Revisiting Skidmore deference after Loper Bright

The recent Supreme Court decision in Loper Bright Enterprises v. Raimondo, 144 S. Ct. 2244 (2024), marks a significant shift in tax administration by overruling Chevron deference to administrative regulations. This decision reaffirms the relevance of Skidmore v. Swift & Co., 323 U.S. 134 (1944), which established Skidmore deference as an approach to judicial review of agency interpretations. Previously, the Supreme Court upheld Skidmore deference in Mead Corp., 533 U.S. 218 (2001). In that case, the Court stated:

Chevron did nothing to eliminate Skidmore’s holding that an agency’s interpretation may merit some deference whatever its form, given the “specialized experience and broader investigations and information” available to the agency … and given the value of uniformity in its administrative and judicial understandings of what a national law requires. [Mead Corp., 533 U.S. at 234 (citing Skidmore, 323 U.S. at 140)]

Under Chevron deference, a court was required to first ascertain “whether Congress has directly spoken to the precise question at issue.” See Loper Bright, 144 S. Ct. at 2254 (quoting Chevron, U.S.A., Inc. v. NRDC, Inc., 467 U.S. 837, 842 (1984)). If the intent was not clear or the court determined “the statute is silent or ambiguous with respect to the specific issue,” the court had to “defer to the agency’s interpretation if it was ‘based on a permissible construction of the statute’” (id.).

In contrast to Chevron, Skidmore deference is less stringent. Under Skidmore, courts have the discretion to consider an agency’s interpretations. In the interpretation of a statute, Skidmore allows, but does not require, a court to consider an agency’s regulations and promulgations depending on (1) “the thoroughness evident in [the agency’s] consideration,” (2) “the validity of [the agency’s] reasoning,” (3) the agency’s “consistency with earlier and later pronouncements,” and (4) “all those factors which give [the agency] power to persuade, if lacking power to control” (Skidmore, 323 U.S. at 140).

In Skidmore, seven packing plant employees of Swift and Co. filed a lawsuit in the Northern District of Texas under the Fair Labor Standards Act (FLSA). They sought to recover approximately $77,000 in overtime pay, attorneys’ fees, and liquidated damages. The employees orally agreed to stay on company property for three to four nights per week to respond to fire alarms. The Department of Labor’s Wage and Hour Division (the division), which administers the FLSA, had previously ruled that on-call time in a fire hall did not count as work and, therefore, did not require compensation. During the relevant period, there were no actual fires, and alarms were infrequent. Swift paid the employees a fixed amount for each alarm to which they responded. The district court concurred with the division’s interpretation, which held that merely living on the worksite did not equate to working 24 hours a day. Therefore, the court held that Swift was not required to pay overtime since the employees, although available, were seldom required to perform work-related tasks. On appeal, the Fifth Circuit concurred in the judgment (Skidmore v. Swift Co., 136 F.2d 112 (5th Cir. 1943)).

The Supreme Court’s primary concern was the level of deference, if any, the courts should give to the division’s interpretations. The Court observed that no statute explicitly prescribes the level of deference that courts should grant to the division’s interpretations and rulings. Stating that the division’s rulings “are not reached as a result of hearing adversary proceedings in which [the division] finds facts from evidence and reaches conclusions of law from findings of fact,” the policies outlined were “made in pursuance of official duty, based upon more specialized experience and broader investigations and information than is likely to come to a judge in a particular case.” In addition, although not binding on the Court, the division did “determine the policy which will guide applications for enforcement.”

Prior to reaching its holding, the Court acknowledged it “has long given considerable, and in some cases decisive, weight to Treasury Decisions and to interpretative regulations of the Treasury and of other bodies that were not of adversary origin.” Notably, the Court did not provide any citations to support this statement. The Court stated that “rulings, interpretations, and opinions of [the division], while not controlling upon the courts … constitute a body of experience and informed judgment.” Further, the Court stated that “courts and litigants may properly resort [to this experience and judgment] for guidance.”

The Supreme Court reversed the Fifth Circuit’s decision and remanded the case for further proceedings. It ruled that the deference given to the division’s judgment depends on the four factors described above.

In striking down Chevron deference, the Loper Bright decision made it clear that “statutes, no matter how impenetrable, do — in fact, must — have a single, best meaning.” (Loper Bright, 144 S. Ct. at 2266). Loper Bright, however, upheld Skidmore deference. Under Skidmore, courts may, but are not obligated to, consider the four factors quoted above.

— Kelly Walker, CPA, J.D., LL.M., is an associate clinical professor in the Adkerson School of Accountancy at Mississippi State University in Starkville, Miss. To comment on this column, contact Paul Bonner, the JofA’s tax editor.