interpretation Archives - TAX CONTROVERSY 360

Government Files Its Brief in Auer Deference Case

As we discussed in a prior post and in our article for Law360, the Supreme Court is poised to decide in Kisor v. Wilkie whether to overrule the Auer deference doctrine. This doctrine, which originated in the 1945 Seminole Rock case, generally affords controlling deference to an agency’s interpretation of its own ambiguous regulations. To date, the petitioner has filed its brief, several amici have filed briefs and the government has filed its brief (links to these documents can be found here). Argument is currently scheduled for March 27, 2019, and an opinion is anticipated by the end of June 2019.

The government’s brief, filed on February 25, 2019, acknowledges that Auer deference raises serious concerns. Specifically, the government states that the basis for the doctrine is unclear, the doctrine is in tension with the Administrative Procedures Act (APA) and overly broad deference to agency interpretations can have harmful practical consequences. However, relying on principles of stare decisis, the government advocates for maintaining Auer deference subject to certain prerequisites that would limit the doctrine. These prerequisites include applying deference only after all traditional tools of construction have been exhausted and only if the agency’s interpretation has reasonably interpreted any ambiguity. In deciding whether to defer to the agency’s interpretation, a reviewing court should look at whether the interpretation: (1) was issued with fair notice to regulated parties, (2) is not inconsistent with the agency’s prior views, (3) rests on the agency’s expertise and (4) represents the agency’s considered view (i.e., not merely the views of “mere field officials or other low-level employees”). Presumably these limits would curtail the application of Auer deference in circumstances where the agency’s interpretation is first widely known only because of a litigating position.

Practice Point: The Supreme Court’s decision in Kisor v. Wilkie will be important for taxpayers and their representatives in light of the substantial regulatory guidance issued in the wake of tax reform. We will continue to follow this case and provide updates after argument is held and the case is decided.

Tax Court Reinforces Plain Meaning Approach in Interpreting Tax Statutes

The Internal Revenue Service (IRS) and taxpayers frequently spar over the meaning and interpretation of tax statutes (and regulations). In some situations, one side will argue that the statutory text is clear while the other argues that it is not and that other evidence of Congress’ intent must be examined. Courts are often tasked with determining which side’s interpretation is correct, which is not always an easy task. This can be particularly difficult where the plain language of the statute dictates a result that may seem unfair or at odds with a court’s views as the proper result.

The Tax Court’s (Tax Court) recent opinion in Borenstein v. Commissioner, 149 TC No. 10 (August 30, 2017), discussed the standards to be applied in interpreting a statute and reinforces that the plain meaning of the language used by Congress should be followed absent an interpretation that would produce an absurd result.

In Borenstein, the taxpayer made tax payments for 2012 totaling $112,000, which were deemed made on April 15, 2013. However, she failed to file a timely return for that year and the IRS issued a notice of deficiency. Before filing a petition with the Tax Court, the taxpayer submitted return reporting a tax lability of $79,559. The parties agreed that this liability amount was correct and that the taxpayer had an overpayment of $32,441 due to the prior payments. However, the IRS argued that the taxpayer was not entitled to a credit or refund of the overpayment because, under the plain language of Internal Revenue Code Sections 6511(a) and (b)(2)(B), the tax payments were made outside the applicable “lookback” period keyed to the date the notice of deficiency was mailed. (more…)

Government Files Its Brief in Auer Deference Case

Tax Court Reinforces Plain Meaning Approach in Interpreting Tax Statutes

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