USA Trends and Developments Contributed by: Kim Marie Boylan, Kevin Spencer, Nicholas Wilkins and Sean Lyons, White & Case LLP
earlier holding that other aspects of the relevant regulations were invalid under step one of the Chevron analysis (FedEx at *17). “Because [this court] never reached Chevron [S]tep 2, it never deferred to an agency interpretation, the defer- ence the [US] Supreme Court deemed impermis- sible in Loper Bright” (Id at *18). Next, the court rejected the government’s argu - ment that Loper Bright stands for the proposi - tion that “where Congress has delegated power to an agency to promulgate regulations, courts have ‘circumscribed’ powers of review and must enforce the regulation as written” (Id at *19). Instead, the court reviewed the relevant regula - tory provisions and concluded that they “con- tradict the plain language” of the statute (Id at *20). Observing that “[p]romulgating a regulation that contradicts statutory language is outside the boundaries of the authority delegated to the IRS” (Id), the court ruled that the relevant Treasury Regulations were invalid as applied to the facts before the court (Id at *26). ii) Regulation held to be valid: Lissack v Com - missioner Lissack v Commissioner, 125 F4th 245 (DC Cir 2025) ( “Lissack” ) illustrates a contrary outcome. There, the US Court of Appeals for the DC Cir - cuit had previously held that Treasury Regula - tions promulgated under Section 7623 of the Code were entitled to deference under Chevron (Lissack at 249). The US Supreme Court vacat - ed the DC Circuit’s original opinion (Lissack v Commissioner, 68 F4th 1312 (DC Cir 2023)) and remanded the case “for further consideration in light of Loper Bright” (Lissack v Commissioner, 144 S Ct 2707 (2024) (No 23-413)). On remand, the DC Circuit “reconsidered the statutory issues de novo” and held that the reg -
ulations were “proper exercise of the Treasury Department’s authority” under the statute (Lis - sack at 256). The Lissack court on remand began by reviewing the plain language of the statute and concluded that the statute was ambiguous (Id at 257). The court then used customary tools of statutory construction to resolve the ambi - guity (Id). Looking to the “IRS’s statutory analy- sis for its persuasive value” (Id at 259), the DC Circuit concluded that the relevant regulations “correctly interpreted and applied” the statute (Id at 249). Like the FedEx decision, Lissack is still subject to appeal at the time of writing. Challenges to transfer pricing regulations: 3M Co v Commissioner and Coca-Cola Co v Commissioner There are currently two separate challenges to the so-called blocked income regulation of Treasury Regulation Section 1.482-1(h)(2) pending before the US Courts of Appeal for the Eighth and Eleventh Circuits. Both challenges are appeals from the US Tax Court. Treasury Regulation Section 1.482-1(h)(2) pro - vides rules for determining when foreign legal restrictions on payments to related parties will be taken into account in a transfer pricing anal - ysis. The regulation lists criteria, all of which must be met for the foreign legal restrictions on payments to be taken into account, and also describes “deferred income method of account- ing” that taxpayers must elect in order to defer recognition of amounts that should have been paid absent the foreign legal restrictions. 3M Co v Commissioner, No 23-3772 (8th Cir) ( “3M” ) and Coca-Cola Co v Commissioner, No 24-13470 (11th Cir) ( “Coca-Cola” ) both involve the application of Treasury Regulation Section 1.482-1(h)(2) to allocations of royalties that the IRS alleged should have been paid by Brazilian
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