The Use of Audited Self-Regulation as a Regulatory Technique

At first blush, self-regulation seems to be self-contradicting. If government regulation of an industry or problem is considered necessary, how can that responsibility then be returned to those from whom it was taken? Notwithstanding this apparent contradiction, audited self-regulation is used successfully by federal regulatory agencies. It is apparently adopted, however, on an ad hoc basis: in one industry or application but not in another that possesses similar characteristics. This article reviews these previously uncollected efforts at audited self-regulation to evaluate the general usefulness of this regulatory technique across industries and applications. These insights would be relevant not only to reform current federal agency regulation but also to design new programs, since new schemes of self-regulation are continually appearing. This article concludes that, within specific limits, experience has shown that audited self-regulation is a useful technique which should be considered in a systematic fashion by government agencies when formulating regulatory policies. Part I defines and narrows the scope of the term audited self-regulation to make possible a careful inquiry, and distinguishes other related forms of regulation. Part II discusses the potential advantages and limitations of audited self-regulation. Part III extrapolates from these advantages and limitations the characteristics of the regulation, agency, industry, and self-regulatory organization which suggest that self-regulation would be successful. In addition, part III discusses the principal legal requirements of such programs. Part IV is a survey of federal agencies use or attempted use of audited self-regulation in administration of their statutes, with an evaluation of each against the principles described in parts II and III. Part V combines the theories of parts II and III with the programs surveyed in part IV to distill essential elements of a successful program of audited self-regulation. Finally, part VI evaluates the options for achieving the systematic consideration of the use of audited self-regulation

The Guardians of the New Internal Revenue Code

The proliferation of electronic filing (e-filing) of income tax returns creates new problems and opportunities for the regulation of the tax return preparation industry. Now that e-filing is universal, the rules of the law are, for many taxpayers, the code of the tax software, not in the Internal Revenue Code. The natural consequences of universal e-filing are unremitting complexity in a tax code which is also used to deliver social benefits in the form of tax credits. This, combined with the polit¬ical pariah status of the Internal Revenue Service (IRS), makes it imperative that the IRS work with the tax return preparers to ensure that their products are safe and accurate. More importantly, the exis¬tence of such an industry creates great opportunities for the IRS to leverage its relationship with this private sector group to improve the tax return filing experience for many taxpayers. The existing voluntary relationship between the IRS and the industry is likely no longer via¬ble, but this article provides the blueprint for government-supervised self-regulation which can solve the problems with the new code

Business Law Reform in the United States: Thinking Too Small?

Dean Johan Henning presents the South African experience with business entity reform as one part of a coordinated whole. It included, for example, government funding for business, tax reforms, accounting and securities changes. Henning says that these reforms, though multi-faceted, had a uniform purpose: to use small business as an engine to improve the economy and to move “historically and socially disadvantaged groups” into the mainstream of the economy and the society. These are noble goals and far reaching efforts, and a lot to ask of business entity reform. But because the South African experience was nonetheless successful by all counts, it is worth asking whether we could have—or have had—similar noble motives for business entity reform in the United States in the past decade. The efforts have proceeded on both state and federal levels, in response to many different motivations at many different times. Has the United States, nonetheless, somehow furthered a noble purpose even in this haphazard, piecemeal fashion? To answer this question, I will consider the United States\u27 counterparts to Dean Henning\u27s description of South African initiatives in three principal legal areas: business entity organization, federal income tax, and financial reporting and disclosure. Each area is a fundamental part of small business policy in the United States. Further, each of these areas had revolutionary developments in the 1990s. In substantive business entity law, we saw the creation of the limited liability company ( LLC ) and limited liability partnership ( LLP ), and reform of corporation law to make it more consonant with the needs of closely-held businesses. In tax, we saw the development of the check-the-box rules for classification of entities for federal income tax purposes. Finally, in financial reporting and disclosure law, we saw important initiatives to simplify the tasks and ease the burdens on small businesses. In each area, I will review and attempt to reconstruct some of the evident policies. I conclude that in the attempt to provide alternatives for small businesses in the United States, there are now too many alternatives. Dean Henning urges to think small, first. We have, perhaps, been thinking too small

Cooperative Implementation of Federal Regulations

Professor Michael examines regulatory programs in which the federal government leaves many compliance decisions up to the regulated entities themselves. Drawing on prior research and theory in the area, he concludes that such cooperative implementation is feasible if three principles are observed: (1) regulatory standards are written to leave discretion in methods of compliance and that discretion is within the competence of the regulated entities; (2) there are economic incentives to offset the additional costs to these entities; and (3) the entities self-report their own compliance, the agency closely monitors the program, and the agency maintains a residual program of traditional surveillance and direct enforcement. Next, Professor Michael examines existing programs which fall within the definition of cooperative implementation programs. These programs include voluntary and mandatory programs of self-enforcement and self-reporting in workplace safety and health, air and water pollution control, food safety, and transportation safety. In each instance, those programs that conform most closely to the three principles are more successful. Moreover, those programs that were not wholly successful failed to satisfy one or more of these principles. The Article concludes with general recommendations on how to expand the use and ensure the success of cooperative implementatio