Administering the Tax System We Have

Traditional perceptions of tax exceptionalism from administrativ–law doctrines and requirements have been predicated at least in part on the importance of the tax code\u27s revenue–raising function. Yet, Congress increasingly relies on the Internal Revenue Service to administer government programs that have little to do with raising revenue and much more to do with distributing government benefits to the economically disadvantaged, subsidizing approved activities, and regulating outright certain economic sectors like nonprofits, pensions, and health care. As the attentions of the Treasury Department and Internal Revenue Service shift away from raising revenue and toward these other matters, the revenue—based justification for tax exceptionalism from general administrative—law norms fades. To demonstrate the shift, the Article incorporates empirical analysis of Treasury Department and Internal Revenue Service regulatory activity over time

Taxpayer Standing and \u3cem\u3eDaimlerChrysler v. Cuno:\u3c/em\u3e Where Do We Go From Here?

In granting certiorari in the case of Daimler-Chrysler Corp. v. Cuno, the Supreme Court asked the parties to brief whether respondents have standing to challenge Ohio\u27s investment tax credit. This report applies modern standing doctrine to the Cuno case and concludes that the Cuno plaintiffs do no have standing to raise their claims in federal court. Moreover, the authors write, allowing the Cuno plaintiffs\u27 case to be resolved in federal court would open the federal court system to a wide range of taxpayer challenges better left to the political branches of government. Nevertheless, they recognize that there may be other litigants that would have standing to challenge Ohio\u27s investment tax credit in federal court

Symbolism and Separation of Powers in Agency Design

My goal with this Essay is a modest one: to raise a few reservations regarding judicial refashioning of agency design via this severance remedy for separation of powers violations. To that end, the Essay will proceed fairly straightforwardly. I will describe three cases or sets of cases in which the Supreme Court or the D.C. Circuit has employed the severance remedy: Free Enterprise Fund v. Public Company Accounting Oversight Board, a series of D.C. Circuit cases brought by the Intercollegiate Broadcasting System against the Copyright Royalty Board, and PHH Corp. v. Consumer Financial Protection Bureau. Then I will highlight three reservations I have about using the severance remedy in this way: (1) that the remedy may not reflect the judicial restraint that motivates it; (2) that the remedy is sufficiently weak that its repeated use will chill litigation of legitimate constitutional challenges; and (3) that the remedy makes agency officials more politically accountable when, arguably, popular understandings of separation of powers principles might counsel otherwise. To the extent these reservations are accurate, judicial use of the severance remedy to address agency design flaws may, in turn, exacerbate questions regarding the fairness and legitimacy of agency actions

Should Advance Pricing Agreements be Published?

The purpose of this comment is to review the role and function of the advance pricing agreement process, to examine the merits of both sides\u27 arguments in the BNA suit, and to discuss the policy implications should BNA prevail. While advance pricing agreements are not the ultimate solution to transfer pricing disputes and tax jurisdiction issues, they are a dispute resolution tool worth maintaining, at least until Congress or Treasury provides greater guidance in this area. Sufficient legal basis exists for the courts to find against BNA and rule that advance pricing agreements are exempt from publication under IRC § 6103. However, if the courts do not, Congress should step in and make advance pricing agreements exempt for policy reasons

Should Advance Pricing Agreements be Published?

The purpose of this comment is to review the role and function of the advance pricing agreement process, to examine the merits of both sides\u27 arguments in the BNA suit, and to discuss the policy implications should BNA prevail. While advance pricing agreements are not the ultimate solution to transfer pricing disputes and tax jurisdiction issues, they are a dispute resolution tool worth maintaining, at least until Congress or Treasury provides greater guidance in this area. Sufficient legal basis exists for the courts to find against BNA and rule that advance pricing agreements are exempt from publication under IRC § 6103. However, if the courts do not, Congress should step in and make advance pricing agreements exempt for policy reasons

Pursuing a Single Mission (or Something Closer to It) for the IRS

It is often said that taxes are the lifeblood of government. As the nation’s tax collector, the IRS serves a critical function without which the federal government would cease to function. Yet the IRS is an agency in crisis—mired in scandal, chronically underfunded, overreliant on automation, and failing to provide taxpayers with the support they need to comply with the tax laws and pay their taxes. This Essay argues that a major contributor to the IRS’s woes is Congress’s penchant in recent decades for utilizing the IRS to administer social welfare and regulatory programs that are only tangentially related to the IRS’s traditional revenue raising mission. This Essay examines the consequences of that choice and calls for reforming the IRS’s organizational structure to segregate the revenue collection function from the biggest and most politically fraught social welfare and regulatory programs that currently fall within the IRS’s jurisdiction. To that end, this Essay suggests giving serious consideration either to spinning off several non-revenue raising programs from IRS oversight or to splitting up the IRS altogether and distributing its many functions among other new or existing agencies

Coloring Outside the Lines: Examining Treasury\u27s (Lack Of) Compliance with Administrative Procedure Act Rulemaking Requirements

The Treasury Department and the Internal Revenue Service have a strange relationship with Administrative Procedure Act notice-and-comment rulemaking procedures. Treasury acknowledges the general applicability of APA procedural requirements when it promulgates regulations interpreting the Internal Revenue Code. Treasury also maintains that most Treasury regulations are exempt from the APA\u27s public notice and comment requirements. Nevertheless, Treasury purports to utilize those same procedures anyway in promulgating most Treasury regulations. This Article documents a study of 232 separate Treasury regulation projects for which Treasury published Treasury Decisions and notices of proposed rulemaking in the Federal Register between January 1, 2003, and December 31, 2005. In connection with this study, this Article compares Treasury\u27s actual practices and exemption claims with current doctrinal trends in courts evaluating compliance with APA requirements across administrative agencies. The Article documents the study\u27s finding that, in 40.9% of the projects studied, Treasury failed to follow APA notice and comment requirements. The Article also concludes that, as interpreted by the courts, established exceptions from those requirements generally do not apply to excuse this noncompliance. Consequently, among other implications, many Treasury regulations, including some of Treasury\u27s most complex and controversial rulemaking efforts, are susceptible to legal challenge for failure to adhere to APA rulemaking requirements

The (Perhaps) Unintended Consequences of King v. Burwell

The Supreme Court’s decision in King v. Burwell surprised many people, not because of its outcome but because, even as the Court ultimately agreed with the IRS’s interpretation of the statute, the Court expressly denied the IRS Chevron deference. As regards that result, this Essay makes three points. First, the Chevron discussion in King was not incidental, but the IRS and taxes were not foremost on the Court’s mind. Rather, King reflects a careful effort by Chief Justice Roberts to accomplish, through alternative framing, a broader curtailment of Chevron’s scope that he advocated unsuccessfully two terms earlier in City of Arlington v. FCC. Second, although King could be read as announcing a new, additional standard for whether and when a reviewing court should apply Chevron review in evaluating an agency’s interpretation of a statute that it administers, given the Court’s larger body of Chevron jurisprudence, it is unlikely that a majority of the Court agrees wholeheartedly with Chief Justice Roberts’s preferred view of Chevron’s scope. Rather, it seems more likely that most of the Justices did not view the opinion’s rhetoric about Chevron as sufficiently impactful for future cases to warrant writing separately about the Chevron issue. With that understanding, one might expect lower courts to be circumspect in applying King’s rhetoric in future tax cases. Nevertheless, and third, Supreme Court rhetoric sometimes leads to unintended consequences, and the King opinion has tremendous potential for such—particularly in the tax area, where Congress increasingly relies upon the IRS to administer a variety of spending and regulatory programs that serve legislative goals falling outside the IRS’s traditional tax expertise

Unpacking the Force of Law

In its 2011 decision in Mayo Foundation for Education and Research v. United States,\u27 the Supreme Court rejected tax exceptionalism, holding that the general administrative law standards articulated in United States v. Mead Corp. and Chevron USA Inc. v. Natural Resources Defense Council, Inc. govern judicial review of U.S. Department of the Treasury ( Treasury ) regulations. In so doing, the Court admonished, [W]e are not inclined to carve out an approach to administrative review good for tax law only. A few months later, the D.C. Circuit, sitting en banc in Cohen v. United States, reinforced the policy of administrative law uniformity in applying Administrative Procedure Act ( APA ) provisions to Internal Revenue Service ( IRS ) guidance: The IRS is not special in this regard; no exception exists shielding it-unlike the rest of the Federal government-from suit under the APA. Most recently, in United States v. Home Concrete & Supply, LLC, the Supreme Court considered the validity of a Treasury regulation that contradicted an earlier Supreme Court interpretation of the Internal Revenue Code ( I.R.C. ) and that was issued initially in temporary form, in the midst of ongoing litigation, with only postpromulgation notice and comment. While the Court decided that the meaning of the statute was clear, and thus avoided several administrative law questions raised by the briefs and the courts below, the Home Concrete litigation and its many administrative law issues were closely followed by members of the tax bar. Taken together, these cases have given tax lawyers a fresh awareness of administrative law doctrine as relevant to their field

Open Minds and Harmless Errors: Judicial Review of Postpromulgation Notice and Comment

In 2012, the Government Accountability Office surprised many administrative law specialists by reporting that fully 35% of major rules and 44% of nonmajor rules issued by federal government agencies lacked pre-promulgation notice and opportunity for public comment. For at least most of the major rules, however, the issuing agencies accepted comments from the public after issuing the rule, and in most of those cases, the agencies followed up with new final rules, responding to comments and often making changes in response thereto. Post-promulgation notice and comment do not precisely comply with the Administrative Procedure Act, yet are arguably close enough that some courts have felt compelled to uphold them. Challenges to rules adopted in this manner have created a jurisprudential mess, as courts struggle to balance their duty to enforce the requirements of the Administrative Procedure Act with the practical realities of the modern administrative state. The sheer extent of the practice demonstrates the need for a more consistent judicial response. This Article explores the different approaches courts have taken to judicial review of post-promulgation notice and comment. The Article concludes that the all-or-nothing models embraced by some courts are doctrinally and practically untenable, but that the middle-ground alternatives employed by other courts thus far do not ensure that post-promulgation notice and comment function as an equivalent substitute for pre-promulgation procedures. The Article proposes a solution to the middle-ground problem, first by reviewing the doctrinal theory surrounding agency rulemaking and then articulating a set of factors for courts to employ in evaluating post-promulgation notice and comment case by case