TAX TAKE: Back to the Future – OMB Takes a Pass on Tax Regs
On June 9, 2023, the Biden administration turned back the clock five years and reinstated a policy allowing the Office Management and Budget (OMB) to skip reviewing regulations issued by the Internal Revenue Service (IRS). The new agreement between the Department of the Treasury (Treasury) and OMB that reverses a Trump-era move that expanded OMB's review of federal rulemakings by the Office of Information and Regulatory Affairs (OIRA) to include the IRS.
Back in 2017, the White House directed Treasury to review its recent regulations to identify rules that may have imposed undue complexities or financial burdens or that may have extended beyond statutory limits. Several regulations were identified and slated for withdrawal, setting the stage for the 2018 directive for OMB to start reviewing IRS regulations.
For tax policy professionals, the new OMB review stage had two immediate effects. First, as expected, it slowed the process for the IRS to issue regulations. Naturally all taxpayers, businesses, and individuals prefer as much time as possible to digest, prepare for, and comply with new regulations. This change coincided with the flood of regulatory changes mandated by the Tax Cuts and Jobs Act (TCJA), so the timing was either ideal – or not – depending on your point of view.
Second, OMB's new authority to review tax regulations introduced a new formal opportunity for taxpayers to express policy concerns to OIRA before a rule was proposed or finalized. OIRA would host meetings with concerned parties and include Treasury experts upon request.
That all changes now. Without the OMB review stage, taxpayers can expect a faster rulemaking process at the IRS. The agency is starting to issue the implementation rules for the Inflation Reduction Act's (IRA) many green energy tax provisions, so the decision to skip the OMB is likely intentional.
Under this new/old regime, it is even more important to get involved early in reviewing IRS guidance, especially Notices that are precursors to formal regulations. The opportunities and time to make your case just got narrowed. #TaxTake
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