Interim-Final or Temporary Regulations: Playing Fast and Loose with the Rules (Sometimes), by Kristin E. Hickman

by Guest Blogger — Thursday, Feb. 1, 2018

In administrative law doctrine, much significance is placed not only on what agencies say but on the format they use to say it. Interpretations of statutes expressed in legislative rules carry the force of law—i.e., are legally binding on private parties—so must comply with Administrative Procedure Act (APA) notice and comment requirements and usually are eligible for judicial review on a pre-enforcement basis, albeit under the deferential Chevron standard of review. Interpretations of statutes expressed in less formal documents that qualify as interpretative rules or policy statements generally lack the force of law, do not require APA notice and comment procedures, and receive the less deferential Skidmore review by judges.

Interim-final or temporary regulations fall in the middle, in that they carry legal force, are subject to pre-enforcement judicial review, and are eligible for Chevron deference, but forego pre-promulgation notice and comment procedures. Sometimes Congress expressly authorizes interim-final or temporary regulations. More typically, agencies rely on the APA’s good cause exception in foregoing pre-promulgation notice and comment. Consistent with a recommendation of the Administrative Conference of the United States, agencies that claim good cause and adopt interim-final or temporary regulations often invite the interested public to submit comments after promulgation, and may publish responses to those comments or even modify the regulations in question.

Procedure conveys legitimacy in the eyes of those subject to regulatory commands. So, perhaps recognizing that the middle ground occupied by interim-final or temporary regulations is a bit fraught in that regard, courts construe the good cause exception narrowly to prevent agencies from avoiding notice and comment procedures on a whim. Regulations that respond directly and demonstrably to imminent life-or-death circumstances pass muster. Regulations that generically assert a need for immediate guidance do not. At the same time, jurisprudence interpreting the good cause exception is murky. An agency may claim good cause in good faith, only to have a reviewing court later conclude otherwise. Courts recognize that some agency procedural errors may be unintentional. The APA counsels courts to take “due account . . . of the rule of prejudicial error”—i.e., the harmless error rule—when evaluating agency violations of APA requirements. Courts in some cases have been willing to declare a mistaken good cause claim harmless. Yet again, courts are wary of applying the harmless error rule too liberally.

Judicial caution notwithstanding, agencies invoke the good cause exception and forego pre-promulgation notice and comment a lot. In December 2012, the Government Accountability Office published a study documenting that federal agencies failed to publish a notice of proposed rulemaking and offer the public the opportunity to comment before issuing fully 35% of the 568 major rules and 44% of the 30,000 nonmajor rules adopted from 2003 through 2010. For about two-thirds of those rules, agencies claimed good cause for foregoing pre-promulgation notice and comment. My own study several years ago of 232 Treasury regulations adopted from 2003 through 2005 interpreting the tax laws is consistent, showing that 40.9% of those regulations did not offer pre-promulgation notice and comment. Unlike most agencies, however, the IRS does not rely on the good cause exception to justify its avoidance of pre-promulgation notice and comment. Instead, at least until recently, the IRS claimed that most Treasury regulations were interpretative rules irrespective of their binding effect—a position rejected by the United States Tax Court in the Altera case in 2015 and again in the SIH Partners decision in January. The IRS has also pushed a strained reading of Internal Revenue Code § 7805(e) as independent authorization for temporary regulations with only post-promulgation notice and comment, but courts have rejected that argument as well. Regardless, that provision requires the IRS to pursue post-promulgation notice and comment for its temporary regulations, and the IRS typically does so.

It is simply implausible that such widespread use of interim-final or temporary regulations is either necessary or consistent with the APA. Agencies undoubtedly are sincere in believing that their substantive goals are so important and the need for binding regulations is so great as to justify foregoing or at least putting off public participation. But using interim-final or temporary regulations so frequently to communicate agency legal interpretations and impose regulatory requirements is not only legally questionable, it is short sighted. A sizeable plurality of the American public retains some residual discomfort with the prespect of unelected agency officials adopting regulations governing primary behavior without relative transparency and accountability of the legislative process. The opportunity for public participation in the rulemaking process mitigates that concern. Moreover, requiring agencies to consider feedback from interested parties improves the quality of regulations. Meanwhile, post-promulgation notice and comment are an inadequate substitute for pre-promulgation procedures that themselves are already a second-best proxy for the legislative process. Social science research and common sense suggest that, once an agency has begun administering a particular regulation, the agency’s interest in stability and continuity will discourage it from making changes in response to comments received. Perceptions that commenting will be futile discourage participation.

Some legal scholars lament that agencies are under attack from those with an antiregulatory agenda. Certainly, the IRS feels more than a little beleaguered. With their excessive use of interim-final or temporary regulations, however, agencies are handing ammunition to their critics.

Kristin E. Hickman is a Distinguished McKnight University Professor and the Harlan Albert Rogers Professor in Law at the University of Minnesota Law School. This essay draws substantially from her article with Mark Thomson, Open Minds and Harmless Errors: Judicial Review of Postpromulgation Notice and Comment, 101 Cornell L. Rev. 261 (2016).

This post is part of a symposium entitled How Agencies Communicate. You can read all the posts here.

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4 thoughts on “Interim-Final or Temporary Regulations: Playing Fast and Loose with the Rules (Sometimes), by Kristin E. Hickman

  1. Leigh Osofsky

    The notion that agencies are shirking their pre-promulgation notice and comment requirements offers a persuasive case for a regulatory problem. But I wonder what we should make of the practice in light of earlier posts in the symposium about the agency’s difficulty in getting guidance out there in a less formal fashion. Could this issuance of temporary guidance be an agency’s attempt to reach some middle ground between the need for procedure on the one hand and the desire just to be able to issue guidance in response to regulated parties’ requests? Of course, this post acknowledges that agencies are likely acting because they are motivated by a good-faith desire to get guidance out there. How, if at all, can we help craft a regulatory regime that gives agencies the flexibility that we need, while also abiding by the procedure we want? I am curious to hear whether others think we already have crafted this regime, and agencies just are not abiding by it the way they should, or whether there is more we can do in terms of giving agencies more flexible regulatory space.

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  2. Eric Rasmusen

    What we want is for temporary regulations to be truly temporary, replaced in reasonable time by permanent regulations that are the result of genuine notice-and-comment. How often does that happen? It doesn’t count if there is post-promulgation notice-and-comment that shows no sign of having been read (even if the regulation is later modified). It does count if there is post-promulgation notice-and-eomment whose arguments receive full discussion of what is adopted, what not, and why— I suppose, even if there are zero changes made for the final regulation, unless someone finds an agency memo admitting that the procedure was pure show.

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  3. Susan C Morse

    I wonder how much of the concern is tied to what weight the guidance gets at a juidical review stage. Here is one way to put it: Let us assume that the judicial review standard is changed, so that Skidmore power-to-persuade rather than Chevron deference applies to interim-final or temporary regulations. Does this erase concerns about the power of interim-final or temporary regulations that have not gone through notice and comment? Or are the causes for concern still more or less there, on the theory that whatever the judicial review standard, the on-the-ground impact of an interim-final or temporary regulation will be material almost regardless of its procedural pedigree, and almost regardless of the applicable deference standard that will apply in the unlikely event it is contested in court?

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  4. Kristin Hickman

    Thanks for the comments. My concern has always been about binding regulated parties to a particular legal outcome without first pursuing public participation, unless the agency really has a good reason for doing so (other than the rote “need for immediate guidance”). We have a regulatory regime that gives agencies the flexibility to communicate their interpretations of the law without notice and comment — nonbinding guidance in the form of interpretative rules and policy statements. Most folks will follow such pronouncements anyway, and judges will give them some deference under Skidmore. But, absent a really good reason, we shouldn’t elevate an agency’s interpretations to the status of law — and subject private parties to penalties for noncompliance — without either requiring public participation first or, at the very least, requiring the agency to shoulder the burden of demonstrating with specificity why its own noncompliance with the law (i.e., APA procedural requirements) should be considered harmless error.

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