Podcast Summary: Supreme Court Rulings Alter the Future of Tax Regulations

ACTEC Trust & Estate Talk Episode | November 26, 2024
Host: Margaret Van Houten (ACTEC Fellow)
Guests: Mark Parthomer (ACTEC Fellow), Jenny Johnson (Guest)

Episode Overview

This episode dissects the major impacts of two recent U.S. Supreme Court decisions—Loper Bright Enterprises v. Raimondo and Corner Post Inc. v. Board of Governors of the Federal Reserve System—on the future of federal (including tax) regulations. The conversation explores the end of Chevron deference, changes in the statute of limitations for regulatory challenges, and practical implications for wealth planners and estate professionals.

Key Discussion Points and Insights

1. The End of Chevron Deference

[01:52–04:12]

• Background:

  • The Administrative Procedures Act (APA) set rules for agency regulations (1940s).
  • Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc. (1984): For 40 years, courts deferred to agencies if (a) the statute was ambiguous and (b) the agency’s interpretation was reasonable.
  • With Loper Bright, the Supreme Court now rejects this, restoring an earlier, more limited approach from Skidmore v. Swift & Co. (1944).

• What’s Changed:

  • Courts, not agencies, are the final experts in interpreting statutes.
  • "The Supreme Court held that the APA requires courts to say what the law is, not agencies, and that courts, not agencies, are experts in statutory interpretation." — Jenny Johnson [03:06]
  • Express (not implied) congressional delegations to agencies are required for deference.

• Current Standard of Review:

  • Express Delegation: If Congress explicitly delegates regulatory authority, courts uphold regulations unless arbitrary or capricious.
  • No Express Delegation: Under Skidmore, agency interpretations offer guidance but get no formal deference; courts make the final call.

2. Broad Implications and Recent Applications

[04:12–07:56]

• Comparison with Other Cases:

  • Mark Parthomer notes how Varian v. Commissioner (the first post-Loper Bright case) underscored that clear statutes will not get deference, but ambiguous ones now get only consideration, not deference.

• Broader Trend:

  • Shrinking agency leeway also seen in Supreme Court’s approach to agencies' interpretations of their own rules (e.g., from Seminole Rock to Kisor v. Wilkie (2019)).
  • "We're seeing a parallel now going on to the issuance of a regulation very similar to what we've seen on an agency's interpretation of its own regulations. So not a surprise." — Mark Parthomer [05:38]

3. Corner Post: Statute of Limitations for Challenging Regulations

[07:56–11:37]

• Key Ruling:

  • Six-year statute of limitations (28 USC § 2401(a)) to challenge a regulation now starts when the challenger is injured, not when the regulation is issued.
  • "The government wanted that statute to start running when the regulation was published and instead the court said, nope, it only starts running when the individual... has a cause of action." — Jenny Johnson [08:09]

• Implications for Taxpayers:

  • Taxpayers still face strict time limits for challenging IRS actions due to the Anti-Injunction Act (IRC §7421(a)).
  • For claims such as refunds, this decision confirms that—six months after the IRS ignores a refund claim, the taxpayer has six more years to file in court.
  • For direct challenges not involving tax collection/assessment (like information reporting requirements), the six-year clock starts upon actual injury (e.g., resources spent to comply).

• Resulting Landscape:

  • More opportunities for regulation challenges, but traditional procedural hurdles (timing, claim type) remain in tax cases.

4. Practical Impact and Best Practices

[11:37–12:23]

• Forum Shopping and Venue Importance:

  • Because the Supreme Court now emphasizes "correct interpretation over uniformity," expect variations by circuit and increased forum shopping.
  • "Venue is going to become very important... as you're doing your planning, you're going to want to be thinking about putting your trusts or the taxpayers who are going to be challenging certain regulations in the circuits that are going to be most advantageous to them." — Jenny Johnson [11:18]

• Strategic Regulatory Writing:

  • Agencies like IRS may bolster regulations with more thorough rationales (e.g., detailed explanations, advisory releases) to withstand challenges.

• Outlook:

  • Expect ongoing evolution as litigation and agency responses develop. More circuit splits and regulatory variation likely.

Notable Quotes & Memorable Moments

• "The benefit of the doubt embedded in the Chevron case is gone, so we need to know what is in its place." — Margaret Van Houten [00:39]
• "Courts, not agencies, are experts in statutory interpretation." — Jenny Johnson [03:06]
• "Now we're back to where courts are not going to abandon their review." — Mark Parthomer [06:32]
• "Venue is going to become very important... think strategically about forum shopping." — Jenny Johnson [11:18]
• "We’re likely to see the IRS issue more expansive explanations in regulations to build a better file to protect against attacks." — Mark Parthomer [11:51]

Timestamps for Key Segments

• 00:39: Episode introduction and overview of Supreme Court cases.
• 01:52: Historical background and Chevron deference summary.
• 03:06: Loper Bright decision explained; end of Chevron.
• 04:12: What Skidmore means as the new standard; effect of express vs. implicit delegation.
• 07:56: Corner Post decision; procedural changes for statute of limitations.
• 11:18: Importance of venue selection and practical planning impacts.
• 11:51: Predicted agency responses and future developments.

Conclusion

This episode clarifies the quantum shift in federal and tax regulatory review post-Loper Bright and Corner Post: courts now have the final say on statutory interpretations unless Congress is explicit, and challenges to regulations may arise years after issuance, reshaping compliance, planning, and litigation strategies for practitioners and clients alike.