On July 24, the U.S. Court of Appeals for the Fifth Circuit, sitting en banc, held in a 9—7 opinion that a tax outsourced by Congress to an independent agency and then determined by a private corporation violates the Constitution’s separation of powers. That case is Consumers’ Research v. Federal Commissions Commission.¹ In invalidating the tax in question, the en banc Fifth Circuit overturned a three-judge panel decision to the contrary. While the doctrinal and practical implications of this en banc decision are far more consequential than the specific background of this case, reciting some aspects of that background might be helpful.

In 1996, the Telecommunications Act was enacted. Through that statute, “Congress delegated its taxing power to the Federal Communications Commission.”² The FCC did not devise the tax directly, however. Instead, it “subdelegated the taxing power to a private corporation” named the Universal Service Administrative Company (USAC). USAC, “in turn, relied on for-profit telecommunications companies to determine how much American citizens would be forced to pay for the ‘universal service’ tax that appears on cell phone bills across the Nation.” In particular, “USAC is managed by representatives from interest groups affected by and interested in universal service programs who are nominated by their respective interest groups.” The way it works is that telecommunications carriers pay this tax into a Universal Service Fund (USF) under the FCC’s aegis — hence, this exaction is colloquially known as the “USF tax” — but most of those carriers shift these payments over to their customers. Declaring this tax to be a “misbegotten” one, the Court of Appeals held it unconstitutional under the Constitution’s Legislative Vesting Clause.³

That provision is one of the foundational pillars of the federal government. All of the legislative power of the United States is vested in Congress. “Accompanying that assignment of power to Congress is a bar on its further delegation.”⁴ The authority to make legislative decisions, therefore, rests with Congress — something that Congress is not allowed to delegate.⁵ At the same time, Congress is deemed to retain some quantum of “flexibility and practicality, which will enable it to perform its function.”⁶ Furthermore, the line between lawmaking and execution of laws can, at times, be a blurry one, where even evidence from the founding era could be somewhat contradictory. As Justice Scalia pointed out 35 years ago:

The whole theory of lawful congressional ‘delegation’ is not that Congress is sometimes too busy or too divided, and can therefore assign its responsibility of making law to someone else, but rather that a certain degree of discretion, and thus of lawmaking, inheres in most executive or judicial action, and it is up to Congress, by the relative specificity or generality of its statutory commands, to determine — up to a point — how small or how large that degree shall be.⁷

In that opinion, Justice Scalia invoked the first Justice Harlan’s longstanding opinion for the court, observing:

‘The true distinction . . . is between the delegation of power to make the law, which necessarily involves a discretion as to what it shall be, and conferring authority or discretion as to its execution, to be exercised under and in pursuance of the law. The first cannot be done; to the latter, no valid objection can be made.’⁸

For nearly the last nine decades, the Supreme Court has said that Congress may delegate its functions to federal agencies so long as the agencies are guided by some “intelligible principle.”⁹ Under the court’s cases, the standard of what counts as an intelligible principle is not a particularly demanding one. The Supreme Court has upheld statutes that delegate to agencies the power to regulate matters in the “public interest.”¹⁰ It has also permitted agencies to set what they determine are “just and reasonable” rates and “fair and equitable” prices.¹¹ And the court has sustained a delegation containing only the statutory guidance that the agency’s action be “requisite to protect the public health.”¹² As a result, it has been contended that much of what at the country’s founding was a power that was “legislative” in character has been improperly delegated to agencies. Even at the turn of this century, Justice Thomas contended that “there are cases in which the principle is intelligible and yet the significance of the delegated decision is simply too great for the decision to be called anything other than ‘legislative.’”¹³

Nonetheless, the power to delegate is not unlimited. “[T]here are limits of delegation which there is no constitutional authority to transcend.”¹⁴ The Fifth Circuit explained in Consumers’ Research that “[v]ague congressional delegations undermine representative government because they give unelected bureaucrats — rather than elected representatives — the final say over matters that affect the lives, liberty, and property of Americans.”¹⁵ What is more, “[w]hen elected representatives shirk hard choices, constituents do not know whom to hold accountable for government action” by “offend[ing] the deliberation-forcing features of the constitutionally prescribed legislative process.” After all, in the framing era, Alexander Hamilton had justified the reticulated procedures for enacting legislation — bicameralism and presentment, namely — on the ground that “[t]he oftener the measure is brought under examination, the greater the diversity in the situations of those who are to examine it, the less must be the danger of those errors which flow from want of due deliberation, or of those missteps which proceed from the contagion of some common passion or interest.”¹⁶

Perhaps for these reasons, the resistance to this approach has accelerated in recent years in many pockets of the federal judiciary. Of late, the Supreme Court has been scrutinizing agency power more closely, even through statutory interpretation’s prism. Certain cases illustrate the point. The court’s decision in West Virginia v. EPA, just two years ago, reaffirmed that agencies may not presume the power to regulate matters of great economic or political import without explicit congressional authorization.¹⁷ And at the end of the most recent Supreme Court term, the court ended Chevron deference — the erstwhile duty of judges to defer to reasonable agency interpretations of ambiguous statutes.¹⁸ The day before Chevron’s demise, the court had ended the practice of mandatory in-house agency adjudications of matters existing at common law — matters that, under the Seventh Amendment, the court maintained, should be decided by a jury in an Article III court.¹⁹ But the case that fell one vote short of reviving non-delegation a few years ago was Gundy v. United States.²⁰ Gundy, whose facts previously have been recited on Taft’s platform, concerned a federal statute that had empowered the Attorney General to decide whether a certain class of sex offenders would get a benefit — or not. Not very much cabined the Attorney General’s discretion as to the benefits or burdens to be visited upon that class.

In Gundy, a fractured court, dividing 4-1-3 (with one justice recused), just barely held the delegation in question to be consistent with the separation of powers. But Justice Alito, who had supplied the fifth vote, held that if the whole project of non-delegation — not piecemeal fact-specific cases — were up for a decision, he would restore that doctrine after almost a century of its dormancy. And the dissenters in Gundy expressed robust criticism towards the delegations upheld during this interregnum. Writing for them, Justice Gorsuch emphasized that “while Congress can enlist considerable assistance from the executive branch in filling up details and finding facts, it may never hand off to the [Executive] the power to write his own [legal] code.”

The Fifth Circuit’s USF case might be the other shoe waiting to drop at the Supreme Court. The en banc Court of Appeals, bound by the Supreme Court’s “intelligible principle” test, held the USF tax delegation inconsistent with the separation of powers as it was not guided by an intelligible principle. Specifically, the Fifth Circuit held that the FCC or USAC was “exercis[ing] legislative power” through this “double-layered delegation” — from Congress to the FCC to USAC. In the Fifth Circuit’s view, legislative delegation to the Executive “circumvent[s] the [Constitution’s] accountability checkpoints” that are part of its bicameral and presentment process. It also “obscures,” in the Fifth Circuit’s eyes, “lines of accountability the Framers intended to be clear.” Similarly, it “render[s] the promise of recourse to the judiciary illusory because they give reviewing courts no standard against which to measure the compatibility of executive action with the prescriptions of the people’s elected representatives.” Delegations to private entities create a different set of problems. For one thing, “private entities are neither legally nor politically accountable to … government officials or to the electorate.” And “passing off a Government operation as an independent private concern allows Government officials to wield power without owning up to the consequences because the people might not associate bad results with the Government at all.”

From these precepts, the Fifth Circuit deduced that “USF combines these features, meaning accountability is undermined twice over.” It starts this way: “[T]he public cannot tell whether it is being taxed by the FCC or USAC.” Should a consumer somehow figure out that the federal government had instituted the USF tax “on his phone bill,” that still did not solve the attribution conundrum. Who exactly was responsible for that charge? “[H]ow could [John Q. Public] determine which governmental official to blame? Not only could Congress and FCC point fingers at each other, but both could offload responsibility onto the private entities — USAC and its private, for-profit, constituents — to which FCC delegated the USF Tax without congressional authorization.” As the Supreme Court had observed about 15 years ago: “Without a clear and effective chain of command, the public cannot determine on whom the blame or the punishment of a pernicious measure, or series of pernicious measures ought really to fall.”²¹ That was not all. The Court of Appeals noted that “even as government officials are immunized from public oversight by this Matryoshka doll of delegations and sub-delegations, important governmental responsibilities are carried out by private entities with a legal obligation not to serve the public but rather to reap profits from it.” And the pertinent Telecommunications Act provision gave the “reviewing courts” no “judicially workable standard” to “redress[] the injuries of aggrieved citizens.”

There is a chance that this case will go to the Supreme Court. The Solicitor General might have to appeal it due to her institutional responsibilities as well as the fact that the anomaly between Fifth Circuit consumers’ phone charges and those of users elsewhere might warrant Supreme Court intervention. The issue is too important, both factually and doctrinally, for the Supreme Court to pass up. This means that the court will get the opportunity to either uphold the USF tax on separation of powers grounds or to invalidate it. If the latter is the course the Supreme Court chooses, the court would have to decide whether it can take a narrow path by invalidating just this unique “double-layered delegation” or it must write a broader opinion because there is no principled basis to so eschew. The court would have to decide whether this tax is justified under the intelligible-principle test or whether that test itself should be jettisoned in favor of an alternative that is far more delegation-skeptical. Should the latter prospect be in the cards, then the unfinished project of the Gundy dissenters and Justice Alito might achieve fruition.

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¹ 109 F.4th 743.
² Unless stated otherwise, the quotes pertain to the en banc decision itself.
³ Namely, Article I, § 1.
⁴ Gundy v. United States, 588 U.S. 128, 135 (2019) (plurality opinion).
⁵ Loving v. United States, 517 U.S. 748, 758 (1996); Touby v. United States, 500 U.S. 160, 165 (1991).
⁶ Panama Refin. Co. v. Ryan, 293 U.S. 388, 421 (1935).
⁷ Mistretta v. United States, 488 U.S. 361, 417 (1989) (dissenting opinion).
⁸ Field v. Clark, 143 U.S. 649, 693—94 (1892) (quoting Cincinnati, W. & Z. R. Co. v. Comm’rs of Clinton Cty., 1 Ohio St. 77, 88—89 (1852)).
⁹ J.W. Hampton, Jr., & Co. v. United States, 276 U.S. 394, 409 (1928).
¹⁰ See, e.g., National Broadcasting Co. v. United States, 319 U.S. 190, 216 (1943); New York Central Securities Corp. v. United States, 287 U.S. 12, 24 (1932).
¹¹ See, e.g., Yakus v. United States, 321 U.S. 414, 422, 427 (1944); FPC v. Hope Natural Gas Co., 320 U.S. 591 (1944).
¹² Whitman v. Amer. Trucking Assns., 531 U.S. 457, 472 (2001).
¹³ Id. at 487 (concurring opinion).
¹⁴ Panama Refin., 293 U.S. at 430.
¹⁵ Citing Tiger Lily, LLC v. U.S. Dep’t of Hous. & Urb. Dev., 5 F.4th 666, 674 (6th Cir. 2021) (Thapar, J., concurring) (“By shifting responsibility to a less accountable branch, Congress … deprives the people of the say the framers intended them to have.”).
¹⁶ The Federalist No. 73.
¹⁷ 597 U.S. 697 (2022).
¹⁸ Loper Bright Enterprises v. Raimondo, 144 S. Ct. 2244 (2024).
¹⁹ SEC v. Jarkesy, 144 S. Ct. 2117 (2024).
²⁰ 588 U.S. 128 (2019).
²¹ Free Enter. Fund v. Pub. Co. Accounting Oversight Bd., 561 U.S. 477, 497—98 (2010).