Mayo Foundation v. US – The First Chevron Opinion without Justice Stevens

January 11th, 2011

Mayo Foundation v. United States represents the first opinion citing Chevron in which the august author of Chevron, Justice John Paul Stevens, did not participate in. Feels kinda lonely, no?

In Mayo Foundation v. United States, Chief Justice Roberts had an opportunity to opine on admin law. He applies Chevron to tax cases.

In the typical case, such an ambiguity would lead usinexorably to Chevron step two, under which we may notdisturb an agency rule unless it is “‘arbitrary or capriciousin substance, or manifestly contrary to the statute.’” Household Credit Services, Inc. v. Pfennig, 541 U. S. 232, 242 (2004) (quoting United States v. Mead Corp., 533 U. S. 218, 227 (2001)). In this case, however, the parties dis-agree over the proper framework for evaluating an am-biguous provision of the Internal Revenue Code.

Under Chevron, in contrast, deference to an agency’sinterpretation of an ambiguous statute does not turn onsuch considerations. We have repeatedly held that “[a]gency inconsistency is not a basis for declining toanalyze the agency’s interpretation under the Chevron framework.” National Cable & Telecommunications Assn. v. Brand X Internet Services, 545 U. S. 967, 981 (2005); accord, Eurodif S. A., supra, at ___ (slip op., at 10). We have instructed that “neither antiquity nor contempora-neity with [a] statute is a condition of [a regulation’s] validity.” Smiley v. Citibank (South Dakota), N. A., 517 U. S. 735, 740 (1996). And we have found it immaterial to our analysis that a “regulation was prompted by litiga-tion.” Id., at 741. Indeed, in United Dominion Industries, Inc. v. United States, 532 U. S. 822, 838 (2001), we ex-pressly invited the Treasury Department to “amend itsregulations” if troubled by the consequences of our resolu-tion of the case.

The principles underlying our decision in Chevron apply with full force in the tax context. Chevron recognized that “[t]he power of an administrative agency to administer acongressionally created . . . program necessarily requires the formulation of policy and the making of rules to fillany gap left, implicitly or explicitly, by Congress.” 467 U. S., at 843 (internal quotation marks omitted). It ac-knowledged that the formulation of that policy might require “more than ordinary knowledge respecting thematters subjected to agency regulations.” Id., at 844 (internal quotation marks omitted). Filling gaps in theInternal Revenue Code plainly requires the TreasuryDepartment to make interpretive choices for statutoryimplementation at least as complex as the ones other agencies must make in administering their statutes. Cf. Bob Jones Univ. v. United States, 461 U. S. 574, 596 (1983) (“[I]n an area as complex as the tax system, theagency Congress vests with administrative responsibility must be able to exercise its authority to meet changing conditions and new problems”). We see no reason why our review of tax regulations should not be guided by agency expertise pursuant to Chevron to the same extent as our review of other regulations.

We believe Chevron and Mead, rather than National Muffler and Rowan, provide the appropriate framework for evaluating the full-time employee rule. The Depart-ment issued the full-time employee rule pursuant to theexplicit authorization to “prescribe all needful rules and regulations for the enforcement” of the Internal Revenue Code. 26 U. S. C. §7805(a). We have found such “express congressional authorizations to engage in the process ofrulemaking” to be “a very good indicator of delegation meriting Chevron treatment.” Mead, supra, at 229. The Department issued the full-time employee rule only afternotice-and-comment procedures, 69 Fed. Reg. 76405, again a consideration identified in our precedents as a “signifi-cant” sign that a rule merits Chevron deference. Mead, supra, at 230–231; see, e.g., Long Island Care at Home, Ltd. v. Coke, 551 U. S. 158, 173–174 (2007).

Once he finds Chevron applies, the regulation easily satisfies step 2, and that’s the ballgame folks. Regulation is kosher.

The Chief has these parting words for tireless medical students who now need to pay more taxes on their paltry salaries:

We do not doubt that Mayo’s residents are engaged in avaluable educational pursuit or that they are students of their craft. The question whether they are “students” forpurposes of §3121, however, is a different matter. Because it is one to which Congress has not directly spoken, and because the Treasury Department’s rule is a reasonable construction of what Congress has said, the judgment ofthe Court of Appeals must be affirmed.

Justice Kagan, whose forte was admin law, was recused.