What was the State of Deference at the Enactment of the APA? (10/7/24)

I am presently writing an article I hope to publish to SSRN later this week. In that article, I include a discussion of Skidmore v. Swift & Co., 323 U.S. 134 (1944) which may have taken on new life as a result of the demise of deference from Loper Bright Ent. v. Raimondo, 603 U.S. ___, 144 S. Ct. 2244 (2024).

One key claim I make in the article is that Loper Bright is wrong in claiming that the cases in the 1940s “cabined” “deferential review to fact-bound determinations.” (144 S.Ct., at 2249.) The reason that the claim is important to the result is that Loper Bright needs to present the state of the law at the time the APA was enacted as not sanctioning deference to agency interpretations of ambiguous statutory text. During the consideration of the APA in 1945 and 1946, the consistent statements of the meaning of APA § 706 [§ 10(e) of the original APA before codification] was that § 706 restated existing law and made no change to the existing scope of judicial review of agency action. For a survey of those consistent statements, see John A. Townsend, The Tax Contribution to Deference and APA § 706 (SSRN 12/14/23 as updated on 10/6/24), here. In fact, the law is clear that deference was the state of the law at the time, as shown by Skidmore itself when read carefully.

Loper Bright gives new emphasis to Skidmore in the statutory interpretation universe, and at least as presented in Loper Bright, Skidmore has no relationship to the Loper Bright claim of no deference at the time the APA was enacted. But, as I present in my new yet-unfinished article, Skidmore confirms that Loper Bright just made up that claim of no deference.

9th Circuit 3-Judge Panel Has Three Different Interpretations Illustrating the Stupidity of Loper Bright's Rejection of Deference (9/3/24; 9/7/24)

In Brown v. Commissioner, 116 F.4th 861  (9th Cir. 2024), CA9 here & GS here, the Court rejected Brown’s claim that his offer in compromise had been statutorily eemed accepted under § 7122(f) because, he claimed, the IRS had not rejected the offer within 24-months of the date of the offer. Brown’s claim would have permitted him to settle $50 million+ tax liability for a bare fraction.

 Section 7122(f) provides:

(f) Deemed acceptance of offer not rejected within certain period
Any offer-in-compromise submitted under this section shall be deemed to be accepted by the Secretary if such offer is not rejected by the Secretary before the date which is 24 months after the date of the submission of such offer. For purposes of the preceding sentence, any period during which any tax liability which is the subject of such offer-in-compromise is in dispute in any judicial proceeding shall not be taken into account in determining the expiration of the 24-month period.

The Tax Court held that, under the facts, the offer had been rejected within the 24-month period. The Court of Appeals, in a 3-way split opinion (more below) held that Brown loses on the issue, with two judges reaching the result by different interpretations of the law and the dissenting judge reaching a contrary result (Brown wins) on a different interpretation. In other words, all the judges differed in their interpretations of the applicable law, but 2 interpretations favored the IRS and one favored Brown. Brown loses.

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.

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?

Oral Argument on 1/17/24 in Supreme Court Cases on the Future of Deference (1/16/24)

Oral argument in the cases (Loper Bright and Relentless, combined for oral argument) challenging Chevron deference is Wednesday, January 17. The relevant links are:

• Oral Argument Live, here (these are the only cases docketed for oral argument, so the oral argument should begin at 10am  EST).
• Recording of Oral Argument, here (listed under 22-451 Loper Bright Enterprises, Inc. v. Raimondo, Sec. of Comm. and 22-1219 Relentless, Inc. v. Dept. of Commerce.
• Transcripts of Oral Arguments (these are subject to change):
• Loper Bright, here.
• Relentless, here.

I thought I would use this blog to alert readers to some hyperbolic claims likely to appear in the oral argument (as they have proliferated in the press). (George Will, no fan of the administrative state or of Chevron, has said that “Hyperbole [is] the default setting in today’s discourse.” George F. Will, How the Supreme Court could end the ‘Chevron deference’ foolishness (WAPO 1/12/24), here (the claims he makes in his article prove the ubiquity of hyperbole).

Before addressing the hyperbole likely to appear in oral argument, I think it is helpful to establish what deference is:

Deference is commonly stated as a court applying an agency interpretation that reasonably interprets ambiguous statutory text within the scope of the ambiguity. Deference is more subtle than that. Deference is neither required nor applicable if the agency interpretation is the best interpretation (best interpretations are per se reasonable, after all). Rather deference only occurs when the agency’s reasonable interpretation is not the best; only then can a court defer to that not-best agency interpretation. (This does not address the phenomenon of the state of interpretive equipoise which I discuss in paragraph 4 below,)

 Now, to the hyperbole:

1. The hyperbole: Deference was the creation of the Chevron case decided in 1984. George Will says, “first propounded by the court in 1984.” That statement is not only hyperbole, it is false. Deference to reasonable agency interpretations of ambiguous statutory text has been a feature of authoritative judicial decisions since at least the 1920s. All Chevron did was to (i) articulate an additional rationale for deference in the executive branch’s more direct accountability to the citizens than courts with lifetime appointments and no constituency and (ii) permit the famous 2-Step, which later courts found implicit in Chevron. (Since deference was the same as prior deference, the 2-Step formula was implicit in pre-Chevron deference.)

A Conceptual Analysis of Chevron Footnote 9’s Approach to (Possibly) Mitigating Chevron Deference (10/15/23; 2/6/24)

I am working on a paper addressing the issue of whether APA § 10(e) of the original Administrative Procedure Act in 1946 (now codified at 5 USC § 706, here). My principal contribution is to bring the tax authorities into the discussion. Tax authorities are important to the discussion but have been overlooked or misunderstood by those writing on the subject.

Today’s blog addresses the commotion about whether rigorous statutory interpretation is a cure, in whole or in part, to so-called "reflexive deference." This topic was originally in the drafts of the paper, but I took it out to slim the paper down and now offer the discussion here.

The cure championed by some (e.g., Justice Kavanaugh) is to deploy rigorous statutory interpretation at Chevron Step One to determine the best interpretation without ambiguity. (Remember that only at Chevron Step Two after determining ambiguity does Chevron deference apply.) This approach is the so-called Chevron Footnote 9 approach based on Chevron’s footnote 9 (Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837, 843 n9  (1984) (case citations omitted)):

   n9  The judiciary is the final authority on issues of statutory construction and must reject administrative constructions which are contrary to clear congressional intent. If a court, employing traditional tools of statutory construction, ascertains that Congress had an intention on the precise question at issue, that intention is the law and must be given effect.

The notion is that more rigorous interpretation will shrink the scope of the ambiguity and will shrink (or tame) the scope of deference. Deference deniers view this as a positive good to at least partially emasculate Chevron deference.

This blog is inspired by a tax phenomenon at the heart of abusive tax shelters sold with “opinions” written by prominent lawyers and accountants that the key legal edifice (and components) supporting a bullshit tax shelter opinion would “more likely than not” prevail. That type of legal opinion was inspired by the fact-finding concept that preponderance of the evidence meant a finding that, on the evidence, the fact was more likely than not. The fact-finding concept was sometimes conceptualized as a finding that the fact was more than 50% likely based on the evidence. A 50% or lesser likelihood meant the party bearing the burden of persuasion lost on that fact issue. So, in theory, if the fact-finder found that the fact was 51% likely the party bearing the burden of persuasion on that issue wins. I hope at this point you have spotted the problem—what exactly is the difference between 50% and 51% likelihood? Can a fact-finder really perceive that fine a difference in a way meaningful to make a rational fact-finding? Isn’t this a context where there is a range rather than a finite percentage. See in a similar context in fact-finding, John A. Townsend, Burden of Proof in Tax Cases: Valuation and Ranges—An Update, 73 Tax Lawyer 389 (2020), here.

Applying that theoretical concept to “law-finding,” what is the difference between a 51% and a 50% likelihood for a legal opinion. Can any rational or responsible law-finder—whether a judge in a case or a lawyer rendering a legal opinion--make that fine an analysis? Specifically, in the current context, is a judge’s or a lawyer’s belief that the likelihood of being the correct interpretation is 51% (proponent wins) or 50% (proponent loses) meaningful? Is that sliver of difference of 1% (or with finer tuning, .000001%) meaningful to anyone? See e.g., Daniel J. Hemel and Aaron L. Nielson, Chevron Step One-and-a-Half, 84 U. Chi. L. Rev. 757, 781-782 (2017) (using a similar spectrum analysis)

DC Circuit Denies Petition for Rehearing in Case Involving the Best Interpretation, Meaning no Deference (5/9/23)

The D.C. Circuit denied the petition for rehearing en banc in Guedes v. ATF, 45 F.4th 306 (D.C. Cir. 8/9/22), DCCir here and GS here, pet. reh. den. ___ F4th ___ (D.C. Cir. 5/2/23), DCCir here and GS here. In the panel decision (45 F.4^th 306), the question was “whether the Bureau [ATF] had the statutory authority to interpret ‘machine gun’ to include bump stocks;” the Court’s answer was: “Employing the traditional tools of statutory interpretation, we find that the disputed rule is consistent with the best interpretation of “machine gun” under the governing statutes.” In other words, the panel appears to have resolved the case at Chevron Step One where there is no deference, not even getting to Step Two (although it could have potentially been resolved at Step Two by applying the agency best interpretation, where there is also no deference).

On the petition for rehearing en banc, the Court denied the petition without explanation by the full panel. Judge Wilkins wrote an opinion, joined by Judge Millett, concurring in denial of the petition. Judges Henderson and Walker wrote separate dissenting opinions. Judge Henderson’s opinion referred to her concurring in part and dissenting in part in the panel opinion. Judge Walker wrote a political screed with ample conservative/libertarian rhetoric but without, in my mind, serious consideration of how the country should interpret laws where the language of the statute, whatever it's original meaning, if sufficiently copious to cover the situation within the purpose of the statute. (There are huge debates about all of this, but I use examples in two contexts: (1) When the Declaration of Independence declared that all men are created equal, are or should we be locked into meaning of free white men with property?; or (2) when the Bible says eye for an eye, are we now locked into that concept as justice?)

Looking to a larger issue not directly addressed by the opinions concurring and dissenting from denial of the petition, I have addressed the key point that a best interpretation of statutory text is not in need of deference. Of course, if that best interpretation is determined at Chevron Step One, the interpretation is applied because there is no ambiguity in the statute that could permit deference, required to proceed to Step Two. Further, if that best interpretation is the agency interpretation determined at Step Two when competing interpretation(s) are considered, the agency interpretation is the best interpretation and not subject to real deference. Only where, at Step Two, the agency interpretation is the less persuasive interpretation to another interpretation is there any possibility of deference and then only when the Court applies the agency interpretation even though it thinks there is a better interpretation.

So, to put this in the expanded Chevron Steps where there is no deference to agency interpretations:

Deference--Real Deference--To Agency Less Persuasive Interpretations and APA Review of Agency Discretion (5/4/23)

Yesterday, I spent about 5 hours going through The Papers of Professor Carl McFarland at the UVA Law School Special Collections, here. Professor McFarland was a major player in shaping the Administrative Procedure Act (“APA”), enacted in 1946. What I hoped to find in the long, very long legislative and related history of the APA about (i) the consideration of deference and (ii) the distinction between legislative rules and interpretive rules (called interpretative) in the APA. I found nothing directly addressing those issues in Carl McFarland’s papers, but I did get have an insight from those materials that may help in the deference analysis. I will post that insight below. (As an aside, while at UVA law in 1966 or 1967, I played the role of Professor McFarland in the law school’s annual Libel Show roasting professors.)

While at the UVA Law Library, I recalled that some law professors uploaded to HeinOnline extensive history (statutory, legislative, and otherwise) of the APA. That collection is The Bremer-Kovacs Collection: Historic Documents Related to the Administrative Procedure Act of 1946 (HeinOnline), here. That collection requires a subscription to HeinOnLine, but it can be accessed at many law schools. This is an exhaustive collection; let me repeat that, exhaustive). For discussion of this collection, see Emily S. Bremer and Kathryn E. Kovacs, Editors, Introduction to The Bremer-Kovacs Collection: Historic Documents Related to the Administrative Procedure Act of 1946 (HeinOnline 2021), 106 Minnesota Law Review Headnotes 218 (2022), here. Yesterday, while at the UVA Law Library, I accessed a lot of that history and downloaded key documents in pdf format that I will review for the topics I mentioned in the opening paragraph.

Now to the insight. The insight is that it is clear from the legislative history and the APA itself, that the APA does not affect an agency’s exercise of discretion within the scope of the discretion. APA § 706(2) does permit review for abuse of discretion. But within the scope of discretion, there is no court review.

Relating discretion to deference, as I have noted many times, when the agency reasonable interpretation is better than other reasonable interpretations in the zone of the ambiguity in the statute, a court applying the agency interpretation is not deferring to a less persuasive agency interpretation. Only when a court determines the better interpretation within the ambiguity and nevertheless applies a lesser agency interpretation does it actually defer. In the latter case, real deference (both Chevron and pre-Chevron deference during the long history of deference) may be said to create a zone of deference (or discretion) on a spectrum from reasonable (real deference at Chevron Step Two) to unreasonable (no deference at Chevron Step Two). (Actually, that may be better conceptualized as a binary choice of agency reasonable but not the most persuasive (real deference) and unreasonable (no deference). Unreasonable may be equated to abuse of discretion in the words of § 706(2).

That is the insight I wanted to share. I will now get into a more technical discussion of key statutory and legislative history from the original APA as enacted to current § 706(2). I suspect most readers will not be interested in this, but here it is.

Chevron Step Two Reasonableness and Agency Best Interpretations in Courts of Appeals (2/9/23)

Many observers have noted that the Supreme Court has avoided Chevron deference in recent years. E.g., Isaiah McKinney, The Chevron Ball Ended at Midnight, but the Circuits are Still Two-Stepping by Themselves (Notice & Comment 12/18/22), here. The Supreme Court has affirmed so-called Auer deference for agency subregulatory interpretations of ambiguous regulations. Kisor v. Wilkie, 588 U.S. ___, 139 S.Ct. 2400 (2019). (Auer deference is now sometimes called Auer/Kisor deference.) But the Supreme Court has not deployed core Chevron deference recently, although one prominent scholar has said that Kisor was an affirmation of Chevron deference. Cass R. Sunstein, Zombie Chevron: A Celebration, 82 Ohio St. L.J. 565, 570-571 (2021) (“If Kisor was right, it would be easy to conclude that Chevron was also right, and for exactly the reasons given by the Court in that case.”) Still, I suspect that the Supreme Court’s Chevron avoidance is to avoid reflexive deference and more rigorously apply the tools of construction to find no ambiguity at Chevron Step One (without mentioning Chevron).  See e.g., Isaiah McKinney, At the Supreme Court, Chevron Deference Has Morphed into the Application of the Tools of Construction (Notice & Comment 2/9/23), here.

Not all Justices avoid Chevron. Justice Gorsuch has lamented Chevron in dissenting opinions. E.g., Buffington v. McDonough, 143 S. Ct. 14 (2022), here, discussed at Justice Gorsuch's Newest Rant on Chevron and the Administrative State (Federal Tax Procedure Blog 11/7/22; 11/8/22), here. This ranting is just a continuation of his famous claim on the 10^th Circuit that Chevron was the “elephant in the room * * * [permitting] executive bureaucracies to swallow huge amounts of core judicial and legislative power and concentrate federal power in a way that seems more than a little difficult to square with the Constitution of the framers' design.” Gutierrez-Brizuela v. Lynch, 834 F.3d 1142, 1153 (10th Cir. 2016) (concurring to his own majority opinion apparently because he could not get the other judges on the panel to join his rant).

With Chevron falling  into desuetude on the Supreme Court, others have noted that the Chevron action is in the lower courts, noting particularly the Courts of Appeals. Chevron is Supreme Court authority that has not been overruled; logically, Chevron should be used by Courts of Appeals in appropriate cases.

I recently tested a one-year dataset of possible Chevron applications in the Courts of Appeals. Is Chevron on Life Support; Does It Matter? (Federal Tax Procedure Blog 4/2/22; 4/3/22), here. That data set included no Court of Appeals opinion where the Court said it was deferring to a less persuasive agency interpretation. In each instance where a Court of Appeals invoked Chevron in outcome determinative way, it simply declared the agency interpretation reasonable at Chevron Step Two. Of course, agency interpretations that are the best interpretations are reasonable. So, when a court stops at merely declaring the agency interpretation reasonable, it has not determined that the agency interpretation was not the best interpretation and was deferring anyway.

Fifth Circuit En Banc Reverses the Bump Stock Regulation By Wobbling Around Statutory Interpretation Issues (Including Chevron) (1/8/23)

In Cargill v. Garland, 57 F.4th 447 (5th Cir. 2023) (en banc), CA5 here and GS here, the Fifth Circuit reversed the prior panel opinion and held that the ATF bump stock regulation interpreting the term "machinegun" to include a so-called bump stock. The holding, one of statutory construction, may be stated as follows: 

• "A plain reading of the statutory language, paired with close consideration of the mechanics of a semi-automatic firearm, reveals that a bump stock is excluded from the technical definition of "machinegun" set forth in the Gun Control Act and National Firearms Act." (Slip Op. 3)
• But, even if the statutory term machinegun were not unambiguous, the statutory term "machinegun" is not ambiguous enough to include bump stocks as a permissible interpretation because of the rule of lenity when criminal consequences might attend, requiring ambiguities to be resolved in favor of the citizen potentially subject to those criminal consequences.

In the course of these core holdings, the en banc majority, concurring and dissenting opinions delve into many topics that I have discussed in connection with the bump stock cases related to Chevron and Chevron-related issues (in a broad sense). I collect at the end of this blog in paragraph 16 some of my earlier Federal Tax Procedure blogs on these issues arising in prior cases involving the bump stock regulations.

I address several key points in the various opinions (the en banc majority, the concurring, and the dissenting opinions).

1. I state at the outset that I believe this commotion about bump stocks is inherently political. Those judges fearing the administrative state (at least in their rhetoric landing them a place on a court) are more likely to reach the decision the en banc majority reached. Those judges whose rhetoric does not include fear of the administrative state and believe that administrative agencies can enrich our society and make it work better are less likely to reach the decision the en banc majority did. Both sides can pull up soundbites masquerading as reasoned decisionmaking to justify the result they prefer. At the end of the day, I think the real issue is whether there can be a symbiotic relationship between Congress, the Executive, and the Courts which together act reasonably to make our system work.

2. The en banc majority main holding is that the meaning of the statutory term "machinegun" is plain and unambiguous. In the Chevron framework, that would be a Step One determination that stops the Chevron analysis. There have been many words spent in addressing precisely what is meant by plain meaning and unambiguous to avoid the Chevron framework (or, equivalently, stopping the Chevron analysis at Step One), but I think the en banc majority's claim is that the other courts finding ambiguity means that those other just missed the meaning of the term that is so plain to this en banc majority. Everyone can agree that, when enacted in the 1930s, the statutory term machinegun did not include a bump stock which did not then even exist. But once they began to exist around 2000, I don't think it is so plain that the statutory term machinegun should not include bump stocks. This seems to be an eye of the beholder thingy, with political implications (which is what originalism is about).

3. At least in less political analysis, determining whether the statute is plain requires the use of the normal tools of statutory construction. Rhetoric aside, the normal tools of statutory construction include Skidmore respect for an agency interpretation. Skidmore v. Swift & Co., 323 U.S. 134 (1944). None of the en banc opinions cite Skidmore. (Note in this regard that Skidmore is not deference as many so-called smart judges and scholars mislabel it.  See Really, Skidmore "Deference?" (Federal Tax Crimes Blog 5/31/20; 2/14/21), here.

Justice Gorsuch's Newest Rant on Chevron and the Administrative State (11/7/22; 11/8/22)

Justice Gorsuch continues his ranting against Chevron and the administrative state in a dissent today from a denial of a petition for certiorari.  Buffington v. McDonough, 143 S. Ct. 14 (Sup. Ct. Case No. 21–972 11/7/22), SC here and GS here; Supreme Court docket entries here.  

As with his concurring opinion in Gutierrez-Brizuela v. Lynch, 834 F.3d 1142, 1153 (10th Cir. 2016), GS here, he rants alone, unable to attract any other Justices’ concurrence in his concurrence.  I will write more later today or tomorrow on his rantings; in the meantime, readers can read the rant (only 16 pages) without being distracted by my counter-rant.  I will say that my text search indicates that he does not repeat his Brizuela concurring rhetoric about elephant in the room. At least that is good, but he does have some other rhetorical sound bites that may play well with persons who hate the administrative state as much as he does.

When I write more, I will post it to this blog entry and note the date and time I added it.

Added 11/8/22 ___ pm 2:15 pm:

1. Justice Gorsuch makes clear that he does not like Chevron “deference” because, he believes, it allocates interpretive power to agencies that should belong to the courts. I think readers interested in this area should respectfully consider his arguments (sort of like Skidmore respect for arguments in non-majority opinions.). I do not deal in detail with the arguments because they are addressed in my article,  The Report of the Death of the Interpretive Regulation Is an Exaggeration  (SSRN December 14, 2021), here. (Referred to in this blog entry as Report of the Death.)

2. I disagree with two major points in Justice Gorsuch’s argument:—

 (i) courts did not defer to agency interpretations before Chevron was elaborated after the decision in 1984 but instead only gave respectful consideration to agency interpretations a la some Skidmore-type respect to determine the best interpretation);  and

(ii) the APA § 706 allocated to the courts all interpretive power over ambiguous statutory text just as the Constitution requires from the sound bite in Marbury v. Madison.

What is the Best Interpretation for Purposes of Determining a Not Best Interpretation for Chevron Deference? (10/21/22; 11/8/22)

Last week, I participated in a panel at the ABA Tax Section Fall Meeting in Dallas. The panel was offered by the ABA Tax Section Teaching Taxation Section. The program was titled “Classification of Tax Regulations and the APA.” The panel participants were Les Book (moderator), Kristin Hickman, Gil Rothenberg, and me. The program dealt in part with some issues that Professor Hickman and I have engaged in the past. On those issues, Hickman and I continue to engage without agreement. 

I say "without agreement," but in fact Hickman and I did agree (i) on the starting point that, at the enactment of the APA in 1946, the APA permitted both legislative rules (must be notice and comment regulations) and interpretive rules (including, although not required, notice and comment regulations such as Treasury used for interpretive rules adopted as regulations) and (ii) that for well after the APA, the category of interpretive notice and comment regulations was alive and well, without controversy. Our point of continuing disagreement is whether something has changed that original meaning of the APA, so that notice and comment regulations that do no more than interpret ambiguous statutory text no longer exist but are now legislative regulations. That disagreement is not the focus of this posting but may underly some of the analysis in this posting.

In the panel discussion, I repeated my recent claim that Chevron deference is inapplicable if the agency interpretation is the best interpretation. The corollary to this is that Chevron’s domain in an outcome determinative sense involves only deference to “not best” agency interpretations. We only touched on that issue lightly in the panel, but one panelist questioned whether "best interpretation" was a meaningful concept. (Added 10/25/22 11:00am:  On Chevron's domain as limited to not best interpretations, see e.g., Nat’l Cable & Telecomms. Ass’n v. Brand X Internet Servs., 545 U.S. 967, 980 (2005) (“Chevron requires a federal court to accept the agency’s construction of the statute, even if the agency’s reading  differs from what the court believes is the best statutory interpretation.”).)

I thought it might be helpful to say further what I mean by “best interpretation.”  The best (or most persuasive) interpretation is the interpretation which the court would apply based solely on interpretive tools in the absence of an agency interpretation or, if there is an agency interpretation, in the absence of Chevron deference. The court’s job in statutory interpretation is to determine and apply the best interpretation of the statute to the facts before the court. (BTW, it is important to note that courts cannot legislate, so courts’ exercise of interpreting a statute to determine the best interpretation is not legislative.  See Is Statutory Interpretation a Legislative Act When Agencies Do It But Not When Courts Do It? (Federal Tax Procedure Blog 4/8/22; 10/23/22), here.). 

If the agency interpretation is that best interpretation, the court applies that interpretation because it is the best interpretation and not because it is deferring to the agency interpretation. Of course, in determining the best, most persuasive interpretation, the court should consider respectfully the agency interpretation. Skidmore v. Swift & Co., 323 U.S. 134, 140 (1944) (Skidmore respect is not deference (although frequently mislabeled as deference) and applies at Chevron Step One as well as in generally determining the most persuasive interpretation.) See Really, Skidmore "Deference?" (Federal Tax Procedure Blog 5/31/20; 2/14/21), here. Deference—real deference--is only outcome determinative if the court invokes Chevron to apply a “not best” interpretation over the court’s own best interpretation.

That best interpretation concept is simple and, I think, irrefutably true. There will always be a “best interpretation” so defined because, in the absence of an agency interpretation, it is the interpretation the court would apply to decide the case. In deciding whether or not to apply Chevron deference to an agency interpretation, a court will have to know what the best interpretation is (i.e., what the court would do without deference to the agency interpretation). How else could a court determine whether an agency interpretation is “reasonable” or “permissible” even though not best (the requirement for Chevron deference)?

Is Chevron on Life Support; Does It Matter? (4/2/22; 4/3/22)

In teaching tax procedure for many years, I introduced my students to Chevron deference while discussing the false claim of “tax exceptionalism.” I define Chevron deference as a court deferring to an agency statutory interpretation that is less persuasive than the interpretation determined by the court. After all, if a court determines that the agency interpretation is the best interpretation, it does not defer to the agency interpretation. In a recent article titled  See John A. Townsend, The Report of the Death of the Interpretive Regulation Is an Exaggeration (SSRN last revised 12/15/21), here, I addressed the key feature for Chevron deference, the continued existence of the APA interpretive regulation category.  As a Postscript to that article I dug in deeper on Chevron deference.  Readers can view that Postscript separately here. In the Postscript, I review my evolved thoughts on Chevron, developing analytical Categories for potential deference to agency interpretations.  (Those Categories are below.)  I inferred that Chevron deference to lesser agency interpretations is rarely outcome determinative. I base my inference on how I understand judges work (do they really apply less persuasive interpretations if they can avoid it?) and my reading of many cases citing Chevron.

An author posted an empirical analysis of cases where he identified 56 Federal Courts of Appeals cases as “granted Chevron deference” for the year ended November 30, 2021. Damonta D. Morgan, Chevron’s New Step Zero?: Measuring the Impact of Justice Gorsuch’s “Pecuniary Interest” Query (Notice and Comment 1/4/22), here. Mr. Morgan graciously shared his data set and permitted me to use it to test my inference.

I used the Categories to identify which cases in Mr. Morgan’s dataset involve deference to lesser agency interpretations. My categorization of the cases is in the table linked here; and explanations for the Categories assigned in the table are here [Note: the linked file when this blog was originally published was the wrong one; on 4/3/22 at 1:30 pm, I posted the correct linked file.] The aggregate results by Category are:

Category 0 - Cannot characterize but no deference; some could be like Chevron Step 0; this Category was not in the Postscript.	8
Category 1 - Statute unambiguous with no interpretive space for agency interpretation; no deference.	2
Category 2 - Statute ambiguous; no agency interpretation; court interprets; no deference	0
Category 3 - Court determines agency interpretation is best interpretation and applies it; no deference	8
Category 4 - Court determines agency interpretation unreasonable & applies the court's better interpretation; no deference	2
Category 5 - Court determines agency interpretation is reasonable but not best interpretation and defers to the agency interpretation anyway; deference (only category where court expressly deferred to a less reasonable agency interpretation)	0
Category 6 - Court determines agency interpretation is reasonable but makes no determination of best interpretation; applies agency interpretation; inconclusive deference	36
Category 7 - Court determines agency interpretation is reasonable but there is at least one other reasonable interpretation and court is in equipoise as to the best interpretation; court applies agency interpretation; no deference (because the court does not defer to a less persuasive agency interpretation)	0

The only relevant Categories to test my inference are Categories 5, 6 and,7 possibly, 7.  I wanted to present the other Categories (0-4) to illustrate a large swath of cases involving interpretations where there is no deference.  Actually 56 identified cases in a year that could possibly involve Chevron deference is a very small percentage court of appeals cases in the courts of appeals.  Mr. Morgan’s data set already excluded the bulk of the Category 0-4 cases because they involve no possible deference.  I have cases in those Categories where I disagree with Mr. Morgan that they were “granted Chevron deference.” Based on my assignment of cases to Categories, I conclude:

Justices Discuss Limited Ambiguity Role for Lenity and by Analogy Chevron Deference (3/11/22)

Ambiguity in statutory text can invoke two interpretive regimes.  Ambiguity in a criminal statute invokes the rule of lenity that says that if a criminal statute is ambiguous (or, sometimes, grievously ambiguous) the statutory ambiguity must be interpreted in the criminal defendant’s favor.  Ambiguity in a statute potentially subject to Chevron deference to an agency interpretation is interpreted consistent with the Chevron-entitled agency interpretation if it is reasonable (permissible).  Both interpretive regimes turn on ambiguous statutory text.

The question I address in this blog is what ambiguity means for both lenity and Chevron deference.  The only thing that I am sure of is that ambiguity in either context has no litmus test, thus is itself ambiguous.  As I note in The Report of the Death of the Interpretive Regulation Is an Exaggeration 75 n. 296 (SSRN December 14, 2021), here.

   n. 296 The word ambiguous in deference jurisprudence may be ambiguous. E.g., Aditya Bamzai, Delegation and Interpretive Discretion: Gundy, Kisor and the  Formation of Future Administrative Law, 133 Harvard L. Rev. 164, 187 n. 140 (2019) (“The question of how to identify ‘ambiguity’ is a long-running one in both administrative law and elsewhere,” citing scholarly discussions); Brett M. Kavanaugh, Book Review: Fixing Statutory Interpretation, 119 Harv. L. Rev. 2118, 2118-2119 (2016) (“judges often cannot make that initial clarity versus ambiguity decision in a settled, principled, or evenhanded way”); and Ryan D. Doerfler, The “Ambiguity” Fallacy, 88 Geo. Wash. L. Rev. 1110 (2020) (“‘ambiguity,’ is critically ambiguous.”)

Ambiguity in the ambiguity concept also infects lenity.  In Wooden v. United States, 595 U. S. ____ 2022 U.S. LEXIS 1421 (3/7/22), S.Ct. here and GS here, Justices Kavanaugh and Gorsuch, in concurring opinions, weighed in on the issue in ways that evoke the ambiguity discussion for Chevron deference and may offer some guidance in Chevron deference.

I start with Justice Gorsuch’s discussion on p. 9 of his concurring opinion which starts here.  Justice Gorsuch starts with a complaint about the gloss sometimes added to the lenity discussion that the ambiguity must not only be ambiguous but also must be “grievously ambiguous.”  I think he does a pretty good job in demolishing the spurious notion that there are two categories of ambiguity for lenity purpose – grievous in which lenity applies and non-grievous in which lenity does not apply.  Lenity applies where there is ambiguity, period.

This still does not help in determining what ambiguity is.  Is it just that the judge knows it when he or she sees it.  Justice Kavanaugh discusses that issue in his concurring opinion starting here.  Basically, Justice Kavanaugh argues that ambiguity in statutory interpretation for lenity purposes is a rare phenomenon.  Evoking the Chevron / Auer concepts hinging on ambiguity, Justice Kavanaugh says (p. 2 of concurring opinion):

Tax Court Holds that Collected Proceeds for Whistleblower Awards under § 7623(b) Do Not Include Unrelated Collections (8/18/21; 8/19/21)

In Lissack v. United States, 157 T.C. 63 (2021), here, the Tax Court (Judge Lauber) held (quoted from the Syllabus):

P filed Form 211, Application for Award for Original Information, claiming that T had failed to report membership fees as gross income. R initiated an examination on the basis of P’s claim. During the examination R determined that T had properly treated the membership fees as nontaxable deposits but also discovered an unrelated issue--that T may have claimed an erroneous deduction. R expanded the scope of the examination to include the latter issue and ultimately disallowed the deduction, yielding a $60 million adjustment. R subsequently denied P’s whistleblower claim on the ground that he had not supplied any information about the erroneous deduction.

A whistleblower is eligible for an award only if R “proceeds with an[] administrative or judicial action * * * based on information” supplied by the whistleblower and collects proceeds “as a result of the action.” I.R.C. sec. 7623(b)(1). The parties have filed cross-motions for summary judgment addressed to the question whether P is entitled to an award under this standard.

Held: Although R proceeded with an administrative action, P is not eligible for a whistleblower award because R did not collect any proceeds “as a result of the action.” See I.R.C. sec. 7623(b)(1). The examination of the erroneous deduction issue constitutes a separate administrative action that was not initiated on the basis of P’s claim. See sec. 301.7623-2(a)(2), (b)(1) and (2), Example (2), Proced. & Admin. Regs. 

Held, further, the construction of I.R.C. sec. 7623(b)(1), as set forth in these regulations, is valid under Chevron, U.S.A., Inc. v. Nat. Res. Def. Council, Inc., 467 U.S. 837 (1984).

More Thoughts on APA and Legislative and Interpretive Regulations Inspired by Recent Cases (4/8/21; 4/11/21)

As readers of this blog know, I have recently been considering and even obsessing over the distinction between legislative and interpretive regulations for purposes of the APA and Chevron deference.  Just in the past few days, I have focused on four opinions that I think highlight the confusions in this area.  The first three are decisions by three different Circuits on the issue of the validity of a recently adopted regulation including bump stocks within the statutory definition of “machineguns,” thus prohibiting their possession with potential criminal penalty consequences.  Those decisions are:

• Guedes v. BATFE, 920 F.3d 1 (D.C. Cir. 2019), cert. denied, 140 S. Ct. 789 (2020), D.C. Cir. here and GS here; 
• Aposhian v. Barr, 958 F.3d 969 (10th Cir. 2020), 10th Cir. here and GS here; and
• Gun Owners of Am., Inc. v. Garland, 992 F.3d 446  (6th Cir. 3/25/21), 6th Cir. here; GS here.  [Note that the lengthy decision was published on the same day as oral argument.]

The regulation was sustained in Guedes and Aposhian as a Chevron-entitled interpretation of the ambiguous statutory text; the regulation was invalidated in Gun Owners as (i) violating separation of powers and the rule of lenity and (ii) in any event not passing Chevron analysis as a reasonable interpretation of ambiguous statutory text.

The Fourth Opinion, a truly monster opinion, was an en banc opinion in Brackeen v. Haaland, 994 F.3d 24 (5th Cir. 4/6/21), 5th Cir. here; GS here.  The opinions are, in the aggregate, 325 pages long and the portions of the opinions that represent the en banc opinion are scattered in two separate opinions – that of Judge Dennis and that of Judge Duncan.  Here is the Court’s description:

Dennis, J., delivered the opinion of the en banc court with respect to Parts II(B), II(C), and II(D)(2) of his opinion (except as otherwise noted in the Per Curiam opinion, supra). 

Duncan, J., delivered the opinion of the en banc court with respect to Parts III(B)(1)(a)(i)–(ii), III(B)(1)(a)(iv), III(B)(2)(a)–(c), III(D)(1), and III(D)(3) of his opinion (except as otherwise noted in the Per Curiam opinion, supra).

The exercise of working through that stuff to figure out what the en banc holdings were would be daunting indeed.  So, the Fifth Circuit helpfully offers the first opinion, a per curiam opinion, to provide a guide to the en banc opinions embodied in the opinions with the named authors.  Fortunately, for purposes of this blog entry, I and readers interested in the legislative – interpretive distinction do not have to dig through all of that morass.  In relevant part, Judge Dennis’ opinion has the en banc opinion at outline paragraph II.D.2., titled The Scope of the BIA’s Authority, on pages 138-147, beginning here.

I offer this high level summary with limited citations (I am revising my article on the subject for posting to SSRN later).  I begin with what I think should be the starting point for discussing the issue—the original meaning of the APA distinction between legislative and interpretive regulations and how that original meaning played out in deference.  I will then address the cases which evidence the distortions and distractions that have obscured the original meaning.

Original Meaning of the APA

More on Fact Finding Tools and Statutory Interpretation through Chevron Deference (1/21/19; 1/25/19)

The Chevron Framework that is so ubiquitous in administrative law now (see e.g., Law Finding (The Chevron Framework) and Fact Finding in Trials (Federal Tax Procedure Blog 1/19/19), here) offers another interesting relationship to fact finding.

A standard formulation of the preponderance of the evidence fact finding standard is that, if the fact finder is in "equipoise" as to the existence of the fact, the party bearing the burden of persuasion loses on that fact.  Equipoise is that point (stated in percentages at 50% belief in the existence or nonexistence of the fact) where the trier cannot decide with the comfort level of more likely than not (in percentages greater than 50% (existence) less than 50% (nonexistence)).

That same phenomenon conceptually occurs in determining a proper interpretation of a statute.  If there is more than one reasonable interpretation of the statute, then presumably the most reasonable interpretation applies.  The most reasonable interpretation could be the one that is more likely than not the correct one.  In the percentages, it is the interpretation that the court is persuaded to a level greater than 50%.  But the most reasonable interpretation can mean something less than 50% if there is more than two reasonable interpretations of the statute.  Then, presumably, the most reasonable interpretation could be the one at a 40% level if the other two are at 30%.  But, even though not the more likely than not interpretation, a court has to pick one interpretation and would, presumably, pick the 40% level.

But what does a court do when the interpretations are 50-50 with no one of them more likely than not?  I don't have an answer to that question, but I do want to pursue the question in the context of an agency interpretation in a regulation.  The court would then apply the Chevron Framework (based on Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984) and its progeny).

Chevron deference would mean, theoretically, if the agency in the above three interpretation choice example, chose a 30% interpretation, the court should defer to it (assuming 30% is within the range of reason even though it believed the 40% interpretation was the most reasonable (actually I would say was the more reasonable)).

Now, going back to the two interpretation choice example, Chevron would say that, if the Choice 1 were 60% and Choice 2 were 40% and the agency interpretation was Choice 2, then the agency interpretation controls (provided the court agrees that Choice 2 is at least a reasonable interpretation).  Perforce, that would mean that if the interpretations are equally persuasive (50% for each, the state of equipoise under the fact finding analogy), then the agency interpretation governs.

I recently picked up this on Chevron and equipoise (Paul A. Larkin, Jr., Reawakening the Congressional Review Act, 41 Harv. J.L. & Pub. Pol'y 187, 209 (2018), here, in discussing judicial review of agency interpretations:

[T]he controversy is biased in the agency's favor. Chevron and other Supreme Court decisions place a thumb on the government's side of the scale when it comes to the meaning of federal law, with the agency winning when it has the better of the argument and when courts find themselves in equipoise.

Notice that the author says Chevron applies (i) when the agency has the better (in percentages more than 50%) or is in equipoise (50%-50%).  As I suggest above, the way I read Chevron is that Chevron deference to the agency interpretation may apply in a third category -- when an agency interpretation is not the better and there is no equipoise, so long as the agency interpretation is reasonable.

Indeed, to work this further, if the agency interpretation is better (in the court's mind), then deference means nothing because that is the interpretation the court would have chosen anyway.  So, deference is meaningful only in the equipoise situation (a rare occurrence in fact-finding and, I think, equally rare in law finding) and where the agency interpretation is not the better interpretation but is reasonable.

Addendum 1/25/19: