Supreme Court overrules 40-year-old Chevron doctrine

The Supreme Court, overturning its decision in Chevron U.S.A. Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984), on Friday held that the Administrative Procedure Act (APA) requires courts to exercise their independent judgment in deciding whether an agency has acted within its statutory authority, and courts may not defer to an agency’s interpretation of the law just because a statute is ambiguous (Loper Bright Enterprises v. Raimondo, No. 22-451 (6/28/24)).

The Court, in a 6–3 opinion, wrote “[t]he deference that Chevron requires of courts reviewing agency action cannot be squared with the APA” (slip op. at 18), and “neither Chevron nor any subsequent decision of the Court attempted to reconcile its framework with the APA” (slip op. at 21).

“The APA, in short, incorporates the traditional understanding of the judicial function, under which courts must exercise independent judgment in determining the meaning of statutory provisions,” the Court found. “In exercising such judgment, though, courts may — as they have from the start — seek aid from the interpretations of those responsible for implementing particular statutes. Such interpretations ‘constitute a body of experience and informed judgment to which courts and litigants may properly resort for guidance’ consistent with the APA” (slip op. at 16).

The Supreme Court noted that Congress may still grant authority to agencies, subject to constitutional limits, and stated that “to stay out of discretionary policymaking left to the political branches, judges need only fulfill their obligations under the APA to independently identify and respect such delegations of authority, police the outer statutory boundaries of those delegations, and ensure that agencies exercise their discretion consistent with the APA. By forcing courts to instead pretend that ambiguities are necessarily delegations, Chevron does not prevent judges from making policy. It prevents them from judging” (slip op. at 26).

The Court said that while it was overruling Chevron, it does “not call into question prior cases that relied on the Chevron framework. The holdings of those cases that specific agency actions are lawful — including the Clean Air Act holding of Chevron itself — are still subject to statutory stare decisis despite [the Court’s] change in interpretive methodology” (slip op. at 34).

Background

The Chevron doctrine, adopted by the Court in 1984, required courts to give deference to a reasonable interpretation of an ambiguous statute by a government agency. But it was not until 2011, in Mayo Foundation for Medical Education and Research, 562 U.S. 44 (2011), that the justices resolved a split in the lower courts and held that Chevron deference applied to interpretive tax regulations issued under Sec. 7805(a), which gives a general grant of authority to Treasury to “prescribe all needful rules and regulations for … enforcement” of the Code. Before that decision, courts had generally given a lower level of deference to Treasury’s interpretive regulations.

— To comment on this article or to suggest an idea for another article, contact Martha Waggoner at Martha.Waggoner@aicpa-cima.com.