This is the second in a series of my posts discussing some of the various amicus briefs filed in King v. Burwell:

In their brief supporting the taxpayers, the Washington Legal Foundation and Professor Steven J. Willis argue that Section 36B’s plain text forecloses the IRS’s interpretation. A good chunk of the brief repeats arguments and background facts that are already found in the petitioner’s opening brief, and I’m not sure of the utility of including that material. The brief also contains a “Statement of the Case” section, even though Rule 37.5 does not require one.

The brief’s key contribution is found in Part II (pages 14-22), in which WLF argues that the legislative grace canon prohibits Chevron deference at Step Two. Under that canon, courts generally tip the scales in favor of the government when deciding tax cases. Taxpayers cannot claim tax deductions or credits via implication; tax benefits must be “unambiguously proven.” If the canon applies in full force here, Section 36B would not extend credits regarding policies purchased on federal exchanges. The statute’s plain language authorizes credits only for policies purchased on state exchanges, and courts cannot draw various inferences from related statutes to extend the credit to federal policies. (I will forgo comments on whether the legislative grace canon actually influences courts in making their decisions, as opposed to reflecting some meaningless rhetoric that is thrown into an opinion that would have in any event gone against a taxpayer.)

Whatever the utility and legitimacy of the legislative grace canon, WLF’s presentation of it raises a couple interesting questions. First, should Section 36B be interpreted just like any other tax statute and be subject to the same canons? And second, if the legislative grace canon applies, does it reflect a tool properly applied at Step One or instead at Step Two of Chevron analysis?

Regarding the first question, it’s mentioned only occasionally that if King v. Burwell were a run of the mill tax dispute, this case would probably be quite straightforward. Taxpayers frequently present stronger claims for tax benefits than that reflected in the analysis extending Section 36B to purchases on federal exchanges. Yet even with relatively stronger reasoning, taxpayers often face the denial of their claims or sometimes even the imposition of penalties. Something must be special about Section 36B if it implicitly authorizes billions of dollars of tax credits, and if the Court concludes it does, tax lawyers will surely argue that other benefit-granting provisions are similarly special and must receive expansive interpretations.

Regarding the second question, the Court in Chevron told us that ambiguity must be determined using “traditional rules of statutory construction,” but no one seems sure about what that exactly means. I would have expected WLF to argue that the legislative grace canon applies at the first step, to help buttress the argument that the IRS has no room to exercise discretion at Step Two. But WLF uses the canon at the second step. (Update 6/10/15: Whoops. As WLF points out in a blog post, the brief actually refers to the canon at Step One. My bad.)

I’d like to see the legislative grace canon discarded entirely, but if it is a legitimate interpretive tool, I think it fits more naturally at Step One. The canon may have a long and confused history (check out Scalia & Garner on that point), but its frequent application makes it far more “traditional” than many other canons.

I’m glad that WLF filed its brief in this case. Although I doubt that the legislative grace canon will play a significant role here, the brief pushes the Court to say at least something about it. And any statement by the Court, even if made via an errant remark in a footnote, could influence and improve the application of at the canon in future cases.

Oh, and a programming note: Since I decided to survey the King v. Burwell amicus briefs, even more briefs have been added to the Court’s docket — far more than I can possibly comment on or perhaps even read. I’d appreciate any help from readers in separating the wheat from the chaff. If you come across a brief that says something that is worth bringing attention to, please email me or tweet me @AndyGrewal .

Andy Grewal

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