Ct. 2244 (2024), SC Slip Op. here & GS here, the Court (per Chief Justice Roberts) held (Slip Op. 35):

          Chevron is overruled. Courts must exercise their independent judgment in deciding whether an agency has acted within its statutory authority, as the APA requires. Careful attention to the judgment of the Executive Branch may help inform that inquiry. And when a particular statute delegates authority to an agency consistent with constitutional limits, courts must respect the delegation, while ensuring that the agency acts within it. But courts need not and under the APA may not defer to an agency interpretation of the law simply because a statute is ambiguous.

I provide in this blog several points about this holding. I divide my discussion into (i) the implications of the demise of deference and (ii) some key points going to the correctness of some claims made in the opinions. I try in this blog entry to address major points. Given the short amount of time I have had to devote to the blog, I may have missed or even misstated some things which I may need to supplement or correct later. I apologize in advance to readers, but this is just too important a development not to do my best to provide in this one place my discussion of key points. 

IMPLICATIONS OF DEMISE OF DEFERENCE.

1. First, we need clear definitions of key terms used in the discussion.

a. Deference. Deference is--well, was--a court accepting an agency statutory interpretation that is not, in the court’s opinion, the best interpretation of the statute.

b. Chevron deference. The discussion of deference has been framed by the 1984 Chevron decision. However, deference with essentially the same features as Chevron was in the law well before Chevron, going back to before the new deal and the enactment of the APA in 1946. See John A. Townsend, The Tax Contribution to Deference and APA § 706 (SSRN December 14, 2023), pp. 5-23)   https://ssrn.com/abstract=4665227 That is not how the Loper Bright Opinion of the Court imagines the pre-Chevron landscape so I will only address this further in the section below dealing with some of the things the majority erred. And, when I use the term Chevron deference, I include that pre-Chevron Chevron-like deference.

2. The Opinion of the Court justifies deference’s demise based on both the APA and the role of courts in the constitutional scheme, as exemplified by Justice Marshall's claim (judicial soundbite) “[i]t is emphatically the province and duty of the judicial department to say what the law is.” Marbury v. Madison, 5 U.S. (1 Cranch) 137, 177 (1803).

3. The definition of deference I offered does not help if the court is in legal interpretive equipoise and thus cannot decide the best interpretation of the statute. The Court’s opinion does not appear to even recognize the possibility of legal interpretive equipoise. For example, the Court states (Slip Op. 22, emphasis), that “Courts instead understand that such statutes, no matter how impenetrable, do—in fact, must—have a single, best meaning.”  (See Slip Op.22 (emphasis supplied); see also 23 and 31 (“The statute still has a best meaning, necessarily discernible by a court deploying its full interpretive toolkit.”) Whether legal interpretive equipoise is a possibility is a key point of Justice Kagan’s dissenting opinion. (See e.g., Dissenting opinion Slip Op. 7 (stating that sometimes there is no “fixed single best meaning” (cleaned up) of the statute text).

a. Query: Is the majority’s key assumption of the absence of the possibility of legal interpretive equipoise correct?

Today’s Supreme Court Decision on Bump Stock Not Being Machineguns Ducks the Chevron Issues (6/14/24)

In Garland v. Cargill, 602 U. S. ____ (6/14/24), SC here, the Supreme Court rejected the ATF regulation treating bump stocks as within the meaning of the statutory term “machinegun, “which is  statutorily defined as “any weapon which shoots, is designed to shoot, or can be readily restored to shoot, automatically more than one shot, without manual reloading, by a single function of the trigger.” 26 U. S. C. §5845(b).

I won’t get into the fray of whether the majority correctly treats a bump stock as not a “machinegun.” The majority view is now the law of the land. Any change will have to come from Congress. (But we all know that, given the polarization over guns and other hot-button divisive political issues, the Supreme Court now determines the law of the land in the swath of decisions it alone can decide to pronounce; the Court makes the policy decisions that Congress should make.)

I do want to mention that in its opinions (majority and minority), the Court ducked any discussion or hint of the Chevron issues. Ultimately, the issue before the Court was whether the ATF regulations definition was within the reasonable scope of the statute’s text definition of “machinegun.” That sounds both within Chevron Step One (assuming that an unreasonable agency interpretation cannot get past Step One which conflates the Chevron Steps) or, at a minimum, Chevron Step Two (certainly Chevron Step Two rejects an unreasonable interpretation). The Court side-stepped any mention of Chevron by simply holding in a straight-forward manner (without mentioning Chevron), that the ATF interpretation was outside the permissible scope of a reasonable interpretation (as the majority saw it). In other words, for an unreasonable interpretation (i.e., outside the reasonable scope of any ambiguity in the statutory text), the agency interpretation cannot stand without mentioning Chevron.

The Courts below found some reason to at least mention or discuss Chevron. After all, notice and comment regulations interpreting statutory text has been the common ground for applying the Chevron two-step analysis (even before Chevron). (Most commentors don’t recognize or acknowledge that Chevron-type analysis has been a feature for testing the validity of agency rules since well before the APA in 1946. See John A. Townsend, The Tax Contribution to Deference and APA § 706 (SSRN December 14, 2023), pp. 5-23), https://ssrn.com/abstract=4665227

Excellent Article on Practical Effects the Administrative Law World Awaits Supreme Court Opinion(s) on Chevron (5/5/24)

The flood of Chevron comments seems to have slowed down while the Supreme Court is considering Chevron for what further havoc it will wreak in pursuit of its conservative agenda. Readers will certainly know that Chevron is a favorite bogeyman (real or feigned) in the conservative community.

I write to point readers to an article that I found very good about what might happen with the much-anticipated opinion. The article is James Downing, Energy Lawyers Debate the Impact of Losing the Chevron Deference (RTO Insider 4/29/24), here. The article reports on a discussion among “energy lawyers” which are perhaps not as nerdy as tax lawyers because of energy’s long-standing reputation of being major risk-takers. One of my favorite memories from moving to Houston in 1977 was an ad from a local entrepreneur, Eddie Chiles, proclaiming “If you don't have an oil well, get one,” see Wikipedia entry here. Tax lawyers are not identified with any particular risk-taking community and have long been thought as so nerdy as to be risk-averse (that reputation was challenged as tax lawyers forayed into bullshit tax shelters in relatively recent memory).

At any rate, the article reports interesting comments from the lawyers serving in energy regulator roles. I quote excerpts from the article:

          Chevron makes sense as a legal doctrine and provides judges with an easy way of affirming an agency’s decision-making when there is ambiguity in the law, FERC General Counsel Matthew Christiansen said at the EBA’s Annual Meeting. But underlying those decisions is some basic common sense being applied by the judges.

          “Because I think that Chevron is largely deployed as a way of providing a compelling path to affirm an agency action, I’m not convinced that the loss of Chevron in many cases, if that is indeed what happens, is going to lead to wildly different outcomes,” Christiansen said. “I’m sure it’s going to lead to different outcomes on the margins. But at the end of the day, I’m a big believer in agencies’ ability to still put forth compelling justifications.”

          Chevron has provided a lot of value over the decades, but the politics have reversed completely since it was first decided, DOE General Counsel Samuel Walsh noted. The late Justice Antonin Scalia, a textualist, was a big fan of the doctrine, and Justice Clarence Thomas authored the Brand X decision in 2005 that extended deference to the Federal Communications Commission and kept internet service providers from being regulated as common carriers.

          “Some of the most important Chevron cases were cases where agencies were using the flexibility afforded by deference to regulate in a more light-handed way, or maybe not at all,” Walsh said.

          The biggest area where DOE might be affected by the change in precedent would be on its ability to set efficiency standards for electric appliances, he said.

          “But to my knowledge, we’ve only been upheld at Chevron Step 2 once,” Walsh said; Step 1 is deciding whether the law’s intent is clear from the text. “We’ve done hundreds of rules over the last four decades, and I think we’ve only benefited from it in a clear and explicit way once.”

          DOE has benefited from the law more in its other functions such as litigation around nuclear waste storage in the 1990s and in litigation against the federal power marketing administrations it oversees. The law that governs sales from federal dams specifically calls “municipalities” preferred customers, so in the early 1990s, some “clever” city governments asked the Western Area Power Administration to sell them cheap electricity, Walsh said. WAPA argued that the term “municipalities” meant municipal utilities, and Chevron helped it carry the day in court.

*  * * *

District Court Rejects State End-Run of Federal Tax SALT Limitations with State Creditable "Charitable" Contribution (4/8/24)

In New Jersey v. Mnuchin, ___ F.Supp. 3d ___,  2024 WL 1386080, 2024 U.S. Dist. LEXIS 59122  (S.D. N.Y. 3/30/24), CL here and GS here, the Court rejected now familiar attacks, including APA and Chevron. This time the attacks come from the states rather than those who fear the administrative fear (either in reality or to stir the base). The complaint of the states (including New York and Connecticut components as named plaintiffs) is that Treasury failed both substantively (improper interpretation a la Chevron) and procedurally in promulgating the Final Rule interpreting § 170 (the charitable deduction provision). The Final Rule denies a charitable contribution deduction where the state gives a quid pro quo in the form of a state and local tax credit. The state tax credit was simply a state end-run around the 2017 Tax Act “SALT” (state and local tax) deduction limitation. 

The Court described the Treasury response to the state legislation (Slip Op. 2-3, footnotes omitted and cleaned up):

On June 13, 2019, the Treasury Department and the Internal Revenue Service ("IRS") promulgated a new regulation (the "2019 Final Rule") governing the availability of charitable contribution deductions for payments made to state and local governmental units where the taxpayer receives or expects to receive a state or local tax credit in return. The new regulation involves an interpretation § 170, which in part governs the deduction of charitable contributions on federal income tax returns.

The 2019 Final Rule provides that "the amount of the taxpayer's charitable contribution deduction under [S]ection 170(a) is reduced by the amount of any state or local tax credit that the taxpayer receives or expects to receive in consideration for the taxpayer's payment or transfer." 26 C.F.R. § 1.170A-1(h)(3)(i).

In this action, Plaintiffs seek a declaration that the 2019 Final Rule is invalid under the Administrative Procedure Act, 5 U.S.C. § 706. Plaintiffs contend that Defendants — Treasury, the IRS, and their officers (the "Government") — exceeded their statutory authority in promulgating the 2019 Final Rule, and that the issuance of the Rule was arbitrary and capricious.

The Court dispensed with threshold issues such as 

• Standing (Slip Op. 16-29), 
• Anti-Injunction Act (Slip Op. 29-32) , and 
• Violation of the Regulatory Flexibility Act (Slip Op. 32-36).

Moving to the Merits of the Claim under the APA (Slip Op. 35-59), The Court first holds that the Regulation easily passes Chevron’s two-step analysis.  Key points:

George Mason Law Review Symposium Articles on Chevron; My Discussion of Professor Bamzai's Article (4/4/24)

Readers of this blog interested in Chevron deference should consider the Chevron on Trial Symposium Law Review edition of the George Mason Law Review. See Megan Dill, The George Mason Law Review’s Chevron on Trial Symposium Issue (Yale J. on Reg.: Notice & Comment 4/2/24), here. The N&C article lists and links a number of articles in the Symposium Issue.

In the N&C list, I focused principally on Professor Aditya Bamzai’s On the Interpretive Foundations of the Administrative Procedure Act, 31 Geo. Mason L. Rev. 439 (2024), html here and pdf here. I previously blogged on a draft of Professor Bamzai’s article. See Scholar Doubles Down on Erroneous Claim that APA § 706 Precludes Deference (Federal Tax Procedure Blog 1/23/24; 1/24/24), here. I have now made a few short amendments to that earlier blog (indicated in red font) to address the Final Article; hence, the final date in blog title’s parenthesis has changed to 4/4/24, which is how I flag the latest change). Scholar Doubles Down on Erroneous Claim that APA § 706 Precludes Deference (Federal Tax Procedure Blog 1/23/24; 4/4/24). Suffice it to say here that I continue to disagree with Professor Bamzai.

Tax Court Holds Conservation Easement Proceeds Regulation Invalid Consistent with Eleventh Circuit Holding in Hewitt (3/28/24; 4/6/24)

In Valley Park Ranch, LLC v. Commissioner, 162 T.C. ___ No. 6 (3/28/24) (reviewed opinion), JAT Google Docs here and GS temp link here (GS permalink to follow when available)*, the Court declares the “proceeds” conservation easement regulation invalid by reversing its prior holding in Oakbrook Land Holdings, LLC v. Commissioner, 154 T.C. 180 (2020), aff’d, 28 F.4th 700 (6th Cir. 2022) and adopting the holding of Hewitt v. Commissioner, 21 F.4th 1336 (11th Cir. 2021). The Tax Court gets there with a thin one-judge majority because it drew only 7 agreements with the opinion of the Court (including the author, Judge Jones); there were two concurring opinions in result only and 4 dissenting opinions. (Note that the Tax Court has only 13 active judges, with six vacant positions per § 7443(a).)

I noted yesterday that the commotion about Chevron deference is just a battle in a “larger war to discredit what is perceived (or claimed for political purposes) to be an evil administrative state.” See Discussion with Reporter about Possible Demise of Deference, Now Often Called Chevron Deference (Federal Tax Procedure Blog 3/28/24), here (See Bryan Camp’s comment that, for APA issues, everything looks like a nail.) My initial reaction when I saw the positions of all the judges on this issue was to test whether some such bent may have been involved in Valley Park Ranch. Here is my breakdown (readers can click on the graphic of the spreadsheet for a cleaner view and download; NOTE THERE WAS A BUST IN THE CALCULATION IN THE ORIGINAL POSTING THAT UNDERSTATED THE OBAMA NOMINEES; I CORRECTED ON 3/29/24 @ 8:45AM):

The breakdown is interesting.