Point | Counterpoint, 43 ABA Tax Times 20-34 (Winter-Spring 2024):
David A. Weisbach (Chicago; Google Scholar), Point: Does More Procedure Produce Better Guidance?, 43 ABA Tax Times 20 (Winter-Spring 2024):
In a series of articles, Kristin Hickman has advanced the thesis that the Treasury consistently violates the requirements of administrative law as laid out by the Administrative Procedure Act (APA) and interpreted by courts. She argues that the Treasury is not, and should not be, exempt from those rules and, therefore, needs to come into compliance. Other commentators have taken up these views as well (known together under the rubric “anti-tax exceptionalism”), and a number of courts have followed their lead. The stakes are high because, under some versions of anti-tax exceptionalism, many guidance documents may be invalid.
Others, including me [Against Anti-Tax Exceptionalism, 77 Tax L. Rev. __ (2023)], have disputed the merits of these claims. On the positive front, I argued that the Treasury substantially complies with the requirements of administrative law. On the normative front, I argued that administrative law is flexible and should be applied to the particular circumstances of each agency.
The details of these debates are available in the relevant articles. Many of the doctrinal issues are before the courts, or soon will be, and we will likely see resolution of some of the issues. …
In sum, I do not see the case for channeling more tax guidance through the notice and comment process. It will not lead to improved information flows, at least compared to other methods, and it will not lead to increased democratic accountability. Increased scrutiny of preambles is not only not a promising direction for improving the tax administrative process, it is in fact positively dangerous to the effectiveness of that process. Tax administration needs improvement. The additional funds provided to the IRS in recent years, if well spent, is likely to help. I do not think, however, that more attention to the niceties of the Administrative Procedure Act is a good method for pursuing those improvements.
Kristin Hickman (Minnesota; Google Scholar), Counterpoint: Tax Exceptionalism from Notice-and-Comment Rulemaking Procedures Is Bad Policy and Bad Law, 43 ABA Tax Times 25 (Winter-Spring 2024):
It has been said that democracy is the worst form of government except for all the others. Much the same can be said for notice-and-comment rulemaking and judicial review thereof as an approach to administrative governance. Critics argue that the procedures and deliberative process imposed upon agency rulemaking by the Administrative Procedure Act (APA), Office of Information and Regulatory Affairs (OIRA) review, and the courts are excessive. All that procedure and process takes time, consumes scarce agency resources, and delays agency regulations that we anticipate will accomplish good things. Further, judicial review to enforce agency compliance gives judges the opportunity to impose their own policy preferences. Yet, as political scientist Rachel Potter has observed, “the United States’ notice-and-comment rulemaking process has repeatedly been held up as a model for bureaucratic decision making across the world,” including by the OECD and the World Bank, precisely because its many requirements facilitate oversight and constrain the otherwise broad discretion enjoyed by agency officials.
Echoing administrative law’s critics, David Weisbach maintains that notice-and-comment rulemaking procedures generally add little value in the tax context. He points to the many Treasury regulations that receive few or no public comments. He observes that Treasury and the IRS have other, better ways of getting the information they need. He doubts that judicial scrutiny of regulatory preambles results in better regulations. Accordingly, he argues that courts should back off and interpret administrative law requirements to allow Treasury and the IRS to be more relaxed than other agencies about how they follow those procedures.
Notwithstanding his framing, in the end, David’s argument is not about tax exceptionalism at all. He has made no real effort to actually distinguish tax administration from other areas of administrative governance, and his complaints are not unique to tax. Normatively, much of my reply can be summarized in two brief statements. First, we impose procedural and process burdens on agencies not for the easy cases but for the hard ones. Second, sometimes (perhaps often) Treasury and the IRS (like most agencies) just don’t know what they don’t know. Turning to doctrinal arguments raised in David’s recent article on the same topic, it is true that administrative law relies more on standards than on bright-line rules, thus affording judges a certain latitude in individual cases. The flexibility those standards offer is not so great as David suggests, however, particularly against a backdrop of longstanding Supreme Court policy favoring administrative law uniformity. Unless and until Congress and the courts move the law in a direction more to David’s liking, we instead should encourage Treasury and the IRS to follow the law that governs them—not half-way or in loosey-goosey fashion but fully, in both letter and spirit, just as they expect taxpayers to follow the tax laws. …
Administrative law is a dynamic field with many open questions and near-constant, high-stakes litigation. Whereas the federal tax laws are very rule-oriented, the APA and administrative law jurisprudence more often use broad and messy standards and principles like “the force of law” or “arbitrary and capricious” that are not easily reducible to clear instructions for either courts or agency regulation drafters. Within established parameters, reasonable minds can and do differ over the meaning, scope, and applicability of statutory and doctrinal administrative law requirements as well as whether those requirements are the best way to achieve congressional and public policy goals. Meanwhile, we all aim to achieve a system of tax administration that is effective, efficient, and fair. I firmly believe that tax administration will be improved by learning from other agencies and embracing general administrative law requirements, doctrines, and norms, particularly as Congress continues to turn to Treasury and the IRS to implement and administer social welfare and regulatory programs with only a tangential relationship to revenue raising. Nevertheless, I welcome ongoing discussion and debate over these issues.
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