Tax Regulations in a Loper Bright Light

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Blaine G. Saito

Abstract

The Supreme Court’s decision in Loper Bright Enterprises. v. Raimondo overturned Chevron deference. In doing so, Loper Bright loosed chaos into many areas of administrative law, including tax. Indeed, the majority opinion in Loper Bright undid Chevron but left open the question of what the actual standard of review is, namely, whether it is de novo or Skidmore applies.


Tax too will suffer some of the chaos, especially as courts work out the matters. But both the positive citation in the opinion of Skidmore along with some of the language supporting long-standing regulations that are contemporaneously promulgated with the statute’s enactment will help, intimating a slight revival of the old National Muffler test. Additionally, some of the discussions on giving agencies more leeway on delegated matters should also help in the tax area. Furthermore, given the messy and technical nature of tax law, many judges may be willing to allow the IRS’s and Treasury’s interpretations to stay in place unless a hot-button political matter is involved.


But expect there to be major fights. One area where we could see some of these matters play out is in transfer pricing, which is a huge and complicated regulatory area. Treasury’s moves toward things like formulary appointment and away from the arm’s-length standard will likely get struck down as ultra vires. In the end, while Loper Bright creates significant chaos now, some of it will eventually wane. And in the end while there will be some stability restored and generally a decent range given to the agencies, expect some bumpiness in the coming years.

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