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Senate Attempts to Repeal Chevron Deference

In Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc. 467 US 837 (1984), the Supreme Court of the United States established a framework for assessing an agency’s interpretation of statutory provisions. First, a reviewing court must ask whether Congress “delegated authority to the agency generally to make rules carrying the force of law,” and whether the agency’s interpretation was promulgated under that authority. United States v. Mead Corporation, 533 US 218, 226–27 (2001). Delegation may be shown in a variety of ways, including “an agency’s power to engage in adjudication or notice-and-comment rulemaking, or by some other indication of a comparable congressional intent.” Id. at 227. If an agency has been delegated the requisite authority, the analysis is segmented into two steps.

Under step one, the reviewing court asks whether Congress has clearly spoken on the precise question at issue. See Chevron, 467 US at 842. If so, both the court and agency must follow the “unambiguously expressed intent of Congress,” and the inquiry ends. Id. at 842–43.

If the statute under review is ambiguous or silent, the reviewing court moves to step two: whether the agency’s interpretation is based on “a permissible construction of the statute.” Id. at 842. This inquiry asks whether the interpretation is reasonable and not “arbitrary, capricious, or manifestly contrary to the statute.” Chevron, 467 US at 843; see also Judulang v. Holder, 565 US 42, 53 n.7 (2011); Encino Motorcars, LLC v. Navarro, 579 US ____, 136 S. Ct. 2117, 2125 (2016). If the agency’s interpretation passes muster, then the agency’s interpretation is given Chevron deference, and afforded the force of law. The Chevron two-part analysis applies to tax regulations issued by the United States Department of the Treasury and the Internal Revenue Service. Mayo Foundation for Medical Education & Research v. United States, 562 US 44, 55 (2011).

In addition to Chevron deference, which is considered the strongest level of deference afforded to a governmental agency, courts have recognized Skidmore and Auer deference. Skidmore deference can apply to revenue rulings and revenue procedures based on the persuasiveness of the reasoning. See Skidmore v. Swift & Co., 323 US 134 (1944). Finally, Auerdeference can apply when an agency interprets its own regulations. See Auer v. Robbins, 519 US 452, 461 (1997). A more thorough discussion of Skidmore and Auer deference can be accessed here.

On July 19, 2017, the Separation of Powers Restoration Act (SOPRA), S. 1577, 115th Cong. (2017) was introduced in the Senate. If passed, SOPRA would repeal Chevron deference, and presumably Skidmore and Auer deference, by amending the Administrative Procedures Act (APA) to require reviewing courts to determine “de novo all relevant questions of law, including the interpretation of constitutional and statutory provisions and rules . . . .” Id.

SOPRA was introduced by a group led by Senator Orrin Hatch. In a press release, several Senators, led by Senator Hatch, describe SOPRA as an attempt to reestablish the Constitution’s separation of powers and return power to the judicial branch that has been slowly eroded by federal bureaucracy. See Press Release, Orrin Hatch, Senate, Senate Leaders Introduce Bill to Restore Regulatory Accountability (July 19, 2017). Senator Mike Lee expressed concerns that Chevron deference has increasingly allowed the executive branch to write, enforce and interpret the law. Id.

Earlier this year, the House of Representatives passed a similar measure named the Regulatory Accountability Act of 2017 (RAA), introduced by Representative Bob Goodlatte. Regulatory Accountability Act of 2017, HR 5, 115th Cong., §§ 107, 202. The RAA would also require de novoreview, but the House added an additional provision that a reviewing court, “shall not interpret . . . [a] gap or ambiguity as an implicit delegation to the agency of legislative rule making authority and shall not rely on such gap or ambiguity as a justification either for interpreting agency action expansively or for deferring to the agency’s interpretation . . . .” Id.. To date, the Senate’s latest action on the RAA was to hold a hearing of the Committee on Small Business and Entrepreneurship on March 29, 2017. H.R.5 – Regulatory Accountability Act of 2017,, (last updated March 29, 2017).

It should be noted that SOPRA amends section 706 of the APA, which imposes requirements on the promulgation of agency rules, serves to police improper agency behavior and provides for adjudications. There is an overlap between Chevron’s second step in its analysis and the APA’s requirement of “reasoned decisionmaking.” When a Treasury Regulation is found invalid under the APA because it lacks a reasoned decisionmaking, then for that reason alone, the regulation is not entitled to Chevron deference, and it does not have the force of law. Encino Motorcars, LLC v. Navarro, 579 US ____, (2016), 136 S. Ct. 2117 (2016) (stating a regulation that lacks a reasoned explication does not receive Chevron deference); cf. Altera Corporation & Subsidiaries v. Commissioner, 145 TC 3 (2015) (holding a section 482 regulation invalid under the APA rather than Chevron, but noting that it would also be invalid under Chevron step two), appeal docketed, No. 16-70496 (9th Cir. Feb. 23, 2016).

Practice Point: Under Chevron, an agency’s reasonable statutory interpretation prevails over an even more reasonable interpretation offered by a taxpayer to fill the statutory gap. The Senate’s current draft of SOPRA, however, would require de novo review of “all relevant questions of law.”  Presumably, this means that the analysis of the reasonableness and persuasiveness of the taxpayer and agency’s competing interpretations should be on equal footing, and the agency’s interpretation should not automatically prevail.

If enacted into law, SOPRA could potentially increase litigation against the government because an agency’s interpretation of a statute, or its own regulations, will be afforded substantially less deference. Moreover, the amount of time required to promulgate a regulation will likely increase significantly if government agencies will no longer be able to rely on Chevrondeference.

© 2020 McDermott Will & EmeryNational Law Review, Volume VII, Number 212


About this Author

In 1934 E.H. McDermott opened a law practice that focused exclusively on taxes. As chief counsel to the Joint Committee on Taxation of the United States Congress, McDermott observed firsthand how the rapidly expanding federal tax laws were affecting businesses and individuals. He recognized the need for a law firm to assist people and their businesses to understand and comply with their changing tax obligations.

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