Tax Law | Expert Legal Commentary
November 17, 2008
Swallows Holding: 3rd Circuit Applies Chevron Deference to Uphold IRS Regulation
Swallows Holding, Ltd. V. Commissioner
By
H. Jacob Lager of Zuber & Taillieu
The recent win for the IRS in Swallows Holding, Ltd. V. Commissioner, 515 F.3d 162 (3rd Cir. 2008), elucidates the ongoing debate over the appropriate standard for judicial review of Treasury regulations. In Swallows, the Third Circuit reversed a Tax Court decision and applied the highly deferential standard set forth in Chevron U.S.A. Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984) to uphold a Treasury regulation, finding that Congress intended for the agency action to have the force of law. While the decision is notable for its deferential treatment of the IRS regulation, it is equally notable for the unanswered questions left in its wake.
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About the Author
H. Jacob Lager is a Partner of Zuber & Taillieu, focusing on tax law.
1 The two-prong test of Chevron requires that a Court determine 1) whether Congress has directly spoken to the precise question at issue (in which case the inquiry ends), and 2) if the intent of Congress is unclear, in that the statute is ambiguous or silent as to the particular issue, whether the agency’s regulation is based on a permissible construction of the statute.
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