While many tax practitioners are understandably focused right now on the outcome of PPL Corp. v. Commissioner, in the wake of Mayo and Home Concrete, the tax community would be remiss if it did not also register the Supreme Court’s decision Monday in City of Arlington, Texas v. FCC, No. 11-1545. City of Arlington was not a tax case, but the decision represents a significant statement regarding the scope of Chevron deference with potential implications for future tax litigation. Plenty of administrative law scholars are and will be commenting on the case, but the opinions are nuanced, and careful consideration of the decision is worthwhile.
The question before the Court was whether a court should apply Chevron to review an agency’s determination of its own jurisdiction—an issue that had divided the circuits for some time. In an opinion written by Justice Scalia, a majority of five Justices answered this question in the affirmative. Justice Breyer wrote an opinion concurring in part and concurring in the judgment. Chief Justice Roberts wrote a dissenting opinion in which he was joined by Justices Kennedy and Alito.
The principal explanation for the Court’s decision in favor of Chevron review was the difficulty of delineating which questions of statutory interpretation are jurisdictional and which are not. “[T]he distinction between ‘jurisdictional’ and ‘nonjurisdictional’ interpretations is a mirage,” according to Justice Scalia. That said, Justice Scalia’s opinion is arguably internally inconsistent on this point, as he then proceeded to support his position by listing from among the Court’s extensive Chevron jurisprudence several cases in which he said the Court had afforded Chevron deference for jurisdictional interpretations. The dissenters, by contrast, focused particularly on the “vast power” that agencies wield, the role of the judiciary as an important check on agency exercises of that power, and the potential for courts to apply the Chevron standard so as to abdicate that responsibility. Interestingly, Chief Justice Roberts arguably seems in this opinion as though he would like to resurrect the old general versus specific authority distinction that he rejected so explicitly in Mayo as a basis for denying or extending Chevron deference.
Also significantly, the Court described elaborated the standard articulated in United States v. Mead Corp. for determining whether Chevron applies in the first instance. Recall that Mead calls upon a reviewing court to ascertain whether Congress delegated to an interpreting agency the power to act with the force of law. The dissenters argued that a reviewing court should evaluate each question of statutory interpretation independently under this step of Mead to determine whether Congress would have wanted the agency rather than the courts to resolve any ambiguity in the relevant statutory provision. The majority, however, said that a general grant of authority to adopt regulations effectuating a statute was sufficient to require Chevron review for all of an agency’s regulations that interpret that statute. In short, according to a majority of the Court, Mead’s first step calls for a statute-by-statute assessment of congressional delegation, not a provision-by-provision one.
One final, if somewhat less obvious, aspect of these opinions, however, is their relatively consistent embrace—whether under the guise of Mead or Chevron step one—of a robust, almost de novo-level of judicial review in ascertaining whether Congress would have wanted the courts to defer to an agency’s interpretation of a statute it administers. Justice Scalia has always been a staunch proponent of an involved approach to Chevron step one, for example stating in a 1989 Duke Law Journal article that he finds Chevron-triggering ambiguity in relatively few cases. In dismissing the dissenters’ concerns about the judiciary abdicating its oversight role, Justice Scalia again suggested “taking seriously, and applying rigorously, in all cases, statutory limits on agencies’ authority.” Justice Breyer’s concurrence reflected a somewhat different conception of Chevron generally but also advocated a sweeping approach to Chevron step one that takes into account not only “traditional tools of statutory construction” like the statute’s test, context, and structure but also the complexity of the subject matter, the relationship between the question at issue and the agency’s core expertise, and the longevity of the agency’s interpretation. The dissenters’ concerns about limitations on agency power potentially foreshadow an inclination to beef up their inquiry at Chevron step one as well. If reviewing courts take this aspect of the City of Arlington opinions to heart, then notwithstanding that the Court’s majority opted for a broader scope of applicability for Chevron, agencies may not win that many more cases than they would if the dissenters had prevailed.