Reworking the Revolution: Treasury Rulemaking & Administrative Law

How administrative law applies to tax rulemaking is an open and contested question. The resolution of this question has high stakes for the U.S. tax system. The paradigm is shifting away from so-called “tax exceptionalism”—where Treasury action is considered effectively exempt from the Administrative Procedure Act (the “APA”) and related administrative law doctrines. This paradigm-shift is salutary. However, currently prevailing anti-exceptionalist theory—an administrative framework for tax that is rapidly gaining credence within both the federal judiciary and the legal academy—threatens to destabilize the U.S. tax system. This formalistic approach to administrative law in tax rulemaking has the potential to invalidate a wide swath of existing Treasury regulations and to preclude the timely promulgation of new tax rules. This Article argues that these two existing theories of tax administration— exceptionalism and anti-exceptionalism—are inadequate, often for complementary reasons. This Article’s critique then supports its proposals for tax rulemaking processes that comply with the APA, but in a workable manner that does not upend established tax law. These proposals provide an intellectual and practical middle ground between the exceptionalists and anti-exceptionalists.