The Tax Contribution to Deference and APA § 706

Abstract

In the October 2023 Term, the Supreme Court accepted cert to address whether Chevron deference to agency interpretations should be overruled or clarified. Chevron is shorthand for deference articulated in Chevron U.S.A., Inc. v. NRDC, 467 U.S. 837 (1984).

The key features of Chevron deference are: (i) ambiguity (or silence sometimes treated as ambiguity) in the statute, and (ii) agency reasonable interpretation within the interpretive scope of the statutory ambiguity. Further refined, the (ii) element for deference is that the agency interpretation not be the best interpretation; stated otherwise, an agency best interpretation within the scope of the ambiguity neither needs nor requires deference. Deference with those features has been used in statutory interpretation judicial review since well before Chevron in 1984 and the APA in 1946.

One of the issues on cert is whether the APA Scope of Review provision (5 U.S.C. § 706) precludes, requires, or permits deference. Some in the legal community (including judges, but none so far in opinions of their respective courts) argue that the APA, properly interpreted, precludes deference.

This article asserts that § 706 permits deference. The tax authorities evidence that, properly interpreted, § 706 permits deference and perhaps even requires deference. Since so much has already been written on that issue, this article focuses on discussion of the tax background largely ignored in the competing claims on § 706 and deference.

Particularly, the article also introduces into the deference discussion Dobson v. Commissioner, 320 U.S. 489 (1943), reh. den. 321 U.S. 231 (1944), a tax case applying deference to appellate review of Tax Court statutory interpretations. Dobson recognized the settled authority of deference to agency interpretation of ambiguous statutory text. The Tax Court statutorily was an agency. But, recognizing that the Tax Court scope of review statute permitted reversal only for Tax Court interpretations that were “not in accordance with law,” Dobson read into those words a deference regime like the then existing agency deference regime (now called Chevron deference).

The standard “not in accordance with law” was adopted in § 706 for appellate review of agency interpretations of law. The settled meaning of those words, announced in Dobson, meant that review of agency interpretations of law are reviewed with deference.

The article concludes that the APA permits, perhaps requires, deference. If the Court rejects deference the Court should do it on some basis other than that § 706 precludes deference.

Keywords: Chevron Deference, Deference, APA §. 5 USC 706

JEL Classification: K23, K34