In Loper Bright v. Raimondo, 144 S. Ct. 2244 (2024), the Court overrode Chevron, relying partly on the history of judicial nondeference. That is, before Chevron, courts did not offer “deference to agency resolutions of questions of law.” Id. at 2258. Loper Bright concluded that this history of nondeference helped establish that Chevron led courts away from their proper role.

Under Loper Bright, courts can never defer to agencies in statutory interpretation matters. That is, under the longstanding judicial principles codified in Section 706 of the APA, see id. at 2261, courts must always apply their independent judgment to statutes. See id. at 2262.

Loper Bright’s rejection of deference creates a major conundrum for the tax system. Long before Chevron, courts deferred to Treasury regulations. In Commissioner v. South Texas Lumber, issued just two years after Congress enacted the APA, the Supreme Court acknowledged that it had “many times declared that Treasury regulations must be sustained unless unreasonable and plainly inconsistent with the revenue statutes.” 68 S. Ct. 695, 698 (1948). South Texas Lumber involved a pure question of law, not one of fact. In various other cases, the Court has applied some sort of “reasonableness” test to tax regulations, generally analogous to Step Two of Chevron. The tax system had Chevron before Chevron.

Loper Bright thus takes the tax system to uncharted territory. The tax system cannot return to pre-Chevron practices because those practices, involving deference, are now forbidden by Loper Bright. Other areas of administrative law may face similar challenges. In her Loper Bright dissent, Justice Kagan argued that though the pre-Chevron era revealed inconsistencies, the Court had embraced deference in various areas. See 144 S. Ct. at 2303-04 (2024) (Kagan, J., dissenting) (citing cases).

My forthcoming article, Tax Regulations After Loper Bright, explores the new landscape. The abstract is below, and comments are welcome.

After decades of uncertainty, the Supreme Court, in Mayo v. United States, finally resolved a conflict over the proper deference standard for tax regulations. The Chevron doctrine, not the National Muffler doctrine, would govern whether a tax regulation properly interpreted a statute.

This period of calm would last for only a little over a decade. Through Loper Bright, the Court has now killed any form of judicial deference to agency regulations. Loper Bright upsets not only Chevron, but nearly a century’s worth of tax-specific precedents that extended deference to Treasury regulations.

This Article, prepared for the Michigan State Law Review’s Tax & Policy Symposium, explores the new administrative review framework for tax regulations. It divides the analysis between general authority and specific authority regulations. They will now face markedly different review standards. Though the sky will not fall, the new review frameworks pose difficult interpretive challenges that will take decades to resolve.

The article is available on SSRN.

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