My Distillation of the Legislative - Interpretive Regulation Distinction (4/3/21)

In further considering the legislative-interpretive distinction, it occurred to me that one way to distill the essence of the distinction is as follows (when I cite Chevron, I refer to the Chevron framework):

For a valid legislative regulation, two things are required:  (i) Congress must have enacted express and specific authority to the agency to make the law (with an appropriate intelligible principle limiting the delegation); and (ii) the agency must have promulgated the legislative regulation pursuant to that authority.  Accordingly, if the agency says it is invoking its express and specific authority in the statute to make law, court review of the regulation tests only whether the regulation is within the scope of the delegated authority.  If so, the regulation is the law, just as if it were a statute.

For a valid interpretive regulation, Congress must have conferred upon the agency express or implied authority to interpret ambiguities within statutory text.  If the agency is invoking its express or implied interpretive authority, then, under Chevron, court review tests only whether the interpretation in the regulation is reasonable within the scope of the ambiguity in the statutory text. 

These tests turn upon  what the agency has done – (i) exercise its legislative regulation authority (for which it must cite an express delegation of legislative authority, such as § 1502 for consolidated returns); or (ii) exercise its express or implied authority to interpret statutory text.  If Congress has delegated the agency legislative authority, the agency would want to specifically invoke its legislative authority because, by invoking legislative authority, the regulation is the law and has the force of law just as if it were a statute.  If the agency has no such legislative authority or doesn’t invoke legislative authority in promulgating the regulation and the regulation only interprets ambiguous statutory text, the regulation is an interpretive regulation which, under Chevron, controls (note the conjunctive) (i) if the interpretation is reasonable within the scope of ambiguity in the text of the statute and (ii) the court defers to the agency interpretation even though the court believes there is a better reasonable interpretation.  (It the court interprets the same as the agency, there is no deference to the agency interpretation, there is no deference; if the court is in a state of equipoise as to the better interpretation and defaults to the agency reasonable interpretation, that too is not deference because the court is not substituting the agency interpretation for its own better interpretation.)

So, for legislative regulations, the only potential application of Chevron, a test of interpretation, is conceptually limited to determining the scope of Congress’ delegation of legislative authority.  Does the agency have interpretive authority over the scope of Congress’ delegation of authority to make the law via legislative regulation'?  That is an interpretative issue as to which, at least conceptually, a test of interpretation such as Chevron could apply.  For a valid legislative regulation, the agency has to exercise express statutory delegated authority.  If the agency is interpreting the scope of the delegation, then it would seem to me that the agency is not exercising express delegated authority.  Express authority implies to me clear and unambiguous authority in the statute, so that Chevron analysis is stopped at Chevron Step One without deference.   Indeed, given the constitutional limits on Congress' power to delegate its lawmaking authority to agencies, ambiguity in the statutory delegation (a key requirement for interpretation, including Chevron) would surely be resolved against delegation, so that the agency could not resolve such ambiguity in its favor.  Further, determining the scope of an express delegation of authority to make the law via legislative regulation is not an area of special competence of an agency, one of the key bases for Chevron deference in the first place.  Although I have not fully researched that issue, all that I have learned in chasing down the difference between legislative and interpretive regulations leads me to conclude that the agency cannot determine the scope of its legislative authority by interpretation qualifying for Chevron deference.  The court alone determines the scope of the delegated authority to make the law via legislative regulation.  Once the court determines that an agency regulation is within the scope of the authority to make law, any regulation within that scope is the law without any interpretation and without any conceptual possibility of Chevron applying.  Courts do not defer to law, whether the law is a statute or a valid legislative regulation.

I have claimed above that a legislative regulation requires express delegated authority.  I pick off the classic tax legislative regulations, the consolidated return regulations adopted pursuant to § 1502.  So far, as I am aware, no one can responsibly or credibly claim that § 1502 is not an express delegation of legislative rulemaking authority.  If that express delegation did not exist, could the IRS under its general rulemaking authority in § 7508(a) have adopted consolidated return regulations?  I don't believe that anyone would make that claim, and it is clear that Congress in enacting the predecessor of § 1502 did not think Treasury had that authority.  Sections 1502 and 482 had the same provenance in pre-1928 Acts, but being split in 1928 with the 1928 Act version of § 1502 explicitly conferring legislative regulation authority which was omitted from the 1928 Act version of § 482.  The only possible interpretation of that split is that Treasury can make the law under § 1502 but it cannot make the law under § 482.  If, nevertheless, § 7805(a) conferred legislative rulemaking authority upon Treasury, then the fights about the § 482 regulations in cases such as Altera would be meaningless, for once  the regulations were within the scope of § 482 (the regulations clearly had to with adjusting income and such items among related entities to clearly reflect income), the regulations would then have been the law just as the consolidated return regulations are the law.  Fights about "the law" such as in Altera would thus be a diversion and waste of administrative and judicial resources.  The law would be what Treasury says it is.  Further,  if Treasury does have authority to make the law under § 482 through § 7805(a), Treasury could then set about dealing definitively by "legislative" regulation for all problems it perceives in the application of § 482 and any other provision of the Code to which § 7805(a) could apply.  Fortunately, though, § 7805(a) does not confer legislative lawmaking authority on Treasury.  Treasury regulations under § 482 are not the law as are consolidated return regulations under § 1502. .

Under this analysis, the claims that courts make that Chevron applies to legislative regulations and sometimes even only to legislative regulations are wrong and, conceptually, nonsensical.