Source: U.S. Supreme Court
In a series of landmark decisions, the Supreme Court has significantly altered the terrain of tax practices. We’ve summarized the key implications from some of the recent court decisions.
Moore v. United States (2024): Constitutional Challenges in Tax Law
While the challenge to section 965's (treatment of deferred foreign income) constitutionality failed, Moore v. United States demonstrated how technical tax issues can be leveraged to advance broader legal agendas. Tax practitioners should anticipate future constitutional challenges to tax provisions, even on seemingly settled ground.
Loper Bright Enterprises Inc. v. Raimondo (2024): The Fall of Chevron Deference
The overturning of Chevron deference marks a seismic shift in administrative law. No longer must judges defer to agency interpretations of ambiguous statutes. For tax practitioners, this means:
1. Increased scrutiny of Treasury regulations
2. Potentially narrower interpretations of the tax code by the government
3. Greater opportunities to challenge IRS regulations
Practitioners should be prepared to more aggressively contest Treasury regulations when representing clients.
Corner Post Inc. v. Board of Governors of the Federal Reserve System (2024): Redefining the Statute of Limitations
This decision radically alters when challenges to regulations can be brought under the Administrative Procedure Act (APA). The six-year statute of limitations now begins when a plaintiff is harmed, not when the regulation was issued. Implications include:
1. Vulnerability of older Treasury regulations, especially those issued before full APA compliance
2. Extended window for bringing APA challenges against tax regulations
This ruling opens the door to challenging long-standing regulations based on recent applications to clients.
Consumers' Research v. Federal Communications Commission (5th Circuit, 2024): Reviving Nondelegation
Though not a tax case, this Fifth Circuit decision has potential ripple effects for tax practice. By reviving the private non-delegation doctrine and scrutinizing when a "fee" may be considered a "tax," it sets the stage for:
1. Challenges to IRS delegations to private entities or industry groups
2. Potential recharacterization of certain IRS fees or charges as unconstitutional taxes (yikes)
Practical Implications for Tax Practitioners
- Increased Litigation Opportunities: Be prepared to challenge Treasury regulations on both procedural (APA) and substantive grounds. Consider challenging older regulations that may not have followed proper APA procedures.
- Rethink Statute of Limitations: The Corner Post decision potentially allows challenges to regulations long after they were issued, based on when your client was harmed.
- Scrutinize Agency Authority: Question whether Treasury/IRS actions exceed their statutory authority, especially in light of the demise of Chevron deference.
- Reassess Disclosure Positions: With increased uncertainty around the validity of some regulations, reevaluate disclosure positions on tax returns and financial statements.
- Stay Informed on Administrative Law: Keep abreast of developments in administrative law outside of tax, as these may have significant implications for tax practice.
- Prepare for Uncertainty: Advise clients about the potential for increased uncertainty in tax positions due to the changing judicial landscape.
- Consider Constitutional Arguments: Be open to novel constitutional challenges to tax provisions, as courts seem more receptive to these arguments.
- Watch for New Treasury Approaches: Anticipate changes in how Treasury issues regulations and guidance in response to these judicial trends.
The recent Supreme Court decisions have ushered in a new era of tax practice, characterized by increased opportunities for challenging regulations and greater uncertainty in established positions. While these changes open new avenues for advocacy, they also demand more strategic thinking and careful analysis in tax planning and dispute resolution.
Christine Gervais is a licensed CPA, using her skills to help businesses grow and achieve their fullest potential. Christine has a Master’s degree in accounting from Southern New Hampshire University in addition to holding her CPA license for over a decade. Notably, Christine is a nationally recognized speaker providing education to other CPAs on how to best serve clients as well as instruction on a wide variety of topics for business owners on how to maximize success. Christine prides herself on the value she can bring to clients with her extensive tax knowledge and provides strategic, forward-thinking financial strategies to help clients grow. When not behind her desk, you can find Christine spending quality time with her daughter and stepson or tending to the family’s excessively loved farm animals.
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