The doctrine of administrative deference, established in the Chevron case in 1984, requires deference to an agency’s reasonable interpretation of an ambiguous statute.1 The two-part test for requiring deference first addresses whether “Congress has directly spoken to the precise question at issue.”2 If so, the court must enforce the “unambiguous express intent of Congress.”3 To be deemed “ambiguous,” the statute must have two or more reasonable interpretations. If the statute is silent or ambiguous, part two of the test requires the court to defer to the agency’s interpretation of the statute, if reasonable, regardless of whether the court may have a conflicting interpretation.
The Chevron Case
The Chevron case concerned a dispute over the proper interpretation of the Clean Air Act (CAA), which required certain states to create permitting programs for “new or modified major stationary sources” that emitted air pollutants.4 In 1981, the Environmental Protection Agency (EPA) issued a regulation that defined a “stationary source,” as used in the CAA, to include all pollution-emitting activities within a single “industrial grouping” and allowed states to “bubble,” or group together, all pollution-emitting sources in a single plant for the purpose of assessing emissions.5 This regulation allowed creation of new pollution-emitting structures, provided that the facility as a whole—the “stationary source”—did not increase its emissions.6 The Natural Resources Defense Council (NRDC) filed a petition for judicial review, arguing that this definition of “stationary source” violated the CAA. The NRDC claimed that the text of the CAA required the EPA “to use a dual definition—if either a component of a plant, or the plant as a whole, emits over 100 tons of pollutant, it is a major stationary source.”7 A unanimous Supreme Court disagreed and upheld the regulation, determining that the EPA’s definition of “stationary source” was “a permissible construction of the statute.”8
In its decision, the court ruled that the statutory text was broad, which granted the EPA significant power to regulate sources to effectuate the policies of the CAA. The CAA’s legislative history was consistent with allowing the EPA broad discretion in implementing the CAA policies. The statute’s definition of “stationary source” was deemed ambiguous, and the EPA provided a reasonable explanation of its definition.
The reasons the court gave for deferring to an agency’s interpretation of a statute that it regulates included congressional delegation of authority, agency expertise, and political accountability.9 The rationale for deferring to agencies’ interpretation was that the experts were better suited than judges to interpret their statutes and regulations. Many federal statutes at issue encompass technical or scientific knowledge, not general knowledge or specific knowledge of the law. In cases requiring such technical expertise, it seems appropriate that the agency regulators should have the final word.
That said, how can this concept be reconciled with the idea that both parties have equal footing in a court of law? With the doctrine of administrative deference, the federal agency typically has the upper hand in a challenge, which historically results in success in seventy percent of legal challenges. Does deference prevent an impartial review of decisions from executive branch agencies?
Chevron deference originally applied to ambiguous statutes deemed reasonable, based on the age of the administrative interpretation, any action or inaction by Congress in response to that interpretation, Congress’ awareness (or lack of awareness) of the interpretation at that time, and whether the interpretation is consistent with the clear statutory language. Several years after Chevron, the Auer (1997) decision narrowed the application by requiring the court to defer to an agency’s interpretation of its own regulations, whether or not they are ambiguous.10 Later Supreme Court cases refined the scope of Chevron deference further, maintaining that the doctrine applied to agency interpretations only through formal proceedings such as adjudications and notice-and-comment rulings and did not apply to opinion letters, policy statements, agency manuals, or similar formats not carrying the force of law. In these informal proceedings, Skidmore deference may be applied, giving less deferential treatment to the agency’s interpretation.11 Under Skidmore (1944), the degree of deference given to an agency’s interpretation is based on the degree of the agency’s care, the agency’s consistency, relative expertise, and the persuasiveness of the position. These cases firmly established the doctrine of deference to be applied on a federal level in challenges to governmental agencies’ decisions.
Major Questions Doctrine
Somewhere along the line, the “major questions doctrine” emerged, where the court has occasionally declined to defer to an agency interpretation in extraordinary cases that present an interpretive question of great economic and political significance.12 The term was not created by the courts but rather was discussed in several academic works, indicating that Congress had likely focused on and answered “major questions” encountered in courtrooms. As an alternative tool of statutory interpretation, the major questions doctrine calls into question an assumption of Chevron that Congress intended the agency to resolve statutory ambiguity.
The first decision to potentially uproot Chevron in favor of the major questions doctrine concerned a question of great “economic and political significance.” In FDA v. Brown & Williamson Tobacco Corp. (2000), a Food and Drug Administration decision to regulate tobacco products was under review.13 Although the court used a Chevron analysis to determine that the FDA regulation was, in fact, not ambiguous and therefore not entitled to deference, the court believed “that Congress could not have intended to delegate a decision of such economic and political significance to an agency in so cryptic a fashion.”14 The court concluded that because Congress had directly spoken to tobacco regulation elsewhere, jurisdiction for regulation of tobacco was outside the FDA’s control.
Recently, the court has applied the major questions doctrine in several cases, while downplaying the application of Chevron. No apparent distinctions have been presented to dictate when an issue is significant enough to require applying the major questions doctrine.
Future of Chevron
Recently, the US Supreme Court accepted review of Loper Bright Enterprises v. Raimondo,15 which may determine the fate of the deference doctrine established in Chevron. The case is expected to be heard in the fall of 2023, with a decision issued in 2024. The issue in Loper is whether the court should overrule Chevron or limit or clarify the applicability of requiring deference to an agency’s reasonable interpretation of an ambiguous statute.
In Loper, a group of New Jersey fishermen are challenging the National Marine Fisheries Service’s (NMFS’) claimed authority under the Magnuson-Stevens Act to require fishermen to pay the salaries of on-board federal observers required to monitor compliance with federal law. The Magnuson-Stevens Act does not specifically address the issue, but the US Court of Appeals for the District of Columbia Circuit ruled in favor of NMFS by applying Chevron deference to the agency’s interpretation of Magnuson-Stevens. The court’s ruling held that although federal fishery law clearly states that the government can require fishing boats to carry monitors, it does not specify who must pay for them. The court deferred to NMFS’ interpretation, deeming it reasonable. The Supreme Court granted certiorari to overrule or clarify the holding of Chevron.
The Loper case raises some of the criticisms that academics and jurists have leveled against the Chevron doctrine. These objections include an attack on the presumption that silence is an implicit delegation of interpretive authority and an argument that Chevron favors the executive branch at the expense of the judiciary and Congress.
Conclusion
Although Chevron, with its deference doctrine, has been one of the most cited cases in administrative law challenges, the Supreme Court has not applied the doctrine to any case involving an interpretation of administrative law since 2016. Several justices have recently spoken out against deference, calling it an “increasingly maligned precedent” that the court should simply ignore,16 while stating that it “deserves a tombstone no one can miss.”17
The highly anticipated review of Loper this fall will address the validity and appropriateness of the Chevron doctrine as applied to deference to agencies in administrative law challenges. The court could overrule or limit Chevron and/or determine that Skidmore deference is preferable. This will be a very important case for both federal and state agency interpretations of tax law. The outcome of Loper will impact both federal and state tax courts with respect to tax agency interpretation of tax laws.
Mary Bernard is director, national tax, and Mark Nachbar is principal, national tax, at Ryan LLC.
Endnotes
- Chevron USA, Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984).
- Chevron USA, Inc. at 842.
- Chevron USA, Inc. at 842–843.
- Chevron USA, Inc. at 840.
- Chevron USA, Inc. at 840.
- Chevron USA, Inc. at 856.
- Chevron USA, Inc. at 859.
- Chevron USA, Inc. at 866.
- Chevron USA, Inc. at 843–844, 865–866.
- Auer v. Robbins, 519 U.S. 452 (1997).
- Skidmore v. Swift & Co., 323 U.S. 134 (1944).
- West Virginia v. EPA, 142 S. Ct. 2587 (2022), 2609.
- FDA v. Brown & Williamson Tobacco Corp., 529 U.S. 120, 160 (2000).
- FDA v. Brown & Williamson at 160.
- Loper Bright Enterprises v. Raimondo (US Supreme Court Docket No. 22-451), 2023.
- Pereira v. Sessions, 138 S. Ct. 2105, 2121 (2018) (J. Alito, dissent).
- Buffington v. McDonough, 143 S. Ct. 14, 22 (2022) (J. Gorsuch, dissent from denial of certiorari).
