In a landmark decision, the Supreme Court of the United States has overruled the longstanding Chevron doctrine. This is a monumental decision with far-reaching implications that has captured the attention of American businesses, politicians, government officials, and the public. There are a number of nuanced impacts, but one of the most notable impacts is the immediate questions raised about regulatory compliance and whether courts will now completely abandon longstanding federal agency interpretations of ambiguous statutes. Moving forward, courts retain significantly more autonomy when crafting their own interpretations.
What is the Chevron Decision by the Supreme Court?
The conservatives on the Supreme Court struck down the 1984 decision in Chevron v. Natural Resources Defense Council which established what is known as the “Chevron Doctrine.” This stated that when members of Congress hadn’t already established answers to a legal matter, the courts would defer to federal agencies’ interpretations of the statute(s) in question.
Now, the court says that the original ruling was “fundamentally misguided,” and is creating a massive shift in the landscape of administrative law. Moving forward, the courts will be able to interpret the law on their own rather than deferring to federal agencies such as the Internal Revenue Service.
How Does the Chevron Decision Impact Federal Agencies Like the IRS?
The Supreme Court is granting significant regulatory and rulemaking power to the courts, completely moving away from decades of reliance on federal agencies to do so. This raises questions not only about how future regulatory determinations will be made but also about what past regulatory rulings will be challenged in the wake of the decision.
For example, if the IRS interprets an ambiguous area of tax law and has been applying this interpretation for decades, an individual or business could challenge the interpretation through litigation and force the courts to make their own determination. If the courts were to rule against the prior IRS interpretation, it could trigger widespread litigation to recoup tax losses due to the “outdated” IRS interpretation and completely shift future IRS tax enforcement.
The IRS creates regulations every single year to clarify gray areas of tax law. Some of these regulations have been challenged in the courts, but the courts have generally deferred to the IRS as long as the regulations were considered reasonable and within the confines of what the tax code stated. It’s likely that deferment will become more and more rare as the courts now have expanded authority to invalidate these regulations and establish their own interpretations.
Of course, not all courts are created equal. There are regions where the court leans liberal or conservative, making the jurisdiction of these cases of critical importance. Federal agencies now face a high level of regulatory scrutiny after four decades of flexibility.
Stay Up to Date on the Law with Dahl Law Group
At Dahl Law Group, we expect a significant increase in litigation and regulatory uncertainty. Individuals and businesses across the country will now have an even more urgent need to stay up-to-date on various court rulings as they apply to their own circumstances. Our team is constantly following rulings that impact the people, families, and businesses in California. For a firm with an eye toward the future that remains in touch with today, contact Dahl Law Group and protect what you’ve put your blood, sweat, and tears into.
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