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GAO Greenlights Congressional Review of Payroll Tax Deferral

Posted on Sep. 16, 2020

The Government Accountability Office affirmed that President Trump’s payroll tax deferral falls under the purview of Congress’s regulatory review authority, paving the way for lawmakers to try to undo the president’s unilateral action.

Two top Senate Democrats had asked the GAO to determine if the IRS guidance (Notice 2020-65, 2020-38 IRB 567) implementing Trump’s temporary payroll tax deferral memorandum, signed August 8, could be defined as a “rule” subject to the Congressional Review Act (CRA), but in a September 15 letter, the GAO said that such a determination was unnecessary.

IRS has submitted the document as a non-major rule to GAO for purposes of CRA. That submission obviates the need for us to make that determination here,” the GAO wrote in its response.

The letter notes that the CRA requires the issuing agency to submit the rule to both houses of Congress and to the GAO. By submitting the payroll tax deferral notice to the GAO on August 31, the government watchdog deemed that action to confirm the IRS’s own determination that the notice is indeed subject to the CRA.

IRS submitting the notice to Congress means that the clock for a congressional resolution of disapproval has begun,” Bridget C.E. Dooling of George Washington University’s Regulatory Studies Center told Tax Notes. “Starting that clock is why members of Congress ask GAO for its opinion on this matter.”

The GAO letter explains that when an agency submits a rule that falls under the CRA to Congress, lawmakers can “review the rule and pass a joint resolution of disapproval to void the rule.” It also notes that Congress can use “special procedures” to pass such a resolution if the resolution is passed within 60 session days in the Senate or 60 legislative days in the House after receiving the rule.

According to the GAO, the IRS delivered the IRS notice September 9.

If both chambers of Congress pass a joint resolution objecting to the IRS notice and the resolution becomes law, Trump’s payroll tax action would become void. House Ways and Means Committee member John B. Larson, D-Conn., has already introduced H.J.Res. 94, which the GAO noted could serve as the vehicle for Congress to express its disapproval of the notice.

However, while the GAO letter marks the next step in lawmakers’ effort to undo Trump’s executive action, some Republicans have come around to supporting Trump’s payroll tax deferral, including offering legislation to cement the relief and forgive the deferred taxes. House Ways and Means ranking member Kevin Brady, R-Texas, recently introduced the Support for Workers, Families, and Social Security Act to do just that.

Follow Jonathan Curry (@jtcurry005) on Twitter for real-time updates.

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