Bradford G. Peters, as Executor of the Estate of Andrew J. McKelvey, Deceased v. Commissioner of Internal Revenue

Over a century ago, this Court held that where Congress conditions a tax result on the promulgation of regulations, but no regulations have been issued, courts are powerless to fill the gap. See Dunlap v. United States, 173 U.S. 65 (1899). But for the past 35 years, due to a widespread failure by the Treasury Department (“Treasury”) to promulgate needed regulations, lower courts addressing tax cases have been engaging in what they and scholars call “phantom” regulation—making the rules that Congress commanded Treasury to make in order to reach substantive results that courts believe Congress intended. True to both the “phantom” moniker and the belief in tax law exceptionalism underlying the doctrine, neither lower courts nor Treasury have ever squared phantom regulation with this Court’s precedent. Here, the Second Circuit expanded the doctrine in new and troubling ways, leaving Petitioner retroactively subject to tens of millions of dollars in taxes as to which no statute or regulation provided fair notice. The question thus presented is: Whether, or under what circumstances, the Judiciary may enforce an ambiguous provision of the Internal Revenue Code by filling a statutory gap, when Congress delegated gap-filling responsibility to Treasury but Treasury has failed to promulgate required regulations.