Tax Notes Quotes Jonathan Black on Overturning of Chevron

Following the Supreme Court’s decision overturning federal agency regulation deference, tax professionals are predicting significant changes in tax law, including the end of tax exceptionalism, a rise in litigation challenges, and the issuance of more informal guidance.

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“The case raises immediate questions about the extent to which Congress has delegated to Treasury and the IRS the authority to interpret ambiguities in the Internal Revenue Code. We should expect to see more litigation on interpretations in preexisting regulations, at least until this question is settled,” said Jonathan R. Black of Caplin & Drysdale.

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Some predicted that the overturning of Chevron could lead to changes in how Treasury and the IRS provide guidance to taxpayers.

Black said the government may be less willing to expend resources on drafting regulations when its authority to do so is unclear. He pointed out that there are instances when there is no express delegation of authority for the IRS to interpret statutory provisions by regulation, such as in section 6751(b).

“The IRS recently proposed regulations interpreting the ‘initial determination’ of a penalty assessment under section 6751(b). These proposed regulations essentially put forth the IRS’s litigating position, which is clearly not the best interpretation of the statute,” Black said. “In cases such as these, I would expect the proposed regulations to be sidelined indefinitely, if not withdrawn altogether.”

Federico agreed with Black, saying Treasury and the IRS could shift toward less formal guidance that can be issued more quickly.

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