Jan 10, 2017 Kristin HickmanTax Law
Tax specialists are no strangers to the exercise of statutory interpretation. The Internal Revenue Code is an enormously complex statute, with all of the overlapping provisions, competing goals, and specificity interspersed with ambiguity that one would expect to accompany that complexity. And mastering the tax policy aspects of the Code is hard enough that tax specialists might be forgiven for reducing the exercise of statutory interpretation to short statements about considering the Code’s text, history, and purpose, or the “spirit” of the tax laws. A recent exchange between two prominent federal judges—Chief Judge Robert Katzmann of the Second Circuit and Judge Brett Kavanaugh of the D.C. Circuit—and the lengthier books highlighted within their exchange offer a highly readable reminder of the parallel complexity of statutory interpretation theory and jurisprudence. Tax specialists interested in seeing their policy preferences succeed in the real world would do well to take note.
Although tax specialists often like to think of the tax laws as unique, judges in tax cases routinely rely upon and debate about the same tools of statutory construction that they apply and discuss in interpreting other statutes. For just one particularly expansive example, in Rand v. Comm’r, 141 T.C. 376 (2013), in deciding that refundable credits like the earned income tax credit reduce “the amount shown as the tax by the taxpayer on his return” when computing the underpayment penalty under § 6662 and 6664, Judge Ronald Buch discussed the consistent usage canon, the expressio unius canon, the surplusage canon, and the rule of lenity, in addition to the Chevron and Auer standards of review. Judge David Gustafson in dissent maintained that proper application of the rule of lenity supported the opposite conclusion. Judge Richard Morrison, dissenting separately, criticized Judge Buch’s opinion for relying too heavily on the consistent usage canon and ignoring relevant legislative history. (Congress subsequently amended § 6664 to clarify its intent.) Carpenter Family Investments, LLC v. Comm’r, 136 T.C. 373 (2011)—one of the cases leading up to the Supreme Court’s decision in United States v. Home Concrete that basis overstatements are not omissions of an amount from gross income under §§ 6229(c)(2) and 6501(e)(1)(A), includes an interesting exchange between Judge Robert Wherry for the majority and Judges James Halpern and Mark Homes in concurrence over whether unique attributes of the tax legislative process are relevant when considering legislative history in tax cases. And in Yari v. Comm’r, 143 T.C. 157 (2014), in interpreting the phrase “tax shown on the return” in connection with the § 6707A reportable transaction penalty, Judge Robert Wherry referenced several canons, discussed at some length which documents were relevant as legislative history, and observed further that “the process of divining the legislative intent underlying a statute’s language and structure, while subject to canons of construction and well-established methodologies, is hardly an exact science.” Continue reading "Thoughts On Statutory Interpretation—For Tax Specialists, Too"
Dec 14, 2015 Kristin HickmanTax Law
Much of tax scholarship—past and present—focuses on the “what” of taxation: the substantive content of the tax laws, and what that content is or ought to be. As Leigh Osofsky recently observed in a delightful series of posts on PrawfsBlawg (see here, here, here, here, and here), a growing trend in tax scholarship considers tax administration, which one might describe as the “how” of taxation, or at least part of it. A separate, but related, strain of tax scholarship concerns the “how” of taxation from a different perspective, that of the tax legislative process. Two recent articles published last year offer interesting insights into this aspect of taxation: Michael Doran’s Tax Legislation in the Contemporary U.S. Congress, and Rebecca Kysar’s The ‘Shell Bill’ Game: Avoidance and the Origination Clause.
Doran styles his article as an update of our understanding of the tax legislative process. He describes the old process as a tug-of-war between “tax instrumentalism,” with Congress “us[ing] the Internal Revenue Code to pursue nontax economic and social objectives” and cluttering up the Code with “particularistic provisions setting out narrow rules and exceptions for specific constituents and interest groups,” and “tax reform,” with Congress repealing those instrumentalist provisions. Doran posits that, since the late 1980s, gridlock has become the norm. (Pp. 555-556.) At the same time, he suggests that “major items of tax legislation” adopted during that period are “strikingly ‘clean’—that is, nonparticularistic.” To support this proposition, Doran looks at 25 years of “major tax legislation,” listed in a handy table. He documents a decline in the length of tax legislation and draws from that admittedly “very rough proxy”—in addition to his own impressions—that contemporary tax legislation is simply less particularistic than in the past. Continue reading "Exploring the “How” of Tax Legislation"
Oct 21, 2014 Kristin HickmanTax Law
Monetary penalties for noncompliance are a routine feature of the tax laws. The tax literature includes extensive debate over different ways of structuring those penalties to improve tax compliance and eliminate the tax gap. In Collateral Compliance, Josh Blank shifts his gaze beyond that debate to examine what he labels “collateral tax sanctions”—nonmonetary penalties that federal and state governments impose, in addition to the monetary ones, for failing to comply with the tax laws.
One rather dramatic example of a collateral tax sanction comes from the Supreme Court’s 2012 decision in Kawashima v. Holder, in which the Court upheld a Bureau of Immigration Appeals interpretation of the Immigration and Nationality Act that treated willfully filing a false tax return as an “aggravated felony” and, thus, a deportable offense for non-citizens. Less spectacularly, perhaps, states regularly suspend driver’s licenses, professional licenses, liquor licenses, or hunting licenses for nonpayment of taxes. Congress has considered legislation revoking passports and denying FHA-insured mortgages as punishment for tax delinquency.
Plenty of articles examine the pros and cons of one collateral tax sanction or another. Blank’s article is unique for his effort to step back and consider collateral tax sanctions more systematically. He explores in some depth why collateral tax sanctions sometimes succeed where monetary tax penalties fail. He also proposes some basic principles for structuring collateral tax sanctions to maximize their effectiveness as a mechanism for encouraging tax compliance. Continue reading "Evaluating the Efficacy of Nonmonetary Tax Penalties"
Sep 25, 2013 Kristin HickmanTax Law
In contemporary governance, while the U.S. Constitution recognizes the fifty states as sovereign entities, federal and state governmental policies and operations are functionally quite intertwined. Nevertheless, state governments frequently like to show flashes of independence, particularly on hot button political issues. Hence, we have seen states like California and Massachusetts getting ahead of their federal counterparts in adopting laws and policies to protect the environment and embrace gay marriage. On the opposite side of the political spectrum, we have states like North Dakota, Texas, and Arizona challenging federal laws and policies regarding abortion rights, health care, and immigration.
Tax policy ranks among the more heated issues in modern politics. Politicians argue a lot about what rates to apply to which taxpayers, but the tax policy debate is not limited to tax rates. It is strange, therefore, just how little state individual income tax regimes differ from their federal counterpart. State tax laws tweak the federal model here and there around the edges, but in the main, all of the states that impose a broad-based income tax rely either explicitly or implicitly on federal tax laws to define their tax base. In her thoughtful article, Delegating Up: State Conformity with the Federal Tax Base, Ruth Mason thoroughly documents and persuasively challenges federal and state lawmakers to think more carefully about the consequences of this phenomenon. Continue reading "Recognizing and Rethinking Federal-State Tax-Base Conformity"
May 3, 2013 Donald TobinTax Law
With the Supreme Court’s recent decision in Mayo Foundation for Education and Research v. United States, there is a huge void of scholarship regarding how administrative law principles apply in the tax context. Kristin Hickman helps fill that void by continuing her work at the intersection of administrative law and tax procedure in her recent Vanderbilt Law Review article “Unpacking the Force of Law,” which deals with the treatment of temporary treasury regulations and IRB guidance after the Supreme Court’s decisions in Mayo and United States v. Mead Corp.
In Mead and Mayo, the Court clarified that agency regulations received Chevron deference if they were based on either specific grants of rulemaking authority contained in a statute or on general rulemaking authority granted by Congress to a specific agency. Mead explained that an agency’s regulation was entitled to Chevron deference as long as “Congress delegated authority to the agency generally to make rules carrying the force of law, and that the agency interpretation claiming deference was promulgated in the exercise of that authority.” In addition, in Mayo, the Supreme Court rejected the idea of tax exceptionalism stating “[w]e are not inclined to carve out an approach to administrative review good for tax law only.” Continue reading "Temporary Treasury Regulations and IRB Guidance in a Post-Mead and Mayo World"
Apr 18, 2023 Jon ChoiTax Law
Brian D. Galle & Stephen E. Shay,
Admin Law and the Crisis of Tax Administration, __
N.C. L. Rev. __ (forthcoming 2023), draft available at
SSRN (Jan. 27, 2023).
Tax regulations and subregulatory guidance abound with apparent giveaways to taxpayers, favorable interpretations with little or no statutory justification. Examples include the check-the-box rules, the waiver of 382(l)(5) net operate loss carryforward limitations during the financial crisis, and many more. On the other hand, it’s hard to think of cases where Treasury or the IRS has deviated from the statute at taxpayers’ expense. The typical explanation for this asymmetry is standing doctrine: if my tax bill is too high because of an agency rule, I can sue the government, but if it’s too low, nobody can sue to raise it. Now, a terrific new article by Brian Galle and Stephen Shay considers the implications of this “tilt against revenue” for administrative law.
Galle and Shay bring a fresh perspective to the classic debate on administrative tax exceptionalism. They suggest that the tilt against revenue cuts against the formalist, anti-exceptionalist position (most famously promoted by Kristin Hickman) that tax regulations should follow the same procedural rules that apply to all other regulations. Instead, they suggest that courts should counter-act the tilt against revenue by applying administrative law requirements more leniently to Treasury and the IRS. Continue reading "The Case for a Tilt Toward Revenue in Tax Administration"
Jul 19, 2022 Richard PierceAdministrative Law
Thomas Merrill’s book, The Chevron Doctrine: Its Rise and Fall, and the Future of the Administrative State, is timely in several ways. First, it arrives immediately after he was named one of the fifty most important legal scholars of all time. Second, it tells the story of the Supreme Court’s 1984 opinion in Chevron v. NRDC, the most frequently cited administrative law opinion in history, at a time when the Chevron doctrine is in severe jeopardy. Third, Merrill uses the history of the Chevron doctrine as a lens through which he explains and defends the administrative state at a time when it is under attack as illegitimate and unconstitutional.
Merrill begins by describing the Chevron opinion and its effects. The opinion was long, complicated, and nuanced, but many circuit courts ignored the rest of the opinion and applied only the famous two-part test that the Court announced:
When a court reviews an agency’s construction of the statute which it administers, it is confronted with two questions. First, always, is the question whether Congress has directly spoken to the precise question at issue. If the intent of Congress is clear, that is the end of the matter; for the court, as well as the agency, must give effect to the unambiguously expressed intent of Congress. If, however, the court determines Congress has not directly addressed the precise question at issue, the court does not simply impose its own construction on the statute, as would be necessary in the absence of an administrative interpretation. Rather, if the statute is silent or ambiguous with respect to the specific issue, the question for the court is whether the agency’s answer is based on a permissible construction of the statute. Continue reading "The Administrative State As Seen Through a Chevron Lens"
Jul 25, 2018 Wyatt SassmanLegal History
I am probably too early in my career to recognize a watershed piece of scholarship, but this sure seems like one to me. In her most recent article, Maggie McKinley traces the origins of the administrative state to the historical practice of petitioning Congress for relief, as protected by the Petition Clause of the First Amendment. She details how Congress afforded petitions important procedural protections, and tells the story of how Congress eventually “siphoned off” its responsibility for resolving these petitions to boards, commissions, and other ad hoc bodies that became the foundation of the modern administrative state. Her overarching thesis is that the petition process reveals a constitutional obligation originally located in Congress, and now located in the administrative state, to ensure individualized and meaningful participation in federal lawmaking.
This thesis is, among other things, a breath of fresh air in a heated yet stale debate about the constitutional validity of the administrative state. As Kristin Hickman recently surveyed for Jotwell, this debate has fixated for decades on whether or not we can assume the constitutional validity of the administrative state from either its existence or its practical necessity to modern life. McKinley offers what I think is a truly novel argument to this contest: that the constitutional basis for the administrative state is at least partly rooted in the First Amendment’s right to petition the government. Drawing on a wide range of sources from Founding-era practices to legal process theory, her insights will interest readers on all sides of this debate. Continue reading "Excavating Congress’s Relationship to the Administrative State"
Aug 12, 2014 Christopher WalkerAdministrative Law
Kristin E. Hickman
, Administering the Tax System We Have, 63
Duke L.J. 1717 (2014), to be reprinted in
Duties to the Tax System: A Resource Manual for Tax Professionals (Scott Schumacher & Michael Hatfield eds, forthcoming 2014), available at
SSRN.
In addition to regular servings from the Administrative Law Review and Yale Journal on Regulation, I look forward to two annual administrative law symposia. This year’s symposium from the George Washington Law Review will not become available here until later this month, so I’ll focus on the Duke Law Journal’s Taking Administrative Law to Tax Symposium, which was published in May. There is a lot to like about this symposium, starting with a refreshingly succinct foreword from Andy Grewal and followed by articles from Ellen Aprill, Bryan Camp, Kristin Hickman, Steve Johnson, Leandra Lederman, and Lawrence Zelenak. [Video of the symposium is available here, and the written issue is here.]
As the title suggests, the symposium focuses on tax exceptionalism, or “tax myopia” as Paul Caron coined the phenomenon two decades ago. Tax exceptionalism is the misperception that tax law is so different from the rest of the regulatory state such that general administrative law principles do not apply. But tax exceptionalism is dying—something my tax colleague Stephanie Hoffer and I document in a forthcoming article on the Tax Court and the Administrative Procedure Act (“APA”). In Mayo Foundation v. United States, for instance, the Supreme Court refused to apply a standard less deferential than Chevron to the Treasury Department’s interpretation of the tax code, noting that it was “not inclined to carve out an approach to administrative review good for tax law only.” That same year (2011), in Cohen v. United States, the D.C. Circuit held that the judicial review provisions of the APA apply to IRS notices: “The IRS is not special in this regard; no exception exists shielding it—unlike the rest of the Federal Government—from suit under the APA.” Continue reading "Taking Administrative Law to Tax Exceptionalism"
Aug 16, 2010 Kathryn WattsAdministrative Law
One of the “hotter” areas of administrative law scholarship in the last few years has been the empirical study of the role of legal doctrine in judicial review of agency action. In a recent Virginia Law Review article titled Reasonable Agencies, Professor David Zaring adds to this growing body of scholarship by reporting new empirical research on appellate courts’ review of agencies’ formal findings of fact using substantial evidence review. His main goal, however, is not simply to add yet another empirical study to the pile. Rather, Professor Zaring draws upon the important empirical work done by others, such as Thomas Miles, Cass Sunstein, William Eskridge, Lauren Baer, Kristin Hickman and Matthew Krueger, and he aggregates the various studies in a way that has not been done before. Ultimately, his goal is to draw broad conclusions about how courts apply administrative law’s complex judicial review doctrines and to argue that the law of judicial review descriptively has been and normatively should be simplified into one “reasonable agency” standard.
Professor Zaring begins by surveying the law of judicial review and summarizing six different administrative law doctrines that he identifies: (1) Chevron deference used to review agency interpretations of ambiguous statutes; (2) the less deferential Skidmore standard, which applies when Chevron’s stronger version of deference is inapplicable; (3) de novo review; (4) arbitrary and capricious review applied to informal factual findings; (5) substantial evidence review applied to formal factual findings; and (6) general arbitrariness review used to test the rationality of agency decisions or the adequacy of reasons given. As Professor Zaring describes, determining exactly which of these standards of review to apply can be a daunting task for courts and litigants, forcing them to sort through many complicated questions, such as whether the agency action involved fact finding, legal interpretation, or policymaking. Continue reading "Grappling with the (In?)significance of Doctrine in Judicial Review"
