Interpretive and Legislative Regulations and the Relationship to Chevron (2/26/17)

I have been struggling with the APA distinction between legislative and interpretive regulations and how that distinction might be impacted by the Chevron doctrine.  I link here my latest revision to my Federal Tax Procedure Book currently due to publish in August 2017 (and will be available for free download on my SSRN account, here, then).  (Note that the linked current status of the revision may not be final, but I think it is fairly close to final subject to comments from this blog entry.)

Basically, I conclude that the historic distinction between legislative and interpretive regulations remains even after Chevron and its progeny, although some loose thinking / language about Chevron has muddied the water as to the historic distinction.  I will state the historic distinction and refer readers to the linked documents for more details (both pro and con).

The historic distinction is (from Kenneth Culp Davis, Administrative Rules - Interpretative, Legislative, and Retroactive, 57 Yale L.J. 919, 928 (1948) (footnotes omitted)):

According to the theory, legislative rules are the product of a power to create new law, and interpretative rules are the product of interpretation of previously existing law.  Legislative rules may change the law but interpretative rules merely clarify the law they interpret.

Then I say in  my text (footnotes omitted):

To illustrate this discussion, I use examples at the extremes of a spectrum.  Such examples  can offer key insight even though much of the play in the real world is between the extremes where things become less certain.  Here are the extremes on the issue at hand.  Code § 162(a)(2) allows deductions for expenses incurred while “traveling ... away from home in the pursuit of a trade or business.”  The regulation, adopted under the general authority stated in § 7805(a), interpreted “traveling ... away from home” text to require that the taxpayer must sleep or rest, sometimes called the overnight rule.  The Supreme Court sustained the regulations’ interpretation of the statutory text. The regulation was an interpretive regulation.  By contrast, § 1502 delegates to the IRS the authority to adopt regulations that the IRS “may deem necessary” for consolidated reporting among an affiliated group of corporations.  The regulations do so in mind numbing detail, in regulation after regulation.  The consolidated return regulations are legislative regulations.

The Chevron doctrine may be summarized as a rule of interpretation of a statute that defers to an agency interpretation under this analysis:  Step One, if the text is plain (not ambiguous), that meaning applies, end of analysis; do not go past Step One; and Step Two, if the text is not plain (ambiguous), the agency interpretation applies unless unreasonable.  Under my analysis (perhaps not mainstream), Chevron only applies to agency regulations that are interpretive and does not apply to legislative regulations.

The linked text relates to the foregoing with more detail.

I address in this blog the current movement to eliminate or throttle back on Chevron deference.  There are speculations about at least judicial throttling back when Judge Neil Gorsuch is confirmed as a justice on the Supreme Court.  And, there is pending legislation that would eliminate Chevron deference.  The proposed legislation would take away the authority of the judiciary to apply Chevron.  Although not mentioning Chevron by name, the proposed legislation would require courts do the following with respect to agency rulemaking:  (i) "decide de novo all relevant questions of law, including the interpretation of constitutional and statutory provisions, and rules made by agencies" and (ii) take away from courts the authority to interpret a statutory "gap or ambiguity as an implicit delegation to the agency of legislative rule making authority and [to] rely on such gap or ambiguity as a justification either for interpreting agency authority expansively or for deferring to the agency’s interpretation on the question of law."

First, note that this speaks only as to interpretive issues related to Chevron, not legislative rulemaking authority.

Second, I just pose this practical question.  If the Supreme Court or the legislation would eliminate the Chevron doctrine, what would that mean for legislative regulations?  Under my interpretation (summarized above and detailed in the linked document), Chevron is a rule of interpretation applying only to statutory interpretations.  Chevron is not a rule that can apply to a legislative regulation under the traditional definition of legislative regulation (a regulation establishing the substantive rule).

If as some claim, Chevron applies to legislative regulations, what would happen to, for example, the consolidated return regulations under § 1502 after the demise of Chevron (either judicial demise or legislative demise)?