US: Landmark Supreme Court Decision Holds IEEPA Tariffs Invalid
Blog International Trade Compliance Update

In a widely anticipated decision, on February 20, 2026, the US Supreme Court ruled in Learning Resources, Inc. v. Trump that the International Emergency Economic Powers Act (“IEEPA”) does not authorize the President to impose tariffs. This decision invalidates substantial tariffs that President Trump imposed under the IEEPA in the first year of his second term, resetting the trade landscape. Following the Supreme Court’s announcement, the Trump Administration issued an executive order terminating the IEEPA tariffs, and a Presidential Proclamation imposing 10% tariffs on products of all countries under Section 122 of the Trade Act of 1974. The fact sheet for the new 10% tariffs can be found here.

In the opening months of his second term, President Trump issued a series of Executive Orders imposing tariffs under the IEEPA, a 50-year-old statute that confers emergency powers on the President. Those Executive Orders claimed that illicit drug flows, porous borders, synthetic opioid supply chains, persistent trade deficits, and other determinations constituted national emergencies that justified the imposition of duties on imports from Mexico, Canada, China and the rest of the world.

Multiple cases have challenged the legality of these IEEPA tariffs, most notably V.O.S. Selections, Inc. v. United States and Learning Resources In V.O.S. Selections, in which the Court of International Trade (“CIT”) found the IEEPA tariffs unlawful, issuing a permanent injunction, which was subsequently stayed. The Court of Appeals for the Federal Circuit affirmed the finding of unlawfulness. In parallel, in Learning Resources, the District Court for the District of Columbia also deemed the IEEPA tariffs invalid. The Supreme Court agreed to consider both cases and consolidated the proceedings. Oral arguments were held in November 2025.

Supreme Court Finds IEEPA Tariffs Unlawful

The Supreme Court ruled in a 6-3 decision that the IEEPA tariffs are unlawful. The majority opinion states that tariffs are a form of taxation, and the power to impose taxes is strictly reserved to the US Congress. Chief Justice John Roberts, writing for the majority held that IEEPA’s language empowering the President to “regulate…importation” in response to national emergencies cannot be construed to authorize the imposition of tariffs. Although the IEEPA does authorize the President to regulate economic transactions (such as through sanctions and export controls), it does not authorize the President to impose tariffs or duties on imports.

The Supreme Court majority invoked the “major questions” doctrine to conclude that Congress did not confer such authority to the President under the IEEPA. The majority noted that the IEEPA tariffs impacted trillions of dollars in global trade and therefore presented a question of economic and political significance. As a result, if Congress had intended the IEEPA to confer to the President such authority, it would have had to do so explicitly. Because the IEEPA does not include an explicit grant of such authority to the President, the IEEPA did not authorize the imposition of the tariffs.

Several Justices authored concurrences agreeing with the conclusion that the IEEPA does not authorize tariffs but diverging or expanding on the rationale. Justices Kagan, Sotomayor, and Jackson concluded the case can be resolved through ordinary statutory interpretation. Justice Jackson wrote separately to examine the IEEPA’s legislative history, showing Congress intended the IEEPA to empower freezing and control of foreign property, rather than revenue‑raising duties. And Justice Gorsuch wrote separately to expand on the application of the “major questions” doctrine. In dissent, Justices Kavanaugh, Thomas, and Alito argued that “regulate importation” has historically encompassed tariffs, citing ordinary meaning, longstanding practice, and precedents such as President Nixon’s 1971 tariffs under the IEEPA’s predecessor statute (the Trading with the Enemy Act), and contended that the major questions doctrine should not apply as the majority argues in the foreign affairs and trade context.

What’s Next: Impact of the Supreme Court’s Decision on Importers

The Supreme Court’s decision means that the IEEPA tariffs were invalid at their inception, and directs that the Court of Appeals for the Federal Circuit’s decision that the IEEPA tariffs imposed under the fentanyl/migrant orders on products of China, Mexico, and Canada and the global reciprocal tariffs are unlawful is affirmed. The decision does not provide any direction on the process for claiming refunds.

As a result, the question of whether the IEEPA tariffs paid by importers may be refunded will need to be decided by the CIT, subject to the appellate review by the Court of Appeals for the Federal Circuit, as well as what administrative process, if any, for claiming refunds may be instituted. Many companies have already filed suit at the CIT claiming refunds of the IEEPA tariffs paid, and we expect that litigation will continue.

Importers interested in claiming refunds of the IEEPA tariffs paid should consider whether they want to pursue refunds of the IEEPA tariffs through litigation at the CIT, where cases filed to date remain subject to a stay and where litigation is scheduled to proceed 30 days from the date of the Supreme Court’s decision. Meanwhile, it’s possible (but uncertain) that an administrative refund process may be implemented by US Customs and Border Protection, which may preclude the need for litigation.

Importers will also need to consider the US federal and state tax treatment of any refunds of the tariffs. For example, for US federal income tax purposes an issue arises as to whether a refund of customs duties/tariffs is includible in a taxpayer’s gross income in the year of the refund under the tax benefit rule to the extent that the taxpayer previously included the tariffs in its cost of goods sold. See, e.g., I.R.S. Technical Advice Memorandum 200543051 (Oct. 26, 2004) (treating refunds of certain anti-dumping duties as includible in gross income); I.R.C. § 111(a) (no inclusion in gross income for recovery of amounts that did not provide a tax benefit in a prior year). Similarly, taxpayers should also consider whether legal expenses incurred in recovering the tariffs are currently deductible or must be capitalized. Taxpayers should evaluate the state and local sales and use tax implications of this decision, particularly with respect to sales and use taxes paid on tariff‑inclusive purchase prices where tariffs are subsequently refunded. Finally, taxpayers that may have incorporated tariffs into their transfer pricing structure and policies should revisit these to determine whether adjustments are warranted.

The Trump Administration has previously indicated that it could seek to rely on alternative authorities—such as Section 232 of the Trade Expansion Act of 1962 (which authorizes the President to impose tariffs if imports threaten national security), Section 301 (in response to unreasonable foreign trade practices), or Section 122 (to address large balance‑of‑payments deficits) of the Trade Act of 1974— to impose substitute tariffs in the event that the IEEPA tariffs are struck down. Now that Supreme Court has ruled that the IEEPA does not provide the Administration with unilateral tariff authority, businesses should closely monitor the Administration’s expected efforts to introduce new tariffs to fill the gap. Indeed, within the same day of the Supreme Court’s decision being announced, the Administration issued a new executive order imposing 10% tariffs on products of all countries under Section 122 of the Trade Act of 1974. It should be noted that these alternative mechanisms, including Section 122, come with significant limitations not present in the IEEPA, insofar as they require an investigation, are time-limited, and/or cap the rate of duties that may be imposed.

Importers should also note that the Administration had also invoked the IEEPA to suspend duty-free de minimis treatment on all imports. Although the Supreme Court’s decision does not expressly consider whether the IEEPA authorizes this suspension, the holding that the IEEPA does not confer tariff authority has potential implications on its use to remove de minimis treatment. Pending litigation has challenged the de minimis orders. Those cases were stayed pending the Supreme Court decision in Learning Resources. The resumption of this litigation will clarify the effect of the decision on the de minimis orders. Although Congress has since enacted legislation rescinding the de minimis exception, this provision does not take effect until 2027, which means the Learning Resources decision may afford temporary (and retroactive) relief to importers who benefit from de minimis treatment.