A History of Tax Regulation Prior to the Administrative Procedure Act

Article excerpt


The relationship of the Administrative Procedure Act (APA) to tax administration has been the subject of increasing scrutiny from scholars and courts. Some of this scrutiny has critiqued the long-held view of the Department of Treasury that tax regulations issued under the general grant of authority in I.R.C. [section] 7805(a) are interpretative regulations within the meaning of the APA. This Article reviews the almost 150-year history of tax administration before the enactment of the APA to show the origins and basis for this long-held view. The Article also argues that the application of the general terms of the APA to tax administration must be informed by this pre-APA history of tax regulation.


I.   The Guidance Problem and the Tax-Exceptionalism Claim
     A. The Problems of Issuance and Authority
     B. Issuance, Authority, and the New Orthodoxy
        1. Recent Examples
        2. Precursors to the New Orthodoxy
        3. A Critique
II.  Tax Guidance from 1789 to 1862
III. Tax Guidance from 1862 to the APA
     A. The Problem of Authority
     B. The Problem of Issuance
     C. The Impact of Regulatory Changes


The 2014 Duke Law Journal Administrative Law Symposium is titled "Taking Administrative Law to Tax." The title flows from some excellent recent scholarship that properly urges those who study and practice tax administration to be more aware of general administrative-law principles. This same scholarship, however, has created a constraining conceptual box labeled "tax exceptionalism." The idea is that tax administration has been granted exceptional treatment in the application of the law and thus now operates outside the bounds of administrative law in general and the Administrative Procedure Act (1) (APA) in particular.

This Article pushes back. This Symposium could have been titled "Taking Tax to Administrative Law." As this Article argues, general principles of administrative law can be, and indeed since the early nineteenth century have been, informed by the particulars of tax administration. The APA contains general commands about how agencies must make rules. Surely no one doubts that the APA applies to the agencies charged with administering tax laws. But the APA is neither the source nor the summation of administrative-law principles. An exploration of pre-APA administrative law helps to understand both what the law is and what the law should be. Professors Jerry Mashaw and Ann Woolhandler, among others, have studied early administrative law on a broader scale. (2) Their studies, however, do not give much attention to tax administration. Thus this study fills a bit of a gap there as well.

The goal of this Article is to reorient the discussion about the relationship of tax administration and administrative law away from metaphysical abstractions about legislative rules and interpretative rules and toward a more concrete understanding of where those terms came from. This Article's review of the intellectual history of tax administration may help general administrative-law scholars and others at least start in the right place. Part I delineates the current tax exceptionalism claim to which this Article responds. Parts II and III then review the legal history of tax administration up to the APA to show how the idea of tax regulations evolved and suggest why it was commonly believed that the APA requirements of notice and comment did not generally apply to tax regulations.


A. The Problems of Issuance and Authority

An important part of any agency's work is to guide employees, as well as the regulated community, on how to both apply and comply with the law the agency administers. (3) Agency guidance includes a variety of documents meant for internal or external use, some labeled "regulations" and some given other labels. …