There have been occasions over the years where I have seen Collection Due Process or innocent spouse regulations place indirect limits on what the Tax Court may do. For example, under section 6015(g)(3), refunds can be awarded as part of relief under subsections (b) and (f), but not (c). Regulation § 1.6015-4 further provides that subsection (f) (which applies when relief is not available under subsections (b) or (c)) may not be used to circumvent the limitation of subsection (g)(3) of no refunds under (c): “Therefore, relief is not available under [subsection (f)] to obtain a refund of liabilities paid for which the requesting spouse would otherwise qualify for relief under [subsection (c)].” These are indirect limits on the Tax Court’s power, since they initially only limit what the IRS may do by way of awarding a refund under subsection (f). But, I have wondered about whether such regulations deserve Chevron deference because they also impinge on the Tax Court’s powers. In an amicus brief that Keith and I filed in a case challenging this particular regulation (but where the Court ultimately ruled so that it did not have to reach the regulation validity issue), we argued that Chevron deference should not be given to it – pointing to Supreme Court authority saying that deference is not owed to agency views as to judicial review matters.
I am still not sure that I am right as to no Chevron deference to such indirect limitations, but the Supreme Court recently decided a case, Smith v. Berryhill, 587 U. S. __ (2019) (May 28, 2019), where it repeated the rule that agencies are not entitled to Chevron deference as to their views on judicial review. Because many are not familiar with this exception to Chevron deference, I thought it would be useful to quote what the Court said in this recent case.
The issue in the case was whether certain Social Security disability benefits rulings are subject to judicial review. The rulings were those of an internal Appeals Council, holding that benefits applicant Mr. Smith’s appeal to that Council was untimely. The Council rulings were made after a full hearing on the merits before an administrative law judge. Mr. Smith then sued for judicial review, and lost at both the district court and the court of appeals.
In the Supreme Court, the government reversed its prior position and agreed that claimant Smith was entitled to judicial review of the Appeals Council’s determination regarding the timeliness of his administrative appeal. The Court appointed an amicus to argue the government’s prior position – that the rulings were not “final” under the Social Security Act, and therefore not subject to judicial review. In its argument, the amicus contended that the Court should give Chevron deference to the position of the agency (prior to its switch in the case) that these rulings were not “final” agency decisions. Rejecting Chevron deference to this prior regulatory interpretation, the Court wrote:
Chevron deference “‘is premised on the theory that a statute’s ambiguity constitutes an implicit delegation from Congress to the agency to fill in the statutory gaps.’” King v. Burwell, 576 U. S. ___, ___ (2015) (slip op., at 8). The scope of judicial review, meanwhile, is hardly the kind of question that the Court presumes that Congress implicitly delegated to an agency.
Indeed, roughly six years after Chevron was decided, the Court declined to give Chevron deference to the Secretary of Labor’s interpretation of a federal statute that would have foreclosed private rights of action under certain circumstances. See Adams Fruit Co. v. Barrett, 494 U. S. 638, 649–650 (1990). As the Court explained, Congress’ having created “a role for the Department of Labor in administering the statute” did “not empower the Secretary to regulate the scope of the judicial power vested by the statute.” Id., at 650. Rather, “[a]lthough agency determinations within the scope of delegated authority are entitled to deference, it is fundamental ‘that an agency may not bootstrap itself into an area in which it has no jurisdiction.’” Ibid. Here, too, while Congress has empowered the SSA to create a scheme of administrative exhaustion, see Sims, 530 U. S., at 106, Congress did not delegate to the SSA the power to determine “the scope of the judicial power vested by” §405(g) or to determine conclusively when its dictates are satisfied. Adams Fruit Co., 494 U. S., at 650. Consequently, having concluded that Smith and the Government have the better reading of §405(g), we need go no further.
Slip op. at 14.
Of course, some justices on the Supreme Court currently think that Chevron deference should be abandoned entirely. But, until it is (if ever), tax practitioners may consider whether to raise this exception to Chevron when litigating the validity of regulations that directly or indirectly impinge on the Tax Court’s powers.