Notice & Comment

Baldwin v. United States Is Ideal Vehicle to Revisit Reflexive Deference, by William Yeatman

Attention all administrative law nerds: Code Red Cert-Alert!

On Friday, the Cato Institute and NFIB filed an amicus brief on behalf of petitioners seeking Supreme Court review of the Ninth Circuit’s April order in Baldwin v. United States. Of course, the odds of the Court exercising its appellate jurisdiction are low for any given controversy; nevertheless, Baldwin reflects a rare combination of worst-practices that might catch the eye of any Justice intent on revisiting “reflexiveChevron deference and its corollary doctrines.

The Baldwins are a married couple from California who believe they overpaid $167,000 in taxes and sought a refund from the IRS. They claim that they sent their amended return months in advance of the statutory deadline. To prove timely mailing, the Baldwins have offered circumstantial evidence—in the form of multiple affidavits by corroborating witnesses—that they deposited their documents at a post office with months to spare. A federal district court has determined that the Baldwins’ testimonial evidence is credible.

The IRS, however, claims never to have received the documents. The tax code doesn’t directly speak to the possibility of lost mail, but the agency reads the statute’s silence as leaving the Baldwins out of luck, no matter how many witnesses the couple calls forth to testify that the tax documents were timely sent. According to the IRS, the Baldwins not only are denied a refund, but the filing deadlines trigger the government’s statutory waiver for sovereign immunity, so the couple also is denied access to the courts for redress.

Millions of taxpayers rely on the US Postal Service to mail tax documents every year, and these mountains of mail are carried and received by imperfect humans who misplace documents. Indeed, the Baldwins’ plight is far from unique, and many such cases have come before the courts over the years.

Since 1954, circuit courts have split over how to deal with allegedly lost mail that denies taxpayers their “day in court.” On the one hand, two circuits adopted the IRS’s unforgiving interpretation. On the other hand, four circuits turned to an old common-law evidentiary principle, known as the mailbox rule, which allows taxpayers to present extrinsic evidence that their claims were timely mailed.

After decades of litigating the mailbox rule with mixed success, the IRS switched gears and tried an administrative shortcut. Specifically, the agency underwent a cursory five-page rulemaking to “clarify” that the statute meant what the IRS had argued all along in court.

On its own terms, the IRS’s “clarifying” rule fails to implicate agency expertise; instead, it purports to deny courts access to a common-law principle developed by federal judges to police their own jurisdiction. Simply put, the agency’s rule regulates the craft of judging, which is obviously outside of the IRS’s bailiwick.

The IRS’s lack of expertise explains why the agency’s rulemaking said so little—because there was so little to say. Across the proposed and final rules, the entire rulemaking provided a paltry nine paragraphs of conclusory reasoning.

Having jumped through the bare-minimum procedural hoops, the agency then felt entitled to the Chevron framework. The Ninth Circuit, alas, agreed. In so doing, a three-judge panel applied the sort of cursory methodology that can give deference a bad name.

At Step One, the court’s analysis was short and circular. The panel reasoned that the tax code “is silent as to whether the statute displaces the common-law mailbox rule” because “the statute does not address” it. At Step Two’s reasonableness inquiry, the agency’s interpretation survived, as it does 93.8% of the time.

In fact, the Ninth Circuit was involved in the circuit split identified above, and previously had ruled against the IRS. In the normal course, circuit precedent can be changed by one of three means: 1) a Supreme Court order, 2) passage of a statute, or 3) an en banc hearing.

Here, however, deference doctrines did all the work. To overcome its precedent, the Ninth Circuit panel simply turned to the Brand X principle that “a court’s prior judicial construction of a statute trumps an agency construction otherwise entitled to Chevron deference only if the prior court decision holds that its construction follows from the unambiguous terms of the statute and thus leaves no room for agency discretion.”

Because the Ninth Circuit’s previous reading of the tax statute was merely its *best* exposition and not “the only reasonable interpretation,” the agency was free to disagree, and the court felt it must yield. For all intents and purposes, the IRS is playing the role of a “super circuit.”

The Baldwins, now represented by the New Civil Liberties Alliance, seek review of the Ninth Circuit’s decision before the Supreme Court.

Last Friday, the Cato Institute and National Federation of Independent Business filed a brief in support of their petition. We argue that if Baldwin stands, and the IRS is permitted to wave away 50 years of adverse court decisions with a handful of pages in the Federal Register, then the Court’s inaction would occasion an awful template for other agencies. A sham notice-and-comment process cannot sustain an invitation for judicial deference.

If the Supreme Court takes the case, then it promises to be an administrative law blockbuster. There are any number of doctrinal questions that potentially could come into play. For example:

  • To what extent is statutory silence not an implied delegation of interstitial lawmaking authority?
  • Is Brand X uniform?
  • Where do judge-made concepts like evidentiary principles and substantive canons fit into the Chevron framework?
  • How serious is the Court about linking agency expertise to the availability of deference?

For more, check out our brief and also NCLA’s  resources on the case.

Baldwin v. United States Is Ideal Vehicle to Revisit Reflexive Deference

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