What do commercial fishing boats have to do with the IRS and potentially your taxes? That’s a question on some people’s minds since the U.S. Supreme Court recently heard oral arguments in Loper Bright Enterprises v. Raimondo.
The Loper Bright dispute is about a regulation by the National Marine Fisheries Service that requires commercial fisheries to pay about $700 daily for an industry monitoring program. However, the legal question before the Justices is whether the Court should clarify or overrule a fundamental administrative law doctrine: Chevron deference.
In a brief submitted to the Court on behalf of the federal government, U.S. Solicitor General Elizabeth B. Prelogar wrote, “Overruling Chevron would be a convulsive shock to the legal system.”
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UPDATE: The U.S. Supreme Court overruled Chevron on June 28. For more information, see our updated story: Supreme Court Strikes Down Chevron: What It Means for the IRS.
Because of this and since the plaintiffs are represented by well-funded conservative groups, the Cause of Action Institute and the New Civil Liberties Alliance, some worry that the case is a call for the Supreme Court to weaken the rulemaking authority held by federal agencies — including the IRS.
In a release about the case, the NCLA argues against the Chevron doctrine. “In fact, interpreting statutes is not policy choice, but a traditional legal duty that Article III of the Constitution entrusts to federal courts. Congress cannot delegate or reallocate such judicial power — which it never possessed in the first place — to executive agencies like NOAA.”
In any case, if the Court strikes down or alters the Chevron doctrine, it would shift the federal rulemaking landscape that’s been in place for nearly 40 years. Here’s more of what you need to know.
What is Chevron doctrine?
Federal agencies frequently use their authority and expertise to create rules and regulations to enforce laws passed by Congress. In the process, they often fill in gaps in the law. These gaps may occur due to unclear legal language or because lawmakers intentionally wrote legislation to appease both sides in a political debate. Consequently, laws sometimes do not provide clear guidance or details on essential questions. Sometimes the gaps involve policy questions.
In many cases, the Chevron doctrine allows federal agencies the flexibility to interpret ambiguous statutes and receive deference from the court. Currently, courts defer to federal agency expertise when those agencies attempt to fill in gaps left by Congress in implementing specific laws, provided the agency’s interpretation is reasonable.
That principle came from the High Court’s ruling in a 1984 case, Chevron v. Natural Resources Defense Council. For the last four decades, courts have typically embraced the Chevron doctrine, even when the agency’s reading of a statute differed from the court’s.
IRS tax authority: Chevron doctrine overturned?
The IRS and the U.S. Department of the Treasury are responsible for implementing tax regulations. Due to the complexity of tax law, they often have to fill gaps in tax legislation passed by Congress.
This is especially true when Congress drafts complex tax legislation at the last minute or amidst challenges on Capitol Hill, as is happening now with a bipartisan tax compromise proposed just weeks before tax season begins. In those and other instances, experts at the IRS and Treasury make interpretations and create rules to provide clarity to taxpayers.
- Some supporters of retaining Chevron deference believe that if courts and taxpayers were more likely to challenge the authority of federal agencies like the IRS, it could create confusion and slow down IRS guidance and new tax rules.
- Meanwhile, some who argue in favor of overruling Chevron, see it as a way to limit federal bureaucracy and overregulation and return more control over various federal laws and rules to those impacted by the regulations.
So, what happens when a law does not cover a specific issue? Should a federal agency be allowed to create rules not mentioned in the statute? And if they have that power, should the court demand a higher standard than a reasonable interpretation to back the agency's decisions? How much deference is too much?
These are some questions the Justices will ponder to decide Loper Bright and a similar case, Relentless Inc. v. Department of Commerce.
Supreme court docket: Bottom line
The fisheries cases come as the Supreme Court has gained attention for overturning longstanding precedents and changing the legal landscape on everything from abortion rights to gun control.
Notably, this term, there are several tax cases to watch, including Moore v. U.S. involving wealth taxes. So stay tuned. The Court is expected to announce these and other rulings this summer.
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