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The Administrative Law of Borrowed Regulations: Legal Questions Regarding the Bankruptcy Law's Incorporation of IRS Standards

Matthew Stephenson

Harvard Law School

Kristin E. Hickman

University of Minnesota - Twin Cities - School of Law

Norton Bankruptcy Law Adviser, Vol. 1, 2008

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.

Number of Pages in PDF File: 17

Keywords: bankruptcy, tax, bapcpa, national standards

JEL Classification: H10, H11, H19, H20, H24, H29, K10, K19, K20, K23

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Date posted: April 9, 2008 ; Last revised: April 11, 2008

Suggested Citation

Stephenson, Matthew and Hickman, Kristin E., The Administrative Law of Borrowed Regulations: Legal Questions Regarding the Bankruptcy Law's Incorporation of IRS Standards. Norton Bankruptcy Law Adviser, Vol. 1, 2008. Available at SSRN: http://ssrn.com/abstract=1117654

Contact Information

Matthew Caleb Stephenson
Harvard Law School ( email )
1575 Massachusetts
Hauser 406
Cambridge, MA 02138
United States
617-495-9863 (Phone)
Kristin E. Hickman (Contact Author)
University of Minnesota - Twin Cities - School of Law ( email )
229 19th Avenue South
Minneapolis, MN 55455
United States
612-624-2915 (Phone)

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