Authors: Dean Smith (PhD, CFP, TEP, CPA, CA, RWM; Partner), Hunter Moore (CPA, Iowa)
SCOTUS, IEEPA, and What Happens Next
Oxford Dictionary penned “rage bait” as its 2025 word of the year. One could argue, however, that tariff would be a more fitting term. With the Supreme Court’s recent ruling and the anticipated refund litigation on the horizon, though, it’s clear the topic will remain in the limelight – and possibly win 2026’s award! In today’s U.S. Tax Tip, Cadesky US Tax will guide you through the Supreme Court’s ruling, the events that led to the legal challenges, the alternative tariff regimes, and a discussion on the current and future impacts.
The Court Speaks
On February 20th, 2026, the Supreme Court of the United States (SCOTUS) issued their highly anticipated ruling on Learning Resources, Inc. v Trump, 607 U.S.___(2026). The Court held that the 1977 International Emergency Economic Powers Act (IEEPA), which was the primary authority for levying the “Trafficking” and “Reciprocal” tariffs, does not authorize the President to unilaterally set tariffs. As such, many of the tariffs have been vacated. In their analysis, the majority’s primary reasoning evaluated the statutory language of the IEEPA, as well as historical precedents. Specifically, Chief Justice Roberts writes, “IEEPA’s grant of authority to ‘regulate…importation’ falls short” and “until now no President has read IEEPA to confer such power”. Clearly, Roberts was not persuaded.
Another area the Court briefly touched on was the major questions doctrine. The doctrine has been present, to various degrees, in the U.S. legislative environment for decades but was never used by SCOTUS until its 2022 West Virginia v. EPA, 597 U.S. 697 (2022), opinion. Essentially, the standard measures whether Congress has clearly delegated its decision-making authority for issues of national importance. In the ruling, Roberts held that “When Congress has delegated its tariff powers, it has done so in explicit terms…[and] has used words like ‘duty’ in statutes delegating authority to impose tariffs”. With that reasoning, it’s understandable why he found issue with “regulate…importation”. Before moving onto the dissent, it’s important to note that only a plurality of the justices agreed with Roberts’ argument – effectively rendering the major doctrine’s reasoning non-binding.
In the dissenting opinion, Justice Kavanaugh rejected the majority’s opinion on the basis that “tariffs are a traditional and common tool to regulate importation” and noted that policy debates are not the Court’s role. In his opinion, the justice signaled his support for the administration’s approach by detailing additional mechanisms the administration can use to enact its economic agenda.
To the Top and Back Again
SCOTUS acted and IEEPA tariffs are no longer levied. How, though, did we arrive at this point? Through numerous executive orders, the White House initiated its strategy and quickly met resistance. On May 28th, 2025, a three-judge panel on the U.S. Court of International Trade (CIT) unanimously ruled against the administration in V.O.S. Selections, Inc. v. United States, No. 25-00066, nullifying the tariffs. However, the U.S. Court of Appeals for the Federal Circuit issued a stay the next day, reinstating tariffs until the Federal Circuit issued its judgment. The Federal Circuit’s decision on August 29, 2025, in V.O.S. Selections, Inc. v. Trump, No. 25-1812, affirmed the CIT’s ruling but vacated the universal injunction (i.e. the CIT was correct with its original decision but applied the tariff restrictions too broadly). From here, the Trump administration petitioned SCOTUS and was granted permission to argue (certiorari) before the Court, which led us to the recent ruling.
Additional Levers
As Justice Kavanaugh mentioned, the President has additional tools to achieve his economic policy. As these mechanisms are utilized, the chart below can help you understand a general overview of the statutes. However, the key takeaway one should recognize is that tariffs will continue to be levied, but the scope of them will be greatly diminished. For instance, the administration introduced a 10% §122 global tariff the day of the ruling.
| Authority | Act | Reason for Tariffs | Oversight |
|---|---|---|---|
| § 122 | Trade Act of 1974 | Trade deficits | 150-day limit; congressional approval required to extend |
| § 201 | Trade Act of 1974 | Serious threat to domestic industries | Investigation required; 4-year initial term, extendable to 8 years |
| § 301 | Trade Act of 1974 | Unfair trade practices | Investigation required; terminates after 4 years unless continuation requested |
| § 232 | Trade Expansion Act of 1962 | National security threat | Investigation required; Secretary must report within 270 days; no duration limit |
| § 338 | Smoot-Hawley Tariff Act of 1930 | Discriminatory trade practices | Presidential determination required; never previously used |
It’s My Money and I Want it Now!
Now that we know the IEEPA tariffs were collected illegally, the next logical step is to recoup funds from the government’s coffers. How will this be accomplished? In short – we don’t know. While the question of refunds was raised during the SCOTUS oral arguments, the opinion made no determination on how reimbursements will be facilitated. Justice Kavanaugh recognized the potential quagmire by acknowledging that many businesses passed their costs to the consumer, which raises the questions as to who was injured and to what extent? As a part of its decision, SCOTUS returned the refund decision to the original court of jurisdiction, the CIT.
Why Cadesky
Though the decision may not have an impact on your business, it’s an important example of the complications when conducting international activities. While tariffs (i.e., import taxes) remain a fluctuating issue, income taxes have the advantage of falling under the purview of Congress; the recent snail’s pace of income tax legislation affords U.S. taxpayers time and reasonable consistency to implement a tax reduction strategy.
Cadesky U.S. Tax specializes in creating tailor-made solutions for cross-border businesses. Whether your need is entering a new market, reorganizing to improve tax efficiency, or meeting your compliance requirements, we have a dedicated team to meet your needs. Please contact USAdminsupport@cadesky.com to schedule a consultation.
