The Report of the Death of the Interpretive Regulation Is an Exaggeration

Abstract

There is a claim about in the administrative law community that the APA category of interpretive regulations, including tax regulations under IRC § 7805(a), are no longer a viable category under the Administrative Procedure Act ("APA). Instead, the claim goes, regulations that have historically been considered interpretive because all they do is reasonably interpret ambiguous statutory text are now legislative regulations under the APA, thus subject to the APAs legislative regulations’ requirements for Notice and Comment and Prospectivity.

In the article, I quote, with permission, a noted scholar who claims:

• "regulations promulgated under 7805(a) are legislative rules as that term is understood for purposes of the Administrative Procedure Act;"

• "Administrative law doctrine says that legislative rules are those that carry the force of law, while interpretative rules do not. Although the force of law concept is blurry at the margins, I do not see any possible way that one could conclude that 7805(a) regulations do not carry the force of law;"

• "In summary, there are no Treasury regulations that are interpretative rules as that term is understood for purposes of the Administrative Procedure Act -- irrespective of the terminology embraced by the tax community."

If that claim is true for § 7805(a) regulations, it is true for all agency regulations interpreting the statute under similar agency grants (either express or implied).

My limited anecdotal polling from talking with administrative law professors is that the claim is a mainstream scholarly position. And courts noise around with the concept, although usually without nuance.

By contrast, in the oral argument in Kisor v. Willkie (Sup. Ct. No. 18-15), transcript p. 10), Justice Breyer, an administrative law scholar (taught administrative law at Harvard Law School), said “there are hundreds of thousands, possibly millions of interpretive regulations.” And courts regularly refer to interpretive regulations as if they were a viable APA category.

So which is it? Are interpretive regulations generally and Treasury interpretive regulations specifically a viable APA category? I address this issue in this paper.

The APA recognizes two categories of regulations – legislative and interpretive. The APA's original meaning of those categories may be stated as follows (in broad strokes):

• Legislative rules, which must be issued as Notice and Comment regulations, are the law within the scope of the delegation. Legislative rules (regulations) are based on an express statutory delegation of authority to the agency to set the rules that are the equivalent of statutes. In APA parlance, legislative regulations have the force of law, just as statutes do. They have the force of law because Congress has delegated law-making power to the agency.

• Interpretive rules, like judicial interpretations, interpret statutory text. Interpretive regulations, like judicial interpretations, do not create law. The statutory text is the law. As an interpretation of the law and not the law, the agency interpretation, like judicial interpretations, can apply from the effective date of the statute. In APA parlance, interpretive regulations do not have the force of law even when a court defers to an agency interpretation.

I assert in the article that this summary was the original meaning of the APA distinction between legislative and interpretive regulations and that the interpretive regulation was a viable APA category from the enactment of the APA. There have been no intervening events that have changed the original public meaning. That original public meaning should and does control.

This December 2021 draft is a major revision of earlier drafts on this SSRN page. My conclusions in this draft are the same, but much of the analysis is more detailed and focused.

In addition, I provide a PostScript titled “The Chevron Rhetoric is Another Exaggeration,” where I discuss the current politicization of Chevron and conclude that real Chevron deference is rare. Basically, I conclude that, where a court applies an agency interpretation which is the best interpretation using the tools of statutory interpretation (including Skidmore), there is no deference to the agency interpretation. I infer from my analysis that that is what is going on when courts noise about Chevron and that the outcome determinative application of Chevron deference is rare.

Note: The principal revisions in the draft linked here are discussions of Supreme Court cases in June 2019. I did make some other minor corrections as well. This "final draft" of the article replaces one originally posted June 6, 2019. I have made substantial revisions to the earlier draft. I do not have plans for further revisions, although I will likely make substantial revisions on this subject to the more summary presentation in my Federal Tax Procedure books (Practitioner and Student Editions) posted on SSRN.

Keywords: APA, Rulemaking, Interpretive Regulations, Legislative Regulations, Deference, Chevron

JEL Classification: K23, K34