Thursday, December 1, 2022

Law Prof Article on the APA Tax Revolution and My Extended Comments (12/1/22; 12/3/22)

Readers of this blog may be interested in a recent article by Professor Reuven S. Avi-Yonah (Michigan Law bio here), The APA Tax Revolution, 177 Tax Notes Fed. 981 (Nov. 14, 2022), here. He says there is an APA Tax Revolution, I think principally started by Professor Kristin Hickman (bio here). Professor Avi-Yonah pronounces: "Hickman has won the debate, and the APA revolution in tax law is here to stay." The debate is grounded in her claim that there are no interpretive Treasury regulations and extensions of that claim (including that Treasury's Temporary Regulations have historically violated the APA, hence Treasury has routinely in the past violated the APA). Professor Hickman and I disagree on that point. See The Report of the Death of the Interpretive Regulation Is an Exaggeration  117-118 (SSRN December 14, 2021), here. Professor Hickman's claim is bottomed on various developments post-Chevron that, she claims, eliminate the interpretive regulation category. (I find Professor Hickman somewhat elusive about those developments; I deal in my article with those rabbit trails I could identify.)

To be sure, there is a lot of commotion on the point, with many scholars and courts accepting Professor Hickman's premises. For the reasons noted in my article, I think they do so without fully thinking through the point from historical perspective as to the meaning of the APA. (See my concluding points about APA original meaning below.)

Most importantly, the Supreme Court has not spoken in a precedential holding on the key issue of whether there are interpretive regulations, so we don't know what the Supreme Court would say on that issue. (See also my concluding points about APA original meaning below.)

There have been contrary Supreme Court voices on that issue. I go into detail in my article. I won't repeat that detail here but ask readers to consider the background and two examples:

Background: As I note in my article, Professor Hickman claims that there are no longer any interpretive Treasury regulations which, if true, would mean there are no other agency interpretive regulations. (Remember her drumbeat claim that tax is not exceptional.) At our ABA Tax panel presentation in October, I asked Professor Hickman whether the regulation considered in Chevron was a legislative regulation. She said yes, an answer I knew she would have to give because she has said too often that there are no longer interpretive regulations. (To be fair, in most of our discussions, Professor Hickman claims that post-Chevron developments are the bases for her claim, but she did say on the panel that Chevron was a legislative regulation under her claim.)  Consider her answer against the following:

Illustrative examples of important voices claiming Interpretive regulations exist:

1.        Justice Scalia said: "Chevron, in fact involved an interpretive regulation." Christensen v. Harris Cty., 529 U.S. 576, 589-590 (2000) (concurring); see also Commissioner v. Estate of Hubert, 520 U.S. 93 (1997) (Scalia dissenting, joined by Breyer, then the Court's other administrative law expert) (involving "interpretive Treasury Regulation, 26 C.F.R. § 20.2056(b)-4(a) (1996)"); and Global Crossing Telecomm. Inc. v. Metrophones Telecom, 550 U.S. 45, 69 (2007) (Scalia dissenting) (distinguishing between "interpretive regulations," meaning "regulations that reasonably and authoritatively construe the statute itself" and substantive (i.e., legislative) regulations "promulgated under an express delegation of authority to impose freestanding legal obligations beyond those created by the statute itself"; note there is no indication that anyone on the Court disagreed with this traditional statement formulation of the distinction).

2.        Justice Breyer, an administrative law expert, said in oral argument in Kisor v. Wilkie, 588 U.S. ___, 139 S.Ct. 2400 (2019): "there are hundreds of thousands, possibly millions of interpretive regulations." Transcript of Oral Argument (Sup. Ct. No. 18-15) 3/27/19, here, p. 10.

I could offer much more and do so in my article above.

As Professor Avi-Yonah notes in his article, Professor Hickman's claim has gained traction--indeed that "Hickman has won the debate.." I think the community has been worn out or confused into submission through her frequent drumbea of the claim (with iterations) in her prolific law review articles, many of which do not extend the argument. One lone scholar making repetitive claims does not usually change the law. I think there may be a more subtle phenomenon causing her claim to gain traction--it plays into the preferences of scholars and judges who distrust the administrative state. See, e.g., Christopher J. Walker, The Federalist Society's Chevron Deference Dilemma (Law & Liberty 4/3/18), here ("The call to eliminate Chevron deference has largely come from those right of center."); Jeremy W. Peters, Trump's New Judicial Litmus Test: 'Shrinking the Administrative State' (NYT 3/26/18), here (noting administrative state angst with anti-Chevron as a litmus test for Trump's judicial, particularly Supreme Court Justice, nominees and further noting that although the right holds up Justice Scalia as the "model jurist, . . . .one person who likely would have not made the cut under the Trump administration's guidelines is Justice Scalia, who for most of his career embraced the Chevron deference doctrine.”)

Original Meaning of the APA on the Legislative/Interpretive Issue.

On the ABA Tax Section panel with Professor Hickman in October, my principal scripted contribution started the discussion with an overview of the state of the law as of and immediately after the enactment of the APA. I said that it was consistently recognized at and for a long time after the enactment of the APA that there were interpretive and legislative regulations, generally and Treasury specifically. I said that was the original meaning of the APA. Professor Hickman agreed. Professor Hickman claimed, however, that subsequent developments (principally, I think, sourced from her writings after 2000) changed the original meaning. I concluded my introduction of the original meaning of the APA by saying that, if the Supreme Court's conservative majority genuflects in substance and not just in rhetoric to "original meaning," then when the Supreme Court does address the issue, it might sustain the original meaning and not Professor Hickman's and others' substantially post-APA and post-Chevron spinning.

Original Meaning of the APA and Other Post-APA Spinning.

Finally, I noted above that the claims of the demise of the interpretive regulation came from post-APA (really post-Chevron) spinning. A similar process has happened with the remedy of vacatur allegedly under the APA whereby a court, upon finding an agency rule defective in some way, vacates the agency rule (having a similar effect to a universal injunction because, with a vacated rule, there is nothing for the agency to enforce anywhere). Some courts vacate; some do not (thus limiting the holding of the rule defect applicable only to the parties or, in some cases, limited geographical area). Most persons advocating for the vacatur remedy base it on APA 5 USC § 706, which provides: the "reviewing court shall . . . hold unlawful and set aside agency action, findings, and conclusions" that are defective (e.g., arbitrary and capricious). The scholars that I am familiar with (a limited data set) have concluded that vacatur was not a remedy under § 706 or anywhere else in the APA but instead "appeared" by a process of spinning the APA after enactment (in much the way I have noted that the Hickman claim is based on spinning after Chevron). See, e.g., Samuel Bray, Vacatur and United States v. Texas (The Volokh Conspiracy 11/30/22), here ("The use of vacatur as a remedy in the D.C. Circuit doesn't develop until decades after the APA. . . .  In my view none of these theories can get us from an APA that was originally enacted without vacatur to an APA that should be interpreted today by the Supreme Court as authorizing courts to vacate agency rules etc."); see also John Harrison, Section 706 of the Administrative Procedure Act Does Not Call for Universal Injunctions or Other Universal Remedies, 37 Yale J. on Reg. Bull. 37 (2020), here; see also John Harrison, Guest Post from Professor John Harrison: Vacatur's Missing Pedigree (The Volokh Conspiracy 11/28/22), here.

Added 12/3/22 4:30pm:

On the last point about whether vacatur (like a universal injunction) is an APA remedy, this issue came up in oral argument this week in United States v. Texas (Sup. Ct. 22-58), here.  The Solicitor General argued, as she had in the U.S. opening and reply briefs, that vacatur was not a remedy contemplated by the APA, despite years of vacatur in some courts (principally the D.C. Circuit) who, arguably, just assumed the remedy rather than holding that it was permissible under the APA.  For a good blog discussions of the vacatur issue at oral argument, see Colin Kalmbacher, 'Wow': Chief Justice Roberts, Justice Kavanaugh, and Justice Jackson Audibly Surprised by Biden Admin's Position on Administrative Law and Judicial Review (Law and Crime 11/29/22), here; and Mark Joseph Stern, Why Roberts and Kavanaugh Got So Furious at Biden’s Solicitor General (Slate 12/2/22), here. For those wanting to be more in the weeds of the vacatur remedy, in addition to the articles cited in the preceding paragraph, see Josh Blackman, Let's Not Set Aside The Scholarly Debate About Vacatur (The Volokh Conspiracy 12/3/22), here.

I link here excerpts (24 pages) of the portions of oral argument relating to the issue of vacatur as an APA remedy.  The following is from the Introduction to the excerpts:


Below are excerpts of Oral Argument in United States v. Texas (Sup. Ct. No 22-58) dated 11/29/22, here, selected by John A. Townsend for the discussion regarding vacatur as a remedy under APA §§ 703 and 706 (5 U.S.C. §§ 703 and 706).  Also involved is immigration statute 8 U.S.C. § 1252(f)(1) which prohibits injunctive relief with respect to review of orders of removal.

The issues involved are (i) whether the APA does not allow vacatur (specifically whether § 706's “set aside” language includes the vacatur remedy) and (ii) if it does at least in some cases, then whether vacatur is inconsistent with the prohibition on injunction in § 1252(f)(1) because vacatur has the same practical effect as an injunction.

The key point of the discussion in the excerpts is that, even if vacatur was not a remedy contemplated by the APA at the time of enactment, its later use by courts (principally the D.C. Circuit which assumed rather than decided that it was a proper APA remedy) has effectively changed what might have been the original meaning of the APA. In this regard, consider this exchange

Justice Barrett (not from the D.C. Circuit) asks (pp. 58-60 - note General Prelogar is the Solicitor General of the U.S.)

JUSTICE BARRETT: Let me pick up on the vacatur point. So one question I have, obviously, the Chief and Justice Kavanaugh have pointed out that the courts of appeals, [*59] particularly the D.C. Circuit, have employed the remedy of vacatur for a long time.

Why isn't it possible -- and let's say that I agree with you and agree with  some of the scholarship that says that this was not contemplated at the time of the APA's enactment.

Why can't remedial authority evolve over time? You know, even if  injunctions and declaratory judgments are what those, you know, who enacted the APA, Congress at the time, scholars at the time, Jaffe, thought that didn't -- vacatur didn't occur to them.

Remedial authority is a flexible concept, and so maybe the courts of appeals have expanded that concept. Why would that be impermissible?

GENERAL PRELOGAR: Well, I think it would be inconsistent with how the  Court ordinarily approaches these types of questions of statutory interpretation. 

And I think, if you agreed with us that this is not what Congress meant to authorize when it enacted Section 706 of the APA, then there would be kind of no basis to alter the text at this stage and to suggest that [*60] actually the Court can read into that language that all agree was not intended to cover vacatur to --

JUSTICE BARRETT: But set aside is broad, right? It's not specific. And even in 703, it says including actions for declaratory judgements or writs of, you know, probatory or mandatory injunctions. It doesn't exclude it. 

And given that set aside is broad, you know, it's -- it's -- it's -- you're asking for a narrowing construction of it. And I guess what I'm saying is, when set aside could be read to include vacatur, doesn't preclude it, why is it not subject to evolution?

That is just a small excerpt from the excerpts.  All an interesting read. 

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