The Treasury Department has broad general rulemaking power and has historically used this power to create new regulations promulgated under APA notice-and-comment procedures. However, out of supposed necessity in the 1980s, the Treasury began increasingly using temporary regulations, which follow no such promulgation procedure, yet are binding on taxpayers when published. Until recently, most courts and scholars acknowledged this administrative failure, but excused it because of their belief in tax exceptionalism—the idea that tax is different than other areas of law and should, therefore, be granted special treatment. However, in 2011 the Supreme Court explicitly rejected tax exceptionalism. Now the question is what does this mean for the enforceability of temporary Treasury regulations promulgated in violation of the APA? This Note addresses both the legal and practical implications of a potential finding that such regulations are invalid.
This Note maintains that the Supreme Court’s Mayo decision creates considerable doubt about the enforceability of temporary Treasury regulations that failed to go through proper notice-and-comment procedures, but recognizes that invalidating all temporary regulations overnight would likely destabilize the tax system. Thus, this Note proposes several judicial and legislative actions that could be taken to correct the procedural invalidity of temporary regulations and to make future Treasury promulgation policy administratively acceptable. The most appealing, and probably most plausible, solution presented is to push the Treasury towards APA compliance by having courts (1) be less deferential to unsupported Treasury claims of exemption from APA procedure; (2) hold that the requirements imposed by § 7805(e) are additions, not alternatives, to the APA; and (3) establish that procedurally invalid temporary regulations will be given no more deference than a proposed regulation.