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

135 Pages Posted: 20 Jun 2019 Last revised: 12 Jul 2019

Date Written: June 6, 2019

Abstract

There is a claim about in the scholarly administrative law community that the APA category of interpretive regulations, including tax regulations under IRC § 7805(a), are no longer a viable category for APA purposes. Instead, so 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.

By contrast, in the recent 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.”

So which is it? Are interpretive regulations generally and Treasury interpretive regulations specifically a viable APA category?

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 the 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. That original public meaning should control since there has been no intervening event that eliminates that understanding. Congress has not amended the relevant provisions of the APA. The only basis for the claim is that subsequent judicial decisions have morphed the concept of "force of law" beyond its specialized APA meaning for legislative regulations that create law (thus having force) to cover interpretive regulations so that those regulations which previously would have been categorized under the APA as interpretive regulations are now categorized as legislative regulations. Other related bases have also been asserted. I challenge those bases for asserting that court decisions have amended the APA to eliminate the category of interpretive regulations.

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.

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

JEL Classification: K23, K34

Suggested Citation

Townsend, John A., The Report of the Death of the Interpretive Regulation Is an Exaggeration (June 6, 2019). Available at SSRN: https://ssrn.com/abstract=3400489 or http://dx.doi.org/10.2139/ssrn.3400489

John A. Townsend (Contact Author)

John A. Townsend, Attorney ( email )

2340 Albans Road
Houston, TX 77005
United States
(713) 521-9977 (Phone)
(713) 521-7713 (Fax)

HOME PAGE: http://www.tjtaxlaw.com/

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