IRB Guidance: The No Man's Land of Tax Code Interpretation

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.

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

JEL Classification: H2, H20, H26, H29, K1, K10, K19, K2, K20, K23, K29, K3, K34, K4, K40, K41, K49