In a groundbreaking case concerning the environmental regulations of fishing boats, the Supreme Court made a significant ruling that overturned the Chevron doctrine. This doctrine had previously mandated courts to defer to reasonable interpretations of statutory provisions by agencies, including the IRS. Our TPC colleague, Howard Gleckman, explored how this decision empowers the courts to independently interpret statutes and second-guess the IRS. However, the Court also provided Congress with guidance on how to uphold an agency’s power to interpret statutes effectively.
The Court’s decision in the Loper Bright case highlighted the importance of judicial interpretation when it comes to delegating discretionary authority to agencies. According to the Court, the reviewing court’s role is to implement Congress’s will within constitutional confines and establish the boundaries of delegated authority. As long as an agency engages in reasoned decision-making, akin to Chevron’s deferential standard, it can operate within these designated boundaries.
Moreover, Congress has the authority to authorize agencies to fill in the details of statutes or regulate within specific limits. The Court referenced Congress’s delegation to the Environmental Protection Agency Administrator, emphasizing the importance of defining terms like ‘appropriate’ or ‘reasonable’ to guide agency actions effectively.
If Congress wishes to uphold the IRS’s rulemaking authority, it can do so by setting intelligible principles for agency actions. Establishing clear boundaries for agency discretion ensures that essential policy decisions are made by elected officials accountable to the public, rather than appointed officials. This preemptive measure safeguards against arbitrary judicial review, providing courts with a benchmark to evaluate challenged official actions.
During the Civil War, Congress established the first income tax laws and delegated enforcement authority to a predecessor of the IRS. This grant of authority included a general provision enabling the agency to create necessary rules and regulations, along with specific delegations in various tax statutes. The ambiguity surrounding what constitutes ‘needful’ regulations within the general grant may lead to future legal disputes.
To mitigate these uncertainties, Congress could supplement the general delegation with specific statutes that provide broad authority to the IRS. By clearly outlining the purpose of tax rules and regulations in these delegations, Congress can fortify the IRS’s interpretive power and deter judicial interference.
In conclusion, Congress has already endowed the IRS with substantial authority to interpret tax laws. Moving forward, Congress can enhance this authority by implementing specific delegations that establish clear boundaries for future regulations. A strategic approach to drafting legislation would significantly aid the IRS in effectively administering tax laws and upholding regulatory standards.
