As we look towards the upcoming year, legal professionals and industry observers are bracing for significant tax-related developments, fueled in part by the implications of the U.S. Supreme Court’s landmark decision to overrule Chevron deference. With this shift, the judiciary, not federal agencies, assumes the primary role in interpreting statutes. This development positions the legal landscape for both increased regulatory challenges and a potential rise in litigation.
The recent case of Corner Post, Inc. v. Board of Governors further energizes this evolving landscape by confirming that the statute of limitations for contesting regulatory actions begins only when a plaintiff experiences injury from the regulation. This raises the prospect for further disputes concerning regulatory validity and invites scrutiny of Treasury regulations, particularly those devoid of robust statutory interpretation, violate notice and comment procedures, or are retroactive.
One significant development to watch in 2025 includes an anticipated surge in legal challenges to regulations under this new framework. Cases such as Varian Medical Systems v. Commissioner and Liberty Global, Inc. v. US have already set the stage, demonstrating taxpayer successes over TCJA regulatory challenges, aided by the Supreme Court’s decision in Loper Bright Enterprises v. Raimondo. This decision allows courts to apply independent judgment in statutory interpretation, further emboldening challenges against regulations.
Faced with these challenges, the IRS is expected to turn increasingly to the economic-substance doctrine to uphold taxpayer assessments. This doctrine permits the IRS to contest taxpayer positions by evaluating the economic effects of transactions, as evidenced in the Siemens USA Holdings, Inc. v. Commissioner case. These matters have prompted Tax Court and the Tenth Circuit to delve into interpreting the relevancy requirement in Section 7701(o).
Given the strain of adapting to stricter statutory interpretation and compliance with administrative procedures, tax consultants and legal experts in multinational corporations must strategize for a year where invalidating regulations becomes more commonplace. Additionally, the ruling in Corner Post emphasizes the importance of strategic timing in claiming regulatory invalidity, particularly as the IRS grapples with procedural challenges under Section 2401(a) of US Code’s Title 28.
In light of these shifts, legal practitioners should prepare for a year marked by intricate litigation landscapes surrounding tax regulation, court interpretations, and IRS procedural tactics. For more detailed insights from the legal experts at Baker McKenzie, refer to Bloomberg Tax.