United States v. Home Concrete & Supply, LLC
The Court ruled that overstating the cost basis of property sold does not count as "omitting" income under the tax code, so the IRS could not use its extended six-year deadline to assess a deficiency against the taxpayers here.
Because a 1958 decision, Colony v. Commissioner, had already interpreted nearly identical statutory language the same way, the Court held that a newer Treasury regulation could not override that precedent, reinforcing limits on when federal agencies can revise the Supreme Court's own reading of a statute.
“In our view, Colony has already interpreted the statute, and there is no longer any different construction that is consistent with Colony and available for adoption by the agency.”
The Court's core reasoning for rejecting the Treasury regulation's reinterpretation of the statute.
How it got here: A federal district court and the Fourth Circuit ruled for the taxpayers against the IRS; the government asked the Supreme Court to review the case.
The Case in Depth
What happened
Home Concrete and other taxpayers sold property in 2000 but overstated how much they had originally paid for it (their "basis"), which understated the income they reported by more than 25%. The IRS asserted a tax deficiency more than three years after the returns were filed, relying on a Tax Code provision that extends the assessment deadline to six years when a taxpayer omits a substantial amount of income from a return.
The question before the Court
Could the IRS use its extended six-year deadline to collect back taxes when a taxpayer merely overstated the cost basis of property sold, rather than leaving income off the return entirely?
The Court's answer
No — the Court ruled that overstating the cost basis of property sold does not count as "omitting" income from a tax return, so the IRS could not use the longer six-year deadline to pursue these taxpayers. This followed directly from Colony v. Commissioner, a 1958 case interpreting nearly identical statutory language the same way; because the current statute's wording is materially the same, the Court treated Colony as controlling under principles of stare decisis.
The government argued that a 2010 Treasury regulation, adopting the opposite reading, should get deference as a reasonable interpretation of an ambiguous statute. The Court rejected this too, explaining that Colony had already found that Congress had spoken clearly enough on this specific question that there was no ambiguity left for an agency to resolve differently.
Curious how the Court got there? See the step-by-step legal reasoning →
Why it matters
Taxpayers who overstate the cost basis of property they sell get the benefit of the ordinary three-year deadline for the IRS to catch the error, rather than the longer six-year window. The ruling also limits how much power federal agencies have to reinterpret a statute once the Supreme Court has already settled its meaning.
What changes now
This is a final merits decision, not a temporary order. The Fourth Circuit's judgment for the taxpayers stands, and the IRS cannot use the extended six-year deadline for similar basis-overstatement cases going forward. The 2010 Treasury regulation has no effect on this issue, though Congress remains free to rewrite the statute if it wants a different result.
What this does not decide
The decision does not overrule the Brand X framework that sometimes lets agencies reinterpret ambiguous statutes after a court ruling; it holds only that Colony's 1958 interpretation left no such gap for the Treasury Department to fill in this specific statute.
Concurrences and dissents
Concurrence in part — Justice Scalia
Justice Scalia agreed the taxpayers should win because Colony controls, but disagreed with the Court's reasoning about agency deference. He argued Colony itself said the statute was ambiguous, so under the Court's own Brand X precedent the Treasury's regulation should have been evaluated as a possible permissible reading, not blocked by inventing a new 'no gap' theory. He accused the majority of quietly revising Chevron doctrine to avoid that result.
Dissent — Justice Kennedy
“There is a serious difficulty to insisting, as the Court does today, that an ambiguous provision must continue to be read the same way even after it has been reenacted with additional language suggesting Congress would permit a different interpretation.”Kennedy's central objection that new statutory language should have allowed the agency to reinterpret the law.
Justice Kennedy argued that Congress added new statutory language in 1954, after the version of the law at issue in Colony, and that this new language left room for the Treasury Department to reasonably interpret the statute differently. He would have deferred to the Treasury's regulation under Chevron and Brand X, allowing the six-year deadline to apply to basis overstatements.
How the Court got there
The legal reasoning, step by step
- The Court first looked to Colony v. Commissioner (1958) — a case interpreting nearly identical 1939 tax-code language — which held that overstating the basis of sold property, and thereby understating income, does not count as an "omission" of income that would trigger a longer, six-year deadline for the IRS to assess taxes.
- Because the operative language of the current statute is materially identical to the 1939 provision Colony interpreted, the Court found that stare decisis — the practice of following a settled precedent on the same legal question — required treating Colony as controlling, since departing from it would effectively overrule that precedent.
- The Court rejected the government's argument that other nearby statutory provisions added in 1954 implied a different meaning, finding those textual clues too weak to overcome Colony's controlling interpretation.
- Turning to whether a 2010 Treasury regulation could override Colony under the Brand X framework (which lets agencies adopt new interpretations of ambiguous statutes even after a court has ruled, unless the court found the statute unambiguous), the Court concluded that Colony had already decided there was no "gap" left for an agency to fill, because Colony's ruling rested on a finding that Congress had spoken clearly to this precise question.
- Because there was no gap for the agency to fill, the Treasury's regulation could not displace Colony's controlling interpretation, so the extended six-year deadline did not apply to the taxpayers' overstatement of basis.
Doctrinal impact
Cases affected by this decision
Reaffirms Colony, Inc. v. Commissioner (357 U. S. 28)
The Court treated this 1958 ruling as controlling and binding on the identical statutory question here.
Distinguishes National Cable & Telecommunications Assn. v. Brand X Internet Services (545 U. S. 967)
The Court applied Brand X's framework but found it did not let the agency override Colony because no gap existed.