It’s Time To Let Go:  Treasury Regulations Are Not Interpretative Rules

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Today’s post is from Kristin Hickman, the McKnight Presidential Professor in Law at the University of Minnesota Law School. Kristin is a leading authority in the fields of administrative law, tax law, and statutory interpretation, and her writing has greatly influenced courts and other academics. Les

It’s tough to know what to do when an esteemed colleague cannot be persuaded from and continues to perpetuate an idea that is not only legally untenable but that arguably has negative real-world consequences. I have nothing but respect and warm regard for Jack Townsend. A smart and experienced tax practitioner and teacher, Jack was kind to me and engaged seriously with my ideas about tax and administrative law when many others did not. For many years now, I have enjoyed discussing and debating the intersection of tax administration and administrative law requirements, doctrines, and norms with Jack. And when it comes to ideas, I believe in a big tent approach, acknowledging that law is often uncertain and seeing merit even in arguments with which I strongly disagree. In this same vein, I am happy to let other people have their say, and I don’t feel that I have to reply to every thought that someone publishes but that I think is misguided.


At some point, however, one does have to recognize that ideas can have consequences, and that refusing to let go of and continuing to promote a legal argument may encourage real world actors to behave badly. Such is the case, I think, with Jack’s claim that a (potentially large) subset of Treasury regulations are interpretative rules under the Administrative Procedure Act (APA), and thus that they are exempt from notice-and-comment rulemaking procedures (even if Treasury and the IRS purport to follow those procedures in adopting such regulations).

For the last 15 years, I have explained in articles, essays, and amicus briefs (e.g., here and here) why Treasury regulations simply do not qualify as interpretative rules for APA purposes under any contemporary standard, so I do not want to belabor the point here too much.  To summarize briefly, black-letter administrative law holds, and has held for decades now, that legislative rules are legally binding and interpretative rules are not.  No one seriously questions that all Treasury regulations are legally binding, whether issued under an express grant of rulemaking power in a particular Internal Revenue Code provision or the general rulemaking grant of 26 U.S.C. § 7805(a). A different understanding did exist at the time the APA was adopted, but that different understanding was predicated on (1) now-rejected perceptions that the nondelegation doctrine of Article I, §1 of the Constitution did not allow § 7805(b)-type regulations to be legally binding (for more on that, see, e.g., here, esp. pp. 1104-1113), plus (2) very different approaches to the tax legislative process and in how Treasury exercised its general rulemaking authority in the 1940s relative to today. The casual use of the term “interpretive regulations” by this or that justice or judge in describing legally-binding regulations that interpret statutes does not alter the standards the courts employ in distinguishing legislative rules from interpretative ones and does not signal that the justice or judge is questioning the categorization of the regulations for APA purposes.

Even if you think that some Treasury regulations should be considered interpretative rules—whether on originalist grounds, for pragmatic reasons, or otherwise—at this point, it is clear that the courts will not agree with you. Whatever case law may have existed previously, the Supreme Court laid the jurisprudential groundwork for treating all Treasury regulations as legally binding for APA purposes in its 2011 decision in the Mayo Foundation case. Since then, no federal judge has concluded that any Treasury regulation is an interpretative rule, while several have held the opposite. The Tax Court, hardly staffed by APA maximalists, unanimously concluded in 2015 in the Altera case that Treasury regulations are legislative rules, using reasoning that was not specific to the regulations at bar and would apply equally to every other Treasury regulation. The Tax Court’s Altera decision was reversed by the Ninth Circuit, but only on other grounds. The IRS and the Department of Justice have mostly if not entirely stopped arguing in court that Treasury regulations are exempt from notice-and-comment requirements as interpretative rules, I presume because they know that the argument is not colorable, will not succeed, and will undermine the credibility of their other claims. Currently, the active debate in the courts is over whether Internal Revenue Bulletin guidance like IRS Notices or Revenue Procedures are legislative or interpretative rules, not whether Treasury regulations are.  The fact that Treasury regulations do not qualify as interpretative rules does not mean that no agency pronouncements qualify as interpretative rules; plenty of agency pronouncements, including by the IRS, fall under the interpretative rule category for APA purposes. Just not Treasury regulations.

Regardless of the above, one might wonder, what’s the harm in continuing to assert in academic articles and blog posts that some Treasury regulations should be considered interpretative rules? After all, academic works advance all kinds of interesting legal and normative arguments that have no chance of succeeding in real world courts. Academic writing is great for developing and exploring crazy new ideas, or resurrect or maintain old ones. 

In this instance, however, when highly-regarded tax lawyers like Jack refuse to concede that all Treasury regulations are legislative rules and parse legal texts to gin up uncertainty regarding that characterization, they embolden Treasury and IRS regulation drafters to do the same. Even as IRS and Department of Justice litigators decline to argue in court that Treasury regulations are interpretative rules, the IRS in the Internal Revenue Manual has doubled down post-Mayo on the assertion that most of its regulations are exempt from APA procedural requirements as interpretative rules. In my experience, many (though by no means all) Treasury and IRS regulation drafters still do not take APA procedural requirements as seriously as they should, no doubt inspired at least in part not just by the Internal Revenue Manual but also by highly-regarded tax lawyers giving them cover. Treasury and IRS intransigence on the applicability of APA procedural requirements to Treasury regulations undermines taxpayer confidence in tax system fairness and legitimacy, which in turn encourages taxpayer disrespect and discourages tax compliance. Why shouldn’t taxpayers rely on untenable legal arguments and stretch the boundaries of statutory interpretation to justify their tax return reporting positions when the IRS continues to embrace an untenable legal claim regarding its own legal obligations in the Internal Revenue Manual?

Tax system integrity depends in no small part on smart and experienced tax lawyers, both inside and outside the government, knowing when to stop pushing the legal envelope. It is time for the tax bar to let go of and move forward from the idea that Treasury regulations are interpretative rules.


  1. Eric B Rasmusen says

    Good for you, Prof. Hickman. I am on the fringe of this debate, but that may help by enabling me to simply be amazed by the claim that tax regulations are different from every other kind of regulation and that courts ought to defer to the IRS on rules that don’t go through notice and comment or provide reasons justification yet have the effect of statutes. It is impressive that you have written so much to make such an obvious point and not gotten too bored to continue. Keep it up!

  2. Robert Kantowitz says

    I agree with Prof. Hickman. Apart from that, I believe, as I have written, that courts are often all too milquetoast in applying Chevron deference to regulations, and in particular that the Ninth Circuit (in reversing the Tax Court) got Altera wrong after a procedural circus. Auer deference barely survived in a weakened state a couple of years ago, and that doctrine (which defers to an agency’s interpretation of its own materials) is less offensive to the rule of law than Chevron deference; I predict that the next shoe to drop will be the elimination of Chevron deference, if not overall than at least the Supreme Court’s overturning of Mayo for tax regulations.

  3. Carl Smith says

    Kristin, Many know that you and I filed competing amicus briefs in the Supreme Court in Mayo Foundation over whether general-authority tax regulations should get Chevron deference. You won, but, ironically, the court cited my brief. (Such are the vagaries of academic life.) In any case, I told you at the time that I agreed with you on plenty, just hoped that Chevron would go away for, at least, general authority tax regulations.

    I have huge respect for Jack Townsend, and I am not as expert as either of you in administrative law. But, on the point of your blog post today, I 100% agree with you from all that I have read, and I share your concern of the potential impact on the courts and government of calling some Treasury regulations interpretative. (Sorry, Jack)

  4. Stuart J Bassin says


    Thank you for weighing in on this topic. As always, you are spot on with regard to this topic.

    Far too many veteran tax lawyers (including several on the Tax Court) fail to recognize that the law concerning regulations and other IRS pronouncements has changed substantially after the Mayo Clinic. The “bottom line” is that most of the “positions” enunciated by the IRS through sub-regulation guidance are not legally valid and unenforceable. We need to stop talking about interpretive vs. legislative regulations, as well as differing standards of review (and requirements for notice and comment), and recognize that many of the rules that tax lawyers learned decades ago are obsolete and largely defunct. Sort of like of us

  5. Howard Kaplan says

    Today is my 70th birthday. I have been practicing tax law since the Carter administration. It was a bit of a shock to wake up today to find out that I was obsolete and largely defunct.

    Regardless of my personal problem, the issue being discussed is vital. When I grew up in the the IRS during the latter half of the 1970s, the difference between legislative regulations and interpretive regulations was sacrosanct. Case law has now intervened in my learning curve, and it is my opinion that it is time we all got with the new plan. Are revenue rulings the next shoe to drop?

  6. Robert Kantowitz says

    Let’s also be realistic about part of why the government over-reaches. Too many tax practitioners are prepared to sell the taxpayers’ birthright for a mess of pottage, to sacrifice what is right in the interest of expediency. How many times to we see a bar report that applauds the government for “cracking down” when what is really happening is the government trying to substitute questionable audit positions or regulations unsupported by the statute for Congress’s enacting a law that one prefers? Or a report that accepts as inevitable regulations not authorized by the statute because “we need some guidance” even if it is incorrect and unlawful or includes over-reach as a trade off for another provision that does taxpayers a favor. Too many “experts” substitute what (maybe) should be for what is. How many times do we see regulations that enshrine what theoreticians insist should be rational behavioral standards, in the face of indisputable evidence that that is not the way independent persons actually operate at arm’s length in the markets (see Altera)?

  7. Leslie Book says
  8. Jack Townsend says

    Professor Hickman states her claims. I believe Professor Hickman is wrong. I do not mean any disrespect to Professor Hickman. I just believe she is wrong. (By way of context, I have often been wrong in the past and cannot exclude the possibility that I am wrong to say that she is wrong.)

    I don’t want to continue this discussion on the Procedurally Taxing Blog because the tenor indicates that further discussion may be distracting for many readers of the Procedurally Taxing Blog. I have posted a response on my Federal Tax Procedure Blog, here:

    I invite Professor Hickman and anyone else to continue the discussion on my FTP Blog by comments or even guest blogs (which will not be edited or restricted). Feel free to disagree with me.

    Those readers wanting to follow any discussion or any of my ongoing thoughts on these issues, may review my Federal Tax Procedure Blog:

    Thank you, and thanks to Professor Hickman for her contributions to my continuing legal education.

    • Kristin Hickman says

      Jack, as always, I appreciate your continued engagement, and we just will have to agree to disagree. I couldn’t figure out how to comment in response to your Federal Tax Procedure Blog post at that site, and I think I will let stand my post and my previous written work on the topic, except for two small points. First, I simply want to thank you for so graciously recognizing that I meant 7805(a) instead of 7805(b). I’ve had the latter in mind more often lately, and hit “send” on my post without proofreading adequately, so I appreciate your gentle correction. Second, to answer one question you posed — yes, what I have written about 7805(a) is consistent with how the courts treat general authority rulemaking grants in a host of other statutes as well, as discussed in my recent George Washington Law Review article, Nondelegation as Constitutional Symbolism (linked in my original post above). Take care, and be well.

  9. Jack Townsend says

    I have just added the following comment to my reply to Professor Hickman:

    26. If Professor Hickman’s claims are true, then she and the courts and scholars subscribing to the notion should proclaim boldly and without equivocation: The judiciary has overruled Congress on the original meaning of the APA provisions for interpretive regulations and eliminated that category from the APA.

    The reply is here:

    • Kristin Hickman says

      Jack, respectfully, I disagree with the premise of your Item 26. (1) Congress didn’t define in the APA what it means to be an interpretative rule; (2) one could just as easily argue (as I have) that the courts haven’t interpreted the APA differently over time, but rather the courts have interpreted the definitions of legislative power and executive power in the vesting clauses of Articles I and II of the Constitution differently, plus legislative and regulatory practices have changed, such that regulations that once would have been considered lacking the force of law now carry the force of law, which is why they no longer qualify as interpretative rules under the APA; (3) whatever courts and commentators may have meant when they used the term “interpretive regulation,” that isn’t a statutory term or category — APA s. 553 refers to “interpretative rules,” and the Internal Revenue Code and other regulatory statutes don’t use the term “interpretive regulations,” either; and (4) courts have not eliminated the APA’s interpretative rule category at all because plenty of agency guidance documents, including some from the IRS, fall well within the definitional standards that courts have developed for identifying interpretative rules. In short, although I won’t speak for other scholars on this question, I don’t subscribe to the notion that the judiciary has overruled Congress on the original meaning of the APA’s interpretative rule category (although I do think the judiciary arguably has disregarded the original intent of Congress regarding other aspects of the APA). Rather, the courts developed standards for defining a statutorily-undefined term/category of agency rules, and Supreme Court interpretations of the Constitution, combined with changes in tax legislative and regulatory practices over time, have caused a shift in the legal and practical characteristics of regulations issued under IRC 7805(a), moving those regulations from one APA statutory category to another.

  10. Kemal Kurtulus says

    Thank you to both Professor Hickman and Professor Townsend, both of which are tax giants. It has been so pleasant to read this good debate. Respectfully, I am still leaning towards Professor Townsend a bit, albeit Professor Hickman has put forth a compelling conclusion. I suppose we can also toss this dicta in the garbage as it relates to APA and taxes, albeit a non-tax in United States v. Mersky, 361 U.S. 41 (1960):

    “An administrative regulation, of course, is not a statute. While in practical effect regulations may be called ‘little laws’… it is the statute which creates the offense… The regulations, on the other hand, prescribe the identifying language of the label itself… Once promulgated, these regulations, called for by the statute itself, have the force of law, and violations thereof incur criminal prosecutions, just as if all the details had been incorporated into the congressional language. The result is that neither the statute nor the regulations are complete without the other, and only together do they have any force. In effect, therefore, the construction of one necessarily involves the construction of the other.”

  11. In the course of my research on various exempt organization issues, I have discovered that in the 1950’s Notices of Proposed Rulemaking (NPRM) for regulations promulgated under the general authority of section 7805, that is, the kind of regulations we tax lawyers have come to call “interpretive regulations,” assumed these kind of regulations were subject to the Administrative Procedure Act.

    Proposed regulations defining “charity” under section 501(c) (3) as limited to relief of poverty were issued in 1956. They were re-proposed, with a much broader definition of “charity,” in 1959. See 24 Fed Reg. 5217, 6391 (June 26, 1959); 21 Fed. Reg. 560, 463 (1956) Both the 1956 and 1959 NPRMs cited section 7805 as the statutory basis for the set of regulations being proposed. Both sets of proposed regulations acknowledge the application of the Administrative Procedure Act to regulations promulgated pursuant to the authority of § 7805(a), although they do not specifically cite APA § 553. They state, “Notice is hereby given, pursuant to the Administrative Procedure Act, approved June 11, 1946, that the regulations set forth tentative form below are proposed to be prescribed by the Commissioner of Internal Revenue, with the approval of the Secretary of the Treasury.”

    The same is true of the still controversial regulations that interpreted “operated exclusively” language in sections 501(c)(3) and 501(c)(4) as “primarily.” See 26 Fed. Reg. 1423 (Feb. 26, 1959. These regulations, although proposed in 1959, were to be effective as of taxable years beginning after December 31, 1953. (In my view, while they may be less than ideally drafted, they reflect the need to accommodate the 1950 enactment of the unrelated business tax in 1950 rather than, as some believe, a betrayal of the statutory mandate.

    That tax policymakers working at a time relatively close to the enactment of the APA viewed these kinds of regulations as subject to its strictures seems important to me. My guess is that proposed regulations in other areas of tax law from that time period do the same. I do not know when the Treasury and the IRS dropped this language. Determining that date would require examining NPRMs from each year from 1960 on until the language changes. I am about to retire. While I plan to keep researching and writing, I will not have research assistants to help me do this kind of work. But if anyone is interested in working jointly on this question, let me know!

    • Jack Townsend says

      Professor April:

      I think Treasury had already begun to use the notice and comment process before the APA, not because it was required but because notice and comment gave legitimacy to the interpretation than would be perceived from rules without notice and comment. Public comment was solicited and that was good, permitting the agency to make any fine-tuning to the rule. In 1946, the APA said that legislative rules must have notice and comment, but that interpretive rules did not require notice and comment. Still, Treasury continued to use the notice and comment process for rules it thought were important but also continued to use subregulatory guidance without notice and comment. That’s my understanding anyway.

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