One would be hard-pressed to find a tax lawyer without knowledge of 1984’s Chevron case, which established a deferential standard for judicial review of agency rulemaking—as long as the rule is a reasonable interpretation of an ambiguous statute, courts should defer to the judgment of the agency. Most tax lawyers presumably also are familiar with 2011’s Mayo decision, which affirmed that tax regulations were subject to the same Chevron standard as regulations in other areas of law. Until Mayo, tax was assumed to be exceptional in this realm, with certain regulations entitled to less deference than Chevron would have provided.
The Mayo decision was praised by many commentators for breaking up a façade of tax exceptionalism, though the Chevron standard remains controversial (to put it lightly). Simplified, opponents of the Chevron standard argue that it cedes too much authority to agencies from courts and legislatures, while proponents of the standard counter that the standard respects appropriate delegations of policy decisions to the experts that reside in agencies. As Jon Choi observes in his forthcoming article, an important question gets lost in these theoretical arguments about the proper scope of the power of the various branches of government: how does the Chevron standard actually affect agency rulemaking?
In setting out to answer this question, Choi praises the Mayo decision for an innovative reason: the decision created the conditions for a natural experiment to study the effects of Chevron on agency rulemaking. More specifically, the sudden shift in understanding regarding tax regulations brought about by Mayo created a control group of those regulations already subject to the Chevron standard (i.e., all non-tax regulations) and a treatment group of the tax regulations whose circumstances had changed.
Using natural language processing and taking his customary detailed and meticulous approach, Choi analyzes almost 70,000 regulations. His results are powerful; the Chevron standard led to a significant shift in focus for tax regulations from statutory interpretation to policy-based decision making. He also finds that the Chevron standard increased the length of regulatory preambles and references in those preambles to public comments, proxies Choi uses for the strenuousness of an agency’s rulemaking procedures.
In short, Choi offers strong evidence that the Chevron standard has real impacts on agency rulemaking; when agencies are subject to the standard, they focus more on normative policy matters and less on statutory interpretation and they bulk up their rulemaking procedures. Choi takes this data and presents a new theoretical model positing that agencies view greater procedural efforts as the “price” of Chevron deference. Because a rule is unlikely to be struck down on substantive grounds, agencies derive utility from enhanced procedural efforts to ensure that their rules are not struck down as being arbitrary and capricious.
Staking no claim on the normative desirability of the Chevron standard, Choi provides those engaged in the debate with fodder. His evidence counters claims that the Chevron standard does not matter on the ground, as he shows that the standard causes agencies assume policymaking powers, albeit with enhanced procedural protections. Choi notes that this evidence does little to move the needle on the debate over the appropriate amount of judicial deference to agency decision making, though he does believe that the evidence on procedural protections indicates that those who want more scrutiny of agency actions should seek “reform, rather than elimination,” of the Chevron standard.
For the critical reader, Choi leaves few soft spots in his research unexposed. He is careful to observe the limitations of his data and of the natural language processing approach and he does an excellent job of explaining the consequences of those limitations for his findings. That makes this part of the review pleasantly difficult. But I am curious as to how much his pricing model will be reflected on the ground when tested. I don’t have much reason to doubt the model, but anecdotal conversations I’ve had with agency officials indicate an overwhelming concern for making sure they do everything right the first time through because their party might get elected out before they can make revisions if their rulemaking efforts fail. Thus, agencies adopt and stick to rigorous rulemaking procedures. My gut says this observation is perfectly in line with Choi’s model; I just wonder how much Chevron’s substance deference regime weighs on those officials’ minds.
In any event, Choi has made impressive contributions to tax and administrative law scholarship, and How Does Chevron Shape Agency Rulemaking? An Empirical Study is no outlier. His insights should prove impactful and this article does a fantastic job of using tax exceptionalism to continue weaving tax into the larger body of administrative law scholarship.