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The IRS and OMB Seem to Be Getting Along

Posted on Jan. 21, 2020

When President Trump issued Executive Order 13789 in 2017, which began the process that ended Treasury’s 34-year claim that its tax rules weren't subject to review by the Office of Management and Budget's Office of Information and Regulatory Affairs, tax practitioners and taxpayers were concerned that the change might mean even longer delays in releasing guidance to the public. But a recent report from the Government Accountability Office (GAO-20-55) suggests that the relationship is working well.

The GAO report focuses primarily on how the IRS can improve customer service and facilitate compliance with the Tax Cuts and Jobs Act. But it also features a discussion about the increased role OIRA played in reviewing guidance. The report explains that by the beginning of the filing season that ended April 15, 2019, OIRA had reviewed two final rules, 17 proposed rules, and one notice about the TCJA.

The GAO interviewed IRS, Treasury, and OIRA officials about how they coordinated the development and review of regulations for implementing the TCJA. The GAO found that the IRS, Treasury, and OIRA "engaged in a number of best practices we have previously identified to enhance and sustain collaborative efforts.” The report didn’t provide many details, but it pointed to the formation of the Tax Reform Implementation Office — a temporary, and now disbanded, group of IRS and Treasury officials who oversaw the coordination of TCJA guidance — and frequent working group meetings and information sharing sessions between the IRS and Treasury as examples of the practices that helped facilitate the development of timely guidance.

The concerns about the pace of guidance being hurt by OIRA review mostly haven't come to fruition. The recently released final Opportunity Zone regulations (T.D. 9889) took only eight business days for OIRA to review. To be sure, other regulatory packages have spent more time at OIRA. For example, the final (T.D. 9885) and proposed (REG-112607-19) rules on the base erosion and antiabuse tax spent a total of nearly two and a half months at OIRA, having arrived September 16, 2019, and been released December 2. The memorandum of agreement between Treasury and OIRA provides for up to 45 days for review of tax regulations, but only 10 business days for proposed regulations under the TCJA, if they are designated for expedited review. Treasury and OIRA can agree to extend the review timeline.

And there’s something of a silver lining to OIRA’s involvement, because all guidance that's submitted for review is posted upon receipt on OIRA’s federal regulatory dashboard, which effectively gives the waiting public notice that the anticipated guidance is about to be released.

The findings of the GAO report don’t mean that there will never be a snag as OIRA continues to review significant tax regulations. But they suggest that the process is now proceeding according to plan and not posing much of an obstacle to the prompt release of regulations.

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