Tax Implications of Recent SCOTUS Decisions: Synthesis and Prediction

Having offered several blog posts highlighting the implications for tax administration of recent non-tax Supreme Court decisions, the question that remains is what these and other cases like them tell us.

We have a Court that includes several Justices who possess extensive administrative law expertise and a deep interest in how agencies are organized and function, but who disagree sharply about the administrative state and the courts’ role in relation to it. Whereas the Court followed a lenient, functionalist approach to separation of powers principles and congressional experimentation with agency design through most of the 20th century, a majority of the Justices today are more inclined to a narrower and more formalist approach to constitutional interpretation, albeit to varying degrees. And whereas Justices in the 1980s and 1990s reacted to a very activist Supreme Court and D.C. Circuit of the 1970s by adopting a more hands-off approach to judicial review of administrative agency action, the pendulum now is swinging back the other way, with Justices and judges reclaiming a more robust judicial role in policing the administrative state.

Yet, although Justices Thomas and Gorsuch have made clear their willingness to disregard precedent in favor of an originalist approach to constitutional interpretation, Chief Justice Roberts and Justices Alito and Kavanaugh seem to be more concerned about stare decisis, stability, and the unintended consequences of sweeping too broadly. Meanwhile, Justice Kagan clearly is looking for compromises and has proven herself willing to embrace more formalist outcomes in exchange for the opportunity to shape the Court’s opinions and to move incrementally to preserve the status quo.

I would note also that, although administrative law is mostly statutory, it is also quasi-constitutional in two key ways. First, the terms of the Administrative Procedure Act (APA) are often undefined or at least under-defined, open-ended, and malleable. Second, much like the Constitution’s structural aspects, the APA fundamentally concerns the allocation of governmental power among the three traditional branches of government. Consequently, how courts interpret and apply the APA’s terms is often influenced by how they think about constitutional separation of powers principles. The separation of powers debates in the background sometimes prompt the Justices to be less deferential to and more demanding of agencies across the board. Lower court judges are following their lead.

As Richard Pierce and I document in our Administrative Law Treatise, courts are more aggressively applying traditional tools of statutory interpretation at Chevron step one. Courts are requiring greater consistency and more robust explanations of discretionary choices at Chevron step two and under State Farm. Although courts historically have been more deferential to Treasury and the IRS than to some other agencies, in the post-Mayo Foundation era, I would expect to see a similar trend toward a less deferential posture in tax cases as well. Additionally, we are seeing signs that courts are more willing to engage in judicial review in the first place, construing justiciability limitations more narrowly to allow judicial review in a broader array of cases, which could spill over to tax as well — for example, with respect to the Anti-Injunction Act and taxpayer standing.

It is an interesting time for administrative law at the Supreme Court. In the most recent biannual supplement to the Treatise, Pierce and I suggest that in this regard we may be in for a bumpy ride. I would expect no less for tax administration in the coming years, as trends in the former spill over and shape the latter.

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kristin hickman

Professor Kristin Hickman is a legal scholar working in the fields of tax administration, administrative law, and statutory interpretation. In addition to the Of Interest blog, Professor Hickman authors the Administrative Law Treatise (with co-author Richard J. Pierce, Jr.) and has published scholarly articles in Columbia Law Review, Virginia Law Review, Cornell Law Review, Duke Law Journal, Georgetown Law Journal, Vanderbilt Law Review, and many other prominent U.S. and international publications. She holds the titles of Distinguished McKnight University Professor and Harlan Albert Rogers Professor of Law at the University of Minnesota Law School.