IRS Evades Regulatory Accountability Through Self-Imposed Exemption From Oversight
21st February 2018
The IRS first started claiming that its regulations have no economic impact in response to the 1980 Regulatory Flexibility Act (RFA), which was designed to mitigate the compliance costs of federal regulations on small businesses. The RFA states that if a proposed regulation could have a large economic impact on small businesses, the agency must consider alternatives that would leave small businesses unharmed.
The RFA also contains a Congressional amendment specifically designed to cover IRS regulations, but the IRS has shirked its duty to comply with the RFA since Congress passed the law. The IRS has broadened its self-exemption from economic impacts to all impacts, including record-keeping and other reporting burdens. That means that IRS regulations can impact small businesses while completely evading oversight from Congress or the White House.
In the Internal Revenue Manual, a document the IRS uses to guide its compliance with oversight mechanisms, the agency bizarrely claims that its rules have no economic impact. This reading allows the IRS to avoid sharing information with Congress, the executive branch, and the American people. The IRS has never offered an adequate justification for this self-exemption.