Law360 included Kevin Otero’s commentary in an article about the impact of the Supreme Court’s decision in Loper Bright v. Raimondo on an Eighth Circuit’s recent decision that backed 3M’s challenge to transfer pricing rules. The ruling signaled the strict statutory analysis that courts may now apply to tax regulations. As stated in the piece, the Eighth Circuit's application of Loper enabled the panel to eschew deference to the IRS and instead go straight to Internal Revenue Code Section 482, which dictates when the agency can transfer income within a corporate group. This approach could indicate how other courts may use a granular statutory lens as the main tool when scrutinizing tax regulations going forward.
According to Kevin, the Tax Court's decision was based in part on trying to sidestep what income means in Section 482 and letting the U.S. Treasury Department and IRS determine that. But the Eighth Circuit essentially said it knows what income means in certain contexts, and here it cannot mean blocked income.
"I think the critical aspect of the decision here is Loper, and invoking Loper in a way that substantially limited Treasury's ability to invoke a regulation under what it tried to say was a vague standard, at least at the Tax Court level," Kevin said. "So I think Loper is pretty important."
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