Expanding OIRA Review to IRS

May 28, 2019

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Abstract

The afternoon panel of the Business, Entrepreneurship & Tax Law Review symposium in February 2019 focused on procedures to encourage “optimal regulation.” This theme was borrowed from University of Missouri Law Professor Thom Lambert’s book, How to Regulate: A Guide for Policymakers. One of the best ways to improve regulatory decision-making is for more agencies to follow existing U.S. policy on regulatory planning and review, which is described in Executive Order (EO) 12866. It directs agencies to identify the nature and significance of the problem they are trying to solve with regulation, to identify alternative solutions, to assess the quantifiable and non-quantifiable costs and benefits of each alternative, and then to choose the option that maximizes net benefits to society, taking into account distributional effects and other considerations.

That policy, which has governed U.S. regulation for several decades, is managed by the Office of Information and Regulatory Affairs (OIRA). It is also subject to several exemptions. In April 2018, the U.S. Department of Treasury (Treasury) and the Office of Management and Budget (OMB) signed a historic memorandum of agreement (MOA) narrowing one of those exemptions. This MOA expands the number of Internal Revenue Service (IRS) regulatory actions for which IRS must comply with EO 12866. This action moved tax rules out of the “presidential tax-policy blind spot” and was a meaningful step towards the optimal regulation described in Professor Lambert’s book. Close study of the MOA reveals six striking features that not only affect tax regulation, but also offer intriguing possibilities for scholarly understanding of OIRA as an institution and the future of regulatory review of independent agencies, which is the largest remaining exemption from OIRA review.