President-elect Trump and Congressional Republicans have pledged to aggressively roll back regulations issued by the Obama Administration, including tax rules. In this post, we consider the paths Republicans might take in pursuing their agenda. In general, alternatives for repeal will depend on how recently rules were issued and whether such rules are regulations or less formal guidance.
Final regulations not yet published in Federal Register. Final regulations do not become effective until they are published in the Federal Register, and publication typically does not occur until weeks after regulations are approved by the relevant agency. Shortly after assuming office, an incoming President typically issues an executive order suspending all unpublished final regulations for review by the new administration. President Obama issued such an order in 2009 and presumably President-elect Trump will as well.
Final regulations issued since mid-June. The Congressional Review Act (the “CRA”) provides fast-track procedures pursuant to which Congress may invalidate final regulations submitted to Congress by agencies within a statutorily defined timeframe. Under this authority, the 115th Congress, which began on January 3, 2017, may invalidate final regulations submitted to Congress on or after June 13, 2016, according to estimates by the Congressional Research Service (the precise date depends on the number of days the House and Senate were in session). The regulations under Section 385 were finalized on October 13, 2016 (and which the House Freedom Caucus has targeted for repeal), and are thus subject to CRA review.
The fast-track procedures of the CRA generally prevent a Senate filibuster, a potentially critical consideration in the 115th Congress, where Republicans hold 52 Senate seats, well short of the 60 needed to end debate. As described by our colleagues, Congress is considering a bill to make the CRA an even more powerful tool.
The CRA has two main limitations. First, a joint resolution invalidating a regulation under the CRA must either be signed by the President or passed over a presidential veto by a two-thirds vote of both houses. Because a President would typically veto an attempt by Congress to override regulations adopted by the President’s own administration, the act is of practical import only during the initial period of a new administration such as that which is about to begin, when a new President may be willing to permit Congress to override the work of the prior administration. (Indeed, the only time a regulation was invalidated pursuant to the CRA since its enactment in 1996 was in such circumstances, when Congress overturned a Clinton-era regulation during the early days of the presidency of George W. Bush.) Second, new regulations may not be issued that are “substantially the same” as regulations that have been invalidated pursuant to the CRA unless authorized by new legislation. The CRA is thus a blunt instrument, which could inspire some caution in its use.
Other final regulations. Regulations finalized outside of the CRA review period are subject to statutory override through the normal legislative process or may be repealed by agency action that follows the same Administrative Procedure Act framework as is required for the issuance of regulations, including notice and comment procedures. Like proposed regulations, proposals to withdraw existing regulations cannot become effective until 30 days after they are published in the Federal Register. For example, the first set of controversial Section 385 regulations, which were finalized in December 1980, were later withdrawn by Treasury. To effect this repeal, Treasury published a notice of proposed withdrawal in the Federal Register on July 6, 1983 and received comments from the public, all of which supported repeal. The proposal to withdraw was finalized on November 3, 1983 with an effective date of August 5, 1983, 30 days after the proposal to withdraw was published.
Notices and other non-regulatory guidance. Sub-regulatory guidance, such as IRS notices, are not subject to the requirements of the Administrative Procedure Act. The IRS may modify or supersede a notice by issuing a subsequent notice.