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Abstract:
The Treasury Department and the Internal Revenue Service have a strange relationship with Administrative Procedure Act notice-and-comment rulemaking procedures. Treasury acknowledges the general applicability of APA procedural requirements when it promulgates regulations interpreting the Internal Revenue Code. Treasury also maintains that most Treasury regulations are exempt from the APA's public notice and comment requirements. Nevertheless, Treasury purports to utilize those same procedures anyway in promulgating most Treasury regulations.

This Article documents a study of 232 separate Treasury regulation projects for which Treasury published Treasury Decisions and notices of proposed rulemaking in the Federal Register between January 1, 2003, and December 31, 2005. In connection with this study, this Article compares Treasury's actual practices and exemption claims with current doctrinal trends in courts evaluating compliance with APA requirements across administrative agencies.

The Article documents the study's finding that, in 40.9% of the projects studied, Treasury failed to follow APA notice and comment requirements. The Article also concludes that, as interpreted by the courts, established exceptions from those requirements generally do not apply to excuse this noncompliance. Consequently, among other implications, many Treasury regulations, including some of Treasury's most complex and controversial rulemaking efforts, are susceptible to legal challenge for failure to adhere to APA rulemaking requirements.

rulemaking, regulations, Administrative Procedure Act, APA, Treasury regulations, empirical, interpretative rules, good cause exception, Treasury, Internal Revenue Service

Abstract:
This Article offers a comprehensive examination of the Skidmore standard for judicial review of agency legal interpretations as applied by the courts in the period since the Supreme Court revitalized Skidmore in United States v. Mead Corp. First, the Article documents an empirical study of five years worth of Skidmore applications in the federal courts of appeals. In the study, we evaluate two competing conceptions of Skidmore review - the independent judgment model and the theoretically more deferential sliding-scale model - and conclude that the appellate courts overwhelmingly follow the sliding scale approach. Also, contrary to two other, significantly more limited studies, we document that Skidmore review is highly deferential to agency interpretations of law, with agency interpretations prevailing in more than 60% of Skidmore applications. Drawing from the Skidmore applications studied, we then analyze more qualitatively how the appellate courts apply the Skidmore review standard as a sliding scale and identify where those courts are struggling to make sense of Skidmore's dictates within that model. To resolve the lower courts' difficulties, we propose re-conceptualizing Skidmore's sliding scale as balancing comparative agency expertise against the potential for agency arbitrariness. Finally, we note several burgeoning issues concerning the scope of Skidmore's applicability and offer preliminary thoughts for addressing those questions.

skidmore, chevron, christensen, mead, judicial review, agencies, deference, judicial deference

Abstract:
This Article takes the controversial position that Treasury regulations are entitled to judicial deference under the Chevron doctrine, as clarified by the Supreme Court in the more recent Mead case, whether those regulations are promulgated pursuant to specific authority delegated in a substantive provision of the Internal Revenue Code or in the exercise of general authority granted in Code Section 7805(a). The Article attributes the unwillingness to concede Chevron's applicability to tax exceptionalism, the erroneous perception of many scholars that tax is different from other areas of the law, which in the context of this Article translates into the idea that tax should have its own judicial deference standards separate from the Chevron/Mead regime. This Article reviews a century of jurisprudence and scholarship to show that what many tax scholars and practitioners believe is a unique tax deference tradition is, in fact, merely consistent with broader deference principles espoused by the courts and scholars throughout administrative law. Further, while many in the tax community believe that aspects of tax law and practice render Chevron deference inappropriate for most Treasury regulations, this Article contends that tax closely resembles other administrative law areas in which Chevron deference clearly applies. Finally, having established that the Chevron/Mead framework should apply in tax cases, this Article applies the standard articulated in Mead to demonstrate that Chevron is the appropriate evaluative standard for Treasury regulations and responds to arguments suggesting an alternative outcome.

Chevron, Skidmore, Mead, National Muffler, deference

Abstract:
Tax shelters generally are designed to take advantage of statutory ambiguity in the tax code. In the civil context, depending upon the format of the IRS's interpretation, a finding of ambiguity typically means that the reviewing court should apply one or another doctrine of judicial deference in evaluating the government's interpretation: either the strong, mandatory Chevron deference, the slightly less deferential Skidmore deference standard, or perhaps the tax-specific National Muffler deference. Whichever of these review standards applies, the government has a distinct advantage over the taxpayer in persuading the court to adopt the government's interpretation of the Code. Consequently the judicial deference doctrines are useful in the IRS's effort to maintain the integrity of the tax laws.

In criminal cases, however, the rule of lenity applies to resolve disputes over interpreting ambiguous statutes. This canon of construction requires courts reviewing ambiguous statutes in the context of criminal cases to construe those statutes in the defendant's favor. The Supreme Court has applied the rule of lenity to resolve not only criminal cases but also civil cases where the statute in question could be used as a basis for criminal prosecution.

Several scholars have observed that doctrines of judicial deference and the rule of lenity are fundamentally in tension. Although the Supreme Court has not ruled conclusively on the issue, the Court's opinions suggest that the rule of lenity may well trump deference principles in civil cases involving regulatory statutes, like the Internal Revenue Code, that provide for both criminal and civil enforcement mechanisms. This essay explores whether the government is undermining its own civil efforts to protect the integrity of the Code by pursuing tax lawyers and accountants criminally for planning and promoting tax shelters and, thus, opening the door for courts to apply the more taxpayer-friendly rule of lenity instead of the pro-government deference doctrines to resolve even civil tax disputes.

Lenity, Chevron, Skidmore, tax shelters, KPMG, National Muffler

Abstract:
In granting certiorari in the case of DaimlerChrysler Corp. v. Cuno, the Supreme Court asked the parties to brief whether respondents have standing to challenge Ohio's investment tax credit. Looking at the posture of the case, this essay argues that the Supreme Court is likely sending a signal that it hopes to overturn the Sixth Circuit decision on standing grounds and avoid the more difficult question of whether the tax credit is unconstitutional based on the dormant Commerce Clause. This essay applies modern standing doctrine to the Cuno case and concludes that the Cuno plaintiffs do not have standing to raise their claims in federal court. First, this essay examines a circuit split over whether state taxpayers have standing to challenge state taxation and spending. The answer, the essay argues, is that standing limits the ability of state taxpayers like the Cuno plaintiffs to challenge state laws in federal court. Second, this essay further argues that the Court could alternatively overturn the Sixth Circuit's decision on grounds of causation, redressability, or zone-of-interests analysis.

Cuno, DaimlerChrysler, standing, tax

Abstract:
In 2004, in Cuno v. DaimlerChrysler, Inc., 386 F.3d 738 (6th Cir. 2004), the Sixth Circuit invalidated the Ohio investment tax credit on dormant Commerce Clause grounds while upholding a property tax waiver by the City of Toledo and local school boards against a similar challenge. The Supreme Court granted DaimlerChrysler's petition for certiorari on the Ohio investment tax credit issue only while ordering the parties to brief whether the Cuno plaintiffs have standing to sustain their challenge. The Cuno plaintiffs' petition for certiorari on the property tax waiver issue remains pending. On October 7, 2005, scholars and other experts gathered at the University of Minnesota Law School to discuss issues raised by the Cuno case. The purpose of this essay is to introduce and provide background for essays produced in connection with a conference on DaimlerChrysler Corp. v. Cuno, as the case is known on the Supreme Court's docket.

Cuno, Daimlerchrysler, State Tax, Dormant Commerce Clause

Abstract:
In earlier work, I found that more than 40% of Treasury regulations studied are susceptible to legal challenge for their failure to satisfy Administrative Procedure Act rulemaking requirements. Given this finding, why is it that taxpayers rarely raise such claims? The article explores this question and focuses particularly on statutory and doctrinal limitations on pre-enforcement judicial review in the tax context and their role in further limiting post-enforcement challenges. Although the article proposes ways in which the courts could relax the limitations on pre-enforcement judicial review in tax cases, the article also acknowledges that the courts are unlikely to change course and that congressional action may be necessary.

Treasury, regulations, APA, Administrative Procedure Act, pre-enforcement, judicial review, Chevron, Skidmore, standing, ripeness

Abstract:
This Symposium Essay compares current patterns and practices surrounding IRS utilization of IRB guidance (revenue rulings, revenue procedures, and notices) with administrative law doctrine concerning informal agency guidance documents. In administrative law jurisprudence, the distinction between legislative and interpretative rules (and thus whether the Administrative Procedure Act requires public notice and comment procedures) and the determination of whether Chevron or Skidmore provides the appropriate evaluative standard on judicial review both ultimately turn on whether the agency legal interpretation at issue carries the force and effect of law. The precise contours of the force of law concept are unclear, as is whether the force of law means the same thing for APA procedural challenges as it does for judicial deference. Although there seems to be an emerging consensus in the tax community that IRB guidance documents contain interpretative rules eligible only for Skidmore deference, this consensus seems premised on longstanding assumptions about IRB guidance that are not entirely consistent with the contemporary reality of IRB guidance. Current IRS practices, government litigating positions in tax cases, Code provisions and regulations imposing penalties for noncompliance, and retroactive application of regulations based on IRS notice publication individually and collectively situate IRB guidance squarely in the gray area of the force of law concept, raising important issues of whether IRB guidance is entitled to Chevron deference but also subject to APA notice-and-comment rulemaking requirements.

revenue ruling, revenue procedure, notice, informal guidance, administrative procedure act, notice-and-comment, rulemaking, judicial deference, Chevron, Skidmore, Mead

Abstract:
In granting certiorari in the case of DaimlerChrysler Corp. v. Cuno, the Supreme Court asked the parties to brief whether respondents have standing to challenge Ohio's investment tax credit. This report applies modern standing doctrine to the Cuno case and concludes that the Cuno plaintiffs do not have standing to raise their claims in federal court. Moreover, the authors write, allowing the Cuno plaintiffs' case to be resolved in federal court would open the federal court system to a wide range of taxpayer challenges better left to the political branches of government. Nevertheless, they recognize that there may be other litigants that would have standing to challenge Ohio's investment tax credit in federal court.

cuno, daimlerchrysler, state tax incentives, taxpayer standing

Abstract:
In the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA), Congress included a provision requiring bankruptcy courts evaluating individual debtors' financial circumstances to utilize certain monthly expense standards developed by the Internal Revenue Service for assessing taxpayers' ability to pay their taxes (the Standards). While the IRS retains a great deal of discretion in applying the Standards for its own purposes, bankruptcy courts have interpreted the BAPCPA as giving the Standards binding force in the bankruptcy context. This unusual arrangement - where a statute regulating one substantive area incorporates documents promulgated by an unrelated administrative agency for use in a different substantive area - presents bankruptcy judges with a set of unfamiliar and difficult administrative law questions. To what extent, if at all, should bankruptcy courts defer to IRS statements, contained in documents other than the Standards themselves, about how the Standards should be applied? May the IRS alter the Standards for its own purposes but not for bankruptcy purposes, or vice versa? What procedures must the IRS use when it modifies the Standards, especially in light of the fact that the Standards now have an apparently binding effect in bankruptcy cases? These questions have become even more pressing since the IRS in 2007 amended the Standards without public notice and comment and provided different effective dates for IRS and bankruptcy court use of the amended Standards. This essay explains from the standpoint of administrative law the difficulties that these questions present and suggest a few possible (and in some cases competing) administrative law theories for thinking about them.

bankruptcy, tax, bapcpa, national standards

Abstract:
As the two-step Chevron approach to determining when courts should defer to agency interpretations of statutes has expanded in influence, questions about when the Chevron doctrine applies have proliferated. This article identifies fourteen questions about Chevron's domain that remain unresolved. The article argues that two background principles are important in answering these questions, each suggesting that Chevron has a relatively narrow domain. First, there are two deference doctrines - mandatory deference as recognized in Chevron, and discretionary deference as reflected in Skidmore - and Skidmore deference is always available as a fallback when Chevron does not apply. Second, Chevron deference rests most plausibly on implied congressional intent to delegate primary interpretational authority to an agency, and hence the scope of Chevron deference is subject to ultimate control by Congress. These two background principles lead in turn to three more specific operational principles: (1) agencies are entitled to Chevron deference when Congress has authorized them to make decisions that bind persons outside the agency with the force of law; (2) an agency interpretation is entitled to Chevron deference only insofar as it is rendered in a format having the force of law; and (3) Chevron deference does not apply if the statutory circumstances suggest that Congress had a clear intent to the contrary. The article concludes by showing how these operational principles can be used to provide principled answers to each of the fourteen questions about Chevron's domain that remain unanswered.