The Treasury Department has proposed repealing 298 regulations. According to the Treasury, the targeted rules are unnecessary, duplicative or obsolete. In addition, the Treasury proposed to amend another 79 regulations to reflect the repeal.
Take away. “We continue our work to ensure that our tax regulatory system promotes economic growth,” Treasury Secretary Steven Mnuchin said in a statement. “These 298 regulations serve no useful purpose to taxpayers and we have proposed eliminating them. I look forward to continuing to build on our efforts to make the regulatory system more efficient and effective.”
The Treasury began reviewing IRS regulations in response to two Executive Order (EO) issued in 2017. The first EO directed each agency to establish a Regulatory Reform Task Force. In addition, each Regulatory Reform Task Force was directed to review existing regulations to determine which, among other things, were outdated, unnecessary or ineffective.
The second EO directed the Treasury to review all significant tax regulations issued on or after January 1, 2016. Accordingly, on June 22, 2017, the Treasury issued an interim report identifying eight regulations to be revised or withdrawn. On October 2, 2017, the Treasury issued a second report noting that the IRS Office of Chief Counsel had identified over 200 regulations for potential repeal.
Treasury did not describe to what extent, if any, the Office of Information and Regulatory Affairs (OIRA) is reviewing tax regulations. Under Executive Order 12866 (Regulatory Planning and Review), a regulatory action is “significant” if it is likely to result in a rule that: (1) has an annual effect on the economy of $100 million or more or adversely affects the economy, a sector of the economy, productivity, competition, jobs, the environment, public health or safety, or state, local, or tribal governments or communities; (2) creates a serious inconsistency or otherwise interferes with another agency’s actions taken or planned; (3) materially alters the budgetary impact of entitlements, grants, user fees, or loan programs or the rights and obligations of recipients thereof; or (4) raises novel legal or policy issues.
Two senior GOP senators recently asked if some tax regs continue to be exempt from OIRA review based on an agreement between the Treasury Department and OMB. Generally, the agreement, dating back to 1983, “exempts regulations issued by IRS from further analysis and review unless [the regulations] were legislative and major.”
Unnecessary, obsolete regulations
The regulations to be repealed fall into three categories: (1) Regulations interpreting Code provisions that have been repealed; (2) Regulations interpreting significantly revised Code provisions that do not reflect the revisions; and (3) Regulations that are no longer applicable.
Moreover, removal is unrelated to the substance of rules they contain. Therefore, there is no negative inference regarding the stated rules. The IRS proposes to remove these regulations from the CFR solely because they have no current or future applicability. In addition, the IRS’s repeal of these regulations is not intended to alter any nonregulatory guidance that cites to or relies upon them.
Further, the Treasury proposes to amend 79 existing regulations to remove cross-references to the 298 repealed regulations. According to the Treasury, these amendments will streamline and reduce the volume of regulations taxpayers need to review and increase clarity of the tax law. These regulations will be repealed as of the date the Treasury decision adopting these proposals is published in the Federal Register.
Treasury requested comments on the proposal. Written or electronic comments and requests for a public hearing must be received by May 14, 2018.