TROUBLING TRENDS: Although Rollinson insisted at the Finance hearing that her priority would be to fairly and impartially enforce laws passed by Congress, GOP tax writers said that Treasury has been improperly using its authority to solve political problems and that they were concerned about Rollinson being subject to improper political pressure as chief counsel. Here’s ranking member Mike Crapo (R-Idaho): “One of the troubling concerns that I've seen is a recent trend that, from my perspective, is a willingness of the IRS and Treasury to ignore the plain language in enacted statutes when issuing regulatory guidance.” “The IRS has simply disregarded statutory deadlines for implementing new Democrat-led provisions,” Crapo added. To name but one example, a tax provision implemented by the American Rescue Plan that would have increased reporting for users of apps like Venmo, PayPal and Stubhub — and is unpopular among both Democrats and Republicans — was delayed for one year by the IRS in December 2022. That law was supposed to go into effect for the 2023 tax season, but e-commerce and third-party marketplace companies lobbied heavily against it. Crapo also cited Treasury’s interpretation of EV credits implemented by Democrats’ climate, health and tax legislation, which conveniently helped placate some U.S. trade partners who were previously rankled by the credits while taking an expansive view on how many vehicles could be eligible for the credits. It's worth noting that Sen. Joe Manchin (D-W.Va.) has also been livid about these interpretations, and other Democrats protested that the Biden administration improperly circumvented Congress to get its preferred policy outcomes. THE PUSHBACK: For some Republicans, part of the problem may lie in how tax regulations are reviewed: namely, the Biden administration in June reversed a Memorandum of Understanding originally issued under the Trump administration that required the Office of Management and Budget to review tax rules made by Treasury. Some tax experts have said the reversal was a good thing, asserting that OMB doesn’t have the expertise to review highly technical tax statutes and that the additional bureaucratic hurdle slowed down the issuance of much-needed guidance to the tax community. However, Sen.James Lankford (R-Okla.) made it clear at the hearing that he thought the decision was a bad one. “No agency should have the ability to make up new rules or guidance without following the Administrative Procedure Act and the law,” Lanford said of the lack of OMB oversight. Treasury’s powers could also be tightly constrained by a case set to be taken up by the Supreme Court this term, as our Josh Gerstein reported yesterday. The case will involve a challenge to a precedent known as the Chevron doctrine, which holds that courts should defer to agencies when it comes to reasonable interpretations of ambiguous laws (and even if a court believes there is a more reasonable interpretation to be made than the one expounded by the agency). Needless to say, overturning the doctrine would have far-reaching consequences for tax law, ranging from regulations governing international tax regimes to procedures that the IRS must follow to assess penalties on taxpayers claiming oversized deductions. Opposition to federal agencies' broad rulemaking power would make sense in the context of anti-deep state attitudes running through the Republican party under Trump, as Jasper L. Cummings, Jr. wrote in a 2019 Tax Notes article. The former president “successfully married his anti-Deep-State rhetoric with other culture war issues” as well as “traditional Republican deregulation efforts," Cummings noted. THE REVOLVING DOOR: Sens. Elizabeth Warren(D-Mass.) and Rep. Pramila Jayapal (D-Wash.) wrote a September 27 letter to IRS Commissioner Danny Werfel following up on a 2021 investigation by the New York Times into revolving door practices between Treasury and the world’s largest accounting firms. The lawmakers said they were pleased that the IRS agreed to move forward with watchdog recommendations to mitigate potential conflicts of interest at the agency but insisted that more needs to be done — especially in light of the fact that, between 2017 and 2021, 15 percent of the IRS’s workforce received income from large companies or accounting firms before, during or after working at the agency.
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