Key insights
- After months of uncertainty, the U.S. Supreme Court has ruled that tariffs imposed under emergency powers are a form of taxation requiring congressional authorization.
- The decision clarifies the boundary between regulatory authority and the power to raise revenue, an important distinction for future tax and trade policy.
- Importers affected by these tariffs may be eligible for refunds. The decision also informs how future government charges that resemble taxes may be evaluated.
Need to know how tariff decisions may impact your tax strategy?
After months of legal uncertainty over Trump’s emergency tariffs, the U.S. Supreme Court has delivered a decision that could impact potential tariff refunds for U.S. importers and reshape how future administrations approach emergency economic powers.
- Background on the tariff decision
- What can businesses do now?
- How could future trade and tax policy be affected?
The Supreme Court decision around tariffs
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On February 20, the U.S. Supreme Court issued its decision in Learning Resources, Inc. v. Trump, 607 U.S. ___ (2026), resolving whether the president may rely on emergency economic powers to impose tariffs.
Although the dispute reached the court as a challenge to trade policy, the court resolved it as a question of taxing authority. The court held that tariffs are taxes and that the Constitution requires a clear congressional delegation before the executive branch may impose them.
The decision turns on the distinction between regulatory authority and the power to raise revenue, a distinction that remains central to constitutional tax analysis.
Background and procedural history
In early 2025, President Trump declared national emergencies related to two asserted foreign threats: the influx of illegal drugs from Canada, Mexico, and China, and large, persistent U.S. trade deficits.
Acting under the International Emergency Economic Powers Act (IEEPA), President Trump imposed a series of tariffs. These included a 25% duty on most Canadian and Mexican imports, an initial 10% duty on Chinese imports that was later increased, and a separate tariff regime imposing a baseline duty of at least 10% on imports from nearly all trading partners.
- The tariffs were implemented and adjusted through a series of executive orders.
- Importers affected by the tariffs filed suit, arguing that IEEPA does not authorize the president to impose duties.
- The U.S. District Court for the District of Columbia and the Court of International Trade agreed, holding that tariffs constitute taxes and that IEEPA does not delegate taxing authority to the president.
- The Supreme Court granted certiorari and consolidated the cases.
The issue at stake in the tariff case
The question before the court was whether IEEPA’s authorization for the president to “regulate … importation” during a declared national emergency includes the power to impose tariffs — that is, to levy taxes on imported goods.
Chief Justice Roberts delivered the opinion of the court. The majority began with Article I, Section 8 of the Constitution, which assigns to Congress the power to “lay and collect Taxes, Duties, Imposts and Excises.” The court emphasized that a tariff is a tax, a point recognized since Gibbons v. Ogden, 22 U.S. (9 Wheat.) 1 (1824).
The government acknowledged that the president has no inherent authority to impose tariffs in peacetime. Its argument therefore depended on IEEPA.
The court examined the statutory text and concluded it does not authorize tariffs. Although IEEPA permits the president to “investigate, block, regulate, direct and compel, nullify, void, prevent or prohibit” certain foreign related transactions, the statute does not refer to tariffs, duties, or taxes.
The court rejected the argument that the power to regulate importation necessarily includes the power to tax. While taxation may have regulatory effects, the court observed that Congress has consistently treated regulation and taxation as distinct powers and has expressly delegated tariff authority when it intended to do so.
The majority also applied the major questions doctrine. Tariffs of broad scope and duration, capable of raising substantial revenue and affecting the national economy, constitute an exercise of significant economic and political authority. Under West Virginia v. EPA, 597 U.S. 697 (2022), such authority requires clear congressional authorization. The court found no such authorization in IEEPA.
The court further noted that no president had previously used IEEPA to impose tariffs in the statute’s nearly fifty-year history. The absence of prior reliance supported the conclusion that Congress did not intend to delegate taxing authority through IEEPA.
The court held that IEEPA does not authorize the imposition of tariffs and affirmed the judgment in Trump v. V.O.S. Selections, Inc. The Learning Resources case was remanded with instructions to dismiss for lack of jurisdiction.
Justice Kagan, joined by Justices Sotomayor and Jackson, concurred in the judgment. They concluded that traditional tools of statutory interpretation resolved the case without reliance on the major questions doctrine. In their view, the text, structure, and context of IEEPA, particularly when compared to statutes that expressly authorize tariffs, made clear that Congress did not delegate taxing authority.
Justice Jackson wrote separately to emphasize legislative history. Committee reports accompanying IEEPA and its predecessor statute described the president’s authority as addressing foreign property and economic transactions, not as authorizing revenue-raising measures.
Justice Gorsuch, joined by Justice Barrett, focused on separation of powers. The concurrence emphasized that courts should require clarity when the executive branch claims authority over matters constitutionally assigned to Congress, including taxation.
Justice Kavanaugh, joined by Justices Thomas and Alito, dissented. The dissent argued that historical practice supports a broader understanding of the power to regulate importation, including the imposition of tariffs. It relied on President Nixon’s 1971 tariffs and Federal Energy Administration v. Algonquin SNG, Inc., 426 U.S. 548 (1976), where the court upheld monetary measures imposed under a statute authorizing adjustments to imports.
Justice Thomas wrote separately, concluding Congress may more freely delegate tariff authority because importation is a privilege rather than a core private right.
Practical implications of the tariff decision
Immediate impact: What should businesses do now in light of the tariff decision?
For importers, the decision has immediate consequences. Tariffs imposed solely under IEEPA are invalid, reopening the possibility of refund claims for duties paid pursuant to those authorities.
The Supreme Court ruling does not contain details about who, when, and how refunds could be administered. Regarding applying for refunds related to IEEPA tariffs, CLA recommends working with the customs broker who handled the importation documentation.
- Identify affected entries — Review customs records to determine which imports were tied to IEEPA-based proclamations and preserve related records as administrative and judicial processes develop.
- Prepare documentation — Assemble complete entry files, including purchase orders, customs forms, broker invoices, and internal accounting records.
- Review contracts — Assess whether tariff costs were passed through to customers and whether refund obligations may exist under supplier or customer agreements.
- Stay informed — Monitor guidance on refund procedures and deadlines. CLA will continue to watch closely and provide updates as we learn more about how this could impact your fiscal year 2025 tax strategy, audits, and more.
At this time, it’s uncertain how states will react with respect to sales taxes collected on tariffs passed through to their customers but would be refunded.
Broader implications on future tariffs and tax policy
The decision reinforces that courts will evaluate government charges based on their function rather than their label. When a charge operates as a tax, clear congressional authorization is required.
At the same time, the decision does not foreclose the use of tariffs imposed under other statutes that expressly delegate such authority. Future tariff actions will therefore turn on the specific statutory basis invoked.
Viewed in that light, the Learning Resources case is not limited to trade. It’s a reminder that constitutional limits on taxing authority continue to shape how emergency and regulatory powers may be exercised.
How CLA can help with tariff strategy
The Supreme Court’s decision is a landmark ruling that could reshape the legal landscape for emergency economic powers and tariff authority. For importers, it may present a rare opportunity to recover significant tariff costs.
If your business was affected by IEEPA-based tariffs, now is the time to assess your exposure, preserve your rights, and prepare for a potential refund process.
As guidance unfolds, CLA can help you understand how this decision could impact your fiscal year 2025 tax strategy, audits, and more. Our professionals can also assist with other tariff risk mitigation strategies.
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