The Office of Information and Regulatory Affairs can review tax regulations as capably as it reviews the rules of every other executive-branch agency, OIRA Administrator Neomi Rao told Bloomberg Government.
“We believe that where we’ve landed is a win for the administration as a whole,” Rao said in an interview following a hearing by the Senate Homeland Security and Governmental Affairs regulatory subcommittee.
Rao and Brent McIntosh, general counsel at the Department of the Treasury, on April 11 signed a new memorandum of agreement that will allow OIRA to review tax regulations for the first time in decades. The memorandum replaces a 1983 agreement that exempted most tax regulations from review.
Treasury and the White House Office of Management and Budget have been negotiating a new agreement since April 2017, when President Donald Trump issued Executive Order 13,789 directing them to review the existing exemption for tax regulations. OIRA is housed within the OMB.
There are two important priorities in this agreement for Trump: reducing regulatory burdens and implementing the new Tax Cuts and Jobs Act in a way that provides timely notice to taxpayers and regulated entities, Rao said.
The agreement provides for some shorter review times to address concerns about delay, and also accounts for Treasury’s primary goal, which is raising revenue, Rao said.
For example, Treasury’s rules have enormous economic impact, so the agreement provides a slightly different way of determining an “economically significant” rule, Rao said.
At the same time, it is anticipated that many rulemaking principles will remain the same when considering tax regulations, including use of OMB Circular A-4 and its requirements for analysis, Rao said.
Tax Experts Arriving
OIRA has recently brought on Kristin Hickman, a law professor at the University of Minnesota, who specializes in tax administration and administrative law, Rao said.
In addition, OIRA is in the process of hiring more tax experts, but also has existing expertise on staff, Rao said.
A key provision in the memorandum requires OIRA to review a rule within 10 business days, but only if the OIRA administrator and secretary of the Treasury agree to the expedited time frame, Rao said.
“So in part we’re going to have to evaluate when the secretary has a request for expedited review whether that is possible, given the nature and complexity of the rule,” she said.
Majority Won’t Be Reviewed
Rao said the new agreement is needed because tax regulations have changed over time to become much more discretionary in nature.
When discretion is being exercised, then it becomes appropriate to put the rule through the ordinary, centralized review process to consider whether it is consistent with law, satisfies cost-benefit standards, and meets the president’s priorities, Rao said.
McIntosh largely agreed, telling reporters that the agreement recognizes the tax regulations that are wholly within Treasury’s authority to promulgate, but also the rules that create compliance costs or other costs that ought to go through OIRA.
“Things that are designed to regulate conduct, and are not primarily designed to raise revenue, those sorts of things ought to be reviewed by OIRA,” McIntosh said.
“For the vast majority of regulations, they are still going to be promulgated by Treasury,” McIntosh said. “We are talking about a subset that are most likely to cause major undue costs,” he said.