Interim-Final or Temporary Regulations: Playing Fast and Loose with the Rules (Sometimes), by Kristin E. Hickman
In administrative law doctrine, much significance is placed not only on what agencies say but on the format they use to say it. Interpretations of statutes expressed in legislative rules carry the force of law—i.e., are legally binding on private parties—so must comply with Administrative Procedure Act (APA) notice and comment requirements and usually are eligible for judicial review on a pre-enforcement basis, albeit under the deferential Chevron standard of review. Interpretations of statutes expressed in less formal documents that qualify as interpretative rules or policy statements generally lack the force of law, do not require APA notice and comment procedures, and receive the less deferential Skidmore review by judges.
Interim-final or temporary regulations fall in the middle, in that they carry legal force, are subject to pre-enforcement judicial review, and are eligible for Chevron deference, but forego pre-promulgation notice and comment procedures. Sometimes Congress expressly authorizes interim-final or temporary regulations. More typically, agencies rely on the APA’s good cause exception in foregoing pre-promulgation notice and comment. Consistent with a recommendation of the Administrative Conference of the United States, agencies that claim good cause and adopt interim-final or temporary regulations often invite the interested public to submit comments after promulgation, and may publish responses to those comments or even modify the regulations in question.
Procedure conveys legitimacy in the eyes of those subject to regulatory commands. So, perhaps recognizing that the middle ground occupied by interim-final or temporary regulations is a bit fraught in that regard, courts construe the good cause exception narrowly to prevent agencies from avoiding notice and comment procedures on a whim. Regulations that respond directly and demonstrably to imminent life-or-death circumstances pass muster. Regulations that generically assert a need for immediate guidance do not. At the same time, jurisprudence interpreting the good cause exception is murky. An agency may claim good cause in good faith, only to have a reviewing court later conclude otherwise. Courts recognize that some agency procedural errors may be unintentional. The APA counsels courts to take “due account . . . of the rule of prejudicial error”—i.e., the harmless error rule—when evaluating agency violations of APA requirements. Courts in some cases have been willing to declare a mistaken good cause claim harmless. Yet again, courts are wary of applying the harmless error rule too liberally.
Judicial caution notwithstanding, agencies invoke the good cause exception and forego pre-promulgation notice and comment a lot. In December 2012, the Government Accountability Office published a study documenting that federal agencies failed to publish a notice of proposed rulemaking and offer the public the opportunity to comment before issuing fully 35% of the 568 major rules and 44% of the 30,000 nonmajor rules adopted from 2003 through 2010. For about two-thirds of those rules, agencies claimed good cause for foregoing pre-promulgation notice and comment. My own study several years ago of 232 Treasury regulations adopted from 2003 through 2005 interpreting the tax laws is consistent, showing that 40.9% of those regulations did not offer pre-promulgation notice and comment. Unlike most agencies, however, the IRS does not rely on the good cause exception to justify its avoidance of pre-promulgation notice and comment. Instead, at least until recently, the IRS claimed that most Treasury regulations were interpretative rules irrespective of their binding effect—a position rejected by the United States Tax Court in the Altera case in 2015 and again in the SIH Partners decision in January. The IRS has also pushed a strained reading of Internal Revenue Code § 7805(e) as independent authorization for temporary regulations with only post-promulgation notice and comment, but courts have rejected that argument as well. Regardless, that provision requires the IRS to pursue post-promulgation notice and comment for its temporary regulations, and the IRS typically does so.
It is simply implausible that such widespread use of interim-final or temporary regulations is either necessary or consistent with the APA. Agencies undoubtedly are sincere in believing that their substantive goals are so important and the need for binding regulations is so great as to justify foregoing or at least putting off public participation. But using interim-final or temporary regulations so frequently to communicate agency legal interpretations and impose regulatory requirements is not only legally questionable, it is short sighted. A sizeable plurality of the American public retains some residual discomfort with the prespect of unelected agency officials adopting regulations governing primary behavior without relative transparency and accountability of the legislative process. The opportunity for public participation in the rulemaking process mitigates that concern. Moreover, requiring agencies to consider feedback from interested parties improves the quality of regulations. Meanwhile, post-promulgation notice and comment are an inadequate substitute for pre-promulgation procedures that themselves are already a second-best proxy for the legislative process. Social science research and common sense suggest that, once an agency has begun administering a particular regulation, the agency’s interest in stability and continuity will discourage it from making changes in response to comments received. Perceptions that commenting will be futile discourage participation.
Some legal scholars lament that agencies are under attack from those with an antiregulatory agenda. Certainly, the IRS feels more than a little beleaguered. With their excessive use of interim-final or temporary regulations, however, agencies are handing ammunition to their critics.
Kristin E. Hickman is a Distinguished McKnight University Professor and the Harlan Albert Rogers Professor in Law at the University of Minnesota Law School. This essay draws substantially from her article with Mark Thomson, Open Minds and Harmless Errors: Judicial Review of Postpromulgation Notice and Comment, 101 Cornell L. Rev. 261 (2016).
This post is part of a symposium entitled How Agencies Communicate. You can read all the posts here.