Melancon: Supreme Court decisions are ‘big deal’ for tax pros

Two recent Supreme Court decisions involving the power of government agencies are a “big deal” for the accounting profession because they introduce a level of uncertainty that makes some tax practitioners uncomfortable, AICPA & CIMA’s CEO said recently.

The reality, in the area of tax law, is that “our profession generally likes certainty,” CEO Barry Melancon, CPA, CGMA, said on a recent AICPA Town Hall. ” … We like to be able to get to a conclusion. We’d like to know something can be done and [that] there’s this precedent and there’s [an] interpretation that this supports a tax strategy. And there’s going to be a significant amount of uncertainty in these things going forward, absent some new, different court decisions.”

Melancon referred to two cases:

• Loper Bright Enterprises v. Raimondo, No. 22-451 (U.S. 6/28/24), in which the Supreme Court overturned its decision in Chevron U.S.A. Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984), and held that the Administrative Procedure Act requires courts to exercise their independent judgment in deciding whether an agency has acted within its statutory authority, and courts may not defer to an agency’s interpretation of the law just because a statute is ambiguous; and

• Corner Post, Inc. v. Board of Governors of the Federal Reserve System, No. 22-1008 (U.S. 7/1/24), a Supreme Court decision involving debit card swipe fees. The court held that the six-year statute of limitation for broad challenges to regulations did not start for Corner Post, a North Dakota truck stop, until it started accepting credit cards when it opened in 2018.

Some regulations, such as those governing partnership basis shifting, “have become vulnerable because there are aspects that are legislative and some that are regulatory, and pieces that can be void, and others that are legitimate to move forward,” said Melanie Lauridsen, the AICPA’s vice president–Tax Policy & Advocacy.

Under Loper Bright, federal judges can rely on IRS expertise and experience, but they do not have to, she said. Thus, Loper Bright “most likely will affect future rulemaking within the IRS.” Under Corner Post, on the other hand, “you could have a regulation that’s over 20 years old, but you’re injured now,” and since the statute of limitation does not start to run until the taxpayer is injured, the regulation can be challenged long after it was promulgated. This will cause “lots of exposure for the IRS,” Lauridsen said.

The decisions will “cause a lot more gray area,” Melancon said.

Those who support the decisions believe “legislators ought to legislate and not rely on as much interpretation,” he said. “But we also will hear noise in our own environment of ‘we need some answers.’ And we know we get frustrated when we don’t get answers in a timely fashion, and filing dates and all of these other things are necessary to give good advice to clients.”

Laws can be voluminous, and they rely on agency interpretation, Melancon said. “And so now, almost at any point, if anybody … believes [they are] injured, [they] can bring cases … and will probably win.”

— To comment on this article or to suggest an idea for another article, contact Martha Waggoner at Martha.Waggoner@aicpa-cima.com.