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• The Mercatus Center at George Mason University has launched http://www.regradar.org/, a web site that monitors federal regulatory activity. The site is interactive, featuring links to relevant websites and detailed regulatory data. Information from government sources is supplemented with input from practitioners and individuals regarding the latest regulatory news, and the site also compiles the latest media coverage of regulatory activity. Its initial focus is on midnight regulations every step of the way – from their initial rumored stage (“Unconfirmed Federal Operations,” or “UFOs”), through the proposal stage, to their final implementation.
  
  
• The Supreme Court heard oral arguments November 7 in Browner v. American Trucking Associations Inc. and American Trucking Associations Inc. v. Browner. The two cases call into question the structure of federal regulation under the 1970 Clean Air Act. See: http://www.law.com/cgi-bin/gx.cgi/AppLogic+FTContentServer?pagename=law/View&c=Article&cid=ZZZAAVUAAFC&live=true&cst=1&pc=0&pa=0&s=
  News&ExpIgnore=true&showsummary=0

• Randolph J. May argues in his October 9 column in Legal Times that Al Gore's Reinventing Government program had limited success.  For all its grandiose rhetoric, it failed to eliminate any significant government program or restructure any major government program.  And Al Gore's claims concerning cost savings and reductions in agency personnel are hotly disputed.  May also points out that Governor Bush, in his major speech on government reform, avoided making specific recommendations concerning his own reinvention program.  For the entire column, see http://www5.law.com/dc-shl/display.cfm?id=3936&query=Randolph%20AND%20J%20AN
  
• The Truth in Regulating Act
  On Tuesday, October 17th, President Clinton signed "The Truth in Regulating Act," which gives the General Accounting Office (GAO) the authority to provide Congress with in-depth, independent assessments of major regulations.  The assessments can include review of potential costs and benefits, available alternatives, and small business and federalism impacts.  The law will help foster implementation of the Congressional Review Act and enhance congressional responsibility for federal regulations.
  
• Regulatory Right to Know: Reports on Regulatory Costs and Benefits
  As part of the Legislative/Treasury/Postal appropriations bill approved by both the House and Senate, Congress made permanent an annual requirement that the Office of Management and Budget (OMB) prepare annual regulatory accounting reports on costs and benefits of regulations.  These regulatory accounting reports have greatly improved the transparency of regulatory costs and benefits.  These reports highlight regulations whose costs are out of proportion to their benefits and promote better, more uniform regulations and use of the best available data.  President Clinton is expected to sign the legislation.

• HOUSE PASSES KELLY-McINTOSH REGULATORY REFORM BILL,  HOUSE COMMITTEE OKs REPORT ON GUIDANCE DOCUMENTS

On Tuesday, October 3rd, the House of Representatives passed the "Truth in Regulating Act of 2000." Rep. David McIntosh, Chairman of the House Government Reform Subcommittee on Regulatory Affairs, led this successful enactment from 1998 until today.  His Subcommittee held two hearings and issued two reports on this initiative.  (This bill previously passed the Senate and thus now goes to President Clinton for approval).  Also, October 5th, the House Government Reform Committee approved a landmark McIntosh Subcommittee Report, entitled "Non-Binding Legal Effect of Agency Guidance Documents."

Link to Chairman David McIntosh's press release today on both regulatory reform initiatives:

http://www.house.gov/reform/neg/press/index.htm

Link to the Subcommittee's Proposed Legislation webpage, which includes Vice Chairman Paul Ryan's floor statement & Chairman McIntosh's statement the next day on S. 1198:

http://www.house.gov/reform/neg/hearings/legis/Default.htm

For further information, contact:

Barbara Kahlow

Deputy Staff Director

Subcommittee on Regulatory Affairs

Barbara.Kahlow@mail.house.gov

Legislation has already passed in the Senate, and President Clinton is expected to sign the bill into law.

• List of Future EPA Regulations

In response to a request from House Government Reform Subcommittee on Regulatory Affairs Chairman David McIntosh's (R-IN) office, the Environmental Protection Agency (EPA) provided a list of 88 upcoming regulatory decisions expected before President Clinton leaves office.  A copy of the list is available in PDF under the breaking news section of the National Manufacturers Association website at: http://www.nam.org/

• To read a brief for the cross-petitioners in American Trucking Associations, Inc. Chamber of Commerce of the United States, Et. Al, (Cross-Petitioners) v. Carol M. Browner, Administrator of the Environmental Protection Agency, et. al. visit the Chamber’s Web site at http://www.uschamber.org/NCLC/Briefs/default.htm.

• The Heritage Foundation has a Social Security Calculator on its Web page to calculate what an American worker at your same age and gender could expect to receive from Social Security. See http://www.heritage.org/socialsecurity/ to generate your estimate.

• Randy May argues the Eleventh Circuit misconstrued the Chevron test in denying Elian Gonzalez an asylum hearing and also ignored the importance of the Supreme Court's recent decision in Christensen v. Harris County in deferring to the INS's newly-developed policy position, which was really more akin to a litigating position. See his column at: http://www5.law.com/dc-shl/display.cfm?id=3633

• Elian Gonzalez an asylum hearing and also ignored the importance of the Supreme Court's recent decision in Christensen v. Harris County in deferring to the INS's newly-developed policy position, which was really more akin to a litigating position. See his column at: http://www5.law.com/dc-shl/display.cfm?id=3633

On July 25th, the Truth in Regulating Act (H.R. 4924) passed the House of Representatives under suspension of the rules by a voice vote. A similar bill passed the Senate earlier in the year by unanimous consent. The bill is reprinted below.

HR 4924

106th CONGRESS

2d Session

H. R. 4924

To establish a 3-year pilot project for the General Accounting Office to report to Congress on economically significant rules of Federal agencies, and for other purposes.

Mrs. KELLY (for herself, Mr. CONDIT, Mr. MCINTOSH, and Mr. TURNER) introduced the following bill; which was referred to the Committee on Government Reform

------------------------------------------------------------------------------

A BILL

To establish a 3-year pilot project for the General Accounting Office to report to Congress on economically significant rules of Federal agencies, and for other purposes.

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, SECTION 1. SHORT TITLE. This Act may be cited as the `Truth in Regulating Act of 2000'.

SEC. 2. PURPOSES.

The purposes of this Act are to--

(1) increase the transparency of important regulatory decisions;

(2) promote effective congressional oversight to ensure that agency rules fulfill statutory requirements in an efficient, effective, and fair manner; and

(3) increase the accountability of Congress and the agencies to the people they serve.

SEC. 3. DEFINITIONS.

In this Act, the term--

(1) `agency' has the meaning given such term under section 3502(1) of title 44, United States Code, except that such term shall not include an independent regulatory agency, as that term is defined in section 3502(5) of such title;

(2) `economically significant rule' means any proposed or final rule, including an interim or direct final rule, that may have an annual effect on the economy of $100,000,000 or more or adversely affect in a material way the economy, a sector of the economy, productivity, competition, jobs, the environment, public health or safety, or State, local, or tribal governments or communities, or for which an agency has prepared an initial or final regulatory flexibility analysis pursuant to section 603 or 604 of title 5, United States Code; and

(3) `independent evaluation' means a substantive evaluation of the agency's data, methodology, and assumptions used in developing the economically significant rule, including--

(A) an explanation of how any strengths or weaknesses in those data, methodology, and assumptions support or detract from conclusions reached by the agency; and

(B) the implications, if any, of those strengths or weaknesses for the rulemaking.

SEC. 4. PILOT PROJECT FOR REPORT ON RULES.

(a) IN GENERAL-

(1) REQUEST FOR REVIEW- When an agency publishes an economically significant

rule, a chairman or ranking member of a committee of jurisdiction of either House of Congress may request the Comptroller General of the United States to review the rule.

(2) REPORT- The Comptroller General shall submit a report on each economically significant rule selected under paragraph (4) to the committees of jurisdiction in each House of Congress not later than 180 calendar days after a committee request is received, or in the case of a committee request for review of a notice of proposed rulemaking or an interim final rulemaking, by the end of the period for submission of comment regarding the rulemaking, if practicable. The report shall include an independent evaluation of the economically significant rule by the Comptroller General.

(3) INDEPENDENT EVALUATION- The independent evaluation of the economically significant rule by the Comptroller General under paragraph (2) shall include--

• an evaluation of an agency's analysis of the potential benefits of the rule, including any beneficial effects that cannot be quantified in monetary terms and the identification of the persons or entities likely to receive the benefits;
• an evaluation of an agency's analysis of the potential costs of the rule, including any adverse effects that cannot be quantified in monetary terms and the identification of the persons or entities likely to bear the costs;
• an evaluation of an agency's analysis of alternative approaches set forth in the notice of proposed rulemaking and in the rulemaking record, as well as of any regulatory impact analysis, federalism assessment, or other analysis or assessment prepared by the agency or required for the economically significant rule; and

(D) a summary of the results of the evaluation of the Comptroller General and

the implications of those results.

(4) PROCEDURES FOR PRIORITIES OF REQUESTS- The Comptroller General shall have discretion to develop procedures for determining the priority and number of requests for review under paragraph (1) for which a report will be submitted under paragraph (2).

(b) AUTHORITY OF COMPTROLLER GENERAL- Each agency shall promptly cooperate with the Comptroller General in carrying out this Act. Nothing in this Act is intended to expand or limit the authority of the General Accounting Office.

SEC. 5. AUTHORIZATION OF APPROPRIATIONS.

There are authorized to be appropriated to the General Accounting Office to carry out this Act $5,200,000 for each of fiscal years 2001 through 2003.

SEC. 6. EFFECTIVE DATE AND DURATION OF PILOT PROJECT.

(a) EFFECTIVE DATE- This Act shall take effect 90 days after the date of enactment of this Act.

(b) DURATION OF PILOT PROJECT- The pilot project under this Act shall continue for a period of 3 years, if in each fiscal year, or portion thereof included in that period, a specific annual appropriation not less than $5,200,000 or the pro-rated equivalent thereof shall have been made for the pilot project.

(c) REPORT- Before the conclusion of the 3-year period, the Comptroller General shall submit to Congress a report reviewing the effectiveness of the pilot project and recommending whether or not Congress should permanently authorize the pilot project.

END

• End of the Blank Check Justices Focus on Nondelegation Issues
  By Randolph J. May
  The Supreme Court ended this term with its usual array of high-profile individual rights cases involving such things as gay Boy Scout leaders and late-term abortion bans. For administrative lawyers, though, the big enchilada came March 21 with the decision in Food and Drug Administration v. Brown & Williamson Tobacco Corp. For more on this article, see: http://www5.law.com/dc-shl/display.cfm?id=3490&query=Randolph%20AND%20J%20AN

• Prescription Price Equity Act of 2000
  In February 2000, Representative Pete Stark of California introduced the Prescription Price Equity Act of 2000, H.R. 3665. The bill would reduce the research tax credits allowed to a U.S. drug company if the company’s U.S. sales prices for prescription drugs exceed the prices it charges in foreign markets.
  Thus, U.S. companies seeking to receive research tax credits would be required to reduce their U.S. drug prices to their price in foreign markets, even if the prices in foreign markets are artificially low because of price ceilings imposed by foreign governments. See Patricia M. Danzon, Making Sense of Drug Prices, 23 Regulation 56, 58 (drug prices in Mexico are low due to price regulation).
• Save Money for Prescription Drug Research Act of 2000
  In March 2000, Representative Fortney Pete Stark introduced H.R. 4089, the Save Money for Prescription Drug Research Act of 2000. The bill would prevent prescription drug companies from taking tax deductions for gifts to doctors, except for free product samples. Ordinarily these expenses are deductible as business expenses under section 162 of the Internal Revenue Code. The rationale for the bill was summed up by Representative Stark: "Spending by drug companies on gifts and promotions to physicians should not be tax deductible. These gifts take away billions of dollars that could be better spent on research and development."
  Appendix A: Outline of Prescription Price Equity Act of 2000
  If a worldwide affiliated group has "any disqualified gross receipts" from any calendar year, then the "applicable percentage" of the "research-related tax benefits" shall not be allowed to any taxpayer which is a member of such group for such taxpayer’s taxable year ending within such calendar year.
  • Disqualified gross receipts.
    • For each OECD member country, calculate the gross receipts of the worldwide affiliated group from prescription drugs manufactured or produced by any member of such group and sold for use or consumption in such country.
    • Such gross receipts are disqualified gross receipts if gross receipts are at least 5 percent less than the amount which would be such gross receipts were such drugs sold at their respective average manufacturing prices charged by members of such group in the United States.
  • "Applicable percentage" is defined as:
    • Aggregate disqualified gross receipts of the worldwide affiliated group, divided by
    • Aggregate gross receipts of such group from all prescription drugs which are manufactured or produced by members of such group.
  • Research-related tax benefits. Defined as benefits provided by:
    • Section 41
    • Section 45C
    • Section 174
  • Worldwide affiliated group. The term "worldwide affiliated group" means any affiliated group as defined in section 1504, without regard to sections 1504(b)(3) and section 1504(b)(4).
  • Expenditures to which section 174 does not apply by reason of the bill shall be treated for purposes of section 197 (relating to amortization of goodwill and certain other intangibles) as a section 197 intangible acquired on the last day of the taxable year in which such expenditures are paid or incurred.

  Appendix B: Simplified Summary of Calculation of Disqualified Gross ReceiptsFor each OECD country, calculate the gross receipts received for prescription drugs sold or consumed in that country.

  • Add all such gross receipts for OECD countries. Only include those countries for which gross receipts are 5% less than the gross receipts if the drugs were sold in U.S. at U.S. prices
  • Divide by gross receipts from worldwide prescription drug sales.
  • Multiply by research-related tax benefits.

• Cato Institute's Project on Social Security Privatization releases report on "Property Rights: The Hidden Issue of Social Security Reform" by Professor Charles E. Rounds Jr. of Suffolk University Law School. Read the report: http://www.socialsecurity.org/pubs/ssps/ssp-19es.html
• In March, 2000, the Staff of the Joint Committee on Taxation issued a report on political bias in the IRS's handling of tax-exempt organizations (JCS-3-00). The report found no credible evidence that the IRS had improperly dealt with tax-exempt organizations.
• Tax Proposals of the Presidential Candidates. Here is a basic list of the tax proposals put forward by each presidential candidate:

  Al Gore

  1. Make the R&D tax credit permanent.
     
     
  2. Create a tax-deductible "Life-Long Learning Account." This would be similar to the current education IRA but could be used to pay for the education of people over 30.
     
     
  3. Make modifications to the standard deduction and Earned Income Tax Credit to reduce the marriage penalty.
     
     
  4. Create a tax-deductible "USA Account" for retirement savings, which would be available to people who do not have access to an IRA or 401(k) plan.
     
     Source: http://www.algore2000.com/agenda/tax_cuts.html
  
  George W. Bush

1. Repeal the estate tax.
   
   
2. Replace the current five tax rates for individuals of 15, 28, 31, 36, and 39.6 percent with four lower rates: 10, 15, 25, 33.
   
   
3. Double the $500 child tax credit to $1,000.
   
   
4. Make the charitable donation deduction a non-itemized deduction.
   
   
5. Increase the annual contribution limit on Educational Savings Accounts from $500 to $5,000. Expand the accounts to cover primary and secondary schools, not just college.

Source: http://www.georgewbush.com/issues/economic/taxes/points.asp

• Corporate Tax Shelters: February 28, 2000, the Treasury Department issued regulations that requires taxpayers to disclose to the IRS whether they have entered into corporate tax shelters. 65 Fed. Reg. 11205 to 11222.
  
  
• In its Decision Regarding a Preliminary Injunction, the Eleventh Circuit, Relying on Chevron, Holds That Elian Gonzalez Had Made a "Substantial Case" That He Was Entitled to Apply for Political Asylum.
  
  
• Using the Chevron test of whether courts should defer to administrative agencies, the Eleventh Circuit on April 19 held that Elian Gonzalez had made a "substantial case" that he was entitled to apply for political asylum.

  The statute regarding applications for asylum, 8 U.S.C. § 1159(a)(1), provides that: "Any alien who is physically present in the United States ... irrespective of such alien’s status, may apply for asylum ..."

  The Eleventh Circuit court read 8 U.S.C. § 1159(a)(1) statute broadly, and refused to defer to the INS’s interpretation of the statute--that minors such as Elian could not apply for asylum without their parent’s permission. The court held that the language of the statute was clear that such minors could apply, and therefore the INS had no authority to interpret the statute any other way. The court cited the case of Chevron v. Natural Resources Defense Council, Inc., 104 S. Ct. 2778 (1994), in which the court held that agencies such as the INS must give effect to the clear language of statutes. Chevron says that agencies have the authority to interpret statutes only when the statute is unclear or silent on the issue at hand.

  The Eleventh Circuit issued a preliminary injunction pending its final decision on the matter. The injunction barred Elian from leaving the country until the Eleventh Circuit reviewed the decision of the District Court for the Southern District of Florida, which had held that Elian was not entitled to apply for asylum.

  The district court had taken a different approach than that taken by the court of appeals. The district court deferred to the executive branch’s narrow interpretation of the political asylum statute, believing it was required to do so by 8 U.S.C. § 1003(a), a statute providing that determinations by the Attorney General on all questions of immigration law are controlling. (The Attorney General had agreed with the INS).

  As an alternative basis for its holding that Elian could not apply for asylum, the district court had also considered Chevron. But unlike the court of appeals, the district court thought essentially that the asylum application statute, 8 U.S.C. § 1158(a), was "silent" (not "clear") on whether minors could apply for asylum. Therefore the court believed that it was required to accept the INS’s interpretation of this "silent" statute. The Eleventh Circuit is now reviewing the district court decision.

• Hunt-Wesson case.
  On February 22, 2000, the Supreme Court unanimously voted to shut down a California rule that attempted to increase taxation of out of state income.If upheld, the rule would have avoided the effects of the Court's previous decisions holding that a state may not tax any income of a nondomiciliary corporation that is attributable to an out of state business activity that is unrelated to the business conducted in the state. The California rule provided that interest expenses were generally deductible, but only to the extent that they exceeded so-called "nonunitary income from an unrelated business"--i.e., the income that is unconstitutional for the state to tax under the Court's earlier rulings.
  Reasoning that "a tax on sleeping measured by the number of pairs of shoes you have in your closet is a tax on shoes," (citations omitted), the Court had no trouble finding that the deduction limitation amounted to a tax. The Court then went on to consider California's justification that the rule was simply one method of allocating interest expenses between taxable and nontaxable income. Because "money is fungible," it is necessary for jurisdictions to come up with a way to allocate expenses, and the Court recognized that reasonable allocation schemes have been consistently upheld, such as in First National Bank of Atlanta v. Bartow County Bd. of Tax Assessors, 470 U.S. 583 (1985). However, California's rule, which does not exist in any other jurisdiction, "pushes this concept past all reasonable bounds" by assuming that all money borrowed by a business is always deemed to first help the nontaxable business. In short, the Court left the door open for states to adopt other deduction limitation schemes, so long as "it is reasonable to expect that, over some period of time, the ratios used will reflect approximately the amount of borrowing that firms have actually devoted to generating each type of income."

• For further details on last month’s issuance and subsequent withdrawal of the Occupational Safety and Health Administration's advisory opinion on work-at-home employees, see Randolph May’s recent Fourth Branch column in the Legal Times at: http://www.legaltimes.com/expcfm/display.cfm?id=2701&query=fourth%20branch
  
  
• On January 27, 2000, David M. McIntosh, Chairman of the House Government Reform Subcommittee on Regulatory Affairs introduced H.R. 3521 entitled the Congressional Accountability for Regulatory Information Act of 2000. This bill aids Congress in analyzing Federal regulations and ensuring the public's understanding of the legal effect of agency guidance documents. To accomplish the former, the bill requires an analytic report to Congress by the General Accounting Office (GAO) on selected important agency proposed and final rules. To accomplish the latter, the bill requires the agencies to include a notice of nonbinding effect on each agency guidance document without any general applicability or future effect.

• Hunt-Wesson Case.
  On January 12, 2000, the Supreme Court heard arguments in the case of Hunt-Wesson, Inc. v. California Franchise Tax Board, U.S. No. 98-2043. The issue is the constitutionality of a California tax law provision which reduces an out-of-state company's interest expense deduction by an amount equal to dividends it received from foreign subsidiaries.
  
• Corporate Tax Shelters.
  On November 10, 1999, the House Ways and Means Committee heard testimony on proposals to combat corporate tax shelters. http://www.house.gov/ways_means/fullcomm/106cong/fc-14wit.htm
  
• Politically Motivated Audits.
  The Joint Committee on Taxation is drafting a study on allegations that the IRS conducts politically motivated audits of tax-exempt organizations.
  
• Testimony of Economists and Accountants Must be Reliable.
  In Kumho Tire Co. v. Carmichael, 526 U.S. 137 (Mar. 23, 1999), the Supreme Court held that testimony by nonscientific experts, which would include economists, appraisers, accountants, and actuaries, must pass the Daubert test for reliability. Before Kumho Tire, some courts had held that the Daubert test for reliability applied only to scientific experts. See Administrative Law & Regulatory News, vol. 3, no. 3, Fall 1999, page 8.
  
• Multidisciplinery Service Providers.
  The Professional Responsibility Section has published a number of articles on the question of multidisciplinery service providers in its newsletter, vol. 3, no. 2, Summer 1999.
  
• Accountant-Client Privilege.
  A new "accountant-client privilege" is now available, under very limited circumstances, due to changes in the law implemented by the IRS Restructuring And Reform Act of 1998. See Administrative Law & Regulation News, vol. 3, no. 3, Fall 1999, page 8.
  
• Shifting of burden of proof to IRS.
  Under very limited circumstances, the burden of proof now rests with the IRS in tax cases, as provided for by the IRS Restructuring And Reform Act of 1998. See Administrative Law & Regulation News, vol. 3, no. 3, Fall 1999, page 9.
  
• The House Government Reform Committee Subcommittee on National Economic Growth, Natural Resources, and Regulatory Affairs, chaired by Congressman David McIntosh, will be holding the following hearing on February 15, 2000 - "Is the Department of Labor Regulating the Public Through the Backdoor?" in 2154 Rayburn House Office Building, at 1:00 PM.