Since the Supreme Court’s decision last year in Mayo,1 which made it clear that tax regulations promulgated by the Treasury Department under the Internal Revenue Code are entitled to the same high level of deference accorded under the Chevron2 rule to regulations promulgated by other federal agencies, a taxpayer considering the adoption of a position inconsistent with a tax regulation has faced a heavy burden if he desires to maintain that the regulation is invalid. Under the two-step method of analysis established by the U.S. Supreme Court in Chevron for determining the validity of a federal regulation, it must first be determined whether Congress had directly addressed the question at issue by statute (Chevron Step One). If the statute is silent on the issue, or ambiguous, principles of administrative deference require that the regulation be upheld if it represents a reasonable interpretation of the statute (Chevron Step Two).

Chevron concerned a regulation promulgated by the Environmental Protection Agency, and courts had on occasion over the years used considerably less deferential criteria in reviewing tax regulations. In Mayo, the Supreme Court disapproved of some of this earlier case law and held that the Chevron method of analysis also applies to tax regulations promulgated by the Treasury Department.

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