Stephanie McMahon, “Tax as Part of a Broken Budget: Good Taxes are Good Cause Enough”

By: Leandra Lederman

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Left to right: David Gamage, Leandra Lederman, Stephanie McMahon, Matt Metz (JD/MPA student)

On February 28, Prof. Stephanie McMahon from the University of Cincinnati College of Law gave a faculty workshop at the Indiana University Maurer School of Law. She presented her paper titled “Tax as Part of a Broken Budget: Good Taxes are Good Cause Enough.” The thesis of the paper is that Treasury regulations are needed to effectuate the statutory tax laws consistent with Congress’s budgeting expectations, and that given the importance of the revenue raised by taxes to the functioning of the U.S. federal government, tax regulations should be excused from the Administrative Procedure Act’s pre-promulgation notice-and-comment process under the APA’s “good cause” exception. The paper thus tackles two arguments that Prof. Kristin Hickman has advanced in her work: post-promulgation notice and comment is insufficient for tax regulations, and there is no reason for “tax exceptionalism” in administrative procedures. Stephanie’s paper also contains a detailed explanation of the tax legislative process.

Given the importance of tax rulemaking and the difficulties the IRS has suffered with its well-known budget cuts, it is very nice to see a paper defending Treasury’s rulemaking strategy. Moreover, Stephanie’s argument is creative and thoughtful. However, the argument seems to depend on regulations being a critical part of the revenue-raising process, as the need for revenue is what Stephanie relies on to justify application of the good-cause exception. But are regulations needed for that? In explaining the budget process, Stephanie’s paper points out that regulations are not scored as part of that process. I think she agrees that tax statutes can raise revenue even in the absence of regulations. Instead, she argues that regulations help effectuate, albeit imperfectly, Congress’s scoring of the tax legislation. But some Internal Revenue Code sections do not expressly call for regulations. Others do, but some of the latter never actually see regulations promulgated. Yet, the tax laws are applied despite these “spurned delegations.” And given President Trump’s anti-regulation Presidential Executive Order on Reducing Regulation and Controlling Regulatory Costs, we may see more tax statutes operating without regulations. Continue reading “Stephanie McMahon, “Tax as Part of a Broken Budget: Good Taxes are Good Cause Enough””

Update on the Future of Treasury Regulations

cfrBy Sam Brunson

I previously wrote about the fact that Treasury and the IRS were going to essentially stop issuing guidance in light of the Trump administration’s one-in-two-out rule for regulations.[fn1]

There seems to be some movement on this front. Yesterday, Commissioner Koskinen announced that the IRS was set to begin issuing “subregulatory” guidance again. He didn’t define what he meant by subregulatory, but it probably includes revenue procedures, notices, and revenue rulings, at least. (Interestingly enough, the Tax Notes reporting doesn’t mention revenue rulings,[fn2] while the BNA reporting does. I don’t know if that difference is accidental, or if the two organizations are interpreting differently what Commissioner Koskinen means by subregulatory.) Continue reading “Update on the Future of Treasury Regulations”

Past Moratoria on Tax Guidance and Regulations(?)

By: Sam Brunson

cch_standard_federal_tax_printOn my previous post talking about the the IRS’s announcement that it was putting a moratorium on issuing new regulations and formal guidance, a commenter asked if it was such an odd thing for a new Administration to temporarily pause guidance. After all, who wants to issue guidance before the new Administration’s people are in place and agenda is set, lest the new Administration change its priorities and positions in the coming months?

I didn’t remember any such (formal, at least) pause in 2009, but, when I got home, I decided to look back a few years. I looked at new regulations and revenue rulings in the first month of the Obama, George W. Bush, Clinton, and Reagan presidencies (I didn’t bother with George H.W. Bush, because that was a Republican to Republican switch). Also, because we don’t know how long the current limitations on regulations and other guidance will last, I also expanded my search of revenue rulings for the first three months of the new administrations.[fn1] Continue reading “Past Moratoria on Tax Guidance and Regulations(?)”

The (Near) Future of Treasury Regulations

cfrToday’s Tax Notes reports[fn1] that the IRS has announced that it will not release pretty much any new formal guidance (including revenue rulings and revenue procedures) for the foreseeable future.[fn2]

Why not? A confluence of an Executive Order and a January 20 memorandum. The EO, “Reducing Regulation and Controlling Regulatory Cost,” requires that, for every new regulation issued, two existing regulations be eliminated.

The January 20 memorandum further prohibits agencies from sending regulations to the Federal Register until they’ve been reviewed by an agency or department head appointed by Trump. Continue reading “The (Near) Future of Treasury Regulations”