New IRS guidance

Author: Keith Martin Publication | June 5, 2018

New IRS guidance may face delays.

Under pressure from President Trump and some Republicans in Congress, the US Treasury and the White House Office of Management and Budget reworked a 1983 understanding that new tax guidance generally does not have to be vetted by OMB before it can be made public.

The new understanding is that three types of “regulatory tax actions” will now be subject to OMB review.

The three are actions that “create a serious inconsistency or otherwise interfere with an action taken or planned by another agency,” “raise novel legal or policy issues” or “have an annual non-revenue effect on the economy of $100 million or more.”

The new policy is in a joint memo signed by the two agencies in mid-April. The earlier policy, dating to the Reagan administration, was that interpretive — as opposed to legislative — tax guidance did not have to run the gauntlet at OMB because it is generally welcomed by taxpayers who want the government to shed more light on what tax laws written by Congress mean.

The part of OMB that will do the review is called the office of information and regulatory affairs or “OIRA” for short.

The reviews are supposed to be done within 45 days.

The IRS cannot release covered guidance until OIRA notifies Treasury that it has waived or concluded its review. Treasury can ask for an expedited review period of 10 business days, although this can be extended.

The IRS is struggling to update tax forms and put out guidance about how a large number of new tax provisions work that were enacted as part of a massive tax reform bill at the end of December. Companies have many questions. The agency is shorthanded and seeking a budget increase from Congress to hire more tax experts to help. The Trump administration is also requiring that two existing regulations must be withdrawn before any new regulation can be issued. It is not clear how the 2-for-1 policy applies to the IRS.

The new policy of subjecting new tax guidance to an additional layer of review by OMB is a response to Executive Order 13789 in which President Trump ordered the Treasury and OMB to revisit their earlier protocol.

It could provide companies that are unhappy with where the IRS may be headed on policy decisions another avenue to try to turn around the decisions by complaining to OMB or other White House staff.

Other agencies already submit their regulations to OMB before publication. In practice, fewer than 10% of regulations end up being reviewed.

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Contacts

Keith Martin

Keith Martin

Washington, DC