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Def. Council, Inc., 467 U.S. 837 (1984), the challenged
regulation need only represent a permissible construction of
section 267(a)(3). Based on a review of the legislative history,
the Court of Appeals concluded that section 1.267(a)-3, Income
Tax Regs., was a permissible construction and therefore valid,
rejecting our view that the regulation was manifestly contrary to
the statute.
4. Chevron
In light of the Court of Appeals’ reversal, we reconsider
our holding in Tate & Lyle I. Because we are reviewing
respondent’s construction of a statute he administers, our
analysis is governed by Chevron. Chevron U.S.A., Inc. v. Natural
Res. Def. Council, Inc., supra; see also Bankers Life & Cas. Co.
v. United States, 142 F.3d 973 (7th Cir. 1998) (Chevron doctrine
applies to tax regulations, whether legislative or interpretive).
Under Chevron, when reviewing an agency’s regulatory
implementation of a statute, we look first to the intent of
Congress. If Congressional intent is clear, our inquiry ends,
and we simply apply the clear intent of Congress. However, if
Congressional intent is not clear, the question is whether the
regulation is based on a permissible construction of the statute.
Chevron U.S.A., Inc. v. Natural Res. Def. Council, Inc., supra at
842-843.
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