Notice & Comment

Severability of Agency Regulations

When Congress passes an Act, and a court finds a portion of it unconstitutional, questions of “severability” arise. That is, the court will consider whether it should strike the entire law, under the theory that without the constitutionally offensive portion, Congress would not never have passed the Act.

I’ve been wondering whether this type of analysis should ever apply to agency rulemaking. When a taxpayer challenges the validity of a tax regulation, the court will generally strike down only the particular language that applies to the the taxpayer. If, for example, subsection (d) of a regulation section exceeds statutory authority, the court will strike that subsection but will not disturb other subsections, nor will it disturb other regulation sections that were a part of the same regulation project.

Is this the correct approach? I’m not sure. In the statutory context, courts acknowledge that they might actually defeat the intent of Congress if they let a pared down act operate. And it would seem like the same danger could apply in the agency context — a watered down regulation project could create loopholes for taxpayers to exploit.

Nonetheless, an agency may have an easier fix than does Congress. An agency can unilaterally withdraw the finalized regulations whereas Congressional repeal of a statute requires Presidential assent. Thus, it seems relatively easy for an agency to cure dangers associated with a watered-down regulation.

Also, the judicial inquiry into regulations does not simply involve looking into an agency’s intent and fulfilling that intent. Rather, the APA and other sources of law provide various guidelines. Thus, in terms of assessing validity, the framework for regulatory interpretation differs substantially from the framework for statutory interpretation.

I nonetheless suspect that an interesting issue may eventually arise regarding whether the invalidity of one section of a regulation should cause the other sections to fall.

Andy Grewal

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