Reply to Professor Hickman's Response to My PT Article (6/17/22; 6/24/22)

Note that changes may be made. I will state when the change is made. The date of the latest update is indicated in the date parenthesis in the blog's title; the last date in the parenthesis is the date of the last change.

UPDATE as of 6/24/22 1:00 pm:  Readers interested in this issue should read Professor Bryan Camp's thoughtful trilogy of Procedurally Taxing Blogs joining of the issue:  

• Bryan Camp, It's Time To Get Real: Treasury Regulations Can Certainly Be Interpretive Rules (Procedurally Taxing Blog 6/23/22), here.
• Bryan Camp, The APA Is Not A Hammer (Procedurally Taxing Blog 6/24/22), here.
• Bryan Camp, The More Things Change The More They Remain The Same (Procedurally Taxing Blog 6/27/22), here.

I have blogged here on the Administrative Procedure Act (APA) distinction between legislative and interpretive regulations. Recently, I posted a guest blog on the Procedurally Taxing Blog. Jack Townsend (Guest Blogger), More On The Confusion Surrounding The Difference Between Legislative And Interpretive Rules (Procedurally Taxing Blog 6/14/22), here. Professor Kristin Hickman posted an opposition response, strongly worded. Kristin E. Hickman, It's Time To Let Go:  Treasury Regulations Are Not Interpretative Rules (Procedurally Taxing Blog 6/16/22), here. The competing positions are academic differences of opinion between Professor Hickman and me as to the proper interpretation and application of the Administrative Procedure Act ("APA") distinction between legislative and interpretive rules. Further discussion of that difference of opinion will not be particularly enlightening to PT readers and perhaps not even to my Federal Tax Procedure Blog readers. Still, the FTPB blog is mine, and I have spent considerable blogs discussing the issue, so I decided to post my response to Professor Hickman's PT Blog on the FTP Blog rather than seeking to post on the PT Blog. I will be pleased to post verbatim as a guest blog any further comments or responses she or anyone else wishes to make that engage the discussion.

So, here is my response to Professor Hickman's PT Blog:

First, I respect Professor Hickman's scholarship and passion for the views she holds deeply. I just disagree with her.

Now to the merits of our disagreements.

I have already stated in detail in my article why I disagree with Professor Hickman's previously stated positions on this issue. The article is:  John A. Townsend. The Report of the Death of the Interpretive Regulation Is an Exaggeration (SSRN December 14, 2021), https://ssrn.com/abstract=3400489. I respond in this blog to her claims in the PT Blog entry without getting too much into the weeds. The weeds in the article required over 100 pages with copious footnotes. (A summary in 7 pages with no footnotes: is John A. Townsend, A Key Point Summary of The Report of the Death of the Interpretive Regulation Is an Exaggeration (SSRN May 11, 2022), https://ssrn.com/abstract=4089906.)

I start my article quoting Professor Hickman's claim that there are no interpretive Treasury regulations, despite the APA continuing to have that category. Her PT Blog makes the same claim. Since, as Professor Hickman has persuasively and correctly championed, there is no basis for tax exceptionalism, the same arguments she makes for Treasury Regulations have to apply to all agency regulations. That means that her argument is that the interpretive rule category for regulations has been eliminated from the APA without any legislative amendment of the APA. Thus, for example, the APA exempts interpretive rules from the requirement of notice and comment and application only prospectively, thus meaning that the interpretive regulation category still in the APA means nothing. I thought that an odd claim, particularly since the APA does not allow exceptions except by legislation expressly stating the exception.   That is the Hickman claim that I address in the article. (Clarification added 6/24/22 8:22 am:  The APA refers to "rules" rather than "regulations;" legislative rules must be notice and comment regulations; interpretive rules may be notice and comment regulations or subregulatory guidance; conventionally, discourse in this context uses the terms legislative regulations and interpretive regulations, with both categories authorized by the APA although not in those specific terms.)

I noted in the article (p. 5), in contrast to Professor Hickman's claim of the evaporation of the APA category of interpretive regulation, that, in oral argument in Kisor in 2019, Justice Breyer (an administrative law expert) said that "there are hundreds of thousands, possibly millions of interpretive regulations." That statement can be true only if interpretive regulations remain a viable APA category.

Does Professor Hickman know something that Justice Breyer does not know? Or vice-versa? At a minimum, there is confusion. I side with Justice Breyer.

I engage Professor Hickman and others on the details in my article. I therefore only address some points she specifically raised by her short PT post. Unfortunately, as we all know, responding to claims cryptically stated often requires more words than cryptic claims.

1. The original understanding of the APA's distinction between legislative and interpretive rules may be briefly stated:  

• Legislative rules are the law rather than an interpretation of an ambiguous statute. Legislative rules require an explicit grant of authority to make the law rather than interpret the law. Hence, legislative regulations were (and are) said to have the force of law as statute substitutes. Legislative rules have to be promulgated with notice and comment regulations. And, as with legislation, legislative rules generally have to be prospective. The classic tax example is the consolidated return regulations authorized by § 1502.
• Interpretive rules do not state the law but are interpretations of ambiguous statutory text; the ambiguous statutory text is the law; interpretative regulations may but are not required to undergo notice and comment rulemaking; and agency interpretations, like judicial interpretations, can generally be retroactive to the date of enactment of the interpreted statute (because the statute and not the interpretation is the law).

Guest Post on Procedurally Taxing Blog and Jack Cummings' on the APA Legislative-Interpretive Distinction (6/15/22; 6/16/22)

I posted a guest blog on the Procedurally Taxing blog site:  More On The Confusion Surrounding The Difference Between Legislative And Interpretive Rules (Procedurally Taxing Blog 6/14/22), here. The posting arose from a comment I made on the prior day’s PT blog entry by Les Book, Update on CIC Services And More On The Legislative vs Interpretive Rule Difference (Procedurally Taxing Blog 6/13/22) here. Rather than approve my comment to that earlier blog, Les suggested I offer it as a guest blog rather than a comment. So, that was the genesis of my guest blog. I thought Tax Procedure Blog readers might like to review the PT Blog entry.

I recommend Les Book’s predicate blog as context for my guest blog. In referring PT readers to my article, Les commends Jasper L. (Jack) Cummings' Letter of 4/7/22 to Editor, Tax Notes (4/18/22), here (Copyright 2022, reprinted with permission of the author and Tax Analysts).  (See Jack's bio here.)  Jack is a prolific commentator in this area of the law; over the years, Jack has substantially contributed to my education and I have cited him both in my Federal Tax Procedure Book and in articles.  I too commend Jack’s letter succinctly refuting the claim by many that penalty implications from interpretations make the interpretations legislative rather than interpretive.  One of the key points in Jack’s argument succinctly states the distinction between the APA categories of legislative rules (requiring notice and comment regulations) and interpretive rules (not requiring notice and comment regulations but often promulgated with notice and comment regulations). Here is the key discussion:

             The straightforward way to determine whether Congress has granted an agency the power to make the law is to look at the statute. If the statute says, in effect, “We’re unsure what the rule should be, so you write it,” then the rule is legislative. If the statute says, for example, that a taxpayer can deduct ordinary and necessary business expenses, and then the agency wrote a regulation stating its views on those words, those views would normally be considered to be interpretive. Many courts have shown that they’re perfectly capable of accepting or rejecting the IRS view on the meaning of those words. Put another way, if a statute states a standard that a court can interpret, then the agency’s view on that meaning is interpretive and a rule stating that view need not be issued with notice and comment.

Exactly!  Jack's statement is a variation of the distinction made before and after the enactment of the APA and still carried forward by those who are not confused by the false claims that rules interpreting ambiguous statutory text can be legislative in character rather than interpretive in character for APA purposes.  I cover all of this in my article in a lot more words.

Added 6/16/22 2:15pm:

Professor Kristin E. Hickman, bio here, has written a vigorous response in opposition to my guest post on the Procedurally Taxing Blog and my predicate writings leading to that blog.  Kristin E. Hickman, It’s Time To Let Go:  Treasury Regulations Are Not Interpretative Rules (Procedurally Taxing Blog 6/16/22), here.  Professor Hickman and I disagree.  I address all of her claims points in the article.