Noah Hertz Marks (UNC) presented “Lingering Proposed Regulations” at Duke yesterday as part of its Tax Policy Seminar hosted by Larry Zelenak:
The Administrative Procedure Act (APA) specifies a three-step process for promulgating enforceable regulations: agencies publish a notice of their proposed regulation (NPRMs) in the Federal Register, receive comments from the public, and then consider those comments in revising and ultimately publishing final regulations. The conventional wisdom within administrative law is that agencies inevitably finalize (or, occasionally, withdraw) their proposed regulations. But in tax, the Treasury Department and the Internal Revenue Service routinely publish NPRMs and then do nothing. The NPRMs linger for years and even decades, with some wielding significant influence over taxpayer behavior. Significantly, letting NPRMs linger fully complies with the APA, which sets no time limits on rulemaking proceedings.
This Article examines the discrepancy between administrative law’s structural assumptions and how Treasury and the IRS regulate in practice.
Assembling and analyzing a unique dataset of every tax NPRM from 1946 through 2025 (3,496 in total) and their dispositions, if any, reveals that approximately 9% (304) remained proposed (in whole or in part) for at least five years, and 158 of those (more than ever before) remain proposed to this day. Such prevalence indicates strategic, intentional agency behavior. Supporting that conclusion, comprehensively reviewing the legal status of NPRMs reveals that they invite reliance in numerous ways, including by including retroactive effective dates, constraining IRS enforcement, increasingly commanding judicial attention, and protecting taxpayers from penalties. Completing the picture, Treasury and the IRS have historically been less incentivized to finalize NPRMs than appreciated and the Supreme Court’s recent administrative law jurisprudence has weakened it even further.
The broad universe of existing lingering tax NPRMs as well as the prospect of more to come raises significant normative concerns. NPRMs add meaningful uncertainty to tax law and their obscurity means that only well-resourced taxpayers and their advisors can access them. Current law is also ill equipped to address these concerns because tax NPRMs are virtually unreviewable. Accordingly, this article proposes three interventions: providing comprehensive public access, reopening comment periods after five years, and automatically sunsetting tax NPRMs after ten years. Together, these would meaningfully improve tax administration by reducing tax uncertainty and making tax guidance and its formulation more transparent, accessible, and accountable.
