TEI tells Supreme Court ... revenue rulings are mere litigating positions and not entitled to deference.

• Position: Tax Executives Institute

In a brief amicus curiae filed with the Supreme Court of the United States, Tax Executives Institute called revenue rulings mere litigating positions of the Internal Revenue Service that are not entitled to deference by the courts. The case, United States v. Mead Corporation (No. 99-1434), is scheduled to be argued before the Supreme Court on November 8. TEI's brief, which was filed by with the Court on August 14, is reprinted in this issue, beginning on page 385.

The Mead case involves a decision by the U.S. Court of Appeals for the Federal Circuit that classification rulings issued by the Customs Service are not entitled to deference under the Supreme Court's 1984 decision in Chevron U.S.A. Inc. v. National Resources Defense Council, Inc. In reaching its decision, the Federal Circuit relied heavily on the lack of deference accorded IRS revenue rulings, noting that such interpretative rulings "do not have the force and effect of regulations." The parallels between Customs rulings and IRS rulings -- neither of which is subject to a notice-and-comment process -- convinced the circuit court that Customs rulings "do not require Chevron deference." This aspect of the appellate opinion also led the tax organization to take the unusual step of filing a brief in a Customs case, according to TEI President Betty M. Wilson of MGM MIRAGE.

"Mead raises a fundamental question of administrative law," Ms. Wilson explained. "In reviewing interpretative rulings by a federal agency, how much should a court defer to the agency's interpretation of the law? The Tax Court has adopted the position that IRS revenue rulings are mere litigating positions. We believe that the Tax Court and the Federal Circuit got it right."

In its brief, TEI stated that the issue of the deference to be accorded an agency's interpretative ruling "requires a careful balance and the answer properly depends on the extent of public involvement in the development of the agency rule." Although an administrative agency may develop expertise in the subject matters within its jurisdiction, the public has an indispensable role to play in ensuring that an agency is well informed and its position does not overreach.

"Simply stated, without notice and comment, an agency's decision could become capricious," the Institute said. "Without meaningful judicial review of interpretative rules, agencies could arrogate to themselves the power to unreasonably interpret or apply the law. A careful balance...