Monday, November 27, 2017

Distinguishing the Internal Revenue Code from Title 26 (11/27/17)

In my working draft for the 2018 edition of my Federal Tax Procedure book (scheduled for publication in August 2018), I have recently revised my discussion on Codified and Uncodified Laws in relation to the Internal Revenue Code of 1986 (IRC) and Title 26 (which is not the enacted revenue law).  For some, that may be confusing, as it was for me until recently.  So, I offer my understanding of what all that means by presenting a summary discussion below of the revised discussion and the full text of the revised discussion here.  (I also will include this revised discussion in my next current supplement to the Federal Tax Procedure Book. 2017 Editions)  Here is the summary discussion with supporting links at the end of the blog:

All statutes are enacted by Congress as Statutes at Large.  Statutes at Large are said to be "positive law."  The Statutes at Large are direct and conclusive evidence of the law.

Congress has authorized the House Office of Law Revision to compile common subjects in the various Statutes at Large into Titles which are not "positive law" -- i.e., the Titles have not been enacted -- they are simply compilations of underlying Statutes at Large and, by statute, are only prima facie evidence of the law -- the underlying Statutes at Large.  See 1 USC § 104(a), here.

Sometimes Congress will enact a Title as a Statute at Large.  Most importantly for tax procedure purposes, the IRC has been enacted as a Statute at Large and is positive law.  The IRC is thus the law.  This enactment occurred in 1939 and again in 1954.  The 1954 enactment was named the Internal Revenue Code of 1954.  In 1986, Congress renamed that enactment as the Internal Revenue Code of 1986, at the same time that substantial amendments to various provisions of that Code were enacted.  But -- and this is critical -- Congress did not enact the IRC as Title 26 of the U.S. Code.  The House Office of Law Revision has compiled -- actually mirror imaged -- the IRC into Title 26.

Therefore, the correct conclusive citation to any provision of the IRC is to the IRC (which is the law) and not to Title 26 (which is only prima facie evidence of the IRC).  Still, most courts and commentators usually cite to Title 26.

And, some statutes that affect the application of the revenue laws are not in the IRC, and therefore not in Title 26 (the IRC mirror image).  A good example of such “uncodified” tax law is § 530 of the Revenue Act of 1978, which is legislation giving taxpayers certain relief in the ongoing problem of characterizing service provides as employees or independent contractors; that uncodified provision is referred to in a note to 26 U.S.C. § 3401, here [scroll to bottom of the notes].

Helpful links for this subject may be found in the following (which are referenced in the footnotes to the excerpt from the current revision of the Tax Procedure Book referenced above.:

  • Library of Congress web page on Statutes at Large, here.
  • House Office of Law Revision Counsel Guide, here
  • House Office of Law Revision Counsel Positive Law Codification, here.
  • House Office of Law Revision Counsel list of codified (positive law) and uncodified (not positive law) Titles of the U.S. Code, here. [Note that the positive law titles are identified by an asterisk]  For a list of the codified titles only, see the note to 1 U.S.C. § 104(a), here.
  • Yin, George K., Codification of the Tax Law and the Emergence of the Staff of the Joint Committee on Taxation, pp. 19 (August 1, 2017). Virginia Law and Economics Research Paper No. 2017-20; Virginia Public Law and Legal Theory Research Paper No. 2017-39. Available at SSRN:
  • Will Baude, Reminder: The United States Code is not the law (The Volokh Conspiracy 5/15/17), here.  
  • Tobias A. Dorsey, Some Reflections on Not Reading the Statutes, 10 Green Bag 282 (2007), here.

Saturday, November 25, 2017

Excellent Article on the Necessity of Chevron or Something Like in the Administrative State (11/25/17)

A significant topic in my Federal Tax Procedure book and in many tax procedure books and classes is the subject of Chevron deference.  Chevron U.S.A., Inc. v. Natural Res. Def. Council, Inc., 467 U.S. 837 (1984).  Chevron deference has some influential critics -- including Justices Thomas and Gorsuch and a number of others, including legislators who rail against the administrative state. 

An excellent article arguing that Chevron or something like it is necessary for the administrative state -- Nicholas R. Bednar & Kristin E. Hickman, Chevron's Inevitability (2017). 85 Geo. Wash. L. Rev. 1392 (2017) (available on SSRN here). Kristin Hickman is a leading authority on Chevron.  The abstract is
For over thirty years, Chevron deference has been the target of criticism. Now, some judges and legislators are calling for an end to Chevron, and legal scholars are heralding the doctrine’s retreat. Chevron may be evolving, as common law often does. But claims that Chevron is in decline are overblown, and efforts to overturn Chevron in any meaningful sense are misdirected. Chevron-style deference is inevitable in the modern administrative state. The real “problem” — to the extent one sees it as such — is not Chevron but rather unhappiness with the natural consequences of congressional reliance on agencies to resolve major policy issues.
Although the whole article is worth reading, I found the following excerpt in the introduction helpful:
Finally, predictions of (or hopes for) Chevron’s pending demise fail to take into account that Chevron deference, or something much like it, is a necessary consequence of and corollary to Congress’s longstanding habit of relying on agencies to exercise substantial policy-making discretion to resolve statutory details. As administrative law’s best-known doctrine, Chevron has become a convenient scapegoat or bogeyman for those who are unhappy with the administrative state or judicial review of agency action. But unless Congress chooses to assume substantially more responsibility for making policy choices itself or the courts decide to seriously reinvigorate the nondelegation doctrine—neither of which seems remotely likely—at least some variant of Chevron deference will be essential to guide and assist courts from intruding too deeply into a policy sphere for which they are ill-suited.
And this excerpt from the conclusion:
Reports of Chevron’s demise are greatly exaggerated, and efforts to overturn Chevron aim at the wrong target. Certainly, Chevron is a highly imperfect doctrine. The opinion itself is confusing. Courts are inconsistent when they apply it, adding to the confusion. Legitimate questions abound regarding Chevron’s proper scope and operation. Undoubtedly, there remains room for improvement and clarification. 
Yet, casting Chevron as administrative law’s bogeyman has always been a bit overwrought. Chevron undoubtedly is not what the Framers had in mind, but then again, neither is the modern regulatory state. So long as agency officials possess the authority to  make major policy decisions, Chevron—or something much like it—will survive. Congress will continue delegating, so courts will continue deferring in some number of cases. To the extent that courts and commentators want to curtail the administrative state, they should focus their efforts on rolling back congressional delegations of policymaking discretion to agency officials rather than overturning Chevron. 
In short, Chevron’s basic premises represent a reasonable judicial response to the government that we actually have and the world in which we actually live. To paraphrase Winston Churchill, Chevron is the worst standard of review, except for all the others.475 
For an excellent discussion of the Article, see Adrian Vermeule, Chevron as a Legal Framework, Jotwell (Oct. 24, 2017), here.  [Note that Vermeule lists Hickman first, but the article lists Bednar first; Hickman is the more recognized scholar]

Wednesday, November 15, 2017

Distinguishing Legislative History from Statutory History (11/15/17)

In my Federal Tax Procedure - (2017 Practitioners Ed. ), here, p. 7 n. 22, I state:
Legislative history is different from statutory history, which is “the formal changes in the [statute] made by the legislature when it enacts new laws and amends them over time.” William N. Eskridge, Jr., Interpreting Law: A Primer on How to Read Statutes and the Constitution 204 (Foundation Press 2016).
I think that many do not distinguish between the two and use the terms interchangeably.  But as noted, they are really two different concepts. 

I thought that fans of this subject might enjoy the following blog: Jonathan H. Adler, Justice Sotomayor looks at ‘statutory history,’ not ‘legislative history’ (The Volokh Conspiracy 11/14/17), here.

I do not discuss this distinction in the Student Edition but users of the Student Edition may also want to note the distinction.  I will likely lift the distinction from the footnote to the text in the next Editions so that it will appear in both Editions.

Saturday, October 28, 2017

New Cumulative Supplement to Federal Tax Procedure Book (10/28/17)

I provide a new cumulative supplement to the Federal Tax Procedure Book.  The cumulative supplement, dated 10/28/17, may be downloaded on the Page to the right titled Federal Tax Procedure Book & Supplements, here.

As always with my publications, I encourage readers to advise me of any matters that need corrections, additions, deletions, etc.

Thursday, October 19, 2017

More on Skidmore (10/19/17)

I recently posted on Skidmore deference:  Other Views of Skidmore "Deference" (10/12/17; 10/15/17), here.  I offer more here on Skidmore, having searched through my database I keep to catalog items that I either actually read or wished I had read.  I just did a simple search on Skidmore.  I got about 525 hits indicating the sections in which Skidmore is cited (some sections had more than two references to Skidmore).  I browsed through the hits and offer the following additional excerpts about Skidmore deference.  I do caution readers than this is not a scientific or representative sampling of all the literature that is out there.

Kristin E. Hickman and Matthew D. Krueger, In Search of the Modern Skidmore Standard, 107 Colum. L. Rev. 1235, 1250, 1252-1253, 1255-1256, 1271, 1280-1281, 1291, 1310 (2007), here (footnotes omitted):
II. What Is Skidmore Deference? 
Drawing fine distinctions among deference standards may seem a purely academic exercise. Legal realists contend that such an effort is pointless, as courts only invoke deference standards to justify their preferred outcome. Although we acknowledge that this critique may be true in some instances, we nevertheless submit to the contrary that deference standards matter. We accept that courts feel constrained by deference standards and speak sincerely when they discuss the application of those standards. 
It is easy enough to recognize the consensus view that Skidmore gives judges more discretion than Chevron's command of mandatory deference. Similarly, from the Court's articulation of the two standards, one can readily discern that Chevron deference involves two binary inquiries, while Skidmore requires courts to evaluate several factors. Nevertheless, once a reviewing court finds itself in Skidmore's realm of discretionary deference, elucidating the appropriate degree of deference is not so simple as plotting a point on a line. Standards of review are not precision instruments. Rather, to paraphrase Justice Frankfurter, standards of review are more accurately described in terms of the "mood" a reviewing court should possess in evaluating the issue at bar. The question to be answered, therefore, is what sort of mood Skidmore analysis contemplates. 
* * * * 
Commentators also generally agree that Skidmore is less deferential than Chevron, falling somewhere further away from the deference pole. This is all well and good, but it offers little guidance for the application of Skidmore as a stand-alone doctrine. 
* * * * 
The independent judgment model of Skidmore deference thus understands the "persuasiveness" of an administrative interpretation to depend ultimately on the interpretation's merits or rightness. This conception discounts Skidmore's contextual factors and does not require courts to regard the presence or absence of those factors as particularly relevant. At most, this view understands Skidmore to require "due regard" be given to the agency's view, while "instructing courts to adopt the statutory interpretations that they themselves deem best." In effect, then, Skidmore directs courts to treat the agency's view just as it would the view of any litigant.  
* * * * 

Thursday, October 12, 2017

Other Views of Skidmore "Deference" (10/12/17; 10/15/17)

In my Federal Tax Procedure book (both editions), I say (footnotes omitted):
Before introducing my summary of the state of the law on IRS interpretations other than regulations, I first return to Skidmore deference which is a weaker form of interpretive deference (weaker in comparison to Chevron deference).  Skidmore v. Swift & Co., 323 U.S. 134 (1944).  Although formulations of Skidmore deference may vary, I think it is fair to say that agency interpretations not entitled to Chevron deference are entitled to some deference to the extent that they are persuasive.  Skidmore deference seems to stand somewhere between Chevron deference and no deference.  If the agency interpretation is intrinsically persuasive (including touchstones of thoroughness and consistency), does it need any deference in order to carry the day?  Presuming the Court means something in paying homage to Skidmore deference, perhaps it means that a court must give slight tilt in favor of an agency interpretation when it does not rise to the level required for Chevron deference.  So, in a case in which the court will not apply Chevron deference, it might still apply Skidmore deference.  (This, of course, raises the question I cannot answer here as to how much conceptual space there is for any given agency interpretation between Chevron deference and Skidmore deference; are there really many cases that can pass muster under Chevron but would not pass muster under Skidmore?)
I just read -- well, given its length, skimmed -- the en banc opinions in Aqua Products, Inc. v. Matal, ___ F.3d ___, 2017 U.S. App. LEXIS 19293 (Fed. Cir. 2017), here, a patent case (which may be even more onerous than a tax case).  There is a lot of discussion in the various opinions about Chevron and its progeny, but only one discussion about Skidmore.  Judge Moore says in his dissent (p. 11 of his dissent in fn. 8):
   n8 An agency interpretation not entitled to Chevron deference may nonetheless be entitled to Skidmore deference which the Supreme Court describes as follows: "Such a ruling may surely claim the merit of its writer's thoroughness, logic, and expertness, its fit with prior interpretations, and any other sources of weight." Mead, 533 U.S. at 235. Skidmore deference is a somewhat ethereal concept as it amounts to deference which the Supreme Court explains is proportional to the ruling's "power to persuade." Id. This feels a lot like saying I defer to your interpretation because I have determined that it is correct.
Still another conceptualization of Skidmore is present in Secretary U.S. Dept. of Labor v. American Future Systems, Inc., ___ F.3d ___, 2017 U.S. App. LEXIS 19991 (3rd Cir. 10/13/17), here (at slip op. 10-12, footnotes omitted):

Tuesday, October 10, 2017

District Court Holds that Temporary Regulations are Legislative and Thus Fail APA's Notice and Comment Requirement (10/10/16)

In Chamber of Commerce v. U.S. IRS, ________ (W.D. Tex. 10/6/17), here, the Court concluded that the so-called inversion Temporary Regulation was a legislative regulation that could not become effective until there was either the APA required notice and comment because no reasoned good cause statement had been given as required for immediate effectiveness of legislative regulations.   Caveat:  this is a revised opinion.  I have not attempted to locate the differences between the original opinion issued 9/29/17 and this revised opinion.  All of the following discussion relates to the revised opinion issued 10/6/17.

First, I offer the Court's explanation of the Temporary Regulation, which it called the Rule.
The Rule was issued pursuant to statutory authority in the Internal Revenue Code, which provides: 
The Secretary shall prescribe such regulations as may be appropriate to determine whether a corporation is a surrogate foreign corporation, including regulations (A) to treat warrants, options, contracts to acquire stock, convertible debt interests, and other similar interests as stock, and (B) to treat stock as not stock. 
26 U.S.C. § 7874(c)(6). And further, 
The Secretary shall provide such regulations as are necessary to carry out this section, including regulations providing for such adjustments  to the application of this section as are necessary to prevent the avoidance of the purposes of this section, including the avoidance of such purposes through (1) the use of related persons, pass-through or other noncorporate entities, or other intermediaries, or (2) transactions designed to have persons cease to be (or not become) members of expanded affiliated groups or related persons. 
26 U.S.C. § 7874(g). The statute uses terms granting broad authority to the Secretary of the Treasury for example: "such regulations as may be appropriate" and "such regulations as are necessary to carry out this section." The statute does not limit the broad authority granted in the first part of each subsection by identifying regulations that would not be appropriate or providing boundaries to the Secretary's authority under the statute. Instead, the statute gives examples of what the Secretary may employ by using the word "including" several times. Further, the examples given in the statute of regulations the Secretary may issue include significant authorizations, such as the authority to "treat stock as not stock," which could substantially alter a calculation under the statute based on the stock of a corporation.
Based on the broad authority granted by Congress, the court concludes the Rule does not exceed the statutory jurisdiction of the Agencies. The Rule directs that certain stock be disregarded in calculations made under the statute, which falls into the statute's allowance that regulations may "treat stock as not stock." Further, the Rule aims to "prevent the avoidance of the purposes" of the statute, which is specifically named as an authorized function of regulations issued pursuant to the statute. 
The court concludes the Rule does not exceed the statutory jurisdiction of the Agencies.
The Court then holds (pp. 8-10) that the IRS gave a reasoned explanation for the Rule consistent with the broad grant of authority. Motor Vehicle Mfrs. Ass'n v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 43 (1983).

JAT Note: The Court to this point has not distinguished between a legislative regulation and an interpretive regulation.

The Court then holds (pp. 10-13) that the Temporary Regulation, issued without notice and comment, violates the APA requirement for notice and comment.  In this portion of the discussion, the Court does not mention the fact that interpretive regulations are exempted from the APA notice and comment requirement.  So, the assumption must be, for purposes of that discussion, that the Temporary Regulation was a legislative regulation.

The Court then turns (pp. 13-15) to the interpretive regulation exception to the APA notice and comment requirement.  This is the nub of the reason I write this blog entry, so I quote the key part: