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06/26/2018

CoA Institute Files FOIA Lawsuit for Internet Browsing Records of OMB’s Mulvaney and USDA’s Perdue

WASHINGTON, D.C. – JUNE 26, 2018– Cause of Action Institute (“CoA Institute”) sued the White House Office of Management and Budget (“OMB”) and the Department of Agriculture (“USDA”) today for failure to disclose records reflecting top officials’ Internet browsing history.  The records at issue—which were the subject of two July 2017 Freedom of Information Act (“FOIA”) requests (here and here)—include the web browsing histories of OMB Director John Mulvaney and USDA Secretary Sonny Perdue, as well as their communications directors, on any government-issued electronic devices.

Cause of Action Institute Counsel Ryan Mulvey said, “The taxpayer foots the bill for the government’s Internet usage; the taxpayer deserves to know whether bureaucrats are behaving as proper stewards of their online resources.  Agencies must be held accountable for their refusal to disclose vital information about the operations of the administrative state.  The public has a right to know what websites are being accessed in the course of official agency business.  Not only would such records reveal the sorts of resources that have influenced decision-making, but they also could expose questionable or inappropriate online activity by government employees.”

To date, OMB has failed to respond to CoA Institute’s 2017 FOIA request.  USDA has responded but refuses to release the requested records because it believes they are not under agency “control” and would entail the “creation” of a new record.  CoA Institute disputes both claims.

The operation of an Internet browser typically creates an electronic record of the user’s online activity.  This record is stored locally and is accessible through the browser’s “History” function.  In this case, the requested records were created on government computers, integrated into their file systems, and can be used by agency officials as they see fit, subject to any applicable record retention laws.  This means that such records fall under “agency” control and should be available to the public, particularly given past scandals involving the abuse and misuse of Internet-based programs.

The full complaint, filed in the U.S. District Court for the District of Columbia, can be found here.

For more information, please contact Mary Beth Gombita, mbgcomms@gmail.com.

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06/11/2018

CoA Institute Calls on Department of Agriculture to Revise Problematic FOIA Rule

Cause of Action Institute (“CoA Institute”) submitted a comment today to the Department of Agriculture (“USDA”) concerning the agency’s publication of a deficient rule that proposes revisions to the agency’s Freedom of Information Act (“FOIA”) regulations.  CoA Institute explained that USDA’s FOIA rule fails to provide a definition of a “representative of the news media” that conforms with statutory and judicial authorities.  The proposed regulations also could cause confusion by directing agency staff to consult outdated fee guidance published by the White House Office of Management and Budget (“OMB”).

News Media Fee Category

USDA’s proposed regulations improperly retain the so-called “organized and operated” standard in the definition of a “representative of the news media.”  This is an important deficiency because the “organized and operated” standard has been used in the past to deny news media requester status to nascent media groups and government watchdog organizations like CoA Institute.  Indeed, CoA Institute took another agency—the Federal Trade Commission—to court, and argued its case all to the way to the D.C. Circuit, just to get the agency to acknowledge that its similar retention of the “organized and operated” standard was unlawful and led to improperly denying CoA Institute a fee reduction.  The D.C. Circuit eventually issued a landmark decision in CoA Institute’s favor to clarify proper fee category definitions and their application in FOIA cases.

Congress amended the FOIA to provide a straightforward and comprehensive definition of a “representative of the news media.”  USDA—and all other agencies—should not attempt to modify that definition or introduce additional hurdles for news media requesters.

OMB Fee Guidelines

USDA’s FOIA rule also proposes to retain references to the OMB’s 1987 FOIA fee guidelines, which are the genesis of the “organized and operated” standard.  Specifically, USDA would like its disclosure officials to estimate fees in accordance with the OMB fee guidelines.  But those guidelines are outdated and unreliable.  Over the past thirty years, Congress has amended the FOIA on numerous occasions, courts have developed overriding FOIA jurisprudence, and technology has evolved in significant ways.  Yet OMB has made no effort to revisit its fee guidance.  That guidance should not be used as a reference point for the proper administration of the FOIA.

In 2016, the FOIA Advisory Committee and the Archivist of the United States called on OMB to update the fee guidelines.  CoA Institute even filed a petition for rulemaking on this issue.  Last November, we filed a lawsuit to compel the agency to provide a response to that petition.  Until OMB acts to revise its fee guidelines, USDA should not direct its staff to consult them in any way as authoritative.

Other Agencies Have Followed CoA Institute’s Advice

CoA Institute has succeeded in convincing a number of other agencies to abandon the OMB’s “organized and operated” standard in favor of a proper definition of “representative of the news media” in line with the FOIA statute and controlling case law.  Those agencies include, among others, the Consumer Product Safety Commission, Office of the Special Counsel, Department of Defense, U.S. Agency for International Development, and Department of Homeland Security.  We hope that USDA similarly will revisit its FOIA rule and eliminate the “organized and operated” standard in lieu of a proper definition of a news media requester.

Ryan Mulvey is Counsel at Cause of Action Institute

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04/13/2018

Oversight Victory: Tax Regulations Now Subject to OMB Review

In a major win for oversight and constitutional governance, the White House Office of Management and Budget (“OMB”) and the Department of the Treasury have scrapped a decades-old agreement that exempted many IRS tax regulations from independent review and oversight.  In its place, the agencies have set up a new agreement that requires Treasury to submit important tax regulations to OMB’s Office of Information and Regulatory Affairs (“OIRA”) for review pursuant to Executive Order 12,866 (“EO 12,866”) just like nearly every other agency.

This change came after an investigative report from Cause of Action Institute and a sustained campaign over the past few months from supporters of OIRA review.  From a transparency perspective, this agreement is already an improvement because it has been announced publicly, posted on Treasury’s website, and not kept secret for thirty-five years, like the previous agreement.

 

The New Memorandum of Agreement

The new agreement will require Treasury to submit the following categories of tax regulations to OIRA for review:

All three categories are well conceived.  First, one of the main focuses of OIRA review has always been interagency consultation.  And IRS rules can overlap with rules from the Department of Labor and, increasingly in the wake of the Affordable Care Act, the Department of Health and Human Services.  Allowing those and other agencies to weigh in on proposed tax regulations is an appropriate and necessary level of oversight, and can lead to better policymaking.  At the Senate hearing where the agreement was unveiled, Senator Lankford asked Treasury General Counsel Brent McIntosh who will make the determination of whether a new rule is likely to create a conflict with another agency.  McIntosh replied that, under the agreement, Treasury will submit a list of rules to OIRA on a quarterly basis and OIRA will then be in a position to flag rules that may create a conflict.

Second, Treasury will send OIRA tax regulations that raise novel legal or policy issues.  These are exactly the type of rules should not be decided in a vacuum and when independent review from OIRA and others can provide a fresh look at novel questions.  This is also an existing category of rules that are covered by EO 12,866 and so it makes sense to include tax regulations in this existing mandate.

Third, and finally, the new agreement includes tax regulations that are likely to have an annual non-revenue impact on the economy of $100 million or more.  This is the existing threshold for significant regulatory actions for other agencies.  The agreement makes a distinction for the “non-revenue” impact of tax regulations.  This is a commonsense distinction because OIRA review and cost-benefit considerations should be focusing on the distortionary impacts of regulatory choices, not money transferred to the fisc.  This modification of the existing language in EO 12,866 was necessary to fit the existing system to the way tax regulations work.  At the hearing, Senator Lankford asked McIntosh which rules from the 2017 tax cuts may meet this threshold.  McIntosh estimated that rules related to pass-through entities, interest expense deductions, bonus depreciation, section 199A, partnerships under section 512, and section 951A could now be subject to OIRA review.

 

The New MOA Puts OIRA in Control

The new agreement includes an important provision that bars Treasury from rushing rules out the door to the Federal Register before OIRA has signed off.

In order for the president and the White House to properly oversee the Executive Branch, they must be able to control its regulatory actions.  This provision makes it explicit that OIRA gets the final say.

 

Agreement Addresses Concerns about Delay and Expertise

Perhaps the biggest pushback against subjecting tax regulations to the same review that applies to other agencies’ rules was concerns about delay.  The new agreement addresses that issue by putting a 45-day clock on OIRA review and a special 10-business-day expedited review for rules stemming from the 2017 tax cuts.  Responding to concerns about OIRA’s expertise, Administrator Naomi Rao announced that Minnesota Law Professor and tax administration expert Kristin Hickman was joining OIRA as an advisor.  And OMB has been staffing up on other tax experts as well.

 

Concerns about the New Agreement

There is at least one concern about the agreement.  It only applies to “tax regulatory actions,” which the agreement gives the same meaning as “regulatory actions” in EO 12,866.  That definition covers “any substantive action by an agency (normally published in the Federal Register) that promulgates or is expected to lead to the promulgation of a final rule or regulation, including notices of inquiry, advance notices of proposed rulemaking, and notices of proposed rulemaking.”  Noticeably absent from this definition are interpretative rules that are not published in the Federal Register.  The IRS is notorious for trying to claim that its rules are interpretative and do not need to follow the strictures of the Administrative Procedure Act.  (CoA Institute recently filed an amicus brief in a case challenging this behavior.)  It remains to be seen whether the IRS and Treasury will try to assert that interpretative rules do not meet the definition of a “regulatory action” under EO 12,866 and thus do not need to be sent to OIRA for review.  A fair reading of the term “regulatory action” should include interpretative rules, even under the IRS’s improperly broad definition of that term.

But overall a dramatic improvement in the oversight of tax regulations and milestone in the project to end so-called tax exceptionalism and bring IRS under the same administrative law as everyone else.

James Valvo is Counsel and Senior Policy Advisor at Cause of Action Institute.  He is the principal author of Evading Oversight.  You can follow him on Twitter @JamesValvo.

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03/13/2018

IRS Seeks to Halt Fifth Circuit Appeal of Controversial Inversion Rule, Submits Final Rule for White House OMB Review

In January, Cause of Action Institute released a report highlighting IRS exemptions from various regulatory oversight mechanisms.  This report kicked off a flurry of activity, and Treasury and OMB are now in talks about whether and how the IRS should continue to be functionally exempt from White House review of IRS rulemakings.  A recent development in a closely watched Fifth Circuit case challenging an Obama-era rulemaking on inversions shows the effort may be bearing fruit.

In April 2016, the Obama Administration issued a controversial rule attempting to block inversions, a business reorganization technique designed to provide relief from high U.S. corporate taxes.  The IRS made this rule by issuing a Notice and publishing a proposed rule in the Federal Register.  Because IRS rules are effective from the date of the Notice, the agency was in no hurry to complete the Administrative Procedure Act (“APA”) rulemaking process that it had begun with the proposed rule and request for comment.  The Obama Administration ended without the rule ever being finalized but the Notice continued to be in effect.

The Chamber of Commerce sued the IRS over the inversion rule, claiming that the agency failed to comply with APA rulemaking procedures and that the substantive rule was in excess of its statutory authority.  The IRS tried to use the Anti-Injunction Act (“AIA”) to block the suit, as it often does.  But, in October 2017, a district court in Texas ruled that the AIA did not deny the court jurisdiction over the case and that the IRS did indeed violate the APA.  The court than invalidated the temporary rule.  The IRS promptly appealed to the Fifth Circuit.

IRS Moves to Stay Appeal of Inversion Rule Decision

But, in a twist, last week the IRS moved the appellate court to stay the proceedings because it was restarting the long-dormant APA process and finalizing the underlying rule.  In its motion seeking a stay (or a 45-day extension), counsel for the IRS wrote that it needs “to reevaluate whether [the IRS] should proceed with th[e] appeal[.]”  The IRS also told the Fifth Circuit that:

Having completed notice and comment, Treasury and the IRS plan to finalize the proposed regulation. That process is nearly complete. A draft of the final regulation has been prepared, and it has been submitted to the Office of Management and Budget for review. The final regulation would replace the temporary regulation that is at issue in this case, which will be removed.

Accordingly, we respectfully request that briefing of this case be stayed until a final regulation is published in the Federal Register, during which time the Government will evaluate whether it should proceed with this appeal or dismiss it.

This is an interesting development.  The inversion rule remains controversial and whether it is still necessary, following the recent changes to the corporate tax rate, is an open question.  But it now appears that Treasury and IRS are rethinking whether it is wise to press the government’s current disadvantage on the AIA and APA compliance in the Fifth Circuit.  This case could provide a clear circuit split with the D.C. Circuit (following Florida Bankers, which held the AIA blocked pre-enforcement review in APA challenges to IRS rules) on the proper application of the AIA.  So we may be seeing a strategic retreat by the IRS trying to limit the damage from its earlier loss in the district court.  But it is good to see that the agency is involving OMB in this finalization process.

We’ll have to wait to see what OMB says about the rule, whether the IRS does indeed finalize the rule, what form that final inversion rule will take, whether the Fifth Circuit grants the stay, and, ultimately, whether the IRS will back out of this appeal.  Stay tuned.

Update: The Fifth Circuit did not act on the stay motion before the deadline for the IRS to file its opening brief, which it timely did on March 16.

Update 2: On March 22, the Fifth Circuit denied the stay motion and the case is proceeding.

James Valvo is Counsel and Senior Policy Advisor at Cause of Action Institute.  He is the principal author of Evading Oversight.  You can follow him on Twitter @JamesValvo.

 

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02/20/2018

Treasury and OMB are Reconsidering IRS Oversight Exemption

I’ve been writing about the series of self-created exemptions the Internal Revenue Service (“IRS”) has been using to evade oversight of its rulemakings.  One of those exemptions is tied to White House review pursuant to Executive Order 12,866 at the Office of Information and Regulatory Affairs.  Today, for the first time, the agency publicly revealed that it is in talks with the Office of Management and Budget (“OMB”) to review that exemption.

The Trump Administration’s Departments of Health and Human Services (“HHS”), Labor, and the Treasury just released a proposed rule that would allow Americans to buy short-term health insurance plans that would not be affected by the Patient Protection and Affordable Care Act’s mandates that are driving up premiums and limiting choice.  Housed within that proposed rule is a microcosm of the problem I’ve been highlighting.

On pages 17–28, HHS and Labor conduct a series of regulatory assessments, including an explanation of what the costs, benefits, advantages, and disadvantages of the proposed rule are.  They even include an analysis of the number of enrollees likely to take advantage of the proposal and the impact on the individual market exchanges.  IRS?  Not so much.  As has been its practice, the IRS simply claims that “[c]ertain IRS regulations, including this one, are exempt from the requirements of Executive Order 12866 . . .  Therefore, a regulatory impact assessment is not required.”

However, the IRS also reveals that CoA Institute’s efforts to urge the Trump Administration to review the exemption is starting to bear fruit.  The IRS states that “[p]ursuant to Executive Order 13789, the Treasury Department and OMB are currently reviewing the scope and implementation of the existing exemption.”

IRS Section from Proposed Rule on Short-Term Insurance

Here’s hoping they go further than simply review the scope and implementation, and resolve to end the practice that allows the IRS to give short shrift to the impacts of its rules, while other agencies, like HHS and Labor here, do their homework.

James Valvo is Counsel and Senior Policy Advisor at Cause of Action Institute.  He is the principal author of Evading Oversight.  You can follow him on Twitter @JamesValvo.

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11/2/2017

CoA Institute Sues OMB, Compelling it to Take Transparency Policy Seriously

Cause of Action Institute (“CoA Institute”) has sued the White House Office of Management and Budget (“OMB”) for failing to respond to two petitions for rulemaking that CoA Institute submitted to the agency.  These two petitions—both aimed at increasing government transparency—were filed during the Obama Administration but were ignored. One petition for rulemaking focused on the OMB’s outdated Freedom of Information Act fee guidelines while the other focused on an executive order related to earmarking. We hope these lawsuits will spur the Trump Administration to action to increase the public’s ability to know what its government is up to.

Petition for Rulemaking on OMB’s Outdated FOIA Fee Guidelines

The Freedom of Information Act requires agencies to produce records on a reduced fee schedule if the requester qualifies as a “representative of the news media” or other favored category.  The FOIA requires agencies to issue records free of charge if the information is in the public interest and the requester has a means to distribute it.  Unfortunately, agencies often use these fee provisions as a mechanism to block requesters that are doing rigorous oversight of the agency.

As information technology advanced over the past two decades, Congress recognized that journalism was changing in fundamental ways and that citizen journalists and nonprofit organizations were just as vital to conducting government oversight as the traditional news media.  That’s why, in the Open Government Act of 2007, Congress provided a statutory definition of a “representative of the news media” that expressly noted that “as methods of news delivery evolve (for example, the adoption of the electronic dissemination of newspapers through telecommunications services), such alternative media shall be considered to be news-media entities.”[1]

But the FOIA also requires OMB to develop and maintain guidelines on FOIA fee issues and it requires agencies to conform their regulations to OMB’s guidelines.  In 1987, OMB issued its one and only guidance document on FOIA fees and in that document it requires “representatives of the news media” to work for organizations that are “organized and operated to publish or broadcast news to the public.”  The Federal Trade Commission (“FTC”) attempted to use this outdated standard against CoA Institute to deny us a preferable fee status and thus drive up the cost of our oversight of that agency.  We took the FTC to the D.C. Circuit and won.  The opinion in that case explained that the “organized and operated” standard was no longer proper.[2]

Yet ten years after Congress changed the statutory standard and two years after the D.C. Circuit directed that the “organized and operated” standard was no longer viable, dozens of agencies still employ it and OMB still has not updated its 1987 FOIA fee guidance.

In an effort to spur OMB to reform its outmoded guidance and to move all agencies toward compliance with the statute, CoA Institute filed a petition for rulemaking with OMB in June 2016.  The agency has not responded to that petition and we were forced to sue to bring the issue to resolution.

Petition for Rulemaking on Executive Order 13457

In 2008, President George W. Bush issued Executive Order 13457 to pressure Congress to reform its profligate earmarking practices.  The order required, inter alia, that executive-branch agencies proactively disclose any attempts by members of Congress or their staff to influence discretionary spending decisions the agencies were making.  President Bush directed OMB to ensure that agencies complied with the order.

Through an investigation, CoA Institute was able to establish that OMB understood Executive Order 13457 to apply to both legislative earmarks (i.e., spending directives in statute and committee reports) and executive branch earmarks (i.e., efforts by outside forces to pressure agencies to make certain spending decisions).  CoA Institute’s investigation also revealed that very few agencies were complying with the order; the Department of Energy was a notable exception.

In an effort to spur the Obama Administration to implement Executive Order 13457, CoA Institute joined with Demand Progress and filed a petition for rulemaking at OMB asking it “to issue a rule ensuring the continuing force and effect of Executive Order 13457, Protecting American Taxpayers From Government Spending on Wasteful Earmarks[.]”  More than two years have passed since we filed the petition and OMB has not responded.

Conclusion

The White House Office of Management and Budget sits at a unique place in the federal administrative state.  It has the opportunity to put in place and require adherence to cross-agency rules that can increase or decrease government transparency.  Ensuring that FOIA fees are not improperly used to block agency oversight and requiring proactive disclosure of congressional attempts to influence agency discretionary spending decisions are two ways OMB can make a difference.  CoA Institute has filed suit today to compel them to take these responsibilities seriously.

James Valvo is counsel and senior policy advisor at Cause of Action Institute.  He was instrumental in crafting both petitions for rulemaking and the lawsuit discussed in this post.  You can follow him on Twitter @JamesValvo.

[1] 5 U.S.C. § 552(a)(4)(A)(ii)

[2] Cause of Action v. Fed. Trade Comm’n, 799 F.3d 1108 (D.C. Cir. 2015).

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11/2/2017

Cause of Action Institute Sues White House OMB Over Failure to Act on Transparency Rules

Washington, DC – Cause of Action Institute (“CoA Institute”) today filed a lawsuit against the White House Office of Management and Budget (“OMB”) for failing to act on two petitions for rulemaking submitted well over a year ago. Both petitions ask OMB to take its transparency obligations seriously and enact rules that would promote public disclosure of agency records.

The first petition requests that the Office of Management and Budget update its fee guidance for Freedom of Information Act (“FOIA”) requests. OMB’s fee guidance is outdated and now conflicts with both statutory and judicial authorities. The FOIA law requires OMB to establish these guidelines and requires every agencies’ fee rules to conform to OMB’s guidance. The FOIA Advisory Committee and the Archivist of the United States have also recommended that Office of Management and Budget update this guidance.

The second petition relates to protecting taxpayers against wasteful executive branch earmarks. Previous administrations have required agencies to disclose congressional efforts to meddle in agency spending decisions, an effort first started under President George W. Bush’s Executive Order 13457. The Trump administration has yet to address this issue.

CoA Institute Counsel and Senior Policy Advisor James Valvo: “It does not appear the Trump administration has any plans to finalize these rules, which would go a long way to promoting government transparency. FOIA requesters are often deterred due to high costs agencies charge to produce records. In recent years, the courts have clarified that many groups beyond traditional journalists are now eligible for news media fee waivers. Updating OMB’s FOIA guidance to reflect this broad definition is critical. This lawsuit is a great opportunity for the Trump administration to show its leadership on transparency issues.”

The lawsuit can be found here

For information regarding this press release, please contact Zachary Kurz, Director of Communications at CoA Institute: zachary.kurz@causeofaction.org

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