17 Pages Posted: 16 Oct 2012
Date Written: October 15, 2012
Should we see major tax reform, taxpayers will clamor for guidance from Treasury and the Internal Revenue Service ('IRS') regarding new provisions, as they did after passage of the Tax Reform Act of 1986 ('1986 Act'). Indeed, the greater the degree of reform, the greater the need for guidance. Treasury and the IRS will feel compelled to issue guidance as quickly as possible. If so, they are unlikely to rely on regulations subject to time and resource consuming notice-and-comment by the public. Instead, they will look to guidance not subject to pre-issuance notice-and-comment - temporary regulations in particular, as was the case after the 1986 Act, along with revenue rulings, revenue procedures, and notices.
This administrative response to major tax reform in the 21st century, however, will face hurdles unknown at the time of the 1986 Act, hurdles that could constrain the ability of the IRS and Treasury to issue guidance that courts will uphold. One is heightened interest in the course of tax litigation regarding compliance by the IRS and Treasury with the Administrative Procedure Act, particularly its requirement for public notice-and-comment in connection with proposed regulations. A second relates to a set of provisions enacted in 1988 and 1996 limiting temporary and retroactive regulations. Moreover, the Tax Anti- Injunction Act and the Declaratory Judgment Act have the effect of postponing challenges to tax guidance until enforcement of administrative guidance has taken place.
All of these considerations could affect the effectiveness of guidance issued after tax reform. This article will examine them in reverse order before discussing actions Congress might take in connection with tax reform to mitigate possible untoward consequences.
Keywords: tax reform, notice-and-comment, temporary regulations, good cause exception
JEL Classification: H20, K23, K34
Suggested Citation: Suggested Citation
Aprill, Ellen P., The Impact of Agency Procedures and Judicial Review on Tax Reform (October 15, 2012). National Tax Journal, Vol. 65, No. 4, pp. 917-932, December 2012; Loyola-LA Legal Studies Paper No. 2012-39. Available at SSRN: https://ssrn.com/abstract=2162267
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