Herold Law Report on the United States Supreme Court Opinion in the Case of Loper Bright Enterprises et al. v. Raimondo, Secretary of Commerce, et al.,

Bright Enterprises et al. v. Raimondo, Secretary of Commerce, et al.,

144 S. Ct. 2244 (2024)

Robert S. Schwartz, Esq.
Joseph M. Lemond, Esq.

Judicial Limitation of the Powers of Federal Agencies

Background

Sometimes, not often, Supreme Court opinions in the particular matter before the Court have tangible effects on at least some people resident in the United States not involved in the case. In the June, 2024 case cited in the title, the tangible effects concern all matters that are or that will become the subject matter of federal government agency rules, regulations or agency pronouncements. Obviously, the subject matter of federal government agency rules, regulations and informal pronouncements is so many and varied that nearly everybody resident here at one time or another during their lifetimes “feels” the tangible effect in question.

Tangible effects of the Loper Bright Enterprises decision are today manifesting themselves to attorneys dealing in the federal law realm and judges deciding cases in the lower federal courts. An example follows below. So question: What rule of law does Loper Bright Enterprises pronounce that may affect nearly everybody at one time or another?

Answer: Whenever a party to a federal case raises an issue concerning the meaning or application of a statute passed by Congress relevant to their matter, all federal court judges must independently interpret and construe that law employing some or all of the time-honored techniques that the courts of England and the United States have used, in order to get to a single, best meaning or application the judge is capable of, regardless of the meaning or application determined by a federal agency pursuant to its rules, regulations and informal pronouncements.

Previous to June, 2024, Chevron U. S. A. Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984), held, at a culmination point in a federal judicial trend, that probably began in 1944, federal judges must defer to “permissible” (evolving to a quite broad term) agency interpretations of the federal statues those agencies administer — even when the reviewing judge reads the statute differently. Loper Bright Enterprises retroactively replaces this “Chevron Doctrine” broad deference to agency statutory interpretations (that manifest themselves in rules, regulations and informal pronouncements) and consequent law enforcement actions with the Answer above. Obviously, the Answer is consistent with the Constitution’s three basic power structures: legislative, executive and judicial. As such, the fundamental2 H:\TEMP\HH\PDI NEWSLETTER\2024 Newsletters\RSS-JML Insert Opinion Loper Bright Enterprises et al (Sept-Oct 2024).docx laws of the land make much more conceptual sense today than they have in somewhere around four decades before June, 2024.

First Federal Tax Case

The U.S. Tax Court decided Varian Medical Systems, Inc. and Subsidiaries v. Commissioner on August 26, 2024. At issue was whether it was too good to be true to the tune of millions of corporate income tax dollars that the corporation for its tax year ended September 28, 2018 could take advantage of differing effective date changes made to the Internal Revenue Code’s international tax provisions by the Tax Cuts and Jobs Act (“TCJA”) enacted at the very end of 2017. Varian corporation did so, later got caught by an IRS Revenue Agent examination team, and the IRS Commissioner was never going to settle.

In late June (2024) the Tax Court asked the parties to write about the impact of Loper Bright Enterprises on their litigation positions. The immediate reason was that the Treasury Department had issued regulations in 2019 interpreting in its way the differing TCJA international tax provisions effective dates such that Varian’s corporate income tax reporting was contrary to the regulations.

The Tax Court opinion adopts the following approach to these IRS regulations: All federal court judges must independently interpret and construe the statute at issue employing some or all of the time-honored techniques that the courts of England and the United States have used in order to get to a single, best meaning or application the court is capable of, regardless of the meaning or application determined by a federal agency pursuant to its regulations. The opinion does this in all the TCJA relevant particulars about Congress’s differing effective dates. Consequently, it held that the regulation is an invalid agency action.

The Tax Court quotes or paraphrases extensively from the Loper Bright Enterprises majority opinion (six), as well as from Justice Kagan’s dissenting opinion (three). The IRS is not going to win any appeal of Varian decision it still has time to make to the Ninth Circuit in California. August 26, 2024, is a banner day for U.S. taxpayers.

This writing is not and should not be interpreted as the rendering of legal advice or performance of legal services to any person by Herold Law, P.A. In accordance with professional ethical rules, Herold Law, P.A., renders legal advice and performs legal services only in the context of an attorney-client relationship entered into before rendering advice or performing services.

• Category: Tax