Afternoon Must-Read: Nicholas Bagley: Deferring to the IRS

…to the argument that accepting the plaintiffs’ interpretation of the statute would raise serious federalism concerns. That’s completely appropriate. But I want to call attention to a different question that Kennedy asked… whether Chevron should apply….

Well, if [the statute is] ambiguous, then we think about Chevron. But it seems to me a drastic step for us to say that the Department of Internal Revenue and its director can make this call one way or the other when there are, what, hundreds of millions, billions of dollars of subsidies involved here?… And it–it seems to me our cases say that if the Internal Revenue Service is going to allow deductions using these, that it has to be very, very clear….

There’s an answer to Kennedy’s question. I drafted an amicus brief….

It is true–but irrelevant–that:

when an agency claims to discover in a long-extant statute an unheralded power to regulate ‘a significant portion of the American economy’, this Court typically greets its announcement with a measure of skepticism.…

[Yet, f]ar from unexpectedly arrogating to itself regulatory powers on the basis of statutes enacted some decades earlier, Treasury has issued a predictable… rule…. It is unclear how Treasury could have implemented the tax-credit provision at all without first resolving whether tax credits were available in states that declined to establish their own exchanges.

Chevron deference is all the more appropriate when agencies confront big, difficult questions that arise in the course of administration:

It is then that the agency’s expertise and political accountability are most essential—and where the structure of the federal government most forcefully counsels judicial restraint.

The plaintiffs are also wrong to suggest that Chevron has no application where the statute in question involves tax credits… Mayo Foundation… v. United States…