The question of how much deference courts should give to administrative agencies is a fundamental issue in modern tax litigation. In the wake of increasing scrutiny and legal challenges, deference to tax authorities—once a cornerstone of judicial review—is now a rapidly shifting concept.

While the federal courts have moved away from the long-standing Chevron doctrine, state courts are left to choose whether to follow suit, retain older deference frameworks, or craft their own hybrid models. For taxpayers and tax professionals operating across multiple states, the lack of uniformity creates both risk and opportunity.

This article explores the key types of deference, the implications of the U.S. Supreme Court’s rollback of Chevron, and the emerging state-level legal landscape. It also outlines practical takeaways for taxpayers facing disputes involving administrative interpretations of tax laws and guidance.

What Is Administrative Deference?

At its core, deference refers to the degree of weight courts give to an agency’s interpretation of a statute. In heavily regulated areas like taxation, this can determine whether a taxpayer wins or loses a dispute based on how much authority is afforded to:

• Regulations

• Revenue rulings

• Tax bulletins

• Audit manuals

• Advisory opinions

Historically, courts deferred to agency interpretations—especially when statutes were ambiguous. But concerns about separation of powers, transparency, and judicial independence have led to a reassessment of that approach.

The Federal Shift: From Chevron to Skidmore

Under the Chevron doctrine, courts deferred to an agency’s reasonable interpretation of an ambiguous statute, provided the agency had authority to regulate. This created a powerful presumption in favor of agency positions—particularly in complex technical areas like tax.

But over time, Chevron was criticized for:

• Undermining judicial independence

• Empowering unelected bureaucrats

• Allowing inconsistent or politically driven rule changes

• Creating uncertainty for regulated entities

Courts increasingly turned to Skidmore deference, which weighs factors such as:

• Thoroughness of the agency’s reasoning

• Formality of the process

• Consistency over time

• The agency’s expertise

More recently, the Supreme Court formally rejected Chevron deference in favor of judicial interpretation under the Administrative Procedure Act, holding that courts—not agencies—must determine the “best” reading of ambiguous statutes. However, courts may still consider agency input as a persuasive aid, particularly where longstanding or contemporaneous interpretations exist.

Implications for State Tax Law

While the federal decision to reject Chevron deference is limited to federal agencies, its reasoning is already influencing how state courts treat their own tax authorities. Many states had already begun moving away from blanket agency deference, and others are now reevaluating their positions.

Key Impacts:

• States that previously applied Chevron-style deference may now adopt Skidmore-style standards.

• Courts may become more willing to independently interpret ambiguous tax statutes.

• Taxpayers may have stronger grounds to challenge longstanding agency interpretations, especially if inconsistent or unsupported by statute.

• Agencies may respond with less rulemaking and fewer formal interpretations, fearing legal challenges.

State-by-State Approaches to Deference

States vary significantly in how they treat agency interpretations. Some have codified limits on deference; others rely on evolving case law.

States That Have Statutorily Limited Deference:

• Florida: A ballot initiative eliminated judicial deference to agencies.

• Arizona and Georgia: Laws now require de novo review of agency decisions.

• Idaho, Nebraska, Indiana: Enacted laws clarifying that courts must independently interpret statutes without agency deference.

States Adopting Skidmore-Like Review:

• Wisconsin: Requires “due weight” review, based on the quality and consistency of the agency’s reasoning.

States With No Formal Deference Doctrine:

• Texas: Applies “serious consideration” to agency interpretations that are reasonable and formally adopted—but courts are not bound.

• Oregon: Favors legislative intent over agency views, but defers where rules are plausible and contextually consistent.

• Washington: Recognizes agency expertise in some cases, but emphasizes that courts retain authority over questions of law.

Court Reactions and Recent Cases

Several state courts have already applied post-Chevron principles to tax cases:

North Carolina

The court declined to defer to a state tax agency’s changing interpretation of tax credits, citing the need for consistency and clarity in tax administration.

Colorado

The state supreme court interpreted ambiguous tax statutes de novo, emphasizing the importance of applying plain meaning and legislative intent over agency opinions.

New York

An administrative law judge refused to defer to a tax department bulletin, finding it merely advisory. Courts in New York have long held that ambiguity in tax imposition statutes must be resolved in favor of the taxpayer.

Practical Implications for Taxpayers and Practitioners

1. Interpretive Materials Are Not Always Binding

Just because a position appears in a revenue ruling or audit guide does not mean it has the force of law. Always analyze the authority behind the interpretation—is it a regulation, a notice, or simply an internal guideline?

2. Be Prepared to Challenge Inconsistencies

If an agency’s interpretation changes between years or appears unsupported by statute, raise the issue. Courts are increasingly receptive to arguments about unfair surprise and procedural irregularity.

3. Use Skidmore Factors Strategically

In disputes over guidance or interpretive positions, assess:

• How consistently the agency has applied its view

• Whether the interpretation was contemporaneous with the statute

• Whether the guidance was formal or informal

• Whether the reasoning is thorough and grounded in the law

4. Monitor Legislative Developments

States may eliminate or redefine deference by statute. Taxpayers should track changes in procedural statutes and judicial review standards, especially those affecting audit disputes and refund claims.

5. Consider the Nature of the Statute

Even where courts decline to defer, they may still respect agency fact-finding or grant interpretive weight when the statute expressly delegates regulatory authority (e.g., tax credits administered by rule).

Looking Ahead: What Comes After Chevron?

Legal experts anticipate:

• More challenges to agency interpretations in court

• Increased litigation over the validity of rules and guidance

• Fewer formal rulemakings, as agencies avoid legal exposure

• A renewed emphasis on the nondelegation doctrine, restricting how much discretion legislatures can give agencies

• Expanded application of the major questions doctrine, especially in tax policy involving broad administrative power

Taxpayers should expect increased complexity in dealing with guidance, with growing pressure to understand not just the content of agency interpretations, but their legal authority and procedural history.

Conclusion: Deference Is No Longer Assumed

For decades, state and federal agencies enjoyed wide latitude in interpreting tax laws. That era is ending. Courts are reasserting their role in statutory interpretation, and taxpayers are finding new grounds to challenge overreaching or poorly reasoned agency positions.

In this new landscape, clarity, consistency, and statutory grounding matter more than ever. Taxpayers and their counsel must scrutinize guidance closely, understand the source of its authority, and be prepared to litigate when interpretations lack legal support.

© 2025 Jeanette Moffa. All Rights Reserved.