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Editor: Paul L. Caron, Dean
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Thursday, February 1, 2018

Grewal, Hickman, Morse & Osofsky: How The IRS Communicates

Yale Notice & CommentSusan Morse (Texas) & Leigh Osofsky (Miami), How Agencies Communicate: Introduction and an Example, Yale J. on Reg.: Notice & Comment (2018):

Would you like to hear from the government? Many people might say no. Or at least, not usually.

But, of course we hear from the government all the time. Many times, this contact comes from administrative agencies. Agencies shape, among many other things, the air we breathe, the taxes we pay, and the question of who may cross our borders. This online symposium, How Agencies Communicate, considers how agencies do and should try to explain what they mean, and how we do and should listen to them.

Agencies can choose from a broad menu of communication strategies. They can make final regulations by following the structured and lengthy notice-and-comment process under the Administrative Procedure Act. In addition, agencies often communicate entirely outside this statutorily prescribed rulemaking process. Agencies communicate with advisories, letters, announcements and press releases. They post on social media. They tweet.

Agencies’ communication involves choices about how and when to convey information. Even the structured promulgation of final regulations is not a cookie-cutter exercise. Agencies choose how to prioritize and draft regs, Preambles, and other guidance. Their toolbox includes not only the written word, but also visual and other communication approaches.

The entries in this symposium consider issues related to agency communication. They tackle the descriptive question of how agencies communicate. They evaluate the weight that communications carry, both as a matter of doctrine and as a matter of practical effect. They consider the question of what weight communications should carry. And they discuss normative principles that can identify better and worse ways for agencies to communicate.

We have recently written about the communication technique of examples, especially in regulations. Even though some courts decline to respect regulatory examples as independent sources of law, many practicing lawyers say that, when they see a new piece of guidance, they read the examples first to understand what the law means.

Just last month, in December 2017, millions of Americans got to experience the power of examples. Here is what happened. On December 20, 2017, Congress passed a big tax bill. One of many changes capped federal deductions for state and local taxes to $10,000, effective January 1, 2018. This raised a pressing issue. Usually, individuals can deduct an expense in the year they write and send a check. But what about a prepayment of taxes? If an individual paid 2018 taxes in the last few days of 2017, could the person deduct the prepayment on his or her 2017 return, thus avoiding the sting of the $10,000 cap? Existing law did not squarely address the issue. Meanwhile, taxpayers had only 12 calendar days to prepay. ...

In our recent article [Regulating by Example, 35 Yale J. on Reg. ___ (2018)], we examine the common phenomenon of regulating by example. Many agencies include examples in their communication of regulatory content. We argue that examples expand agencies’ abilities to effectively convey their view of the law through a concrete communication approach. But we also point out that regulated parties naturally extrapolate guiding principles from examples. We think that, as a default, regulatory examples should be treated as co-equal with other means of communicating law. We explain how meaning can be made from regulatory examples through a process that integrates case-law like reasoning and the rest of the regulatory and statutory scheme.

The use of examples is one of many facets of agency communication. This symposium provides a wonderful opportunity to consider broadly how agencies communicate and why those choices matter. We look forward to the thoughts and different perspectives of our co-contributors.

Andy Grewal (Iowa), Involuntary Rulemaking?, Yale J. on Reg.: Notice & Comment (2018):

As the various entries in this Symposium show, agencies enjoy considerable flexibility in determining whether, when, and how to publicly communicate their enforcement priorities and legal interpretations. But sometimes, through statutes like the Freedom of Information Act, an agency may be forced to reveal things that it would otherwise keep out of the public’s eye. For the IRS, this type of involuntary disclosure poses a particularly significant challenge.

Though FOIA generally applies to all agencies, Congress has imposed special, additional disclosure obligations on the IRS. Section 6110(a) of the tax code requires that the IRS make publicly available any of its written determinations and any related background files. Though the IRS has resisted a broad reading of this provision, litigants have compelled disclosure of many IRS documents under Section 6110. See, e.g., Tax Analysts v. IRS, 117 F.3d 607 (D.C. Cir. 1997).

In 1998, Congress further bolstered Section 6110 by bringing “Chief Counsel Advice” documents within the disclosure regime. CCAs generally include written advice provided from the IRS headquarters (that is, the National Office in Washington) to different IRS field offices or service centers. The conference report associated with the 1998 legislation explained that these disclosures would ensure public “access to the ‘considered view of the Chief Counsel’s national office on significant tax issues.’” U.S. Tax Rep. P 61,101.98 (quoting Tax Analysts, 117 F.3d at 617). ...

Because CCA disclosures are still relatively new, it is difficult to fully assess effects on tax administration. However, as practices develop, scholars should keep an eye on how forced disclosure could short-circuit the traditional notice & comment rulemaking process. The public may deem the IRS to have opined on issues before it has intended to, and the agency may have to devote rulemaking resources towards issues tentatively discussed in CCAs, when it might otherwise have chosen to pursue other projects.

Kristin E. Hickman (Minnesota), Interim-Final or Temporary Regulations: Playing Fast and Loose with the Rules (Sometimes), Yale J. on Reg.: Notice & Comment (2018):

In administrative law doctrine, much significance is placed not only on what agencies say but on the format they use to say it. Interpretations of statutes expressed in legislative rules carry the force of law—i.e., are legally binding on private parties—so must comply with Administrative Procedure Act (APA) notice and comment requirements and usually are eligible for judicial review on a pre-enforcement basis, albeit under the deferential Chevron standard of review. Interpretations of statutes expressed in less formal documents that qualify as interpretative rules or policy statements generally lack the force of law, do not require APA notice and comment procedures, and receive the less deferential Skidmore review by judges.

Interim-final or temporary regulations fall in the middle, in that they carry legal force, are subject to pre-enforcement judicial review, and are eligible for Chevron deference, but forego pre-promulgation notice and comment procedures. Sometimes Congress expressly authorizes interim-final or temporary regulations. More typically, agencies rely on the APA’s good cause exception in foregoing pre-promulgation notice and comment. Consistent with a recommendation of the Administrative Conference of the United States, agencies that claim good cause and adopt interim-final or temporary regulations often invite the interested public to submit comments after promulgation, and may publish responses to those comments or even modify the regulations in question. ...

It is simply implausible that such widespread use of interim-final or temporary regulations is either necessary or consistent with the APA. Agencies undoubtedly are sincere in believing that their substantive goals are so important and the need for binding regulations is so great as to justify foregoing or at least putting off public participation. But using interim-final or temporary regulations so frequently to communicate agency legal interpretations and impose regulatory requirements is not only legally questionable, it is short sighted. A sizeable plurality of the American public retains some residual discomfort with the prespect of unelected agency officials adopting regulations governing primary behavior without relative transparency and accountability of the legislative process. The opportunity for public participation in the rulemaking process mitigates that concern. Moreover, requiring agencies to consider feedback from interested parties improves the quality of regulations. Meanwhile, post-promulgation notice and comment are an inadequate substitute for pre-promulgation procedures that themselves are already a second-best proxy for the legislative process. Social science research and common sense suggest that, once an agency has begun administering a particular regulation, the agency’s interest in stability and continuity will discourage it from making changes in response to comments received. Perceptions that commenting will be futile discourage participation.

Some legal scholars lament that agencies are under attack from those with an antiregulatory agenda. Certainly, the IRS feels more than a little beleaguered. With their excessive use of interim-final or temporary regulations, however, agencies are handing ammunition to their critics.

Susan Morse (Texas) & Leigh Osofsky (Miami), How Agencies Communicate: Wrapping-Up:

The Administrative Procedure Act and the question of judicial deference to agency action may be at the center of the typical Ad Law course syllabus. But they are far from the main topics in the story of How Agencies Communicate uncovered in this symposium. Rather than studiously following the notice and comment process to produce final regulations eligible for Chevron deference, the agency communications explored this week operate at the margins of or outside of the APA and judicial deference. ...

This symposium turns our attention to an important subject in administrative law: communications not clearly addressed by the APA and often not policed by judicial review. These communications raise a deep tension and tradeoff between having an effective government and having a government whose power can be monitored and limited. To what extent do agency practices and regulated party choices lie below the surface and protections contemplated by formal law?

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Comments

I have always thought Rev Ruls were just one person's opinion.

Posted by: Dale Spradling | Feb 1, 2018 8:33:10 AM