Wednesday, January 26, 2011
Can one Congress tie the hands of a future Congress? At its heart, that’s the issue posed by legislative entrenchment rules.
Generally, a statute creates a legislative entrenchment rule whenever it says that a subsequent statute will be effective only if it is enacted or phrased in a specific way. For example, a special rule regarding wealth transfer taxes says that no future statute can exempt the transfer of property from those taxes unless that statute specifically refers to the wealth transfer tax provisions. Even if a type of property enjoys an explicit statutory exemption from "any and all taxation," that won't be enough. The exempting statute must specifically refer to the wealth transfer tax provisions to be effective.
Legislative entrenchment rules may protect existing statutes in other ways. Some say that a given statute cannot be overridden unless the future statute is part of the Internal Revenue Code, disregarding any statute contained elsewhere. Other legislative entrenchment rules require a future Congress to issue a mea culpa when enacting legislation, stating that a future statute will have no effect unless it specifically announces that the polices behind the existing statute have been contravened. Legislative entrenchment rules may also be less restrictive, merely requiring that a future law "expressly" modify a pre-existing provision.
Whether legislative entrenchment rules may validly disregard future statutes that do not comply with their requirements remains an open question. Some commentators have argued that legislative entrenchment rules raise serious constitutional questions because they, in a sense, allow one Congress to bind future Congress. Other commentators have challenged that position, arguing that there is nothing objectionable about strictly applying legislative entrenchment rules.
In the tax area, the difficult statutory interpretation issues raised by legislative entrenchment rules have not received close attention from the IRS, the Tax Court, or taxpayers. Instead, these rules have been either strictly applied or cursorily dismissed, without regard to the broader issues at stake. For example, in a recent case involving over $1,000,000,000 of income, Capital One v. Commissioner, the Tax Court with little discussion nullified a statute because it was not codified in the manner prescribed by a legislative entrenchment rule. But in other circumstances, legislative entrenchment rules have been largely ignored. The IRS and the Tax Court have repeatedly concluded that § 7805(e) creates an exception from the APA’s requirements for temporary regulations, even though the APA’s legislative entrenchment rule seemingly prohibits this interpretation.
This Article analyzes whether legislative entrenchment rules may categorically control the interpretation of subsequently enacted tax statutes. The Article considers and rejects arguments made by the commentators who favor strict application of legislative entrenchment rules, and also considers some of the political motivations and costs/benefits of these rules.