OMB and Treasury Disagree over Process for Issuing New Tax Rules Page: 2 of 4
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to ensure that rules are consistent with the president's policy preferences. Second, when the
executive order's cost-benefit analysis requirements are triggered, OIRA examines the quality
of the analysis to ensure the agency followed existing guidance from OMB in conducting the
analysis. Finally, OIRA also facilitates an inter-agency review process, during which the rule
may be sent to other entities within OMB and the Executive Office of the President.
OIRA Review of Tax Regulations
Since the early 1980s, the IRS has been largely exempted from these OIRA review
requirements. In 1983, the Department of the Treasury and OIRA entered into a memorandum
of agreement (MOA) that waived, for certain components of Treasury, including the IRS, most
of Executive Order 12291's regulatory review requirements. In 1993, after President Clinton
issued Executive Order 12866 and revoked Executive Order 12291, Treasury and OIRA
reaffirmed most of the underlying exemptions from the 1983 MOA.
Specifically, the agreement waived OIRA review for IRS regulations and certain other types
of actions, including revenue rulings, revenue procedures, and legal determinations. Under
these terms, most actions taken by the IRS are exempt from OIRA review and cost-benefit
analysis requirements, with the exception of "major" or "economically significant" rules. In
other words, the most impactful IRS rules-e.g., those that have an annual effect on the
economy of $100 million-are still potentially subject to review. (In 2016, for example, the
IRS issued rules relating to corporate inversions, which OIRA reviewed.)
However, other IRS practices further expand the scope of the 1983 exemption, making
additional IRS rules less likely to be reviewed. As the IRS states in its internal policy on
writing rules, IRS rules are generally considered not to have direct economic effects, thereby
rarely hitting the $100 million threshold identified above. Further, the IRS states that its
regulations "merely implement a statute," meaning that "the effect from a rule in most
IRS/Treasury regulations is almost always a result of the underlying statute, rather than the
regulation itself." The IRS therefore often describes its rules as interpretive and not significant
enough to warrant OIRA review or cost-benefit analysis. Critics of this position, however,
point out that the same argument could be made for "virtually any agency implementing a
Recent Discussions over Potential Changes
In recent years, concerns have been raised over the IRS exemption, about which very little
information was publicly available. In 2016, Senator Orrin Hatch and several other Members
requested a Government Accountability Office (GAO) examination of the exemption. GAO
issued its report in September 2016, recommending that "Treasury and OMB reevaluate their
long-standing agreement to exempt some tax guidance and regulations from OMB oversight."
After the issuance of the GAO report, which discussed the MOA but did not contain a copy of
it, Senator Hatch wrote to Treasury requesting a copy of the MOA, which still had not been
made public. Treasury released a copy of the MOA soon after. In 2017, GAO stated on its
website that Treasury had agreed with its recommendation to revisit the long-standing
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Carey, Maeve P. OMB and Treasury Disagree over Process for Issuing New Tax Rules, report, April 10, 2018; Washington D.C.. (digital.library.unt.edu/ark:/67531/metadc1157089/m1/2/?q=%22executive%20departments%22: accessed December 17, 2018), University of North Texas Libraries, Digital Library, digital.library.unt.edu; crediting UNT Libraries Government Documents Department.