Today, Cause of Action Institute submitted an amicus brief to the U.S. Supreme Court urging it to grant a petition for certiorari to review the D.C. Circuit’s decision in Florida Bankers Association v. Department of the Treasury. The Court should take the case to ensure that IRS rules are subject to the proper judicial review, a much-needed check on the agency’s rulemaking discretion.
In August 2015, the D.C. Circuit ruled that the Anti-Injunction Act shielded the IRS rule at issue from judicial review. The Act requires taxpayers to pay taxes first and sue later for a refund if they believe a particular rule is infirm. The rationale behind this rule is to protect government’s ability to generate a consistent stream of revenue without litigation slowing down that process. However, the rule at issue in Florida Bankers was simply a reporting requirement and the penalty attached to it is designed to ensure compliance, not generate revenue. Nonetheless, the IRS argued, and the majority of the divided D.C. Circuit panel agreed, that the Act applied to challenges to the reporting requirement as well. This argument directly conflicts with a unanimous Supreme Court decision from last term, Direct Marketing Association v. Brohl.
Cause of Action Institute’s amicus brief brought a unique perspective to the question. We revealed that although judicial review is an important part of constraining agency discretion, it comes at the end of a long rulemaking process and is especially important when an agency, such as the IRS, routinely defies established oversight procedures. The IRS is notorious for skirting numerous rulemaking procedures that help ensure both accountable and higher-quality rulemaking.
The IRS, for example, evades Executive Order 12,866, which requires agencies to submit significant rules to the White House Office of Information and Regulatory Affairs for pre-publication review. As Cause of Action Institute informed the Court in its brief, “Over the past ten years, the IRS has submitted only eight rules to OIRA for regulatory review and deemed only one of those rules significant. Those eight rules are less than one percent of the final rules the IRS published in the Federal Register over the same period.”
In addition to evading pre-publication review, the IRS also flouts the Administrative Procedure Act’s rulemaking requirements. Cause of Action Institute relied on University of Minnesota Law School Professor Kristin Hickman’s empirical research to show the Court that in “almost ninety-three percent of the cases she surveyed over a three-year period, ‘Treasury claimed explicitly that the rulemaking requirements of APA section 553(b) did not apply.’”
Effective and accountable agency rulemaking requires robust judicial review of agency authority, the process followed in promulgating rules, and the record upon which the rulemaking is based. Overextension of the Anti-Injunction Act undermines these important principles, and the Supreme Court should grant certiorari and reverse the D.C. Circuit.
Click here to read the amicus brief in its entirely.
