In a highly consequential ruling for tax professionals, trade advisors, and their clients, the Supreme Court of the United States issued its decision in the consolidated cases of Learning Resources, Inc. v. Trump and Trump v. V.O.S. Selections, Inc.. The core issue before the Court was whether the International Emergency Economic Powers Act (IEEPA) authorizes the President of the United States to impose tariffs.

Facts of the Case

The facts of the case center on actions taken by President Trump shortly after taking office to address two perceived foreign threats: an influx of illegal drugs and "large and persistent" trade deficits. Determining that the drug influx created a public health crisis and the trade deficits led to the hollowing out of the American manufacturing base, the President declared national emergencies for both threats, invoking his authority under IEEPA.

To "deal with" these emergencies, the President imposed extensive tariffs. For the drug trafficking emergency, he imposed a 25% duty on most Canadian and Mexican imports and a 10% duty on most Chinese imports. To address the trade deficits, the President imposed "reciprocal" tariffs of at least 10% on "all imports from all trading partners," with several nations facing even higher rates. Subsequently, the President issued multiple adjustments, effectively raising the tariff rate on most Chinese goods to 145%.

Taxpayers’ Request for Relief

The plaintiffs, comprising several small businesses (including Learning Resources, Inc. and V.O.S. Selections, Inc.) and 12 States, filed suit against the government. The taxpayers alleged that IEEPA does not authorize the President to impose the challenged reciprocal or drug trafficking tariffs.

The Learning Resources plaintiffs sued in the United States District Court for the District of Columbia, successfully securing a preliminary injunction after the court concluded that IEEPA did not grant the President the power to impose tariffs. Concurrently, the V.O.S. Selections plaintiffs brought their case before the United States Court of International Trade (CIT), where they were granted summary judgment. The Federal Circuit, sitting en banc, affirmed the CIT’s decision in relevant part, holding that IEEPA’s grant of authority to "regulate . . . importation" did not authorize the challenged tariffs, which the court described as "unbounded in scope, amount, and duration.". The Supreme Court granted certiorari to review these consolidated challenges.

Court’s Analysis of the Law

Chief Justice Roberts, writing for the Court, anchored the majority’s analysis in the fundamental separation of powers established by the Constitution. The Court emphasized that Article I, Section 8, explicitly grants Congress the "Power To lay and collect Taxes, Duties, Imposts and Excises.". The Framers uniquely vested this taxing power—which "very clear[ly]" includes the power to impose tariffs—solely in the Legislative Branch, explicitly denying the Executive any inherent peacetime authority to impose tariffs.

Because the Government conceded the President lacks inherent peacetime authority to impose tariffs, its defense rested entirely on a sweeping interpretation of IEEPA’s delegation to "regulate . . . importation". In rejecting this position, the Court heavily relied on the major questions doctrine. The Court articulated its longstanding "reluctan[ce] to read into ambiguous statutory text" extraordinary delegations of Congress’s core powers. Under this doctrine, when an executive action carries profound economic and political significance, the Executive must "point to clear congressional authorization".

The Court noted that the purported delegation involved the "core congressional power of the purse.". When Congress has historically delegated its tariff powers, "it has done so in explicit terms, and subject to strict limits," such as caps on amounts, durations, and demanding procedural prerequisites. In contrast, the Government’s reading of IEEPA would give the President unchecked power to unilaterally impose unbounded tariffs, representing a "transformative expansion" of executive authority. The Court found no major questions exception for emergency statutes or foreign affairs, holding that the foreign affairs implications of tariffs do not make it likely that Congress would relinquish its taxing power through vague language.

Application of the Law to the Facts

Applying these principles to the text of IEEPA, the Court scrutinized 50 U. S. C. §1702(a)(1)(B), which authorizes the President to "investigate, block during the pendency of an investigation, regulate, direct and compel, nullify, void, prevent or prohibit . . . importation or exportation.".

The Court observed that "Absent from this lengthy list of powers is any mention of tariffs or duties.". The word "regulate" does not fill this void. Analyzing ordinary definitions, the Court noted that to "regulate" means to fix, establish, control, or adjust by rule. The Court highlighted that the facial breadth of this definition places in stark relief what "regulate" is not typically thought to include: taxation. The Government could not identify a single statute in the U.S. Code where the power to regulate includes the power to tax.

Furthermore, the Court reasoned that interpreting "regulate" to include taxation would render IEEPA partly unconstitutional, as the statute also allows the President to regulate "exportation," and taxing exports is expressly forbidden by the Constitution. Finally, evaluating the "neighboring words" in the statute, the Court noted that none of the other eight verbs in §1702(a)(1)(B) include the distinct and extraordinary power to raise revenue, reinforcing that tariffs are "different in kind, not degree," from the other authorities granted in IEEPA.

Conclusions of the Court

The Supreme Court concluded that IEEPA does not authorize the President to impose tariffs. The Court affirmed the judgment of the Federal Circuit in the V.O.S. Selections case. Regarding the Learning Resources case, the Court agreed with the Federal Circuit’s assessment of jurisdictional boundaries, ruling that challenges arising out of modifications to the Harmonized Tariff Schedule fall within the exclusive jurisdiction of the CIT. Consequently, the Court vacated the judgment of the D.C. District Court and remanded the case with instructions to dismiss for lack of jurisdiction.

Concurring Opinions

While a six-Justice majority agreed on the final judgment and the statutory text’s inability to support the tariffs, the Justices fiercely debated the appropriate interpretive framework.

Justice Gorsuch (joined by Justice Barrett) authored a concurrence vigorously defending the major questions doctrine. He argued that the doctrine is not a novel invention but is rooted in centuries of common law involving corporate and agency delegations, functioning as a clear-statement rule to protect Article I’s Vesting Clause. Gorsuch emphasized that because the President claimed an "extraordinary" delegated power, he was required to identify clear statutory authority, which IEEPA fails to provide.

Justice Barrett wrote separately to clarify her view that the major questions doctrine is an ordinary application of textualism, situated within "commonsense principles of communication.". She argued that a reasonable interpreter expects Congress "to make the big-time policy calls itself, rather than pawning them off to another branch," thereby disagreeing slightly with Gorsuch’s framing of the doctrine as an external, substantive constitutional rule.

Justice Kagan (joined by Justices Sotomayor and Jackson) concurred in the judgment but wholly rejected the major questions doctrine. Kagan argued that the "ordinary tools of statutory interpretation amply support" the result, making the major-questions doctrine "unnecessary". Looking at the text in context, Kagan noted that "regulate" does not encompass taxing, and combining the statute’s verbs and objects results in 99 authorized actions, "exactly none" of which involve raising revenues.

Justice Jackson added a separate concurrence to emphasize the value of legislative history, specifically the House and Senate Reports accompanying IEEPA and its predecessor, the Trading with the Enemy Act (TWEA). Jackson highlighted that the legislative history plainly establishes Congress’s intent was to provide the President with the emergency authority "to control or freeze property transactions where a foreign interest is involved," which is entirely distinct from levying tariffs to generate revenue.

Dissenting Opinions

The dissenting Justices argued that IEEPA’s text, historical usage, and prior Supreme Court precedent clearly authorized the President’s actions.

Justice Kavanaugh (joined by Justices Thomas and Alito) authored the principal dissent, arguing that "tariffs are a traditional and common tool to regulate importation.". Kavanaugh relied heavily on historical context, noting that in 1971, President Nixon used identical language in TWEA to impose a 10% worldwide tariff, which was upheld by the Court of Customs and Patent Appeals. Furthermore, Kavanaugh cited the 1976 Supreme Court case Federal Energy Administration v. Algonquin SNG, Inc., which unanimously held that a statute authorizing the President to "adjust the imports" permitted the imposition of monetary exactions. Kavanaugh concluded that when Congress enacted IEEPA in 1977, the public and lawmakers clearly would have understood "regulate . . . importation" to include tariffs. He sharply criticized the majority’s use of the major questions doctrine, arguing that this Court has "never before applied the major questions doctrine—or anything resembling it—to a foreign affairs statute," where Congress traditionally grants the Executive broad discretion.

Justice Thomas wrote a separate dissent to assert that the tariffs are consistent with the separation of powers as an original matter. Thomas argued that the nondelegation doctrine only prohibits Congress from delegating "core legislative power," which is limited to substantive rules depriving individuals of life, liberty, or property. Because importing foreign goods was historically viewed as a "privilege" rather than a vested right, and because power over foreign commerce falls under external affairs, Thomas concluded that Congress may freely delegate the power to impose tariffs to the President without violating the Constitution.

Refunds? About That…

The majority opinion does not address whether the federal government will need to refund the tariffs that have already been collected. However, the dissenting opinion authored by Justice Kavanaugh discusses this issue in detail and warns of the logistical and financial complications it will cause.

Justice Kavanaugh explicitly points out that the majority opinion "says nothing today about whether, and if so how, the Government should go about returning the billions of dollars that it has collected from importers". Despite the majority’s silence on the mechanics of a refund, Kavanaugh argues that the interim effects of the Court’s decision to invalidate the tariffs could be "substantial" and that the United States "may be required to refund billions of dollars to importers who paid the IEEPA tariffs".

Kavanaugh highlights several major complications and concerns regarding these potential refunds:

A Logistical "Mess": Relying on concessions made during the case’s oral arguments, Kavanaugh notes that the administrative process of actually refunding the money to importers is "likely to be a ’mess’".
Passed-Down Costs: He points out the economic complexity that many of the importers who originally paid the tariffs "may have already passed on costs to consumers or others," raising practical questions about the fairness and true economic impact of returning the funds directly to the importers.
Impact on the U.S. Treasury: Because of the unprecedented size and scope of the tariffs imposed by the President, the sheer volume of the required repayments—amounting to billions of dollars—"would have significant consequences for the U. S. Treasury".

In summary, while the controlling ruling of the Court does not provide a mandate or framework for returning the illegally collected tariffs, the dissenting justices foresee the refund process becoming a massive, highly complex, and economically disruptive consequence of striking down the President’s actions.

Prepared with assistance from NotebookLM.