Notice & Comment

A Tale of Two Tax Codes

Christopher Walker’s outstanding article on agency interpretive practice got me thinking about how the tax community interprets the tax code differently from courts.  I was specifically reminded about the gasps of horror and disgust that I received at a discussion forum during a recent ABA Tax Section Meeting.

I had initiated a discussion about the so-called “Blue Book,” a guide prepared by the Joint Committee on Taxation to explain recently enacted legislation.  I mentioned that the Supreme Court had, in a recent case, unanimously and flatly rejected the authoritative value of the Blue Book, saying that whatever weight pre-enactment legislative materials might enjoy in divining legislative intent, subsequently published committee reports could not inform what Congress thought when it passed legislation.

A participant asked, “If the Blue Book does not qualify as legislative history, what weight does it receive?”  I responded with the Supreme Court’s own statement — the Blue Book should receive the same weight as a law review article and could not serve as an authoritative expression of legislative intent.

Judging from the immediate and audible response among the participants, you would have thought that I had announced that the Earth was flat.  The discussants, among them several former and current government officials and legislative staffers, almost universally agreed that the Supreme Court was wrong, and that the Blue Book could continue to be used in taxpayer controversies with the IRS.  I tried to explain that if the Supreme Court says “up means down,” then, for purposes of statutory interpretation, up in fact means down.  But I did not press the point further, knowing that I could not win over this crowd.

This interaction, I think, highlights something that Chris’s article touches on but which might not be sufficiently appreciated by those operating outside the bowels of regulatory law:  Any given agency and its practitioners regularly adopt interpretive conventions different from those adopted by the courts, including the Supreme Court.  The basic nature of agencies lends itself to this exceptionalism, through the creation of offices filled with persons intended to be experts in an area and through the creation of a segment of the bar who claim expertise in that area.  It’s thus not surprising that, once tasked with understanding an area of law, agency officials or practitioners might view some Supreme Court opinions as pesky annoyances, issued by mere generalists who don’t really understand how things work.

This attitude is reflected in various Treasury regulations that openly acknowledge a departure from Court holdings, including several issued even before the Brand X case, which arguably permits this practice.  My interaction with the tax bar also leaves me little doubt that the Blue Book continues to receive authoritative weight in tax controversies — even an unequivocal Court rejection cannot actually stamp it out.  We thus have at least two tax codes — the one as applied by the IRS and another as applied by the courts.

This duality makes studying agency interpretive practice all that much more important, and I am delighted that Chris’s scholarly inquiry has opened discussion of the issues.  I do have some reservations about the potential inferences one might draw from the article, which I will detail in a later post, and which will further establish Chris’s success in advancing discussion about agency interpretive practice.

Andy S. Grewal

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