[author: Lai Lam]

The Treasury Department and the Office of Management and Budget (OMB) has released a Memorandum of Agreement (MOA) establishing a new process for the review of tax regulations. The MOA brings an end (at least for now) to the recent power struggle between the two agencies over who should get the final say in approving tax regulations. In the MOA, the OMB has gained new authority to give final approval to certain tax regulations issued by the Treasury.

Under the new framework, a tax regulatory action will be subject to review by the OMB’s Office of Information and Regulatory Affairs (OIRA) if it is likely to result in a rule that may:

• create a serious inconsistency or otherwise interfere with an action taken or planned by another agency;
• raise novel legal or policy issues, such as by prescribing a rule of conduct backed by as assessable payment; or
• have an annual non-revenue effect on the economy of $100 million or more, measured against a no-action baseline.

A tax rule that is subject to OMB’s additional review cannot be published in the Federal Register until OIRA notifies the Treasury that it has waived or concluded its review. OMB’s review will generally take 45 days after Treasury’s submission of a rule. The MOA also explains that any “policy disagreement that could not be resolved during the review process” will be resolved via a “principals meeting.” OIRA would facilitate such a meeting and, if needed, elevate any outstanding issues to the president.

This new MOA supersedes the 1983 Memorandum of Agreement between the Treasury and OMB with respect to tax regulatory actions.

A copy of the MOA is available here.

The agencies’ official press release can be viewed here.