Loper Bright and Its Implications for Chevron Deference in Tax Regulation
Courts can no longer simply defer to Treasury's reading of tax code gaps.
On June 28, 2024, the Supreme Court overruled a decades-old precedent that had directed courts to defer to agency interpretations. v. Natural Resources Defense Council, Inc., ending forty years of judicial deference to agency readings of ambiguous statutes. For tax practitioners, the ruling in Loper Bright Enterprises v. Raimondo is not an abstract administrative law event. It reopens the question of whether hundreds of Treasury regulations, some decades old, actually rest on statutory ground solid enough to survive a court that no longer has to take the agency's word for it.
How Loper Bright Enterprises v. Raimondo dismantled the Chevron framework
The case started far from tax law. Atlantic herring fishermen challenged a National Marine Fisheries Service rule that made them pay for at-sea monitors, a cost estimated at $710 per day that could cut annual vessel returns by up to 20 percent. Whether Congress authorized that funding scheme under the Magnuson-Stevens Act was narrow. The Court used it to ask something much bigger: should Chevron be overruled or merely clarified?
The answer came down 6-2, with Justice Jackson recused (a companion case, Relentless, Inc. v. Department of Commerce, decided the same day, 6-3). Chief Justice Roberts wrote for the majority, joined by Thomas, Alito, Gorsuch, Kavanaugh, and Barrett. Kagan dissented, joined by Sotomayor. The holding is blunt: the governing statute on judicial review of agency action requires courts to "exercise their independent judgment in deciding whether an agency has acted within its statutory authority." A statute being ambiguous no longer triggers deference to whatever reading the agency prefers. Chevron is gone.
Roberts grounded the decision in Article III, tracing it back to Marbury v. Madison and the line that it is "emphatically the province and duty of the judicial department to say what the law is." Agency expertise still matters, but only in the weaker, persuasion-based sense that Skidmore v. Swift & Co. always allowed: courts weigh an agency's reasoning for its thoroughness and consistency, but they are not bound by it. Roberts did carve out one stabilizer. Cases already decided under Chevron aren't disturbed; their specific holdings remain good law under ordinary statutory stare decisis, even though the interpretive method that produced them no longer exists. Concurrences from Thomas and Gorsuch went further, questioning the constitutional legitimacy of broad agency power generally, a signal that the Court's appetite for shrinking administrative authority may not have stopped at Chevron's overruling.
For four decades, Chevron had been a dominant force in administrative law, applied almost reflexively at the circuit level even after the Supreme Court itself had largely quit invoking it after 2016. Step one asked whether the statute was ambiguous; if not, courts applied Congress's plain meaning. If ambiguous, step two asked only whether the agency's reading was reasonable. That second step is what's gone.
Why the IRC is structurally more exposed to post-Loper Bright challenges than most regulatory regimes
The federal tax code doesn't function on statutory text alone. It runs through a thick layer of Treasury regulations, revenue rulings, revenue procedures, and notices, built up over decades specifically because Congress leaves gaps. Every major legislative overhaul, going back decades, has produced provisions that raise implementation questions Congress never answered directly. Treasury filled those gaps through rulemaking, and Chevron made that rulemaking hard to dislodge.
Scale alone makes tax law a bigger target than most regulatory fields. Few other statutory schemes generate as many pages of implementing regulation, and few depend so heavily on agency interpretation of language Congress left open on purpose. That volume means more surface area for a court to find that Treasury went further than the statute allowed.
There's also a mismatch in expertise. District and circuit judges are generalists. Losing Chevron doesn't just strip legal protection from a regulation, it forces judges who may never have parsed a subpart F provision to independently work through highly technical Code sections without the deference rationale that used to substitute for that expertise. Courts will likely keep functionally deferring on low-visibility, highly technical questions simply because dockets don't allow for reinventing every wheel. But where an issue draws political attention and the underlying tax question isn't too dense to unpack, independent scrutiny is far more likely to bite.
Treasury and the IRS had effectively been operating under two shields, not one: Chevron deference plus the added institutional credibility the Supreme Court once granted tax regulations specifically. Both are weaker now.
Tax exceptionalism's history and its foreclosure under Mayo Foundation
Before Chevron existed, the Supreme Court had already carved out something like a tax-specific deference doctrine. National Muffler Dealers Association v. The case built its reasoning on factors including Congress's delegation of rulemaking power to Treasury and the technical character of tax administration.
That doctrine died in 2011. Mayo Foundation for Medical Education and Research v. United States, decided unanimously on January 11, 2011, applied ordinary Chevron analysis to a Treasury regulation and found no reason to treat tax rules any differently from rules issued by any other federal agency. The regulation at issue, finalized in December 2004 and effective the following April, said medical residents working full-time schedules didn't qualify as "students" exempt from FICA taxes under the relevant tax code provision. § 3121(b)(10). The Court upheld it, and in doing so gave Treasury what amounts to broad latitude in writing and revising regulations, so long as Chevron's two steps were satisfied.
Loper Bright raises an obvious question: could courts now revert to something like National Muffler's tax-specific deference, a standard friendlier to Treasury than plain Skidmore? Conceptually, nothing stops a court from trying. Practically, it's not going to happen. The same six-justice majority that killed Chevron did so because it wants less agency deference across the board and uniform treatment instead of a patchwork of new deference doctrines carved out for favored subject areas. Reviving tax exceptionalism would cut directly against the trajectory the Court has set for itself.
The fault line between legislative and interpretive regulations under the tax code. § 7805
Section 7805(a) instructs Treasury to "prescribe all needful rules and regulations" for enforcing Title 26. Tax scholar Reuven S. Avi-Yonah has described this as a general grant of authority, and that word, general, is why it matters so much after Loper Bright.
A meaningful line now separates two categories of Treasury rules. Legislative regulations rest on a specific, provision-by-provision delegation from Congress. Section 897(l), for example, directs Treasury to "prescribe such regulations as may be necessary or appropriate to carry out the purposes of this subsection." That's a particularized grant, and regulations issued under it sit on much firmer footing. Interpretive regulations are different: they're issued under § 7805 alone, without any statute-specific hook. Treasury is simply interpreting ambiguous code language. Loper Bright says courts don't have to defer to that interpretation just because the underlying statute is unclear.
The Court of Federal Claims tested this distinction directly in Keysight Technologies Inc. v. United States, decided in 2026. The government argued that § 7805(a), either alone or paired with § 951A, gave Treasury enough authority to support a GILTI regulation eliminating the distinction Congress had drawn between fiscal-year and calendar-year filers. The court rejected that argument outright, holding that neither provision supplied the authority needed and that § 7805(a) standing alone cannot rescue a regulation that oversteps what Congress actually wrote. Keysight is a significant post-Loper Bright ruling to say, in so many words, that general § 7805 authority isn't enough on its own, and it turns what had been a theoretical vulnerability into a live one.
Treasury's drafting practice will have to adjust. Leaning on § 7805 as a catchall justification is no longer a safe default; regulations need a specific delegation to point to. The need for clearer statutory delegation language has drawn attention from practitioners and commentators seeking to reduce uncertainty for courts evaluating regulatory authority.
How Corner Post extended the window for challenging existing Treasury regulations
A separate 2024 decision compounds all of this. Corner Post, Inc. v. Board of Governors of the Federal Reserve System, decided July 1, 2024, by a 6-3 vote, changed when the clock starts running on APA challenges to final agency action.
Under the old rule, the APA's six-year statute of limitations began the day a regulation was finalized. Once six years passed, the regulation was effectively locked in against facial challenge, regardless of who it later affected. Corner Post replaced that with an injury-based trigger: the limitations period now starts when a specific plaintiff is actually harmed by the rule, not when the rule was written. A business injured today by a regulation from the 1940s has roughly six years from that injury, not six years from the regulation's birthdate, to sue.
Stacking that against Loper Bright compounds the exposure. Deference has dropped from the old Chevron standard to Skidmore's weaker persuasion test, the de facto time bar that used to protect old regulations from being second-guessed has been lifted for anyone newly affected by them, and courts can still hand out sweeping injunctive relief as a remedy. Put together, litigation against long-standing IRS and Treasury guidance is viable across a far longer historical window than it was two years ago.
Congress has noticed. The Corner Post Reversal Act, introduced July 11, 2024, by Representatives Jerrold Nadler and Lou Correa, would restore the old six-year period tied to an agency action's finalization date. The Agency Stability Restoration Act of 2024, introduced by Senator Chris Coons on July 23, 2024, aims at the same fix from a different angle. As of this writing, neither bill has been enacted. Until one is, regulations that practitioners have treated as settled for years, particularly interpretive rules issued under § 7805 alone, remain open to challenge by any client newly subject to or harmed by them.
3M Co. v. Commissioner shows what independent judicial scrutiny looks like in practice
3M Co. v. Commissioner, decided by the Eighth Circuit on October 1, 2025, is the clearest post-Loper Bright demonstration of what independent judicial review actually does to a tax regulation once the deference is stripped away.
The dispute involved the IRS trying to impute royalty income to 3M from its Brazilian affiliate under the blocked-income regulation issued pursuant to the relevant tax code provision. § 482. Brazilian law restricted the affiliate's ability to make certain payments, but the regulation told the IRS to treat that restriction as if it didn't exist, taxing 3M on income the company never received and was legally barred from receiving. In 2023, a divided Tax Court upheld the regulation under Chevron, with a majority of judges finding it a reasonable reading of § 482.
The Eighth Circuit reversed, and it did so without giving Treasury's interpretation any deference at all. The unanimous panel ran its own textual analysis of § 482 and concluded that the statute only lets the IRS reallocate "income," and that a taxpayer doesn't have income without dominion and control over the amount in question. Because 3M never had that control over the blocked funds, the regulation exceeded what § 482 actually authorized.
The contrast is instructive. Under Chevron, the Tax Court's finding that the regulation was a "reasonable interpretation" would likely have ended the case right there. Under Loper Bright, that same finding is just a starting point for the appellate court's own analysis. The original Tax Court vote was close, with a narrow majority of judges on each side. A split that thin, decided under a standard that no longer applies, is exactly the kind of prior ruling practitioners should flag as vulnerable to re-examination now that courts have to reach their own conclusions about statutory text.
How practitioners should evaluate regulatory authority and advise clients in the post-Loper Bright environment
What due diligence must confirm has changed shape. It used to be enough to confirm that a Treasury regulation existed and covered a given fact pattern. Now the question is whether the statute actually authorizing that regulation supports what the regulation does, independent of how reasonable Treasury's reading might sound.
A workable triage starts with the source of authority. Was the regulation issued under a specific statutory delegation, like § 897(l)'s language, or does it rest on § 7805's general grant alone? Next comes the nature of the regulation itself: does it fill a genuine statutory gap or resolve an ambiguity Congress left open? Those are now the highest-risk categories, precisely the fact pattern Loper Bright was written to address. Then check the regulation's litigation history. If it survived a prior challenge because a court applied Chevron's "reasonable interpretation" standard, that finding no longer means what it used to; 3M is the template for how a court re-litigates that question from scratch. Finally, factor in Corner Post: a regulation's age doesn't protect it anymore if a client is only now becoming subject to it or harmed by it.
Lower-risk positions are the ones backed by an express, provision-specific delegation, comparable to § 897(l), or by a prior ruling from the deference era whose specific holding survives under Roberts's stare decisis carve-out. Higher-risk positions are interpretive regulations resting on § 7805 alone, especially ones that filled statutory silence rather than executing a clear congressional instruction. GILTI-adjacent rules, in light of Keysight, and transfer pricing regulations tied to § 482, in light of 3M, are squarely in that higher-risk column right now.
Where a client's position depends on a high-risk regulation, the job isn't to wait and see whether someone else litigates it first. It's to flag the exposure directly, walk through whether litigation risk is worth taking on, and lay out planning alternatives or compliance adjustments before a court forces the issue. The scale of the problem shows in the Code's regulatory apparatus, which runs into the thousands of provisions, and no practice can manually re-underwrite every regulation it relies on against a Loper Bright framework. That kind of systematic tracking, flagging which regulations rest on thin statutory ground and which clients are newly exposed to old rules under Corner Post, is exactly the sort of repetitive, document-heavy review that purpose-built tax practice software can absorb, freeing practitioners to spend their judgment where it actually counts: deciding what to do once the exposure is found.