Howard L. Baldwin, et ux. v. United States

National Cable & Telecommunications Association v. Brand X Internet Services held that an agency’s “permissible reading” of a statute trumps circuit-court precedent if the prior court had interpreted a statute that was silent or ambiguous with respect to the specific issue. 545 U.S. 967, 984 (2005) (emphasis in original). In all other situations, stare decisis dictates that opinions issued by federal appellate panels can be overruled only by en banc courts of appeals, by this Court, or by a properly enacted statute. The Ninth Circuit in this case, acting under the Brand X doctrine, deferred to the Internal Revenue Service’s interpretation of 26 U.S.C. § 7502 and held that the Ninth Circuit’s prior construction of the statute did not bar IRS’s subsequent contrary construction of that section because the statute was “silent” as to the specific legal issue. App.11a. The Ninth Circuit’s precedent, established in 1992, had upheld the common-law mailbox rule. Nearly 20 years later in August 2011, IRS issued its contrary interpretation, which not only overruled court precedent but also abrogated a common-law rule that has prevailed for hundreds of years. Absent Brand X, Ninth Circuit precedent based on ordinary tools of statutory construction would have controlled. Consequently, Howard and Karen Baldwin, who prevailed in district court, would have obtained a tax refund of about $168,000, plus statutory interest and attorneys’ fees. Accordingly, the Baldwins present the following questions:

1. Should Brand X be overruled?

2. What, if any, deference should a federal agency’s statutory construction receive when it contradicts a court’s precedent and disregards traditional tools of statutory interpretation, such as the common-law presumption canon?