Legislative Entrenchment Rules in the Tax Law

Can one Congress tie the hands of a later Congress? That is the issue posed by legislative entrenchment rules. Generally, a statute creates a legislative entrenchment rule whenever it says that a subsequent statute will be effective only if it is enacted or phrased in a specific way. Some legislative entrenchment rules require a future Congress to make a specific reference to an existing statute if it wishes to amend or create exceptions from that statute. Others impose a general, heightened clarity requirement, stating that amendments or modifications to an existing law must be made “expressly.” Still other rules state that future provisions of law that are not contained in a particular title or in a particular type of act must be disregarded. Legislative entrenchment rules have raised difficult interpretive issues in the tax laws. In a recent case involving over $1 billion of income, Capital One Financial Corp. v. Commissioner, the Tax Court voided a statute because it was not codified in the manner prescribed by a legislative entrenchment rule. But in other circumstances, legislative entrenchment rules have been largely ignored. The Internal Revenue Service (IRS) and the Tax Court have repeatedly concluded that § 7805(e) of the Internal Revenue Code (IRC or Code) creates an exception from the Administrative Procedure Act’s (APA’s) requirements, even though the APA’s legislative entrenchment rule seemingly prohibits this interpretation. The special statutory interpretation issues raised by legislative entrenchment rules have not received close attention from the IRS, the Tax Court, or taxpayers. Instead, these rules have been either applied strictly or cursorily dismissed without regard to the broader issues at stake. This lack of attention has led to inconsistent results and has added confusion to an already complex area of law. This Article analyzes how legislative entrenchment rules affect the interpretation of subsequently enacted tax statutes and argues that legislative entrenchment rules—however formulated—should not automatically nullify subsequent statutes that fail to satisfy those rules’ requirements. Instead, like all other statutes, a legislative entrenchment rule should be subject to the doctrine of implied repeals. That is, if a later enacted statute irreconcilably conflicts with a legislative entrenchment rule or is intended to substitute for it, the later enacted statute should trump the legislative entrenchment rule. This Article also examines several types of legislative entrenchment rules that have caused (or may cause) controversy in the tax laws. Section 446(e) of the Code, the provision at issue in Capital One, receives special attention because of the enormous number of dollars at stake and because the Tax Court construed that statute in a manner directly contrary to this Article’s thesis. Finally, this Article argues that the Tax Court and the IRS have given insufficient weight to the APA’s legislative entrenchment rule in finding that some temporary regulations, issued without notice and comment, never expire