Free-market groups: IRS rules shouldn’t be exempt from White House review

A coalition of free-market groups is urging President Trump and top administration officials to withdraw an agreement that allows IRS rules to avoid review from the Office of Management and Budget (OMB).

“The IRS must live by the same rules of administrative law and agency oversight as the rest of the executive branch,” the groups wrote in a letter Tuesday.

The letter was sent to Trump, Treasury Secretary Steven Mnuchin, OMB Director Mick Mulvaney and Neomi Rao, administrator of OMB’s Office of Information and Regulatory Affairs.

For decades, the IRS and OMB have had an agreement that generally exempts tax rules from full OMB review. The IRS has argued that the economic effects of its actions come from the laws their rules interpret, rather than from the rules themselves, making OMB review unnecessary.

But the free-market groups said the IRS’s exemption prevents Congress from getting information about major rules that should be reported to the Government Accountability Office while curbing the White House’s ability to supervise the executive branch.

The groups also said the IRS’s current practice “impacts the public’s right to learn about and comment on the economic impact of IRS rules that are subject to the Regulatory Flexibility Act.”

Groups that signed the letter include Americans for Prosperity, Americans for Tax Reform, Cause of Action Institute and Citizens Against Government Waste.

Trump signed an executive order last year that directed the Treasury Department and the OMB to review the exemption for tax rules from OMB review. Sens. Ron Johnson (R-Wis.) and James Lankford (R-Okla.) have also urged the Treasury Department and the OMB to revisit its agreement on the exemption.

But some tax lawyers have expressed concerns that subjecting IRS rules to OMB review would slow down the process of issuing guidance needed to implement the new tax law.

When asked about the issue on Monday, House Ways and Means Committee Chairman Kevin Brady (R-Texas) said he encourages the OMB to “maintain their traditional role in rulemaking” but that when it comes to rules implementing the tax law, the bulk of the work will come from the Treasury Department.