Don't Mess With Taxes

The tax community’s focus this year initially was on what the U.S. Supreme Court would decide in Moore v. United States. That case dealt with the Tax Cuts and Jobs Act’s Mandatory Repatriation Tax on corporations’ foreign earnings.

There was concern that if the justices invalidated the tax, which attributes the realized and undistributed income of an American-controlled foreign corporation to the entity’s American shareholders, the entire U.S. tax code could unravel.

Those fears were alleviated on June 20 when the Supreme Court of the United States (SCOTUS) upheld the repatriation tax.

But a new tax worry popped up in the final days of the 2023-24 SCOTUS term.

Chevron is out: On June 28, the nation’s highest court overturned the Chevron doctrine. This prior Supreme Court decision had, for almost 40 years, dictated how federal agencies created regulations and implemented laws.

Now, with Loper Bright Enterprises v. Raimondo erasing Chevron, the implications could be far-reaching for federal agencies, including the Internal Revenue Service.

In the short term, we’re likely to see challenges to dozens of tax regulations. Over the longer term, tax laws will face more scrutiny, meaning Congress will have to be more precise in its creation of the laws. That will slow that process down considerably.

So, this weekend’s Saturday Shout Outs go to members of the tax world and their takes on this landmark SCOTUS ruling.

“Future of IRS Authority in Question After Supreme Court Overturns Chevron Doctrine,” writes attorney Joseph K. Fabbi, who is in Dinsmore’s Orlando, Florida, office.

“Clear as Mud – Chevron Irreverence and Tax Law,” write Devon Bodoh, Joseph Pari, Alex Dobyan, and Grant Solomon on Weil Tax Blog. All are attorneys in the Washington, D.C., office of Weil, Gotshal & Manges.

"Supreme Court Overrules Chevron, Opening Door for New Tax Reg Challenges," write McDermott Will & Emery attorneys Timothy S. Shuman, Susan E. Ryba, Parisa M. Griess, and Samuel J. Preston. Shuman and Preston are in the firm’s Washington, D.C. office. Ryba is in Chicago. Griess is in San Francisco.

“United States: Supreme Court opens door to challenges of old agency guidance,” write Baker McKenzie attorneys Vivek Patel and Joseph Judkins, who are in the firm's Washington, D.C. office, and Yuyao Leng, in its New York City office.

“Supreme Court decision on Chevron doctrine will affect tax pros,” writes Martha Waggoner, senior writer for the Journal of Accountancy.

“What The Supreme Court’s New Curbs On Regulatory Power Could Mean For Tax Law,” writes Howard Gleckman, Senior Fellow at the Urban Institute, for the Tax Policy Center’s TaxVox blog.

More tax uncertainty: My take is that this SCOTUS decision basically undermines something that all taxpayers seek, certainty. Without it, effective tax planning and tax moves essentially are impossible.

It also likely will mean more lawsuits regarding tax laws and IRS guidance and regulations, which will leave us dealing with more tax ambiguities.

There’s an old joke on Capitol Hill that every new tax law should be subtitled the Tax Professionals Perpetual Employment Act. The Supreme Court’s striking of Chevron can be viewed as the lawyers’ version of that not-so-funny saying.

You also might find these items of interest:

• Hunter Biden sues IRS over tax disclosures
• SCOTUS tax law decision could wreck U.S. tax code…or not
• Elderly MN woman wins SCOTUS property tax case, heads back to court to collect her $25,000

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