April 12, 2018
OIRA Review for IRS Regulations Creates Loopholes and Unacceptable Conflicts of Interest
New Memorandum of Understanding Between Office of Management and Budget and Treasury Threatens Agency Independence
The U.S. Office of Management and Budget’s (OMB) Office of Information and Regulatory Affairs (OIRA)’s memorandum of understanding issued today applies additional review and harmful cost-benefit analysis to regulations proposed by the U.S. Department of Treasury, affecting the work of the IRS. Previously, Treasury regulations had been exempt from that review. The new rules could allow President Donald Trump to turn good guidance for taxpayers into political favors and could tilt the implementation of the tax law further in favor of the president’s family and his wealthy friends, Public Citizen experts say.
“While the effort to place the IRS under OIRA’s purview is misguided and destined to fail due to the lack of cost-benefit economic analysis expertise at the IRS and the lack of tax policy expertise at OIRA, there is one silver lining in today’s announcement,” said Amit Narang, regulatory policy advocate for Public Citizen. “The memo clearly recognizes that OIRA review has resulted in significant and systemic delay of new regulations under both Democratic and Republican administrations.”
Section 4 of the memo reduces the OIRA review period for IRS regulations from 90 days to 45 days. For regulations that implement the new tax law, OIRA will have a 10-day review period. This creates an arbitrary and unjustified inconsistency under Executive Order 12866, under which IRS regulations receive fast-track review while all other regulations from other agencies remain under the longer review period, Narang said. Public Citizen will petition OMB to revise EO 12866 to reduce the review periods for all regulations subject to OIRA review under EO 12866 in order to close this loophole.
“Applying OIRA review to the IRS is a straightforward power grab by the administration that would weaken the agency’s independence and put a dent in the trust we place in the agency to collect our taxes fairly,” said Emily Peterson-Cassin, Bright Lines Project coordinator for Public Citizen. “One of the primary justifications for exempting the IRS from OIRA review was to ensure the White House could not take advantage of it for political purposes, yet the new memorandum of understanding places agency disagreements directly on the president’s desk to be resolved. White House review could turn good guidance for all taxpayers into straightforward political favors and could deter the IRS from fairly applying tax laws with respect to the president’s family and friends.”