FedEx Ruling Reinforces Limits on IRS Authority in Transfer Pricing Disputes

February 13, 2025

The U.S. District Court for the Western District of Tennessee has ruled in favor of FedEx Corp in a significant transfer pricing case involving Section 965 foreign tax credit regulations. The decision, influenced by the Supreme Court’s Loper Bright ruling, addresses the limits of agency authority under the Chevron doctrine.

If regulations contradict statute:

Ultra Vires Action: The Court held that Treasury regulations conflicting with the statute exceed the IRS’s delegated authority and are therefore invalid. No Chevron Deference: Relying on Loper Bright, the Court declined to defer to agency interpretation where Congress’s intent is clear.

The case focused on whether the IRS had authority to enforce regulations that contradicted the plain language of Section 965. The Court emphasized that such contradictions are outside the IRS’s regulatory power and rejected the government’s claim that agency-promulgated rules must be upheld where Congress has delegated authority. The ruling signals stricter judicial scrutiny of tax regulations and reinforces statutory boundaries on agency action.

Full Link to English Translation: https://www.itbstevetowers.com/wp-content/uploads/2025/02/US-FedEx-case1.pdf?utm_source=chatgpt.com