Maybe the IRS Is Complying with the Congressional Review Act After All, by Daniel Hemel

by Daniel Hemel — Thursday, June 30, 2016

My co-blogger Andy Grewal asked in a post on Tuesday: “Why doesn’t the IRS comply with the Congressional Review Act?” My first thought on reading Andy’s post was: “Yeah, why doesn’t it?” My second thought was: “Maybe it does.”

The Congressional Review Act, passed in 1996, allows the House and Senate to block certain federal regulations from taking effect. The Act provides that:


(i) a copy of the rule;


(iii) the proposed effective date of the rule.

5 U.S.C. § 801(a)(1)(A). The Act further provides that a “major rule” shall take effect no earlier than 60 days after the date on which Congress receives the agency’s report. If the House and Senate pass a joint resolution disapproving the rule, and if the resolution is signed by the President (or if the House and Senate override the President’s veto), then rule is null and void.

The Act defines “major rule” as follows:

The term “major rule” means any rule that the Administrator of the Office of Information and Regulatory Affairs of the Office of Management and Budget finds has resulted in or is likely to result in—

(A) an annual effect on the economy of $100,000,000 or more;

(B) a major increase in costs or prices for consumers, individual industries, Federal, State, or local government agencies, or geographic regions; or


5 U.S.C. § 804(2).

The IRS is in the habit of deeming its rules “non-major,” ostensibly on the ground that “the effect of most IRS rules is due to the underlying statute, rather than to the regulation.” As Andy argues (and I agree), this is a dubious claim. Andy points to the example of the IRS rule on inversions and related transactions promulgated in April. The IRS deemed the rule “non-major” for purposes of the CRA even though, as Andy notes, the economic effect of the rule almost certainly exceeds the $100 million threshold.

But might the IRS be right that its regulations—even regulations such as the April 2016 inversions rule that aren’t “simply implementing a statute”—don’t qualify as “major rules” under the CRA? Look again at § 804(2). A rule is a “major rule” only if the OIRA Administrator “finds” that the rule will have an annual impact of at least $100 million (or will cause a major increase in prices or other significant adverse economic effects). Whether or not the inversions rule will have an impact on the economy greater than $100 million a year, the IRS is indisputably correct that the OIRA Administrator has made no finding to that effect. Put differently, the inversions rule is only “major” if the OIRA Administrator says so, and the OIRA Administrator hasn’t said so.

OK, then maybe it’s OIRA rather than the IRS that is violating the CRA. After all, the CRA tells OIRA to find that a rule is “major” if it is likely to result in an effect on the economy of at least $100 million a year, right? And OIRA has made no such finding with respect to the inversions rule or many other IRS rules that will indeed have an impact of that magnitude.

But does the CRA actually say that OIRA must find a rule to be “major” if the rule is likely to result in an annual effect on the economy of $100 million or more? Actually, no. The statute only specifies the consequences of such a finding.

This is a familiar problem in administrative law. A statute says: “If Official A makes a finding of X, then consequence Y follows.” And the question arises, “If X is true, does Official A need to make a finding to that effect?” Readers may remember an issue of this sort popping up in Massachusetts v. EPA .

I doubt that this familiar question will admit of a one-size-fits-all answer. And whatever the answer in the CRA context, I doubt it will come from a court. The CRA states that “[n]o determination, finding, action, or omission under this chapter shall be subject to judicial review.” 5 U.S.C. § 805. So if OIRA has omitted to make a finding that a rule is major, there is no recourse in litigation.

One might ask: If nothing in the CRA requires OIRA to make a finding as to whether a rule is “major,” then doesn’t that mean that the CRA is a nullity in practice? But we knew that already : Congress has blocked only one agency regulation using the CRA procedure since the Act’s passage 20 years ago. Perhaps some readers will conclude that we ought to have a more robust mechanism for congressional review of agency action (and there are perennial proposals to that end). But even so, that’s no reason to blame the IRS for following the letter of the law.


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