TaxProf Blog

Editor: Paul L. Caron, Dean
Pepperdine University School of Law

Wednesday, January 10, 2018

IRS Dodges Oversight, Refuses To Measure Economic Impact Of Its Rules

CACause of Action Institute, IRS Dodges Oversight, Refuses to Measure Economic Impact of its Rules:

Cause of Action Institute (“CoA Institute”) today released a groundbreaking investigative report, Evading Oversight: The Origins and Implications of the IRS Claim that its Rules Do Not Have an Economic Impact, that reveals how the IRS has developed a series of self-bestowed exemptions allowing the agency to evade several legally required oversight mechanisms. The report outlines in detail how the IRS created this exemption to exempt itself from three critical reviews intended to provide our elected branches and the public an opportunity to assess the economic impact of rules before they are finalized.

Read about the report in today’s Wall Street Journal [The IRS Evades Accountability—And Its Excuse Is Ridiculous], including suggestions for how the White House and Congress can work together to end this harmful practice.

CoA Institute Counsel and Senior Policy Advisor James Valvo: “The IRS for too long has evaded its responsibilities to conduct and publish analysis of its rules. Rules issued by the IRS can change the economic landscape for Americans in many ways, including how the agency calculates deductions, exemptions, reporting, and recordkeeping. By creating bureaucratic loopholes, the IRS deliberately sidesteps several oversight mechanisms designed to provide a check on overly burdensome rules. The IRS should be held to the same standard as other regulatory agencies and stop avoiding its responsibilities.”

For years, the IRS has evaded several laws directing agencies to create economic impact statements for rules. These analyses are part of three oversight mechanisms: The Regulatory Flexibility Act, the Congressional Review Act, and review by the White House Office of Information and Regulatory Affairs.  All three are good-government measures designed to provide a check on abuse by the administrative state.

CoA Institute’s investigative report reveals the origins and implications of the unprecedented IRS position that its rules have no economic impact and do not require such analysis because, it claims, any impact emerges from the underlying law that authorized the rule, and not the agency’s decision to issue or alter it.

(Hat Tip: Kristin Hickman.)

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What a waste of time and money....of course the rules have an economic impact but do we have make a bunch of assumptions and spend millions to come up with a lousy estimate ....These oversight acts are a waste of the people's money....I thought the cause of action institute was supposed to fight waste rather than create it.

Posted by: Sid | Jan 10, 2018 3:37:00 PM

"but do we have make a bunch of assumptions and spend millions to come up with a lousy estimate"

The law says you do. Is the IRS above the law?

Posted by: Brett Bellmore | Jan 11, 2018 8:45:21 AM

There is something to the argument.

The courts interpret laws and regs, but we never think of what they do as having a financial impact on their own. This is because they are merely interpreting the words laid out by the legislative branch, and we assign blame for financial impact of laws on the drafters of those laws. If a court decides that a law differs from how we have interpreted it in the past, we generally assign responsibility for a change in the economic drag of that changed law back to the drafters.

But such a view - were we to apply it as the IRS claims is proper - would necessarily exempt any administrative rule-making from responsibility for the costs of its rules on the grounds that the rules are merely the practical expression of Congress' laws.

So if the IRS gets away with this, so should every administrative agency.

Posted by: bobby b | Jan 11, 2018 8:48:34 AM

Lois Lerner, is that you hiding behind the online moniker "Sid"?

Posted by: CapitalistRoader | Jan 11, 2018 9:06:48 AM

The response to this evasion should be simple. Allow no rule to go forward that does not submit to a cost evaluation process. I know they have to guesstimate to arrive at their economic impact conclusions--but why create a rule at all UNLESS you expect it to have a meaningful impact?

Posted by: Gregg G. Brown | Jan 11, 2018 9:51:43 AM

Quote: What a waste of time and money....of course the rules have an economic impact but do we have make a bunch of assumptions and spend millions to come up with a lousy estimate"

Actually, even a lousy estimate may show that the costs of rules far outweighs the benefits.

Posted by: Michael W. Perry | Jan 11, 2018 10:21:59 AM