The U.S. Supreme Court ruling that overturned the Chevron doctrine has wide implications on both federal, and potentially state, court rulings going forward. Here’s what to watch for.

By Judy Vorndran

The United States Supreme Court on June 28 released its opinion in Loper Bright Enterprises v. Raimondo and Relentless, Inc. v. Department of Commerce, overturning the Chevron doctrine, which generally saw federal courts deferring to federal agency interpretations when statutory questions arose. With Chevron now overturned, the implications on state and local tax decisions could be great, and potentially in taxpayers’ favor.

The Chevron doctrine stems from 1984 decision in Chevron v. Natural Resources Defense Council (467 U.S. 837 (1984), that effectively allocated administrative authority between agencies and the courts, requiring federal courts to give deference to agencies’ reasonable interpretation of ambiguous statutes. As a result, when taxpayers and others have challenged even state and local tax law, the courts have largely sided with the agency interpretation, effectively muting taxpayer outcry over agency overreach or other legal positions.

Now, however, the Loper rule throws agency deference out the window when it comes to statutory interpretation at the federal level. Courts will need to determine the validity of the law itself on its own merits apart from agency interpretation. This could, in fact, limit agency actions that the courts determine are outside the bounds of statutory law and may result in an increase in taxpayer challenges where statutory language is murky.  

Impact at the State Level

While the case dealt with federal agencies, there may also be a slippery slope affecting state departments of revenue deference as well. Taxpayers should not rely on what an auditor says is the “law” unless it is clearly enumerated in law, and not an agency “interpretation” of the law.

Historically, likely due to the Chevron doctrine, departments of revenue have been given wide latitude to interpret tax laws (as has the IRS). The Loper decision may put into play as well any deference state courts have previously given state and local departments of revenue. It is worth watching closely how future tax cases fare in both federal and state courts in light of the Loper ruling.

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