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Estate and Trust Planning Opportunity – The 65 Day Rule

It is not is too late to plan for 2018. Under Section 663(b) of the Code, the “65 Day Rule” provides an opportunity for estates and certain trusts to elect to treat distributions made within 65 days of year-end as if made on the last day of the prior tax year and thus to carry-out income from the estate / trust and to have the income taxed directly to beneficiaries. For 2018, the highest tax rate will apply to trusts / estates with income in excess of $12,500, while for a single individual the highest tax rate will not apply until income exceeds $500,000. In addition, income level requirements are also different for triggering the 3.8% net investment income tax (i.e. at $12,500 for estates / trusts and $200,000 for a single individual). Given these large differences, the 65 Day Rule is a useful tax planning tool that fiduciaries should keep in mind.

For more information, please contact Andrew MacLeod in the Detroit, Michigan office of Dickinson Wright at 313-223-3187 or any member of Dickinson Wright’s tax team.

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New and Valuable Ways to Reduce Capital Gains Tax

If property is held by someone at their death, the “basis” in the property used by the seller to determine taxable gain on its sale is re-set to the fair market value at the date of death.

Income and capital gain tax rates have increased over the last 10 years, and during that time the exemption to avoid estate tax has increased dramatically. This combination (which did not generally exist before now) creates a tremendous opportunity to reduce income tax on property sales. There are many ways to do this. One simple technique is to transfer a highly appreciated asset to a parent. When Mom or Dad passes away, the basis in the asset is increased to its fair market value at the date of death (even though there is no estate tax), which can eliminate income tax on the gain on a sale thereafter, or permit much greater depreciation deductions when re-acquired by the owner.

So for example, if basis is stepped up by $1,000,000, then the tax on sale of the asset will be reduced, which tax savings could easily be $300,000. Note this is an after-tax savings!

There are related issues that should be addressed to protect the asset, account for timing and further enhance the tax benefits.

To discuss this further please contact Les Raatz, Member of the Phoenix office, 602-285-5022 or lraatz@dickinsonwright.com

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Why Do Any Estate Planning?

The 2017 Tax Cuts and Jobs Act raised the amount that can be sheltered from federal estate tax in 2019 to $11.4 million for an individual and double that amount, or $22.8 million, for a married couple. Why undertake any estate planning in this relatively tax-free environment? Here are some compelling reasons:

  • After 2025, the current high exclusion amount is scheduled to be cut in half. Given the instability of our current law, individuals and couples with larger estates need to monitor whether their current plans will accomplish their intentions now and into the future. For example, should very affluent individuals act now to lock in the benefit of the current high exclusion through lifetime gifts?
  • Income tax planning is an important component of estate planning. For individuals and couples with nontaxable estates, does their current planning provide appropriately for their loved ones and take adequate account of income tax planning? At death, assets (with certain important exceptions) receive a basis adjustment to date of death values with the result that income tax on built in gain can be avoided. Have individuals and couples planned to maximize this potential benefit?
  • All individuals and couples need to make advance planning for the potential financial risks associated with lifetime disability. The uncertainty of our current law spotlights the benefit, in the proper case, of granting trusted family members or friends authority to adjust a disabled person’s planning if and when our law produces unintended estate planning consequences.

If you have any questions or would like further information, please contact Henry M. Grix in the Troy, Michigan office at 248-433-7548.

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Determining Eligibility for the Employer Credit for Paid Family and Medical Leave

Section 45S of the Internal Revenue Code (“Code”), added to the Code by the Tax Cuts and Jobs Act of 2017, establishes a general business credit for an employer who provides paid family and medical leave to qualifying employees. The credit would partially offset the cost of the paid leave, however, it is available only for the 2018 and 2019 taxable years. To assist employers in determining whether they are eligible to claim the credit, the IRS provided guidance in Notice 2018-71, summarized below.

Calculating the Credit

The credit is generally equal to the applicable percentage of the wages paid to qualifying employees while on family and medical leave. The applicable percentage is 12.5% increased (but not above 25%) by 0.25 percentage points for each percentage point by which the rate of payment exceeds 50%. Notice 2018-71 provides further details on how to calculate and claim the credit.

Written Policy

As a prerequisite to claiming the credit, the employer must have a written policy that provides all “qualifying employees” with at least two weeks of paid family and medical leave (pro-rated for part-time employees) at a rate of at least 50% of the employee’s normal wages. The written policy may be in a single document or multiple documents.

For an employer’s first taxable year beginning after December 31, 2017, the written policy could be adopted with retroactive effect as long as retroactive leave payments were made by the last day of the taxable year. (December 31, 2018 for employers with a calendar year.) For subsequent taxable years, the written policy must be in place before the credit is taken. The policy is considered to be in place on the later of the policy’s adoption date or its effective date.

Therefore, if a calendar year employer determines in early 2019 that its current leave policy does not satisfy the IRS guidance, the employer can implement a new or updated policy and claim the credit on a prospective basis in 2019. The practical question is then whether to retain the policy when the credit expires at the end of the 2019 taxable year.

Family and Medical Leave

The types of leave eligible for the credit are leaves qualifying under the Family and Medical Leave Act (“FMLA”), typically for the birth or adoption of a child, the employee’s serious health condition, or caring for a spouse, child or parent with a serious health condition. The leave must be specifically designated for one or more FMLA purposes, may not be used for any other reason, and is not paid by a State or local government or required by State or local law. Thus:

  • PTO days that can be used for sickness, vacation, or personal reasons will not qualify (because the leave can be used for reasons other than FMLA purposes); and
  • To the extent paid leave is provided under State or local law, the federal credit cannot be claimed.

Short-term disability leave can qualify, whether it is insured or self-insured, as long as it meets all other requirements of family and medical leave under Code Section 45S.

Qualifying Employee

A “qualifying employee” is one who has been employed for one year or more and whose compensation is less than 60% of the amount under Code Section 414(q)(1)(B)(i) ($72,000 in 2018 and $75,000 in 2019.) No classification of employees may be excluded and a pro-rata amount of leave must be provided to part-time employees (working fewer than 30 hours per week.) Therefore, a paid leave policy benefiting only full-time employees will not qualify for the federal credit.

If an employer is using payments from a short-term disability (STD) insurance policy to satisfy the paid leave obligation, the employer should review the policy to determine if it has any pre-existing condition exclusions. If so, according to IRS Notice 2018-71, the employer will not be eligible for the credit for any employee because a qualifying employee with a pre-existing condition would not receive payments from the policy. This deficiency can be cured if the employer provides payments on a self-insured basis to any qualifying employee who is not eligible for payments under the STD policy due to a pre-existing condition.

Effective Date

The credit applies to wages paid in taxable years beginning after December 31, 2017 and before January 1, 2020.

The credit is useful in encouraging an employer to provide paid family and medical leave to employees. However, its usefulness is limited as the credit expires at the end of the 2019 taxable year. If an employer wishes to take advantage of the credit, it should carefully review its existing leave policy and STD policy and determine if modifications are necessary.

If you have any questions about the credit for paid family and medical leave, please contact Cynthia A. Moore at cmoore@dickinsonwright.com or any other member of the Dickinson Wright Tax or Employee Benefits group.

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“Non-Performing Artists” Wait on IRS Final Regulations Under Section 199A

In early August, the Internal Revenue Service (IRS) issued proposed regulations under the Tax Cuts and Jobs Act (TCJA) that provide guidance to owners of pass-through businesses as to eligibility for a federal tax deduction of 20% of the income generated by the businesses under new Section 199A of the Internal Revenue Code (IRC). Although the stated purpose of the proposed regulations is to provide clarity on eligibility for and the means to compute the deduction, this guidance created ambiguity and confusion in several areas, including the applicability of the new deduction to persons who are involved in the entertainment industry but who do not perform on stage or in front of a microphone such as directors, producers, makeup artists, editors and the like.

One of the important limitations to the pass-through deduction in the TCJA is that owners of pass-through businesses that conduct a specified service trade or business (SSTB) and whose income exceed the so-called income limitation ($207,500 for single taxpayers and $415,000 for married taxpayers who file jointly) are not entitled to claim the 20% deduction. The TCJA provides that a SSTB includes a trade or business that involves the “performance of services in the field of performing arts”.

The proposed regulations indicate that persons who help create performing arts such as singers, actors, musicians and entertainers do provide services in the field of performing arts but that those whose skills are not unique to the creation of performing arts are not engaged in providing services in the field of performing arts:

Proposed § 1.199A-5(b)(2)(vi) is informed by the definition of ‘performing arts’ under section 448 and provides that the term ‘performance of services in the field of the performing arts’ means the performance of services by individuals who participate in the creation of performing arts, such as actors, singers, musicians, entertainers, directors, and similar professionals performing services in their capacity as such. The performance of services in the field of performing arts does not include the provision of services that do not require skills unique to the creation of performing arts, such as the maintenance and operation of equipment or facilities for use in the performing arts. Similarly, the performance of services in the field of the performing arts does not include the provision of services by persons who broadcast or otherwise disseminate video or audio of performing arts to the public.

Preamble to §1.199A-5-A(2)(i)(e) to Proposed Regulations.

Regrettably, the actual Proposed Regulations do not provide further guidance beyond the information contained in the Preamble. Prop. Reg. §1.199A-5(b)(2)(vi). The only examples in the Proposed Regulations relate to a singer and the royalties received for singing the song and a joint venture formed by an actor who contributes her name and likeness to the partnership in return for an interest in the entity. Both examples were found to generate income from an SSTB.

Several commentators conclude that income generated by persons who do not actually perform on stage or in a studio should not be characterized as a SSTB and have criticized the IRS’s position in the Proposed Regulations that people who are involved in the area of performing arts but who are not performing artists- such as directors, producers, makeup artists, costume designers and set designers- are engaged in the performance of services in the performing arts and thus cannot take advantage of the deduction if their income exceeds the income threshold ($415,000 for joint taxpayers). In fact, one commentator suggests that “the expansion [beyond application to pure performing artists] will create uncertainty and litigation”.

In further support of the argument that the definition of SSTB in IRC Section 199A should be limited to performing artists only, a footnote in the recently released explanation of the TCJA (called the “blue book”) indicated that the list of services in IRC Section 199A that are SSTB is similar to those listed in IRC Section 448 and that the performance of services in the field of performing arts for purposes of IRC Section 448 “does not include the provision of services by persons who themselves are not performing artists”. Hopefully, the IRC Section 199A Final Regulations will be consistent with the blue book’s implicit indication that Congressional intent is that SSTB under IRC Section 199A should be consistent with the interpretation of a similar set of services under IRC Section 448.

As a result of this uncertainty, persons who are “non-performing” artists and who provide services in the entertainment industry as independent contractors must wait on final regulations from the IRS under IRC Section 199A to determine if they can claim the 20% deduction for owners of pass-through businesses under this TCJA provision.

If you have any questions, or for further information, please contact Ralph Z. Levy Jr. in the Nashville, Tennessee office at 615-620-1733.

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Great Lakes Water Diversions – Continued Controversy

Two recent petitions challenging water diversions, one in Wisconsin and another in Michigan, reflect the continued controversy over water rights and usage that have implications, environmental and otherwise, for energy producers and transporters.

On May 25, 2018, Midwest Environmental Advocates (“MEA”) filed a petition challenging the Wisconsin Department of Natural Resources’ (“Wisconsin DNR”) April 25, 2018 approval of the City of Racine’s request to divert seven million gallons per day (“MGD”) of Great Lakes water (“2018 Racine”).

The Wisconsin DNR approved the transfer of 7 MGD from Lake Michigan to an area outside the Great Lakes Basin.  Wisconsin DNR approval is required because of the Great Lakes–St. Lawrence River Basin Water Resources Compact (“Compact”).  The Compact was entered into by the eight Great Lakes states, two Canadian provinces, and enacted into federal law.  A key aspect of the Compact is the ban on diversions of Great Lakes water outside the Great Lakes basin unless the diversion meets narrow exceptions, and the Compact requires any diversion to be primarily for residential households.  For example, in 2016, Waukesha, Wisconsin obtained a diversion of water from Lake Michigan because its water supply was contaminated with radium, a naturally occurring carcinogen.  One important condition was that all the water diverted to Waukesha must be returned, resulting in no net loss of water from the Great Lakes.

The main purpose of the 2018 Racine diversion is to supply a single private industrial customer, the Chinese owned Foxconn, and facilities surrounding the Foxconn plant.  Foxconn, a flat screen manufacturer located in Racine, Wisconsin after receiving a reported $4 billion incentive package from Wisconsin.  The diversion of an average of 7 MGD, has 5.8 MGD being used directly by Foxconn and 1.2 MGD being used by commercial facilities surrounding the Foxconn plant.  It also results in 2.7 MGD not being returned to the Great Lakes basin, largely because of evaporation. The diversion does not require unanimous approval under the Compact because less than 5 million gallons per day will be lost. None of the diverted water will be used for residential purposes.

The MEA petition asserts that the Wisconsin DNR’s approval disregards and unreasonably interprets a core Compact requirement that all water transferred out of the Great Lakes Basin must be used for public water supply purposes, defined as “serving a group of largely residential customers.”  The MEA petition asks for an administrative law judge to review and ultimately withdraw Wisconsin DNR’s approval.  The MEA argues that the Wisconsin DNR ruling could become precedent, if allowed to stand, that would undo “a core provision of the compact, essentially unraveling the international agreement and will do undetermined damage to the sustainability of the Great Lakes.”

Similarly, there is controversy over the Michigan DEQ permit granting Nestle Waters North America’s request to withdraw 400 gallons per minute of water pursuant to the Michigan Safe Drinking Water Act, 1976 PA 399, as amended.  A permit is required if the water is from a new or increased large-quantity withdrawal of more than 200,000 gallons of water per day.  The MDEQ’s approval allows Nestle to withdraw 576,000 gallons of water per day.

On May 31, 2018, the Michigan Citizens for Water Conservation (“MCWC”) filed a petition to contest the Michigan DEQ’s permit in state administrative court.  The MCWC petition claims the DEQ did not obtain “required” data on existing conditions in the field; instead, relying on Nestle-supplied data and computer models. Before Nestle can boost the pumping rate, the DEQ must approve a plan to monitor local wetlands and the health of two trout streams fed by the aquifer Nestle taps for water it bottles under the Ice Mountain spring brand in Stanwood. The DEQ called its review “the most extensive analysis of any water withdrawal permit in Michigan history.”

The permit decision and preceding deliberations caused an uproar among Michigan citizens, particularly those living in Flint and Detroit — two Michigan cities where residents have separately struggled with water safety and affordability.  Michigan law allows Nestle to withdraw groundwater for free provided the extraction doesn’t harm the environment or dry up neighboring wells.  There are also zoning challenges pending at the state court of appeals.

These extraction cases have generated significant national and global attention, and re-ignited a debate about Great Lakes water diversion and groundwater water policy.  The increased focus on water issues can pose regulatory and compliance issues for energy producers who may also seek to use water as part of the energy production process, as well as transporters who cross bodies of waters.

Should you have any questions, please contact the Dickinson Wright attorney below. Thank you.

About the Author:

Peter H. Webster is a Member and Practice Group Chair of the firm’s Municipal Law and Eminent Domain Practice Group.  He has a focus is on municipal and real estate litigation. He can be reached at 248.433.7513 and pwebster@dickinsonwright.com.

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Ohio Revises Administrative Regulations Associated With Commercial-Scale Wind Farms

On March 15, 2018, the Ohio Power Siting Board (OPSB) finalized proposed additions and revisions to administrative regulations associated with commercial scale wind farms. The finalized rule package is the result of a two-year review process, complete with three separate stakeholder comment periods, an opportunity for rehearing, and numerous different iterations of proposed rules.

A diverse group of stakeholders participated in the rulemaking discussion, including Icebreaker Windpower, Inc., the Mid-Atlantic Renewable Energy Coalition, Greenwich Windpark, LLC, Union Neighbors United, Greenwich Neighbors United, the Black Swamp Bird Observatory, the American Bird Conservancy, the Ohio Environmental Council, and the Ohio Farm Bureau Federation. After considering all testimony and hundreds of pages of stakeholder comments, the OPSB finalized a robust regulatory framework covering every conceivable health, safety, ecological, and environmental impact of commercial scale wind.

One can view a complete summary of all new and revised rules here. Ohio’s wind regulations now address all aspects of wind project development, including, but not limited to: operational sound restrictions; regulations governing wind turbine ice throw, blade shear, or shadow flicker; wind turbine setbacks and setback waiver rules; the process required for purposes of project reconstruction, enlargement, alteration, or amendment; and rules pertaining to the decommissioning of wind farms. Although the wind industry voiced concern over certain additions/revisions, it is believed the package as a whole appropriately balanced the interests of all stakeholders and ultimately delivered the stable regulatory environment needed for responsible development to occur.

The new rules come in the midst of an ongoing debate in the Ohio General Assembly regarding the minimum state-mandated distance between wind turbines and adjacent property lines and structures. In 2014 lawmakers almost tripled the state’s wind turbine “setback” law, rendering it the most restrictive in the country. That law made new Ohio wind projects virtually impossible to build—since the change, zero new wind farms have been permitted by the OPSB. It has been referred to as a “functional moratorium.” At the same time, Illinois, Michigan, and Pennsylvania have seen tremendous growth as demand for wind energy is at an all-time high.

Wind developers are hopeful that Ohio’s legislature will revise the state’s setback requirements yet this year. In advocating for a change, proponents continue to highlight the tremendous economic benefits of wind project development, including $4.2 billion in local economic investment and the creation of over 13,000 new, Ohio-based jobs.

The new wind rules took effect April 26, 2018. Should you have any questions, please contact the Dickinson Wright attorneys below. Thank you.

About the Authors:

Terrence O’Donnell is a Member and Chair of the firm’s Government Affairs, School Law, Franchise Law Practice Group. His focus is public policy advocacy at the Ohio statehouse and regulatory compliance. He can be reached at 614-744-2583 or TODonnell@dickinsonwright.com.

Christine Pirik is Of Counsel in the firm’s Columbus office. As an attorney with over 31 years in public service, Ms. Pirik previously served as Chief of Staff and Deputy Legal Director for the Public Utilities Commission of Ohio (PUCO) and the Ohio Power Siting Board (OPSB). She can be reached at 614-591-5461 or cpirik@dickinsonwright.com.

William Vorys is an Associate in the firm’s Columbus office. He focuses his practice primarily on government relations and administrative law, advocating public policy at the Ohio statehouse and assisting clients with regulatory compliance. He can be reached at 614-744-2936 or WVorys@dickinsonwright.com.

  

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Controlled Burn: The Department Of Justice Announces It Will Not Rely On Agency Guidance Documents In Affirmative Civil Enforcement Cases

On January 25, 2018, Associate Attorney General Brand issued a memorandum titled “Limiting Use of Agency Guidance Documents in Affirmative Civil Enforcement Cases,” (the “Brand Memo“) which clarified that Department of Justice (the “Department“) civil litigators may not rely on guidance documents issued by executive branch agencies when enforcing federal regulations via affirmative civil enforcement actions (“ACE“).1 Regulated parties that are or may become subject to ACEs should be aware of this significant change in federal regulatory enforcement policy. This article: (1) describes the basic process that agencies are supposed to follow when promulgating new binding rules; (2) explains how agencies have circumvented this process by issuing binding rules embedded in purportedly non-binding “guidance documents”; and (3) analyzes how the Brand Memo (and its predecessor, the Sessions Memo), may clear away some of the regulatory overgrowth and assist regulated parties in meeting their federal regulatory compliance obligations.

Procedures for Issuance of Administrative Rules

Under well-established Supreme Court precedent, Congress may delegate rulemaking functions to executive branch agencies, so long as Congress provides an “intelligible principle” to guide the exercise of such authority and constrain agency discretion.2 The Administrative Procedure Act (the “APA“)3 creates a set of policies and procedures that agencies must follow to exercise their rulemaking powers. Most significantly, Section 553 of the APA generally requires federal agencies to provide public notice and an opportunity to comment on any proposed rule. If an agency fails to follow the procedures prescribed by the APA in issuing a new rule4, a regulated party may ask a court to declare the rule invalid on procedural grounds.5

Guidance Documents

Notably, however, agencies do not need to follow notice-and-comment procedures to publish guidance documents, which include “interpretive rules, general statements of policy, or rules of agency organization procedure, or practice.”6 And because the notice-and-comment process can be cumbersome and time-consuming, many agencies have attempted to characterize binding rules7 —which should be promulgated under the notice-and-comment procedures—as guidance documents.8 For example, in Iowa League of Cities v. EPA,9 the Eighth Circuit addressed whether certain letters sent by the EPA to Senator Chuck Grassley merely interpreted existing regulatory requirements or “effectively set forth new regulatory requirements with respect to water treatment processes at municipally owned sewer systems.”10 The Eighth Circuit invalidated the rules described in the letters on the ground that they were substantive rules issued in violation of the APA.11 There are myriad other examples of agencies seeking to substantively bind parties through the enforcement of policies set forth in guidance documents.12

In addition to violating the APA, this tactic deprives regulated parties of notice of their additional or different compliance obligations, and deprives the public of an opportunity to assess the need for, improve the quality and clarity of, or seek judicial review of, such regulations.13 It also drastically increases the expense and burden of complying with federal regulations because regulated parties must remain cognizant not only of rules issued through the APA’s procedures, but also of the rules embedded in the constellation of informal guidance documents.14 In addition, this practice has generated extensive legal challenges from industry groups and other regulated parties, embroiling the courts in abstract and sometimes intractable disputes over whether a particular agency directive is a true “legislative rule” or a mere “interpretive rule” or “general statement of policy.”15

Sessions and Brand Memoranda

On November 16, 2017, Attorney General Sessions began paring back some of this regulatory overgrowth by issuing a memorandum, titled Prohibition on Improper Guidance Documents (the “Guidance Policy“), which prohibited the Department of Justice (the “Department“) from issuing “guidance documents that purport to create rights or obligations binding on persons or entities outside the Executive Branch,” or from relying on existing guidance documents to coerce regulated entities “into taking any action or refraining from taking any action beyond what is required by the terms of the applicable statute or regulation.”16 However, he noted that the Guidance Policy did not apply to “documents informing the public of the Department’s enforcement priorities or factors the Department considers in exercising its prosecutorial discretion,” among other things.17

The Brand Memo expanded on the principles set forth in the Sessions Memo by prohibiting Department civil litigators from relying on any agency guidance documents: “[E]ffective immediately for ACE cases, the Department may not use its enforcement authority to effectively convert agency guidance documents into binding rules. Likewise, Department litigators may not use noncompliance with guidance documents as a basis for proving violations of applicable law in ACE cases.”18 The Brand Memo is not a panacea for beleaguered regulated parties. For example, the Department could still rely on an aggressive interpretive rule in pushing for a favorable settlement of a suit relating to an environmental regulatory violation. But it will, at least, narrow the universe of applicable regulations and assist parties with understanding and meeting their compliance obligations.19 It is also possible that the Sessions and Brand Memoranda will in some cases reduce the regulatory certainty enjoyed by some regulated entities: for example, the Sessions Memo may limit the Department’s ability to send comfort letters to regulated entities assuring them that they will not be the target of an enforcement action if they engage in certain proposed conduct. 20 In the aggregate, however, a controlled burn of regulatory overgrowth that ultimately requires Department civil litigators and regulated parties to play by the same set of rules will likely produce outcomes in ACE cases that are fairer, and that hew more closely to the spirit of the APA.

________________________________

1 Associate Attorney General Brand, Department of Justice, Limiting Use of Agency Guidance Documents in Affirmative Civil Enforcement Cases at 1-2 (Jan. 25, 2018), available at https://www.justice.gov/file/1028756/download. The term “guidance documents” means “any agency statement of general applicability and future effect, whether styled as ‘guidance’ or otherwise, that is designed to advise parties outside the federal Executive Branch about legal rights and obligations.” Id. at 1 & n.1.

2 See Whitman v. Am. Trucking Ass’ns, 531 U.S. 457, 472 (2001) (citing J.W. Hampton, Jr. & Co. v. United States, 276 U.S. 394)).

3 Pub. L. 79-404, 60 Stat. 237 (1946) (codified at 5 U.S.C. §§ 500 et seq.).

4 See 5 U.S.C. § 553.

5 See, e.g., PPG Indus., Inc. v. Costle, 659 F.2d 1239, 1250 (D.C. Cir. 1981) (remanding a proposed rule to the EPA because the EPA failed to adhere to the APA’s notice and comment procedures).

6 5 U.S.C. § 553(b)(A); see also n.1, supra.

7 The term “rule” is defined in the APA to mean:
the whole or a part of an agency statement of general or particular applicability and future effect designed to implement, interpret, or prescribe law or policy or describing the organization, procedure, or practice requirements of an agency and includes the approval or prescription for the future of rates, wages, corporate or financial structures or reorganizations thereof, prices, facilities, appliances, services or allowances therefor or of valuations, costs, or accounting, or practices bearing on any of the foregoing[.] 5 U.S.C. § 551(4).

8 See, e.g., Nat’l Mining Ass’n v. McCarthy, 753 F.3d 243, 251 (D.C. Cir. 2014) (“An agency action that purports to impose legally binding obligations or prohibitions on regulated parties—and that would be the basis for an enforcement action for violations of those obligations or requirements—is a legislative rule. An agency action that sets forth legally binding requirements for a private party to obtain a permit or license is a legislative rule. (As to interpretive rules, agency action that merely interprets a prior statute or regulation, and does not itself purport to impose new obligations or prohibitions or requirements on regulated parties, is an interpretive rule.) An agency action that merely explains how the agency will enforce a statute or regulation—in other words, how it will exercise its broad enforcement discretion or permitting discretion under some extant statute or rule—is a general statement of policy.”).

9 711 F.3d 844 (8th Cir. 2013).

10 Id. at 854.

11 See Richard A. Epstein, The Role of Guidances in Modern Administrative Procedure: The Case for De Novo Review, 8 J. OF L. ANALYSIS 47, 71-73 (June 2016).

12 See, e.g., id.

13 See id. at 63.

14 See id. at 61.

15 See id.; see also Iowa League of Cities, 711 F.3d at 872-73 (setting forth a test for distinguishing between legislative and interpretive rules).

16 Attorney General Sessions, Department of Justice, Prohibition on Improper Guidance Documents at 1-2 (Nov. 16, 2017), available at https://www.justice.gov/opa/press-release/file/1012271/download.

17 Id. at 2.

18 Id.

19 See id. (“[T]he Department should not treat a party’s noncompliance with an agency guidance document as presumptively or conclusively establishing that the party violated the applicable statute or regulation. That a party fails to comply with agency guidance expanding upon statutory or regulatory requirements does not mean that the party violated those underlying legal requirements; agency guidance documents cannot create any additional legal obligations.”).

20 See Sessions Memo, supra n.11, at 1 (“It has come to my attention that the Department has in the past published guidance documents—or similar instruments of future effect by other names, such as letters to regulated entities—that effectively bind private parties without undergoing the rulemaking process. The Department will no longer engage in this practice.”).

       

This blog was a previous client alert and is published by Dickinson Wright PLLC to inform our clients and friends of important developments in the field of administrative & regulatory Law. The content is informational only and does not constitute legal or professional advice. We encourage you to consult a Dickinson Wright attorney if you have specific questions or concerns relating to any of the topics covered in here.