Tax regulations

The “major issues doctrine”: another tool for challenging tax regulations? | McDermott Will & Emery

Debates have raged in recent years over the future of Chevron deference, especially given the change in the makeup and opinions of the United States Supreme Court. We have written extensively about Chevron deference to the past (see here, here and here, for example). Although the Court did not address the continued viability of Chevronhe recently found ways to avoid applying Chevron deference for matters involving the interpretation of agency regulations.

In West Virginia vs. EPAno. 20-1530 (June 30, 2022), the Supreme Court did not address Chevron deference directly. However, it reconfirmed and enforced what is known as the “Major Issues Doctrine”. Under this judicial doctrine, which originated in FDA vs. Brown & Williamson Tobacco Corp., 529 US 120 (2000), a federal agency must show clear congressional authorization for the authority it claims. In other words, when a statute gives an agency the power to enact rules, a court must determine whether the US Congress intended to give the agency the power to make decisions of great economic and political importance. Consequently, “[a]agencies only have the powers given to them by Congress and it must be assumed that major policy decisions are left to Congress, not to the agencies.

The recent Supreme Court decision is not limited to any particular organization. Indeed, the major issues doctrine has already been applied in a tax context. In King v. Burwell576 US 473 (2015), for example, the Court applied the major issues doctrine in refusing to defer to tax regulations interpreting the Affordable Care Act (internal references omitted):

In extraordinary cases…there may be reason to hesitate before concluding that Congress intends [] implicit delegation [to the agency to fill in the statutory gaps]. … This is one of those cases. Tax credits are among the major reforms in the law, involving billions of dollars in spending each year and affecting the price of health insurance for millions of people. Whether these credits are available on federal exchanges is therefore a matter of profound economic and political importance that is at the heart of this legislative scheme; If Congress had wished to entrust this matter to the agency, it surely would have done so expressly. It is particularly unlikely that Congress has delegated this decision to the IRS, which has no expertise in designing a health insurance policy of this type.

Thus, it appears that the major issues doctrine is now firmly established as another tool of statutory interpretation and should be considered in any analysis to determine whether tax regulations were validly enacted and should be given deference. .

Practical point: It will be interesting to see how the recent Supreme Court decision will impact future challenges to tax regulations. In the not too distant past, challenges to the Administrative Procedure Act against tax regulations and other issued guidelines were rare, but the 2011 court ruling in Mayo found. form. Educ. & Research v. United States, 562 US 44 (2011) changed the landscape. Some tax regulations are invariably based on political decisions and, in appropriate cases, taxpayers may seek to challenge such regulations under the major issues doctrine.

[View source.]