Agency Enforcement Power and Public Internal Guidance

• In Event: Procedure, Administration, and Organization

Abstract

In recent years, courts, scholars, and legal commentators have expressed concern about how administrative agencies make rules that bind the public. For instance, one longstanding strain of judicial doctrine and scholarship has addressed how agencies can use so-called “guidance,” or statements about the law, to affect public rights and responsibilities, without promulgating the guidance through appropriate procedures. Another more transformational strain of thought has questioned when agencies should have the authority to say what the law is at all in the context of issuing regulations. The latter concern has culminated in Supreme Court decisions like Loper Bright, in which the Court overturned the Chevron doctrine, and West Virginia v. EPA, in which the Court embraced the major questions doctrine.

Attention to agency rulemaking power has overshadowed attention to agency enforcement power. While scholars have long understood that agency enforcement matters, there has been little careful examination of how agencies structure and communicate routine enforcement decisions. This Article examines a quintessential example of how an agency makes and communicates such decisions: through internal guidance that is publicly accessible. Specifically, we examine IRS audit guides, which the IRS produces to train and direct its own agents, but also to educate the public. Audit guides are thus public expressions of how the IRS will exercise its enforcement power across many different segments of taxpayers and many different types of tax law.

In examining audit guides, we find that many of the features that scholars and courts have been concerned about in the rulemaking context exist in the enforcement context as well. Decisions in audit guides not only influence perceptions of the law but also are often treated as if they are law by members of the public, agencies, and even by the judicial and legislative branches. Moreover, in audit guides, agencies will make choices between different possible legal interpretations. These choices are often not subject to challenge, leaving the agency as the final arbiter of the law. Our study thus shows how agency enforcement power not only helps resolve disputes about the law. Rather, it often also helps constitute the law in the first place.

This study has several implications. First, we show how, contrary to conventional wisdom, agency enforcement power remains important and may become even more important in an era of limited agency resources and systematic deregulation of the administrative state. Our study reveals that agencies can use public internal guidance to elucidate their view of the law, even in situations in which they have not issued regulations, and without having to litigate a legal position. As agency resources become more constrained, they may use this type of guidance to an even greater extent to draw legal lines and assert legal positions. Second, the ways that agencies can use public internal guidance to make new legal pronouncements, and pick and choose among existing law, should cause us to question how much Loper Bright really shifted power from agencies to courts to say what the law is. To the extent that agencies retain this power, our study also suggests an unexpected role of agency enforcement power to help improve agency interpretations of the law. It is possible for agency enforcement power to infuse the development of the law with greater participatory values that have long eluded the regulatory process. Agency enforcement power can do so by providing agencies a forum in which to engage in real dialogue with the public about what rules should apply. This is only possible, however, if agencies engage in more transparent and inclusive development of documents such as audit guides. As its final lesson, this Article thus offers a concrete framework for how agencies can better integrate transparency and inclusivity into their development of public internal guidance.

Authors

• Joshua Blank, University of California, Irvine School of Law

• Leigh Osofsky, UNC School of Law