Friday, August 5, 2022
Weekly SSRN Tax Article Review And Roundup: Saito Reviews Kysar’s Interpreting By The Rules
This week, Blaine Saito (Northeastern; Google Scholar) reviews a new work by Rebecca Kysar (Fordham; Google Scholar), Interpreting by the Rules, 99 Tex. L. Rev. 1115 (2021).
Famed Senate Parliamentarian Floyd Riddick said that “[t]he rules of the Senate are perfect. And if they changed every one of them, the rules will be perfect.” The statement shows how rules define both the U.S. Senate and House of Representatives. Recently, scholars have turned their attention to the rules and process of the legislation as a form of pushback against strict textualist approaches to statutory interpretation. These process-based approaches are often invoked in interpreting tax and mandatory spending statutes. But as Rebecca Kysar shows in her piece, Interpreting by the Rules, such an approach requires context and caution. As Riddick’s quote notes, the rules are malleable, and furthermore, they are made to be broken.
Kysar first opens the piece talking about the process-based school of interpretation. This school says that statutory interpretation should hinge on legislative procedural rules. It assumes that Congress follows its rules. Furthermore, this methodology also says that scores produced by the Congressional Budget Office (CBO) and the Joint Committee on Taxation (JCT) should also be used to answer statutory interpretation questions, because of the salience they have to Members of Congress and their staff. Critics of process-based interpretation note that it does not respond effectively to the problem of the indeterminacy of legislative intent. Others argue that such process-based views privy the views of Congressional insiders rather than the ordinary public who reads the statutory text.
Kysar takes a different tact that takes the concept of process seriously, but also recognizes the wrinkles in it. To do this she makes a few observations of Congressional procedure. She notes that each chamber determines their rules and can change them. She also observes that most of the rules are not self-executing. For them to have bite, a member must raise a point of order. Frequently, the House and Senate will find ways to waive these procedural rules and protect legislation from points of order. But just because a point of order is not raised, or they are waived does not mean that Congress wants to have a provision interpreted in a way that is consistent with its procedural rules. It could just be that Congress has priorities that must pass in that bill, and that having such objections should slow down the process too much. In essence, procedural rules are flexible and often ignored or overridden.
Kysar then draws on rich examples of rules that are bent and broken. Of note to us in the tax community are matters involving budget reconciliation and the scores of the CBO and JCT. With respect to budget reconciliation, she notes that the procedure is designed to fast-track certain legislation. Reconciliation bills can circumvent the filibuster in the Senate. That said, there are limitations on what can go through reconciliation. The Byrd Rule is one powerful limit that can strip certain provisions out of a reconciliation bill. But courts should be wary of applying the Byrd Rule themselves when interpreting the statute. Traditionally, the Senate Parliamentarian rules on whether matters comply with the Byrd Rule. But their precedents are opaque. Rulings are often done behind closed doors with no public result or discussion. Various Parliamentarian rulings often appear to conflict directly with each other. Finally, like all other rules, the Byrd Rule is not self-executing. It requires a Senator to raise a point of order, which again may not happen for various other political reasons. It is thus difficult for the courts to apply the Byrd Rule to statutory interpretation questions.
Likewise, while Congressional staff and members take budget scores from CBO and JCT seriously, there are problems in using them to interpret statutes. Often, the line items in these scores just do not have enough granularity to answer questions of interpretation. If one knew the details of the models and assumptions used, then one could make determinations below the top line items in the score. But like the Parliamentarian, these models and assumptions are also shrouded in secrecy to protect the scorekeepers from political interference. In only rare occasions do such details arise that can help courts reach granular answers. Furthermore, shifts in other rules in Congress may even reduce the power these scores have. For example, if the legislative filibuster is repealed, budget reconciliation is no longer important, and thus these scores have less salience.
Some scholars argue then that the rules should be indirectly enforced regardless through statutory interpretation. But Kysar warns about a democratic problem here. While doing so may heighten the deliberative goods of democracy, at some point there must be responsiveness and action. Those needs of democracy then are undermined. Careless application too can lead toward heightening the role of unelected people like the Parliamentarians, CBO, and JCT, which also can create democratic problems.
Instead, Kysar argues that process should matter, but that one must understand the context in which one is applying it. Thus, for example, it makes sense to avoid parsing words too closely in a reconciliation law, because of the rushed process. But courts should avoid delving to the depths of Byrd Rule determinations. If a line item on a JCT or CBO score elucidates the statutory interpretation question in issue, it should be used. But if it requires deeper diving, then that may not work out.
Legislative history itself, like committee reports too may be more important in some areas than others. In our area of taxation, because so much of the procedure, like committee markups, do not actually involve the text, legislative history is more important. The work of JCT and legislative counsel too in the room drafting the text and the reports also serves as another reason to pay attention to the legislative history. Similarly, given that appropriations legislation often are just numbers of budget authority and outlays to certain accounts, the reports of the committees, which often include greater details, may deserve greater weight.
The upshot then of Kysar’s work for those of us in taxation is to take seriously the context in which tax legislation is enacted. That requires a nuanced understanding the Congressional procedural rules that are in place and how they may be bent, broken, and ignored. It means Treasury and the IRS should be aware of these procedures and contexts when developing guidance. It also means that when talking about tax statutes we should push back on an overly formalistic type of textualism, because even the committee markups do not dwell on the text. We have a duty when we litigate, on both sides, to show the courts how processes and context can shape the results, but to do so with some humility knowing when it may not answer the question.
Finally, Kysar’s work also, at least, makes me reflect a bit more on how tax legislation gets made and how democracy operates. While a more idealized tax law is something that I too would love, Kysar’s work points out that democracy requires politics. Politics in the end is messy and it requires tradeoffs. In that sense too, perhaps we should understand that messiness is always going to be present in legislating tax statues, and perhaps we should recognize that this may be democracy at work.
 Wash. Star (Dec. 25, 1974).
Here’s the rest of this week’s SSRN Tax Roundup:
- Elizabeth Morton (RMIT University) and Michael Curran (Victorian Bar), Understanding Non-Fungible Tokens and the Income Tax Consequences (Posted Aug. 3, 2022)
- Kahindi Charoh, Philanthropy or Legal Obligation: The Question of Taxing Kenya Members of Parliament (Posted Aug. 1, 2022)
- Michael S. Knoll (U Penn.) and Ruth Mason (UVA), Bibb Balancing, 91 Wash. L. Rev. ___ (2022) (Posted Aug. 1, 2022)
- Monica Gianni (Cal. State Northridge), Supervisory Approval of Penalties: the Opening of Graev’s Pandora’s Box,75 Tax Law. ___ (2022) (Posted Aug. 1, 2022).
- Tarun Jain (Supreme Court of India), Classification of Services: A Vexed Question in GST Laws, SCC Online Blog (Posted Aug. 1, 2022)
- Ofer Eldar (Duke Law) and Chelsea Garber (Duke Economics), Opportunity Zones: A Program in Search of a Purpose, 102 B.U.L.R. 1397 (2022) (Posted Aug. 1, 2022).
- Henry Ordower (St. Louis University), Block Rewards, Carried Interest, and Other Valuation Quandaries in Taxing Compensation, 175 Tax Notes Fed. 1551 (Jun. 6, 2022), 104 Tax Notes State 989 (Jun. 6, 2022) (Posted Jul. 31, 2022).
- Heydon Wardell-Burrus (Oxford), A Pillar One Design Proposal: Leveraging Pillar Two, (Posted Jul. 29, 2022).