Is the US Supreme Court looking for a way to end decades of judicial deference to tax rules issued by the IRS and the Treasury Department? The judges took a case called Luber Brite Enterprises Inc. v. Raymundo, This would give them the opportunity to reverse the standards established by the Supreme Court itself in a landmark 1984 case called Chevron USA v. Natural Resources Defense Council.

The case has received relatively little attention in the tax world, which is more focused on another lawsuit the court will hear this year. Moore v. United States. This case directly challenges Congress’ ability to tax undistributed corporate profits and could have severe consequences for the entire revenue code.

But while Bright runner Not directly related to taxes, the court’s decision in this case could significantly limit the ability of the IRS and the Treasury Department to fill in the blanks that Congress almost always leaves when it writes, or rewrites, the tax code. The court is expected to hear oral arguments this fall.

Opportunity to limit rule making

Bright runner It involves a dispute over the regulation of commercial fishing boats. But many conservative advocates ( here and here ) see it as an opportunity for the Supreme Court to significantly expand on its recent incremental efforts to limit the power of the executive branch.

Reverse Chevron It would take a big bite out of federal rule-making authority. It would have “really significant implications” for the Treasury Department and the IRS, Loyola University law professor said The UAE Ellen April told me.

The 40-year-old Chevron Doctrine holds that judges generally must defer to federal agencies when Congress delegates the authority to write rules to regulators and so long as their interpretation of the law is “reasonable.”

Of course, the word “reasonable” is open to wide interpretation. But the overarching idea is that courts should recognize the expertise of regulators when laws are ambiguous. In a friend-of-the-court brief, law professors Kent Barnett and Christopher Walker called Chevron A “fundamental precedent” cited in 17,000 judicial decisions.

More uncertainty

This flexibility is particularly important for tax law. Congress often leaves it up to the Treasury Department and the IRS to fill in the blanks, either because taxes are too complex or because lawmakers can’t agree on how to address a particular issue. In fact, legislators often leave implementation of the tax code to the IRS and Treasury because they know they can do it, thanks in large part to Chevron.

If the judges reverse ChevronThe Treasury Department and the IRS are likely to be guided by long-standing opinions, including the Supreme Court’s 1979 decision in National Silencer Dealers Association v. United States. but National silencer It gives judges greater flexibility in deciding when to review tax regulations. As April says in a recent article, “the results of its application are uncertain.” She concludes: “Sometimes respect is prominent, and sometimes rarely at all.”

The Supreme Court has been reducing its regulatory authority since the turn of the century. Today’s conservative majority has embraced a new theory called the “Big Questions” doctrine, which asserts that some issues are so important that they cannot be left solely to regulators, even if Congress explicitly gives them broad rule-writing authority.

Judicial response

the Chevron The ruling will come at a time when the IRS has been receiving significant opposition from the courts. In several recent cases, judges invalidated IRS guidance because they said the agency did not first undergo the rigorous notice-and-comment procedures required for full regulations.

Loyola’s April says agencies may need to ask for public comment more often as a way to strengthen their case for “reasonableness.” But even by doing so, their authority to write regulations without being questioned by judges would be less clear without Chevron.

It is not possible to predict how the judges will rule Bright runner, naturally. If they limit their decision to the narrow facts of the fishing boat case, tax regulation will change little. But if they use the issue to the gut or even the opposite chevron, Tax administration and tax legislation may look very different in the coming years.

The Treasury Department and the IRS will still retain the authority to write regulations, especially for the new law, without continued judicial interference. But without ChevronWith judicial protection barriers, regulators will have much less flexibility to deal with changing circumstances. For example, will they still be able to write the tax rules that apply to cryptocurrencies, which are evolving much more rapidly than Congress can respond to?

Impact on Congress and taxpayers

How can a Chevron-Less impact on the world legislation? These days, tax law is often written at the last minute by non-experts gathered in a back room. The opportunities for policy mistakes or gaps are enormous. In today’s hyperpartisan environment, Congress often cannot move at all to fill in crucial details.

The result: key management questions left unanswered.

cancellation Chevron This would build on the Court’s recent eagerness to weaken the power of the executive branch. But it could upend the way Congress writes the tax code, create real chaos for the Treasury Department and the IRS, and complicate life for taxpayers craving clarity after the legislation.

(tags for translation)Individual Taxes

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