U.S. Supreme Court Makes It Easier to Challenge IRS Regulations

For years, the IRS has had the upper hand when it comes to interpreting and enforcing tax laws. The tax code itself is already a hefty 2,600 pages long, but when you add the 16,000 pages of IRS regulations that interpret those laws, it’s no wonder taxpayers feel overwhelmed.

These regulations were not just explanations—they had the same weight as law. And if you thought a regulation was unfair or went too far, there wasn’t much you could do. Thanks to a legal principle called Chevron deference, courts were required to side with government agencies, like the IRS, as long as their regulations seemed “reasonable.” Essentially, the IRS was seen as the expert, and taxpayers were left with little room to push back.

But now, things are changing.

The Supreme Court Overturns Chevron Doctrine

In a groundbreaking Supreme Court case, Loper Bright Enterprises v. Raimondo, the 40-year-old Chevron doctrine was overturned. This means courts no longer have to automatically defer to IRS regulations. Instead, they’ll make their own interpretations of tax laws passed by Congress.

While this doesn’t invalidate current IRS regulations or undo past court decisions based on Chevron deference, it does create a major shift going forward. Taxpayers now have a stronger footing to challenge new regulations in court.

How This Impacts IRS Regulations

The Supreme Court’s decision is a game-changer, and it’s already stirring up significant changes:

1. More Legal Challenges to IRS Rules
   Taxpayers and businesses are expected to file more lawsuits challenging IRS regulations. For instance, the IRS’s new cryptocurrency rules are already facing pushback and will likely see their day in court.

2. Fewer New Regulations
   With the courts scrutinizing IRS regulations more closely, the IRS might cut back on writing new rules altogether. Instead, they could rely more on informal guidance like revenue rulings, notices, and FAQs, which have never enjoyed Chevron deference.

3. More Careful Regulation Writing
   When the IRS does issue new regulations, they’ll likely proceed more cautiously. The agency may work harder to ensure their rules align closely with Congress’s laws to avoid court rejections.

4. Increased Willingness to Settle Disputes
   Historically, the IRS refused to settle disputes over the validity of its regulations, opting instead to fight it out in court. But with this shift in legal precedent, the agency may prefer to negotiate rather than risk a court ruling that could set a precedent against them.

The repeal of Chevron deference gives taxpayers a louder voice and a better chance to push back against regulations they believe are unfair or overstepping. It’s a significant shift in the balance of power between the IRS and the people it serves.

However, this doesn’t mean that the IRS will stop enforcing tax laws or that all current regulations will vanish. It does mean there’s now more room for debate—and for taxpayers to fight for fairness.

As new challenges to IRS regulations unfold, this decision will undoubtedly shape the future of tax enforcement and compliance in the U.S.

Stay tuned—this is just the beginning.