Estate of Gerson v. Comm'r

Vasquez, J, dissenting: I write separately to address the issue of the proper deference the Court should give to interpretive regulations. 1 I respectfully disagree with the position that when the Court reviews interpretive regulations we should continue to follow the analysis set forth in Natl. Muffler Dealers Association v. United States, 440 U.S. 472 (1979). See Court op. p. 153. I believe that in United States v. Mead Corp., 533 U.S. 218 (2001), the Supreme Court of the United States set forth the analysis that courts should use to decide the deference courts should give to interpretive regulations.

I. Chevron Deference

“If the intent of Congress is clear, that is the end of the matter; for the court, as well as the agency, must give effect to the unambiguously expressed intent of Congress.” Chevron U.S.A. Inc. v. Natural Res. Def. Council, Inc., 467 U.S. 837, 842-843 (1984). Accordingly, an agency interpretation (e.g., a Treasury regulation) cannot conflict with the unambiguously expressed intent of Congress.

If a statute is ambiguous, Chevron provides that a reviewing court is obliged to accept the agency’s position if Congress has not previously spoken to the point at issue and the agency’s interpretation is reasonable. United States v. Mead Corp., supra at 227, 229 . Thus, any regulation entitled to Chevron deference is binding on the courts unless procedurally defective, arbitrary or capricious in substance, or manifestly contrary to the statute. Id. at 227 .

II. Mead

It is “plain error for [courts] to rely on” Chevron in determining what deference to give agency actions without considering Mead. Am. Fedn. of Govt. Employees, AFL-CIO v. Veneman, 284 F.3d 125, 129 (D.C. Cir. 2002).

In Mead, the Supreme Court clarified the limits of Chevron deference owed to an agency’s interpretation of a statute it administers. The Supreme Court held that an agency’s interpretation of a particular statutory provision qualifies for Chevron deference when (1) Congress delegated authority to the agency to make rules or regulations carrying the force of law, and (2) the agency interpretation claiming deference was promulgated in the exercise of that authority. United States v. Mead Corp., supra at 226-227, 237 ; Pool Co. v. Cooper, 274 F.3d 173 , 177 n.3 (5th Cir. 2001). Furthermore, “mere ambiguity in a statute is not evidence of congressional delegation of authority”, agency authority is not to be lightly presumed, and courts should not presume a delegation of power based solely on the fact that there was not an express withholding of such power. Michigan v. EPA, 268 F.3d 1075 , 1082 & n.2 (D.C. Cir. 2001).

When an agency’s interpretation of a particular statutory provision does not qualify for Chevron deference, it is entitled to the deference accorded under Skidmore v. Swift & Co., 323 U.S. 134 (1944). United States v. Mead Corp., supra at 234-235, 237 . Pursuant to Skidmore, the agency’s interpretation is accorded respect proportional to its “power to persuade”. Id. at 235 ; Pool Co. v. Cooper, supra at 177 (in the absence of Chevron deference, pursuant to Mead the agency’s interpretation is accorded respect under Skidmore according to its “power to persuade”); Landmark Legal Found. v. IRS, 267 F.3d 1132, 1135-1136 (D.C. Cir. 2001) (when Chevron deference does not apply, the Internal Revenue Service’s interpretations are entitled to “no more than the weight derived from their ‘power to persuade.’”).

III. Interpretive Versus Legislative Regulations

Treasury regulations are either legislative or interpretive in character. Tutor-Saliba Corp. v. Commissioner, 115 T.C. 1, 7 (2000). Interpretive regulations are promulgated under section 7805; legislative regulations, however, are issued pursuant to a specific Congressional delegation of authority, to the Secretary of the Treasury or the Commissioner, to issue rules or regulations that have the force and effect of law. Id.; Hefti v. Commissioner, 97 T.C. 180, 189 (1991), affd. 983 F.2d 868 (8th Cir. 1993). “An interpretive regulation may be contrasted to a legislative regulation, one which is mandated specifically in the statute and has the force and effect of law.” Matheson v. Commissioner, 74 T.C. 836 , 840 n.7 (1980).

The Internal Revenue Code contains numerous specific delegations of authority from Congress to the Secretary or the Commissioner to issue rules or regulations that have the force and effect of law. See, e.g., sec. 1502. These sections— which provide for issuing legislative regulations — would be superfluous if section 7805 were a delegation of authority from Congress to make rules or regulations carrying the force of law. It is a fundamental rule of statutory construction to give effect to all of the language of the statute. See Hellmich v. Hellman, 276 U.S. 233 (1928); Stanford v. Commissioner, 297 F.2d 298, 308 (9th Cir. 1961), affg. 34 T.C. 1150 (1960); Larkin v. United States, 78 F.2d 951 (8th Cir. 1935); Stolk v. Commissioner, 40 T.C. 345 (1963), affd. per curiam 326 F.2d 760 (2d Cir. 1964). It is a well-accepted rule of statutory construction that the various sections of the Code should be construed so that one section will explain and support and not defeat or destroy another section. Crane v. Commissioner, 331 U.S. 1, 13 (1947); Bernier v. Bernier, 147 U.S. 242, 246 (1893); Pleasanton Gravel Co. v. Commissioner, 85 T.C. 839, 851 (1985). Accordingly, I believe that section 7805 is not a delegation of authority by Congress to make rules or regulations carrying the force of law.

IV. Mead Applied to Interpretive Regulations

Prior to Mead, we questioned whether Chevron applies to interpretive regulations. Cent. Pa. Sav. Association & Subs. v. Commissioner, 104 T.C. 384, 391 (1995) (citing E.I. duPont de Nemours & Co. v. Commissioner, 41 F.3d 130 (3d Cir. 1994), affg. 102 T.C. 1 (1994)). The Supreme Court, also prior to issuing Mead, held that interpretive regulations are owed “less deference than a regulation issued under a specific grant of authority to define a statutory term or prescribe a method of executing a statutory provision”. Rowan Cos. v. United States, 452 U.S. 247, 253 (1981); see United States v. Vogel Fertilizer Co., 455 U.S. 16, 24 (1982) (quoting Rowan Cos.); see also Cent. Pa. Sav. Association v. Commissioner, supra at 391 (citing Vogel Fertilizer Co.). Accordingly, what level of deference the Court should give to interpretive regulations needs to be reexamined in light of Mead.

The first question in the Mead analysis is whether Congress delegated authority to the agency to make rules or regulations carrying the force and effect of law. United States v. Mead Corp., 533 U.S. at 226-227 ; Pool Co. v. Cooper, supra at 177 n.3. The second question is whether the agency invoked that authority. United States v. Mead Corp., supra; Pool Co. v. Cooper, supra.

By promulgating a regulation pursuant to section 7805, the regulation was not issued pursuant to a delegation of authority by Congress to make rules or regulations carrying the force and effect of law. See Tutor-Saliba Corp. v. Commissioner, supra at 7; Matheson v. Commissioner, supra at 840 n.7. Accordingly, pursuant to Mead, interpretive regulations are not entitled to Chevron deference; instead, they are entitled to Skidmore deference. United States v. Mead Corp., supra at 234-235; Rowan Cos. v. United States, supra at 253; United States v. Vogel Fertilizer Co., supra at 24; Pool Co. v. Cooper, supra at 177 ; Cent. Pa. Sav. Association v. Commissioner, supra at 391; Klamath Strategic Inv. Fund, LLC v. United States, 440 F. Supp. 2d 608, 621 (E.D. Tex. 2006) (discussing the differences between legislative and interpretive regulations, concluding that different standards of review apply to each and that courts must accord a higher degree of deference to a legislative regulation than to an interpretive regulation, and holding that “Chevron deference is only available to the Regulation if it is a legislative regulation.”); see also Boeing Co. v. United States, 537 U.S. 437, 448 (2003) (noting that an interpretive regulation promulgated under section 7805 “rather than pursuant to a specific grant of authority” is entitled to some measure of deference; however, the Court did not hold or suggest that interpretive regulations should receive Chevron deference).

V. Conclusion

I believe that Mead changed the landscape regarding the deference courts should give to interpretive regulations. Pursuant to the analysis set forth by the Supreme Court in Mead, I believe interpretive regulations are entitled to Skidmore deference.

Accordingly, I dissent.

Deference only sets the framework for judicial analysis; it does not displace it. United States v. Vogel Fertilizer Co., 455 U.S. 16, 24 (1982); United States v. Cartwright, 411 U.S. 546, 550 (1973).