It’s Time To Get Real: Treasury Regulations Can Certainly Be Interpretive Rules

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Professor Bryan Camp, the George Mahon Professor of Law at Texas Tech School of Law, offers his perspective on the recent posts from Jack Townsend and Kristin Hickman that have addressed the controversial and difficult issue concerning the proper classification of tax regulations under the APA. For Jack’s original post, see here. Kristin’s response. Jack’s reply (on his blog), see here. Les

It was interesting to read the recent back-and-forth between Jack Townsend and Kristin Hickman.  Jack takes the position that most Treasury Regulations are properly categorized as interpretive rules under the APA for purposes of evaluating whether they are validly promulgated.  Kristin disagrees, telling Jack “it’s time to let go.” She says that anyone who fails to recognize that ALL Treasury Regulations are legislative rules under the APA is clinging to an outdated concept of tax exceptionalism and has simply failed to see that ship has sailed.

So I guess I’m blind, too.  I also know, moreover, that ships have a habit of returning to port.  The law has never been static and just because the winds may favor one direction now does not mean they will not change.  I think Jack is mostly right in what he says.  I think Kristin’s assertion that ALL Treasury regulations are “legislative” for APA purposes is incorrect, both as a descriptive and normative matter.  Kristin is a prolific and entrepreneurial academic activist with an impressive list of articles to her credit.  More than I will ever write, that’s for sure.  But that does not make her right.  And it certainly does not give her the right to condescend.

Les and the PT gang have kindly agreed to let me offer you my thoughts on the matter in two posts, one today and one tomorrow.  In my view, Kristin’s conclusion is based on three myths: the myth of Mayo, the myth of Tax Exceptionalism, and the Myth of Change. 


First, I will start where Jack started.  He started his post with the observation that the APA contains guidance on how agencies are supposed to promulgate of agency regulations (called “Rules” in the APA).  But the APA does not similarly give guidance as to what weight an agency rule is supposed to carry when a court seeks to resolve a dispute relating to that rule.  To Jack, the question of deference to an agency rule is different that the question of what procedures an agency must follow to issue the rule.  That’s incontrovertible. 

And Kristin does not contradict Jack.  ‘Cause she can’t.  She instead just ignores the distinction.  ‘Cause she can.  She seems to believe that the distinction between interpretive and legislative rules for APA promulgation purposes was eliminated by the Supreme Court’s opinion in Mayo Foundation for Medical Educ. and Research v. U.S., 562 U.S. 441 (2010).  Her reasoning is that any regulation that carries the “force of law” is legislative and in Mayo, she says in her blog post, “the Supreme Court laid the jurisprudential groundwork for treating all Treasury regulations as legally binding for APA purposes.”

Her reasoning is based on myths.  The first one you can call the Myth of Mayo. 

1. The Myth Of Mayo

In Mayo, the Supremes decided that Treasury Regulations should be given the same weight (i.e. level of deference) as would be given any other agency’s regulations under the Supreme Court’s guidance in Chevron.   Let’s call that “Chevron deference.”  [That’s also a myth, as beautifully demonstrated in Ann Graham, “Searching for Chevron in Muddy Watters: The Roberts Court and Judicial Review of Agency Regulations” 60 Ad. Law Rev. 229 (2008).  But that’s a subject for a different post.]

Mayo says nothing about the distinction between interpretive and legislative rules.  It was a decision about deference.  There was no issue in Mayo over how the regulation at issue had been promulgated.  Again, the issue in Mayo was on the proper level of deference, not on the proper mode of promulgation.  As to deference, the Mayo court sure did say that ALL Treasury regulations get the same treatment as other agency regulations: Chevron deference.  Again, it’s beyond this short post to go into all the reasons for why that is so, but it basically comes down to what is the right way to balance the duties of a court with the duties of administrative agencies.

The myth of Mayo is to say that it stands for the proposition that all Treasury regulations are legislative for promulgation purposes.  The Court said nothing of the sort!  Kristin, however, conflates the two issues that Jack presents as separate: (1) how an agency rule must be promulgated, and (2) what deference should a court give an agency rule. 

Why does she do that? Well, because for the past 15 years or so Kristin has been beating on a drum that Treasury violates the APA when it issues ANY regulation without following the “appropriate” notice and comment procedure.  I use the word “appropriate” in quotes because what is “appropriate” under the APA is a moving target.  Thus, for example, we have the current disagreement on the Conservation Easement proceeds regulation between the 11th Cir. in Hewitt (proceeds regs did not follow proper APA procedure) and the 6th Circuit in Oakbrook (regs were properly promulgated).  I’ll come back to the Oakbrook/Hewitt disagreement in tomorrow’s post.

Kristin started beating on this drum when she looked at a set of 232 Treasury regulation projects published in the Federal Register in 2003, 2004, and 2005.  She concluded that Treasury had not followed what she considered the appropriate APA promulgation procedure in 40% of those projects.  Those were almost all Temp Regs.  In that article she was not entirely sure that this violated the APA because she was not entirely sure what was a “legislative rule” for APA promulgation purposes.  Kristin studied the matter, wrote a couple more law review articles, and adopted the idea that if a regulation has “the force of law” it must be categorized as a legislative regulation under the APA, and therefore must follow the “appropriate” notice and comment procedure.  And Kristin believes all Treasury Regulations have “force of law” because of Mayo.  Once the Supreme Court said that courts should defer to Treasury Regulations on the same basis as other agency regulations, then that made them “force of law” in Kristin’s view.  Again, she writes: “the Supreme Court laid the jurisprudential groundwork for treating all Treasury regulations as legally binding for APA purposes.”

So the first myth that Kristin invokes to support her claim that all Treasury Regulations are properly categorized as legislative regulations is the myth of Mayo.  You only get to her conclusion if you follow her logic.  But her logic ignores the distinction Jack presents, the distinction between the rules governing issuance of agency rules (which is in the APA) and the rules governing what weight courts ought to give agency regulations (which is judge-made).  And her logic creates a second myth, the myth of Tax Exceptionalism. 

2. The Myth of Tax Exceptionalism

Once Kristin concludes that all Treasury regulations have the magic “force of law” she concludes that makes them legislative regulations and so they must be issued, per the APA, thorough the au currant judicial interpretation of APA notice and comment requirements. As a good textualist, Kristin believes all agencies are strictly bound by the APA unless and until Congress specifically exempts them.  So one must find a specific statutory exception to avoid the APA.  She finds no text in the Tax Code that excludes tax regulations from the APA.  Simple!  Case closed! 

And that’s how we get the myth of tax exceptionalism. That myth says that anyone who disagrees with her analysis must be saying that tax administration is not bound by the APA, must be trying to—gasp!—avoid the law!  

No one, ever, has said that the APA does not apply to Treasury regulations.  No one is trying to avoid the law.  It’s an intellectually empty claim.  It’s what in debate we used to call a straw man fallacy.  Remember the difference that Jack explains (and that Kristin simply ignores) between questions of how must an agency issue regulations and how must a court give deference to agency regulations.  In neither branch of the analysis has there ever been a claim that Treasury regulations are somehow exempted from the APA.  Let’s look at each separately.

First, as to on what deference to give regulations, Jack points out correctly that the APA is simply silent on the deference issue.  So as to that there is nothing to be exceptional from!  What courts used to say is that they would give Treasury regulations different authoritative effect than they gave other agency regulations.  Courts did that because the S.Ct. told them to.  See National Muffler.  However, as Kristin rightly points out, the winds of law have changed.  The S.Ct. changed its mind in Mayo.  But, again, that opinion did not turn on whether the regulation there was interpretive or legislative.  The Court was there dealing with the question of what deference to give a 2004 amendment to a 1951 regulation and not whether either had been validly promulgated.  Promulgation was not at issue.  There is nary a word in Mayo about whether the regulations at issue in that case were legislative or interpretive.  It simply did not matter.  And the money quote from Mayo says nothing about promulgation!  It’s all about deference.  Here’s the standard money quote: “we are not inclined to carve out an approach to administrative review good for tax law only. To the contrary, we have expressly recognized the importance of maintaining a uniform approach to judicial review of administrative action.” 562 U.S. at 55. (cleaned up, emphasis supplied).  It’s all about “review” and not about “promulgation.”  Oh, and funny note: Kristin keeps chastising the Treasury Department for claiming “tax exceptionalism.”  But in Mayo it was the government that was asking the Court to apply Chevron. 

Second, as to what is the proper process for promulgation of Treasury Regulations, no one, ever, has said Treasury Regulations are not subject to the APA.  The disagreement is how the APA applies, and how should it apply, to Treasury Regulations.  Kristin’s answer is simplicity itself: she links the deference issue to the promulgation issue.  Read her sentence again: “the Supreme Court [in Mayo] laid the jurisprudential groundwork for treating all Treasury regulations as legally binding for APA purposes.”

Her rationale is that because Mayo blessed ALL Treasury regulations with what Kristin calls “force of law,” then by doing so the Supreme Court, unwittingly, transformed ALL Treasury Regulations into legislative regulations, obliterating without comment over 60 years of understanding.

How can that be?  Well, this takes us to the third myth: the myth of change. 

3. The Myth That Tax Administration Has Changed.

No one, ever, has argued that all Treasury regulations are interpretive for APA purposes.  Jack points out, correctly, that when the APA was first enacted, in the 1940’s, everyone did believe that most Treasury regulations fell into the interpretive category of APA.  I go in to tedious detail on why that is so in “A History Of Tax Regulations Prior to the Administrative Procedure Act,” 63 Duke L.J. 1673 (2014). 

Importantly, Kristin does not (and cannot) deny Jack’s basic point.  Her response is basically “that was then, this is now.”  Her longer explanation is in “Administering the Tax System We Have,” 63 Duke L.J. 1717 (2014).

Her point is well taken, but can easily be pushed too far.  It is certainly possible that even though tax regulations were considered mostly as interpretive regulations under the APA, circumstances now require them to be moved into the legislative regulation box.  Or perhaps we should have a different criteria for typing tax regulations than those who wrote the APA came up with in the 1940’s.

In tomorrow’s post I’ll examine Kristin’s claims on why that should now be different and try to give some refinement to her stark claim that ALL Treasury Regulations are legislative rules under the APA.   I think Kristin’s claim that tax administration has changed has some definite truth to it, but is considerably overstated. 

Again, neither Jack nor I assert that all Treasury regulations are interpretive.  Some are.  Some are legislative.  Kristin, in contrast, asserts that ALL Treasury regulations are legislative (although she leaves open—for now—the question of whether sub-regulatory guidance issued by the IRS are APA legislative rules).  What troubles me about that claim, aside from my inherent distrust of categorical claims, is its reliance on a hugely abstract and amorphous concept called “force of law” to classify claims.  It’s a very top-down approach, which is understandable as Kristin is an academician and is used to taking the 30,000 foot view.  But that approach is not particularly helpful for agency attorneys and those they advise on how to produce timely and effective guidance.  More on that tomorrow.   


  1. Robert Kantowitz says

    A lot of this discussion is pure sophistry. First, is there any doubt that the IRS and Treasury (almost) always try to defend a regulation as merely interpretive? Second, and more importantly, the interpretive-legislative distinction is nugatory given that the government demands that all regulations be granted deference and be given the full force of law. The only approach consistent with separation of powers is to eliminate Chevron deference altogether, which I where I believe the Supreme Court is headed, or if not generally then certainly as to tax law. As I have written in other places, (i) whatever rationale the doctrine ever once may have had has been rendered a joke, since all the history is instantly available and private sector practitioners collectively understand the tax law far better than Treasury staff, (ii) Treasury sometimes is incapable of separating its revenue generation function from its function of fair administration of the tax law and produces regulations that are obviously over-reaching, and (iii) tax law is the only area of law (or one of very few areas) that affects everyone involuntarily and where it is always the government against a person (as opposed to two opposed private actors), which calls into question the fairness of letting the government both set the rules and enforce them (via deference to the rules). The last point is serious, as illustrated by the recent case declaring unconstitutional the SEC’s process of trying violations before itself.

    • Robert Kantowitz says

      In (ii) to be more specific, it is not just an insatiable appetite for revenue but Treasury’s inappropriate usurpation of Congress’s exclusive power to determine tax policy. Altera is a good example of regulation’s pushing a standard that reflects how academics think people should act that does not reflect the way that people actually act in the marketplace as required by the statute itself. It is also a good example of the beyond-deferential milquetoast application of Chevron. The inveterate opposition to conservation easements is another policy-related example.

    • Jack Townsend says

      Robert, there is hyperbole in your claims, but I only address the deference claim that the “government demands that all regulations be granted deference.”

      The Government does not demand that courts defer to all or even most regulations interpretations. Remember that the best interpretation controls without deference. My anecdotal research and observation over the years is that Treasury regulations usually state the best interpretation. No deference demanded, needed, or applied.

      Chevron deference applies in only a narrow set of cases, far narrower than the commotion about Chevron might indicate. See Is Chevron on Life Support; Does It Matter? (Federal Tax Procedure Blog 4/2/22; 4/3/23), where I analyze Chevron deference in Court of Appeals cases for a year and found not much there. (The one-year period was after the courts began complaining about reflexive deference and insisting that courts take seriously the hard work of interpretation at Step One which will, in most cases, determine that the statute is not ambiguous, thus permitting no deference.)

      Still, I think courts have for many years, well earlier than the APA, deferred to reasonable agency interpretations of ambiguous statutes. Courts did not do that just because they were lazy or wanted to cede power from the courts to the agency. They did that because they recognize that agencies are often better able to reach the most practical interpretation in the context of complex administrative situations considering all that they are charged to do under the statute. My sense is that that is the right thing to do because courts are often unable to reach holistic determinations. But as I note in the blog linked above, the reversal of Chevron and the prior authority for deference will just not have that much effect on outcomes in the real world, particularly when Courts take seriously Skidmore respect for agency interpretations. (Skidmore is not deference as many, if not most, claim; it is simply a command that the courts take seriously agency interpretation (and expertise) in determining what is the best interpretation of the statute.)

  2. Jack Townsend says

    First, Bryan, thank you for the post.

    On the force of law issue. It gets the horse before the cart (or top-down, as you state). Under the APA as enacted and interpreted, a regulation properly FIRST characterized as legislative (express statutory delegation of authority) had the force of law because it was, by delegation, a statute substitute. Statutes have force of law; legislative regulations have force of law because they are like statutes.

    But you don’t determine first that a regulation has “force of law” because of deference and then say the regulation is legislative. As I develop in my article, force of law and deference are a red herrings to the APA distinction between legislative and interpretive regulations.

    And what about all the regulations interpreting statutes that are the best interpretation of the statute and thus do not get deference. (I suspect this category includes most regulations that do no more than interpret the statute.) Are they interpretative regulations or legislative regulations?

    Moreover, deference, which was with us before the APA, never conferred force of law status on regulations that did no more than interpret the statute. Deference never transformed interpretations into the force of law in the legislative rule sense. I develop that history in my article.

    Just a point more on deference. Over the years, the courts deferred to agency regulations interpretations. The core of that deference is that the agency interpretation had to be reasonable. Stated otherwise, whatever test the courts used to determine that deference could apply, they would never approve an unreasonable interpretation. Over the years, of course, the courts disagreed about what circumstances were required for deference (such as contemporaneous promulgation, etc.). All Chevron did was to regularize the predicates with the Chevron two-step that permitted courts, as before Chevron, to defer to reasonable agency interpretations. As Justice Scalia said, Chevron was not that big a deal compared to past deference cases, except that it regularized and made more predictable when deference would apply.

  3. Jack Townsend says

    On the notion of tax exceptionalism (real or imagined), readers may also be interested in my discussions of the issue:

    On Tax Exceptionalism and Deference (4/3/22)

    On the History of the Chevron / National Muffler Deference Kerfuffle (8/7/21)

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