Is there a legal argument for delaying the employer penalty?

The following is a guest post by Nicholas Bagley, University of Michigan Assistant Professor of Law.

In an interview with the New York Times last week, President Obama brushed aside a question about whether he’d consulted with his lawyers before delaying the employer mandate:

“[W]here Congress is unwilling to act, I will take whatever administrative steps that I can in order to do right by the American people. And if Congress thinks that what I’ve done is inappropriate or wrong in some fashion, they’re free to make that case. But there’s not an action that I take that you don’t have some folks in Congress who say that I’m usurping my authority. Some of those folks think I usurp my authority by having the gall to win the presidency. And I don’t think that’s a secret. But ultimately, I’m not concerned about their opinions—very few of them, by the way, are lawyers, much less constitutional lawyers.”

The president’s dismissive tone and his refusal to answer the question have kicked up something of a ruckus. And it hasn’t exactly appeased prominent conservatives who argue that the delay “raises grave concerns about [the president’s] understanding of the role of the executive in our system of government.”

What I find odd about this whole debate is that the administration has in fact offered a legal justification for delaying the employer mandate. It’s just that no one noticed. In a letter and in congressional testimony, the administration has invoked a general statutory provision authorizing the IRS to “prescribe all needful rules and regulations” for enforcing the tax code. That rulemaking power, in the administration’s view, allows it to delay the effective dates of tax statutes in narrow circumstances.

But is that right? For support, the administration points to a practice dating back to at least 2000 of providing “transition relief” for new tax legislation “when [its] immediate application would have subjected taxpayers to unreasonable administrative burdens or costs.” For example, Congress in 2007 strengthened a statute imposing penalties on unscrupulous tax preparers. Although the statute set an effective date for those penalties, the IRS provided six months of “transitional relief” to address implementation questions. (No legal justification was offered.) The administration has identified at least ten different cases where the IRS has similarly postponed a tax statute.

In pointing to past practice, administration officials are tacitly arguing that it may act consistently with that practice until either Congress or the courts say otherwise. This is the kind of argument the executive branch makes all the time. As the administration sees it, the IRS has been saying, “Hey, Congress, we think you’ve given us the power to temporarily delay tax statutes where implementing them is really hard. Let us know if we’re wrong.” In declining to clip the IRS’s wings, Congress has acceded to that view. (My kids make this kind of argument all the time. When I tell my son to stop jumping on the couch, he’s apt to say that he’s jumped on it before. For him, my earlier failure to tell him to stop means that there’s no rule against jumping on the couch.)

So, yes, the administration has a legal argument to support its delay of the mandate. But is it any good? Well, maybe not. Just because Congress hasn’t taken the IRS to task doesn’t mean that it agrees with the agency. Maybe Congress never caught wind of the practice of affording transition relief. (“I didn’t see you jumping on the couch.”) Maybe it heard about the practice but didn’t think it was worth intervening. (“You’re going to bed in five minutes anyhow.”). Maybe it was just busy. (“I’m on the phone.”) Congressional acquiescence arguments are tricky because Congress has so many reasons not to act. It’s probably safer to take Congress at its (statutory) word.

Still, the executive branch has an established tradition of giving weight to past practice when it comes to ascertaining the boundaries of an agency’s open-ended authority. Precedent matters in the executive branch, much as it does in the courts. Almost a dozen examples spread across thirteen years and three administrations, both Democratic and Republican, provide a plausible legal basis for delaying the employer mandate. (“But I always jump on the couch, and so does my sister.”) Without question, it’s aggressive for the administration to assert this authority in the teeth of effective dates inscribed in statutes. Arguably, however, the power to provide transition relief is just a modest, well-established adjunct to the power to craft “all needful rules” in administering a complicated tax code.

There’s a broader point here. So far as I know, no one has bothered yet to refute the argument the administration has made. The argument may not convince you. I’m not sure it convinces me (I find an alternative argument more appealing). But I know one thing for certain: you’ve got to grapple with it before you accuse the president of ignoring the law.

Hidden information below


Email Address*