Amid the sea of adjectives that flowed over Monday’s second inauguration of President Obama, several television commentators made a pointed observation. Presidential Inaugurations are certainly occasions to celebrate the American constitutional system; however, there is no more demonstrable picture of this country’s enigmatic arrangement than the sight of President Obama taking his oath at the direction of John Roberts, Chief Justice of the United States Supreme Court. It is the Roberts Court’s murky history of judicial deference toward regulatory agencies that will color many of the disputes to follow the peaceful swearing-in ceremony when representatives of President Obama will also turn their eyes upon Roberts and his court. Not surprisingly, tax preparation may drive the discussion.
Many on the left hailed Justice Roberts for a surprising victory last fall when his court upheld key segments of the Affordable Care Act (ACA) as constitutional. While the law has been saved, this means the ACA will join other legislation in mandating agency prescribed rules that provide fodder for challenge in court. As a consequence, the Supreme Court may be forced to define its relationship with federal regulatory agencies regarding judicial review of rules created by agencies under these laws. One such dispute is the amount of deference that is given to agency interpretations of statutory language by courts during a rule’s review. The road to oyez may have already begun however, and in a place that is far from the buzz words of Obamacare and Dodd-Frank.
Its nearly tax season again in the United States, a time of year never lacking in sound-bite obsessed legislators keen on discussing tax code reform. Notably, the Internal Revenue Service (IRS) was recently dealt a swift defeat in U.S. district court. District Judge James Doasberg, an Obama appointee, struck down an IRS rule that would have mandated strong certification and reporting standards for tax professionals. In many instances tax professionals have a background in either accounting or law which will provide their own set of stringent standards to ensure qualification. The IRS had attempted to fill the gap for everyone else by drafting their own set of standards for tax preparers who do not share this prior training. This rule proved a rare case in which the IRS found support from large-scale industry participants who favored these standards as a check to smaller tax advice specific groups.
The federal court, however, was persuaded that IRS had misinterpreted a statute from the 1880s when it defined tax filings as consistent with the legislation’s use of the word ‘case.’ This may prove to be a short word with long implications. If IRS appeals, which seems likely, the Supreme Court will have to clarify the level of deference given to agency interpretation. Currently the Roberts Court is locked in a disagreement over this deference driven by the debate of Justices Scalia and Breyer over the proper place of the Chevron opinion in the court’s analytical tool-box.
Chevron is often cited as requiring more deference to agency interpretations yet there are some, particularly Justice Breyer, who argue that the decision in Mead limits Chevron deference by instructing a case-by-case view of agency rules. Members of the Roberts Court have left no shortage of complicated dicta on the matter, but so far have ducked any meaningful commitment to an applicable standard of agency deference. Most recently the court turned down, in its harsh ‘cert denied’ manner, the opportunity to jump into the regulatory waters by refusing to take up the EPA’s authority to set air quality standards.
The time may be coming when the Roberts Court has no choice but to define the judicial relationship to regulatory agencies in greater detail. Despite several major lower court defeats for the Obama regulatory apparatus the Court’s history to date leaves little clarity as to its direction on issues such as deference. With the flurry of rules undoubtedly arriving this year, regulatory agencies must await final verdict on a topic that is definitely not, ‘as certain as taxes.’