I am now working on a larger article that incorporates a discussion of the interface of lenity and Chevron deference, both of which supply rules of interpretation to ambiguous statutory text at least where Chevron can apply (i.e., where the agency has adopted a Chevron-entitled reasonable interpretation that is different than the interpretation the court thinks is the best interpretation). Basically, I think the law is as of now ambiguous as to how Chevron interfaces with lenity where both may be truly applicable. I emphasize truly applicable for Chevron because I think much of the commotion about Chevron really does not involve situations where Chevron is truly applicable. In my analysis earlier in the paper I say Chevron is truly applicable only in what I call Category 5 – where the court believes its own interpretation (after perhaps giving Skidmore deference to the agency interpretation) is still better than the agency reasonable interpretation.
I post below the text (but not the footnotes) to my discussion in the hope that readers may (i) be interested and (ii) can offer constructive comment. Thanks in advance.
I discussed above the claim that an interpretation which affects penalties is transformed into a legislative rule. The underlying concern is that Congress alone can enact criminal penalties and the text of criminal statutes (at least as interpreted by the courts) must clearly set the standard of conduct being penalized. Further, there is the rule of lenity, often described as a canon of construction, that requires that courts interpret ambiguity in criminal statutes in favor of the defendant. The rule of lenity and true Chevron deference (the Category 5 deference) would thus conflict if both were to apply to a criminal statute. One author has described the conflict as between a “government always loses” standard (lenity) and a “government always wins” standard (Chevron deference). The answer is less than clear (at least to me) because of the distractive rhetoric that attends discussion of the issue.
Rather than trying to resolve all that rhetoric to some form of black letter law (I think an impossible task on the state of the discussion), I will just try to analyze how the discussion might play out in my area of expertise–tax with a subspecialty in criminal tax.
Many criminal statutes impose an express element that the defendant have acted “willfully.” The criminal statutes do not define “willfully,” As authoritatively interpreted by courts, willfully can mean different things in different criminal statutes. In Bryan v. United States, 524 U.S. 184, 191 (1998), the Court famously noted that noting that the word is a chameleon, “a word of many meanings whose construction is often dependent on the context in which it appears.” I think that, in Chevron analysis, this is simply to say that when, in a criminal statute, Congress makes willfully an element, there is interpretive space that must be filled to give meaning to the statute as to which of the possible meanings of willfully applies. Traditionally, that interpretive space in a criminal statute is filled by the courts. Key Title 26 tax crimes have the requirement that the defendant act “willfully,” interpreted as the highest level of mens rea–that the defendant intended to violate a known legal duty, a standard that is not met just by reckless conduct. Cheek v. United States, 498 U.S. 192, 196 (1991). In other criminal contexts where the statute imposes a willfully element, the courts impose, through interpretation, a lesser mens rea standard. The lower level of mens rea is said to be the general rule for interpreting a statutory willfully element. The higher level of mens rea applies only to a small subset of crimes where willfully is a statutory element and is said to be an exception to that general rule. Determining whether the general rule or the exception applies can be a bit esoteric but that need not concern us here. Suffice it to say for present purposes, Treasury could not, by regulation, authoritatively and binding on the courts interpret the term “willfully” in the elements of tax crimes such as tax evasion to include, for example, a general intent to do some unlawful or reckless conduct without specific intent to violate a known legal duty. I think that is a fair statement of the law.
The next question is whether Chevron deference might apply to purely civil penalty statutes that have criminal statute analogs. I discuss two that are present in my practice–tax and the related foreign account reporting regime in Title 31. Starting with the latter, the Bank Secrecy Act and regulations require that U.S. persons file a Foreign Bank Account Report (“FBAR”). Willfully is a statutory element for the criminal failure to file the FBAR and for the civil penalty analog to the criminal penalty. Although the criminal and civil penalty statutes give no indication in their text that willfully means something different, the courts have interpreted the willfully requirements differently. For the criminal penalty, willfully is the Cheek standard, the higher mens rea requirement of an intent to violate a known legal duty. Ratzlaf v. United States, 510 U.S. 135, 140-41 (1994). For the civil willful penalty, willfully incorporates the lower mens rea standard permitting reckless conduct to draw the penalty without specific intent to violate the law. In other words, even with the definitive interpretation of willfully in Ratzlaf for the criminal penalty, there was still interpretive space in the definition of willfully for the civil willful penalty. At least the holdings are that there is interpretive space for the courts because the courts interpreted willfully for the civil penalty to include reckless conduct. The thought experiment that one should ask is whether that means that, prior to the current consensus interpretations permitting the lesser mens rea, there was interpretive space in the civil willful penalty that would have given Chevron deference (Category 5) to a Treasury interpretation that adopted lower mens rea standard? Of course, that might not be a good example because a court could conclude that an interpretation adopting the lower mens rea standard was the “best” interpretation thus eliminating it from Category 5 which is the only situation in which Chevron deference actually applies. I think we can infer that type of analysis from the trajectory of court interpretation to date. But the larger question is whether, if there is indeed interpretive space in a civil penalty, that interpretive space is exclusively for the courts or can also be for the agency?
A similar example in the tax area. As noted above, most Title 26 tax crimes have a willfully element. The civil fraud penalty which may be viewed as an analog to the tax evasion crime does not have a textual willfully element but rather applies to tax underpayments “due to fraud.” As interpreted “due to fraud” means, in the case of an underpayment, the same conduct penalized by the tax evasion statute. I am not aware that the interpretation of the tax civil fraud penalty has taken the trajectory that the civil FBAR penalty has taken to include reckless conduct within its scope, so the I infer that the standard is the same as the tax evasion standard, but with a lesser level of proof for the government (clear and convincing evidence for the civil fraud penalty and beyond a reasonable doubt for the tax evasion penalty). So, I pose another thought experiment as to whether Treasury could promulgate a regulation interpreting the “due to fraud” text as including reckless conduct. I suspect that the historic interpretations might now be sufficiently jelled as to the proper interpretation equating the criminal and civil penalty conduct standard that a new different agency interpretation might be foreclosed.
The further question is whether there is Chevron interpretive space for statutes, which are neither criminal statutes nor civil penalty analogs but having civil or penalty statute implications. Certainly, it is well established that Congress can impose criminal penalties for violating a regulation. Thus, it would seem that an agency can interpret the statute creating the legal duty that the defendant must knowingly violate to meet the Cheek criminal standard. For example, in Correll (discussed earlier), the Treasury interpreted the trade or business deduction for away from home business expenses and the Supreme Court sustained the interpretation under a pre-Chevron reasonable interpretation standard. Can a defendant who intentionally violates that legal duty(agency interpretation entitled to Chevron deference) be criminally charged for tax evasion requiring that he act willfully or be subject to the civil fraud penalty for an underpayment due to fraud? Certainly, regulations can have a civil penalty implication. For example, the Code’s accuracy related penalty applies a 20% civil negligence penalty for “Negligence or disregard of rules or regulations.” I think he can in both cases.
I will just say that this is a large issue on which further discussion would require a detour far beyond the focus of this article.
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