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Government Files Its Brief in Auer Deference Case

As we discussed in a prior post, the Supreme Court is poised to decide in Kisor v. Wilkie whether to overrule the Auer deference doctrine. This doctrine, which originated in the 1945 Seminole Rock case, generally affords controlling deference to an agency’s interpretation of its own ambiguous regulations. To date, the petitioner has filed its brief, several amici have filed briefs and the government has filed its brief (links to these documents can be found here). Argument is currently scheduled for March 27, 2019, and an opinion is anticipated by the end of June 2019.

The government’s brief, filed on February 25, 2019, acknowledges that Auer deference raises serious concerns. Specifically, the government states that the basis for the doctrine is unclear, the doctrine is in tension with the Administrative Procedures Act (APA) and overly broad deference to agency interpretations can have harmful practical consequences. However, relying on principles of stare decisis, the government advocates for maintaining Auer deference subject to certain prerequisites that would limit the doctrine. These prerequisites include applying deference only after all traditional tools of construction have been exhausted and only if the agency’s interpretation has reasonably interpreted any ambiguity. In deciding whether to defer to the agency’s interpretation, a reviewing court should look at whether the interpretation: (1) was issued with fair notice to regulated parties, (2) is not inconsistent with the agency’s prior views, (3) rests on the agency’s expertise and (4) represents the agency’s considered view (i.e., not merely the views of “mere field officials or other low-level employees”). Presumably these limits would curtail the application of Auer deference in circumstances where the agency’s interpretation is first widely known only because of a litigating position.

Practice Point: The Supreme Court’s decision in Kisor v. Wilkie will be important for taxpayers and their representatives in light of the substantial regulatory guidance issued in the wake of tax reform. We will continue to follow this case and provide updates after argument is held and the case is decided.

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Andrew R. Roberson tax attorney McDermott Will. Andy handles tax cases in Federal court, United States Tax Court
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Andrew R. Roberson is a partner in the law firm of McDermott Will & Emery LLP and is based in the Firm’s Chicago office.  Andy specializes in tax controversy and litigation matters, and has been involved in over 30 matters at all levels of the Federal court system, including the United States Tax Court, several US Courts of Appeal and the Supreme Court. 

Andy also represents clients, including participants in the CAP program, before the Internal Revenue Service Examination Division and Appeals Office, and has been successful in settling...

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Timothy S Shuman, Corporate Tax Attorney, McDermott Law Firm
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Timothy S. Shuman is a partner in the law firm of McDermott Will & Emery LLP and is based in the Firm's Washington, D.C., office.  Tim focuses his practice on corporate and international tax matters for U.S. and foreign multinationals, with particular emphasis on acquisitions, dispositions, restructurings and liquidations.  He has extensive experience in structuring and providing advice on tax-free reorganizations and spin-offs involving both privately held and publicly traded companies and regularly represents clients in obtaining private letter rulings and other guidance from the IRS.  His work has included a number of corporations with special tax status, such as regulated investment companies.

Tim also has experience with international tax issues including supply chain planning and principal structures, foreign tax credit planning, tax-efficient repatriation strategies, tax basis planning and cross-border mergers and acquisitions.

Tim also has represented a number of clients before the IRS in connection with audits and the IRS Appeals process, including with respect to worthless stock losses and foreign tax credit issues. 

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