For decades, the Chevron deference doctrine shielded IRS regulations, granting them significant authority and insulation from court challenges. However, a recent Supreme Court ruling in Loper Bright Enterprises v. Raimondo has dramatically altered this landscape, removing automatic judicial deference to IRS regulations.

This shift is a game-changer for taxpayers and businesses navigating the complexities of federal tax law. Let’s break down what this means for you:

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What Was the Chevron Doctrine?

Under the Chevron doctrine, courts deferred to IRS and other federal agency regulations as long as they were deemed "reasonable," even if the statutory language was ambiguous. This gave the IRS substantial power to enforce its interpretations of the tax code, with limited avenues for taxpayers to contest these rules.

With the Supreme Court’s ruling in Loper Bright, courts are no longer bound to defer automatically to the IRS’s interpretations. Instead, judges will independently interpret tax laws based on Congress’s language.

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What Hasn’t Changed?

The Supreme Court's decision applies only prospectively, meaning:

• Existing IRS regulations remain valid unless successfully challenged.

• Court decisions that previously upheld regulations using Chevron deference still stand.

This ruling primarily impacts future regulations and ongoing legal disputes.

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Implications for Taxpayers and Businesses

1. Increased Legal Challenges to IRS Regulations

   • Taxpayers now have stronger grounds to contest IRS rules in court. For example, cryptocurrency regulations—a hot topic—are expected to face significant legal scrutiny under this new framework.

2. Fewer IRS Regulations, More Informal Guidance

   • The IRS may shift toward issuing sub-regulatory guidance (e.g., revenue rulings, notices, and FAQs), which never benefited from Chevron deference. While these are useful, they lack the enforceability of formal regulations and may leave taxpayers with less clarity.

3. More Cautious IRS Rulemaking

   • Anticipating challenges, the IRS may take a more restrained approach when drafting regulations to avoid judicial invalidation.

4. Increased Likelihood of Settlements

   • Historically, the IRS avoided settling disputes over the validity of its regulations. This policy may soften, as the IRS could prefer negotiation over risking unfavorable court rulings.

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What Does This Mean for You?

The ruling empowers taxpayers, but it also introduces new uncertainties in tax compliance. Navigating this evolving regulatory environment will require careful attention to:

• New IRS regulations or guidance.

• Legal challenges affecting your industry or tax position.

• Opportunities to challenge rules that might overreach or lack statutory backing.

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Take Action

This Supreme Court decision opens doors for taxpayers to push back against IRS overreach. If you have questions about how this change might impact your tax situation—or if you’re considering challenging an IRS rule—reach out to me.

Let’s discuss how we can position your business to thrive in this new regulatory environment.