Applying the Rule of Lenity and Strict-Construction Canons in Tax Cases

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(Today’s post is by Andrew Roberson, a partner at McDermott Will & Emery LLP who specializes in tax controversy. Andy is the lead counsel in the Rand case, where and his firm contributed substantial amount of time pro bono, and he is the Vice Chair of the ABA Tax Section Pro Bono and Tax Clinic Committee. He and McDermott have been very active in the ABA Tax Section calendar call initiative, which is the subject of an article in the Winter 2014 ABA Tax Section NewsQuarterly.

 In this post, which is part of a larger project, Andy discusses the rule of lenity and how it and other statutory construction canons have an increasingly important role in tax cases.)

Tax lawyers have historically been content with viewing tax law as a self-sustained universe.  Mayo Found. for Med. Educ. & Research v. United States, 131 S.Ct. 704 (2011), provided a wake-up call when the Supreme Court held that there was not “an approach to administrative review good for tax law only.”  This admonition has forced tax lawyers to review non-tax materials, most notably the Administrative Procedure Act.

One canon of statutory construction that has not been seen much over the past century in civil tax matters is the rule of lenity.  The Supreme Court, following early English law, adopted this rule in United States v. Wiltberger, 18 U.S. 35, 43 (5 Wheat. 76, 95) (1820), stating as follows:

The rule that penal laws are to be construed strictly, is perhaps not much less old than construction itself.  It is founded on the tenderness of the law for the rights of individuals; and on the plain principle that the power of punishment is vested in the legislature, not in the judicial department.  It is the legislature, not the Court, which is to define a crime, and ordain its punishment.




In Commissioner v. Acker, 371 U.S. 87, 91 (1959), the Supreme Court applied the canon in the tax context, holding that penalty provisions “‘are to be strictly construed’ and that one ‘is not to be subjected to a penalty unless the words of the statute plainly impose it’.” (Citations omitted).  The Tax Court and some appellate courts occasionally applied this principle to statutes and regulations dealing with penalties, but the canon had not been used consistently or frequently.  However, the Tax Court recently issued two opinions applying the rule of lenity in favor of taxpayers.

In Rand v. Commissioner, 141 T.C. No. 12 (Nov. 18, 2013), which has been discussed in detail in prior posts (for example here is a post by Keith discussing litigation strategy if you currently have a Rand-type issue in a case), the court invoked the rule of lenity to confirm its interpretation of sections 6662 and 6664 because the relevant statutes did “not plainly impose a penalty on refunds resulting from overstated earned income credits, additional child tax credits, or recovery rebate credits.” 

In Mohamed v. Commissioner, T.C. Memo. 2013-255 (Nov. 12, 2013), issued just six days before Rand, the Tax Court similarly applied the rule of lenity and construed section 6651(f) narrowly.  However, unlike in Rand, the court also relied on opinions outside the penalty context that had applied a related strict-construction canon.  Specifically, it relied on Gould v. Gould, 245 U.S. 151 (1917), wherein the Supreme Court held:

In the interpretation of statutes levying taxes it is the established rule not to extend their provisions, by implication, beyond the clear import of the language used, or to enlarge their operations so as to embrace matters not specifically pointed out.  In case of doubt they are construed most strongly against the Government, and in favor of the citizen.

Although the Tax Court noted that the canon did not “enjoy universal approval,” it stated that precedent in both the D.C. Circuit (which was the venue for appeal) and the 11th Circuit appeared to still follow Gould.

What do these recent Tax Court opinions mean for taxpayers?  Well, for starters, taxpayers should consider whether arguments pertaining to the rule of lenity and the related strict-construction canon for statutes (and related regulations) are appropriate.  In doing so, it should be noted that, in contrast to the rule enunciated in Gould for revenue raising statutes, rules providing exemptions from taxation are strictly construed in favor of the government.  Additionally, taxpayers should be on the look-out for other doctrines and canons that, while perhaps well-entrenched in other areas of the law, are not commonplace in tax disputes.


  1. First, very interesting post on this subject. Thanks, Andrew.

    It seems to me that this is related to the issue of deference for regulations. Deference requires ambiguity in the statute (as well as the other Chevron/Skidmore requirements). The operation of the rule of lenity and strict construction of tax statutes would require ambiguity. I wonder if the same level of ambiguity is required in either case — i.e., does ambiguity mean something different in these contexts?

    Moreover, where would ambiguity of a civil or criminal penalty permit the ambiguity to be resolved by regulation or even some lesser IRS interpretation under Chevron/Skidmore? For example, I think regulations on the accuracy related penalty or the reasonable cause defense to the accuracy related penalty might be sustained, whereas a regulation defining the crime of tax evasion or good faith defense would not. I think this is a broader issue than raised here, but if you have some thoughts, I would appreciate hearing them.

    • Avatar photo Guest Blogger says

      Jack – you are right, there is definitely a related issue of deference to agency pronouncements and the potential tension between these canons and deference. I’ve been looking into it and am working on an article that discusses the issue. I’ll let you know when it is published. Andy

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