The Intersection of Chevron Deference for Agency Interpretation and the Criminal Rule of Lenity in Statutory Interpretation

In Carter v. Wells-Bowen Realty, Inc., ___ F.3d ___, 2013 U.S. App. LEXIS 23852 (6th Cir. 2013), here, a nontax case, Judge Sutton in a concurring opinion addresses the intersection of the venerable rule of lenity in interpreting criminal statutes and Chevron deference in the context of interpreting statutes with criminal implications. Chevron deference plays a prominent role in the interpretation of the Internal Revenue Code which, of course, contains criminal provisions. Sections 7206 ff. And, even when the IRS's statutory interpretations do not directly apply to the criminal sections, they may apply to the civil tax sections that, in a criminal case, the Government would have to claim satisfy the Cheek requirement of a known and knowable legal duty. Let's say, for example, the IRS were to promulgate a regulation taking an IRS friendly view of the doctrine of economic substance -- either the tax common law doctrine or the statutory doctrine -- which would likely, by setting the interpretive legal duty, make it easier to convict for tax shelters violating the adopted regulatory interpretation but not the common law interpretation. Now, let's go to the Carter opinions.

The majority panel decision opens as follows [enhanced version available to lexis.com subscribers]:

Under the Real Estate Settlement Procedures Act, a title services company may not pay a real estate agent a fee in exchange for a referral. 12 U.S.C. § 2607(a) [enhanced version available to lexis.com subscribers]. Exempted from this prohibition are "affiliated business arrangements." Id. § 2607(c)(4). The statute establishes three prerequisites for this safe harbor, and everyone agrees that the defendants in this case (several realty companies and title companies) satisfied them. The plaintiffs (three home buyers) claim that the defendants nevertheless fall outside the safe harbor's coverage because they failed to satisfy a fourth condition announced by the Department of Housing and Urban Development through a policy statement. As that policy statement is not binding on the Department or anyone else and as it is not otherwise entitled to deference, it does not supplement the Act's existing safe-harbor conditions. We affirm.

View Jack Townsend's opinion in its entirety on the Federal Tax Crimes blog site.

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