In order to govern the sprawling reach of the U.S. administrative state—its countless agencies, bureaucracies, departments, and other regulatory bodies—our courts have come to rely greatly on what is called Chevron analysis. Taking its name from the 1984 Supreme Court case in which it was pronounced, Chevron v. National Resources Defense Council, this doctrine advises when and to what extent courts are to defer to agency actions.


Since agencies can only exercise the legislative powers granted to them by Congress, Chevron counsels that where Congress has spoken clearly on an issue, the statutory text controls, but where Congress is ambiguous or silent, the agency is permitted to fill the gap with its own rules and decisions.


Naturally then, agencies that want more rulemaking power than has been “clearly” granted to them by Congress—so, all of them—find ways to invent ambiguity. In a recent ruling, a panel of the U.S. Court of Appeals for the Fifth Circuit appears to be trying to help them.


Here’s the case: Seeing that the IRS’s definition of “taxable compensation” differed from Congress’s, BNSF Railway sought a refund of overpaid taxes on certain elements of its employee compensation plans—and won on all counts before the district court. On appeal, however, a Fifth Circuit panel reversed, employing the “dictionary rule”—a truncated version of the full, traditional statutory analysis typically required, and an approach that has already been rejected by an en banc (full) Fifth Circuit. This short analysis skips the important, rigorous examination into whether Congress has spoken on the issue (an examination required by Chevron) and looks merely to see if the word can have more than one dictionary meaning. As tends to be much more likely with this type of scant analysis, the Fifth Circuit panel found that Congress was ambiguous, which in turn allowed the IRS’s discretionary definition to prevail.


BNSF has now filed for a rehearing of the case before the en banc Fifth Circuit. Cato has filed a brief supporting this request, joined by tax law expert Patrick J. Smith and administrative law professors Michael Moreland, Jeffrey Pojanowski, and Nathan Sales. As the administrative state continues its unending spew of rules and regulations, the role of the courts as a gatekeeper of administrative authority becomes increasingly vital to maintaining any kind of sanity. That role requires courts to apply Chevron diligently and not to skimp on the considerable duty of determining where Congress’s authority ends and the domain of unelected bureaucrats begins.


By failing to make a rigorous examination, the Fifth Circuit panel adopted an approach that, if allowed to gain a foothold, could threaten a (further) massive shift of governing power away from our elected Congress to a faceless, hardly accountable bureaucracy. In our brief, we urge the Fifth Circuit to send the message that it takes Chevron and its job of checking agency authority seriously by rehearing the case and reversing the panel decision.


The Fifth Circuit will be deciding later this spring whether to take up BNSF Railway Co. v. United States. If it doesn’t, the next step is a petition to the Supreme Court.


This blogpost was coauthored by Cato legal associate Julio Colomba.