Over at TaxProf blog, my colleague Ari Glogower reviews Clint Wallace‘s Centralized Review of Tax Regulations, which is forthcoming in the Alabama Law Review. Last year I read an earlier draft of Wallace’s fascinating paper, which has become all the more important in light of the memorandum of understanding the White House’s Office of Information and Regulatory Affairs (OIRA) and the Treasury Department entered into last month to require OIRA review of tax regulations.
Here’s a snippet from the review:
When and how should tax regulations be subject to centralized review by the White House Office of Management and Budget (OMB)? Clint Wallace’s new work considers these timely questions.
The work begins by describing the somewhat unique role of tax regulations among agency actions. Executive Order 12,866 generally requires that “significant” regulatory actions by agencies must be reviewed by the OMB’s Office of Information and Regulatory Affairs (OIRA). This process generally includes, among other considerations, a cost-benefit analysis by OIRA, interagency review, and in some cases analysis of a rule’s distributional effects.
Tax regulations, however, which are developed by the IRS Chief Counsel’s Office and the Treasury Office of Tax Policy, have generally not been subject to substantive OIRA review. Until recently, tax regulations have historically been characterized as “interpretative” rules that merely effectuate congressional policy, but do not independently have the force and effect of law, and are consequently not subject to EO 12866.
Importantly, the work also highlights the limitations of OIRA review of distributional effects, which is a central consideration in tax law and policy. The work suggests that “future refinements of methods for distributional analysis and procedures for considering distribution in the regulatory policy making process should be priorities.” Of course, assistance in this respect could also come from other policymakers, such as legislators, in the form of more explicit distributional commitments or targets against which the distributional effects of tax regulations could be measured.
Tax regulations are on a path to increased scrutiny and oversight in the years to come. This important work highlights why, if the tax regulatory process is evolving, the centralized review process must necessarily evolve as well in order to account for tax regulations’ complex and varied functions.
Go check out the full review here.