The Decline of Chevron, the Rise of Loper Bright and the Shifting Sands of Tax Law

Abstract

The repeal of the Chevron deference doctrine has triggered what some may argue is a seismic shift in how tax law may be interpreted and applied, which may have far-reaching implications for taxpayers, the Internal Revenue Service and the federal government. This Article examines the evolving landscape of U.S. federal tax law in the wake of the Loper Bright decision, specifically focusing on the tax and economic consequences for key tax areas such as the General Anti-Abuse Rule and the complicated foreign tax credit and transfer pricing regimes, as well as the rules that characterize financial instruments or equity investments and the technical measurement and accrual of interest and OID rules. By removing the automatic deference previously afforded to the federal agencies in general and the IRS in taxation, courts may now be open to take a far more active role in interpreting ambiguous tax statutes, which could introduce further uncertainty on one hand, but also perhaps new opportunities for taxpayers. This Article argues that the repeal of Chevron deference could potentially result in inconsistent rulings, heightened litigation and a redefined balance of power between the judiciary and regulatory agencies. As the U.S. administrative legal system enters this new era, the U.S. federal tax system may follow, and all parties involved must navigate an increasingly unpredictable legal environment, with long-term consequences for innovation, compliance and tax strategy.