On 10/12/99, the NAM filed an amicus brief urging the U.S. Supreme Court not to give deference to an agency's lawyers when interpreting an ambiguous regulation. In November, the Court declined to hear the case.The case was significant because it applied to all regulations issued by all federal agencies, and it raised a serious question about the power of agency lawyers to set policy. In this case, the Third Circuit ignored previous decisions by other courts and gave deference to the IRS's litigating position on a Treasury regulation. The decision was made even though taxpayers are prohibited from citing contrary IRS letters as precendent. By refusing to give each side's arguments equal consideration, the Third Circuit gave the IRS an unfair advantage against the taxpayer.
Under the Third Circuit's rule, the IRS can take inconsistent positions in similar cases, be accorded deference by the courts, and whipsaw taxpayers caught in the middle. The consequences are serious.