Supreme Court adopts TEI's alternative argument in Mead.

• Position: Tax Executives Institute; United States v. Mead Corporation - Judicial deference to a government agency's interpretation of a statute

Earlier this summer, the Supreme Court of the United States ruled that Customs classification rulings are not entitled to the deference normally granted regulations. The high court reversed the decision of the Court of Appeals for the Federal Circuit in United States v. Mead Corporation, and remanded the case for further proceedings. TEI filed an amicus brief in support of the taxpayer in the case last fall because the Federal Circuit had relied on the lack of deference accorded IRS revenue rulings in ruling against the government.

"The Supreme Court's opinion adopts the Institute's alternative argument in the case, but does not discuss the deference to be accorded revenue rulings," TEI President Betty Wilson noted. "It may be some time before lower courts can sort through the opinion to determine its effect, if any, on revenue rulings. We are pleased, however, that the Court decided that a lower standard of deference is appropriate for Customs rulings."

In its June 18 opinion in Mead, the Supreme Court held that so-called Chevron deference -- i.e., deferring to the agency's interpretation of the statute if it is a permissible one -- was not appropriate for Customs classification rulings. (The Chevron doctrine takes its name from a 1984 Supreme Court decision.) Rather, the Court held that Customs classifications rulings were entitled to "respect" under the 1944 decision in Skidmore v. Swift & Co., holding that administrative rulings, while not controlling, constitute a body of experience and informed judgment to which courts may resort for guidance.

In discussing when Chevron deference is appropriate, the Court stated that administrative implementation of a particular statutory provision qualifies when it appears that Congress delegated authority to the agency generally to make rules carrying the effect of law and that the agency interpretation claiming deference was promulgated in the exercise of that authority. Such a delegation may be shown by an agency's use of notice and comment in its rulemaking or another indication of a comparable congressional intent.

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