Will the IRS Have Less Power? Understanding the Supreme Court’s Anti-Regulatory Shift
Part of Redwood Valuation’s 59th Heckerling Institute Coverage
As part of Redwood Valuation’s ongoing coverage of the 59th Heckerling Institute on Estate Planning, we’re spotlighting the legal and regulatory developments that will shape estate and gift tax planning for years to come. One of the sessions, The Brave New (Anti-Regulatory) World, highlighted a series of Supreme Court rulings that collectively signal a dramatic shift in how federal agencies, including the IRS, can interpret and enforce tax law.
For estate planners, tax attorneys, and valuation professionals, the implications are clear: the regulatory guidelines are being redefined. Navigating this new legal landscape will require sharper strategies, deeper documentation, and valuations built to withstand both audit and judicial scrutiny.
Three Key Rulings Reshaping Federal Oversight
Loper Bright: Chevron Deference Is Overturned
For the last 40 years, Chevron deference has allowed federal agencies such as the IRS to interpret ambiguous statutes, assuming they were reasonable. In Loper Bright, the Supreme Court decided that this practice is no longer acceptable. Instead of letting agencies interpret gray areas in the law, courts will now take the lead in deciding what the law means.
The IRS’s interpretations of tax laws, particularly in valuation-specific areas like discounts, ownership transfers, and trust planning, may now face more rigorous judicial scrutiny. Judges with limited tax expertise will decide how ambiguous provisions apply, without defaulting to the IRS’s view. While this could mean less predictability of legal outcomes, it also means taxpayers possibly have more opportunity to push back on aggressive IRS enforcement.
Jarkesy: Limits on In-House Enforcement
In Jarkesy v. SEC, the Supreme Court held that federal agencies cannot impose significant penalties, such as fines, through their own in-house administrative proceedings. When serious consequences are on the line, individuals are entitled to a jury trial in a traditional court.
This ruling may extend to other agencies, including the IRS, which means the IRS’s ability to resolve disputes through administrative processes, especially in technical valuation cases, could be curtailed. Agencies may now have to take more cases to federal court, which is a slower, costlier, and less predictable process. Taxpayers may be more likely to push for judicial resolution, increasing litigation risk and prolonging enforcement timelines. For valuation professionals, this could entail more valuation disputes ending up in court, longer timelines, and higher stakes for complex cases.
Corner Post: Challenging Old Rules, Anew
Normally, if someone wanted to challenge a federal rule or regulation, they had to do it within six years of when the rule was issued. However, the Corner Post ruling effectively resets the statute of limitations for challenging agency regulations. Instead of starting when a rule is published, the clock begins when a party is first affected.
Longstanding IRS interpretations, like those underpinning discounts, estate freezes, or partnership valuations, could be subject to fresh legal challenges, even years after they were issued. Similarly, valuation positions once considered settled might now be disputed.
Implications for Valuation Professionals
This anti-regulatory shift is completely reshaping the compliance and litigation environment. For estate planners and valuation professionals, the following trends are likely to emerge:
1. Increased Legal Risk for IRS Positions
Valuation disputes may no longer hinge on whether a position aligns with IRS guidance, but rather if the guidance holds up in court. Professionals can expect more case-by-case interpretation and less reliance on agency deference.
2. More Frequent and Technical Challenges
Taxpayers now have a greater ability to contest regulatory interpretations. Expect more pushback on valuation assumptions—especially when tied to ambiguous statutory provisions.
3. Greater Emphasis on Documentation and Methodology
Valuation reports will need to do more than check compliance boxes. They must demonstrate strong logical, technical, and legal defensibility, especially if they could be scrutinized by judges without deep tax expertise.
4. Uncertainty in Audit Settlements
The Heckerling session noted that audit outcomes may become harder to predict. As agency guidance loses authority in a post-Chevron environment, both taxpayers and industry professionals may lack a solid framework, potentially leading to more prolonged disputes and an increase in litigation.
A Shift in Power and Responsibility
While these rulings limit the reach of federal agencies, they do not necessarily make life easier for taxpayers. They introduce ambiguity, procedural complexity, and higher stakes for all parties involved in tax and valuation matters.
In the absence of agency deference, courts will become the battleground, and valuation professionals will play a critical role in building defensible narratives grounded in economic reality, industry best practices, and well-documented assumptions.
How Redwood Can Help
In this evolving landscape, technical rigor and proactive strategy are non-negotiable. At Redwood Valuation, we specialize in complex, audit-ready valuations for estate, gift, and income tax purposes. Our team combines deep technical knowledge with an understanding of how valuations hold up under regulatory and judicial scrutiny.
We stay ahead of legal developments so our clients can move forward with confidence. Whether you’re navigating a gift transaction, preparing for an estate freeze, or anticipating audit risk, Redwood delivers valuations that stand up—no matter who’s doing the questioning. We also provide valuable insights and second opinions in cases where clients have already obtained a third-party valuation.
