# A “Hardening Look” Review for the IRS 

December 10, 2019 • Commentary 

By [William Yeatman](https://www.cato.org/people/william-yeatman) 

This article appeared in *[Yale Journal on Regulation](https://www.yalejreg.com/)* on December 9, 2019. 

Welcome back to [*Ninth Circuit Review-Reviewed*](https://www.yalejreg.com/?s=william+yeatman), your monthly recap of administrative law before [arguably](http://yalejreg.com/nc/ninth-circuit-review-reviewed-inaugural-edition-by-william-yeatman/) “the second most important court in the land.” Let’s get straight to last month’s cases.

***Altera* Part I: IRS Becoming Less Exceptional in Admin Law**

“IRS exceptionalism” continues its slow bleed.

For reasons that escape me, the White House and federal courts historically have treated the IRS differently than other executive branch agencies when it comes to administrative law and regulatory process. But that’s changing.

For example, the IRS no longer escapes OIRA review, as it had since the 1980s. Last year, the OMB [won a power struggle](https://www.politico.com/story/2018/03/27/mulvaney-mnuchin-tax-rules-446735) with the Treasury Department; now, IRS rules are subject to the same White House regulatory review process that other executive branch agencies must undergo.

Judicial review, too, is becoming more “normal” for the IRS, as the agency increasingly becomes beholden to the same administrative law doctrines that courts long have employed in reviewing other agencies. Let’s call it “hardening look review.”

The latest sign is the Ninth Circuit’s denial last month of an *en banc* rehearing in [*Altera v. Commissioner*](http://cdn.ca9.uscourts.gov/datastore/opinions/2019/11/12/16-70496.pdf).

“[*Altera*](http://cdn.ca9.uscourts.gov/datastore/opinions/2019/11/12/16-70496.pdf) is a big deal for tax administration” [writes](http://kristinhickman.com/wp/2019/11/13/9th-circuit-rehearing-denial-in-altera-v-commissioner/) Professor Kristin Hickman, because “even as individual judges in the [*Altera*](http://cdn.ca9.uscourts.gov/datastore/opinions/2019/11/12/16-70496.pdf) litigation have disagreed over how administrative law doctrines apply in the case, no judge has questioned whether those doctrines apply in the tax context.” [According to Prof. Hickman](http://kristinhickman.com/wp/2019/11/13/9th-circuit-rehearing-denial-in-altera-v-commissioner/), “\[t\]hat would not have been true ten years ago.”

It’s a fascinating case, with big implications for both the economy and, of course, administrative law. For more, I highly recommend [Prof. Hickman’s blog](http://kristinhickman.com/wp/2019/11/13/9th-circuit-rehearing-denial-in-altera-v-commissioner/), and also [coverage](https://www.google.com/search?q=altera&btnG=&domains=taxprof.typepad.com&sitesearch=taxprof.typepad.com) at [TaxProf Blog](https://taxprof.typepad.com/).

***Altera* Part II: Judge Milan Smith Rings Death Knell for *Auer***

Administrative law doctrines develop in lower courts within the “markers” set from above by the Supreme Court. Accordingly, this blog has been paying close attention to the fate of the Court’s schizoid opinion in [*Kisor v. Wilkie*](https://www.supremecourt.gov/opinions/18pdf/18-15_9p6b.pdf).

On the one hand, Justice Kagan’s plurality opinion upheld the *Auer* doctrine, which requires courts to give binding judicial respect to an agency’s reasonable interpretations of regulatory ambiguities. On the other, her opinion “reinforced” and “expanded on” the doctrine’s limits, so much so that Justice Gorsuch claimed that *Auer* deference emerges “enfeebled” and “maimed.”

So, which is it? Did *Kisor* affirm or enfeeble *Auer* deference? Some scholars claim that the doctrine lives. Others, including me, argue that *Kisor* effectively killed *Auer* deference by imposing so many conditions on its use.

In [prior](https://www.yalejreg.com/nc/ninth-circuit-review-reviewed-kisors-coming-out-party-by-william-yeatman/) [posts](https://www.yalejreg.com/nc/ninth-circuit-review-reviewed-does-step-one-allow-for-a-spectrum-of-ambiguity-by-william-yeatman/), I’ve described how the Ninth Circuit seemed to be applying an anti-*Auer* gloss to *Kisor*. Last month, my analysis was strongly supported by Judge Milan Smith’s powerful dissent to the denial of an *en banc* rehearing in [*Altera*](http://cdn.ca9.uscourts.gov/datastore/opinions/2019/11/12/16-70496.pdf), which was joined by Judges Consuelo Callahan and Bridget Bade.

Judge Smith [observed](http://cdn.ca9.uscourts.gov/datastore/opinions/2019/11/12/16-70496.pdf) that “Treasury does not ask for *Auer* deference,” even though “some amici suggest it could.” I find it quite telling that the agency would leave this argument on the table.

But there’s more! Judge Smith [continued](http://cdn.ca9.uscourts.gov/datastore/opinions/2019/11/12/16-70496.pdf), “it is clear that such deference would not be available even if not disclaimed,” due to “the very detailed limitations on *Auer* deference spelled out in *Kisor*.”

***Altera* Part III: Judicial Disqualification**

Remarkably, 10 active judges recused themselves from considering the petition for an *en banc* rehearing in [*Altera*](http://cdn.ca9.uscourts.gov/datastore/opinions/2019/11/12/16-70496.pdf).

They were (year confirmed): Judges Margaret McKeown (1998), Kim Wardlaw (1998), Jay Bybee (2003), Carlos Bea (2003), Paul Watford (2012), John Owens (2014), Michelle Friedland (2014), Eric Miller (2019), Collins (2019), and Lee (2019).

For comparison’s sake, consider that the average circuit court (excluding the Ninth Circuit) has about twelve judges.

The high number of recusals in *Altera* piqued my curiosity. To learn more, I reviewed [F.R.A.P.](https://www.uscourts.gov/sites/default/files/rules-of-appellate-procedure.pdf), the Ninth Circuit’s [Rules](https://www.ca9.uscourts.gov/rules/), and its [General Orders](https://www.ca9.uscourts.gov/rules/general_orders.php). But those sources were largely fruitless.

As it turns out, recusal is regulated by statute. Under 28 U.S.C. § 455, “a justice, judge, or magistrate judge … shall disqualify himself in any proceeding in which his impartiality might reasonably be questioned.”

Furthermore, in [*Liteky v. United States*](https://scholar.google.com/scholar_case?case=5020361090884494681&q=Liteky+v.+United+States&hl=en&as_sdt=20003), the Supreme Court set forth the general rule that, to warrant recusal, a judge’s bias must have originated in a source outside the case itself.

In fact, there’s an [entire case book](https://www.fjc.gov/subject/recusal) given to the subject of judicial disqualification, and it’s on its second edition! I’m always awed and humbled whenever I discover whole swaths of law about whose existence I’d not known.

**Another *Cri de Coeur* for Reforming *Chevron***

[Last Winter](https://www.yalejreg.com/nc/ninth-circuit-review-reviewed-panels-weaponize-standards-of-review-to-launch-preemptive-strikes-against-chevron-by-william-yeatman/), I discussed [*Szonyi v. Whitaker*](http://cdn.ca9.uscourts.gov/datastore/opinions/2019/11/13/15-73514.pdf). Specifically, I’d bemoaned the split panel’s resort to *Chevron* deference for answers regarding a “pure” question of law.

[As I saw it back then](https://www.yalejreg.com/nc/ninth-circuit-review-reviewed-panels-weaponize-standards-of-review-to-launch-preemptive-strikes-against-chevron-by-william-yeatman/), the court’s error was doubly dire because it contravened prevailing circuit law. Twice before [*Szonyi*](http://cdn.ca9.uscourts.gov/datastore/opinions/2019/11/13/15-73514.pdf), Ninth Circuit panels had adopted interpretations contrary to that advanced by the Board of Immigration Appeals. Nevertheless, the split [*Szonyi*](http://cdn.ca9.uscourts.gov/datastore/opinions/2019/11/13/15-73514.pdf) panel determined that the statute is ambiguous, and, under *Brand X*, sided with the agency over its own best reading.

At the time, I’d [written](https://www.yalejreg.com/nc/ninth-circuit-review-reviewed-panels-weaponize-standards-of-review-to-launch-preemptive-strikes-against-chevron-by-william-yeatman/) that “the court was being modest to a fault when it refrained from adopting its own ‘best’ reading of a ‘purely’ legal question of the sort at issue in [*Szonyi*](http://cdn.ca9.uscourts.gov/datastore/opinions/2019/11/13/15-73514.pdf).”

Last month, however, my disappointment abated somewhat, upon learning that at least two judges agree with me.

In a [thoughtful dissent](http://cdn.ca9.uscourts.gov/datastore/opinions/2019/11/13/15-73514.pdf) to the [denial of an *en banc* rehearing in *Szonyi*](http://cdn.ca9.uscourts.gov/datastore/opinions/2019/11/13/15-73514.pdf), Judge Daniel Collins tore into *Chevron* and its corollary doctrines of deference. Judge Carlos Bea joined.

Judge Collins’s [dissent](http://cdn.ca9.uscourts.gov/datastore/opinions/2019/11/13/15-73514.pdf) sets the tone with its first sentence: “This case well illustrates why *Chevron v. NRDC* has become the subject of so much recent criticism.” And it only gets better from there.

Ultimately, his point is that *Chevron* raises constitutional concerns, so courts must be rigorous in its application. In his opinion, the *Szonyi* panel had demonstrated the sort of “reflexive” deference that gives *Chevron* a bad name.

Judge Collins’s dissent bears a strong resemblance to other criticisms of *Chevron* in the Federal Reporter, including opinions from then-Judge Gorsuch in [*Gutierrez-Brizuela v. Lynch*](https://www.ca10.uscourts.gov/opinions/14/14-9585.pdf) and also Judge Kent Jordan in [*Egan v. Delaware River Port Authority*](https://scholar.google.com/scholar_case?case=17739586487011363526&q=+851+F.3d+263&hl=en&as_sdt=20003).

**Ninth Circuit Again Sounds Alarm on Unworkability of CIMT Framework (SCOTUS, Are You Listening?)**

In a *per curiam* opinion, a Ninth Circuit panel did something curious last month in [*Fugow v. Barr*](http://cdn.ca9.uscourts.gov/datastore/opinions/2019/11/18/16-70918.pdf).

[*Fugow*](http://cdn.ca9.uscourts.gov/datastore/opinions/2019/11/18/16-70918.pdf) involved a hot-button topic in the administration of immigration law—namely, how to discern a “crime involving moral turpitude” (CIMT) in the deportation context.

The court started by observing that neither it nor the agency has been able “to establish any coherent criteria for determining which crimes fall within that classification and which crimes do not.”

Having admitted that judicial review would be “incoherent,” the court then proceeded to conduct judicial review, as is its duty.

As I’ve [observed](https://www.yalejreg.com/nc/ninth-circuit-review-reviewed-courts-constitutional-critics-of-crimes-involving-moral-turpitude-should-start-with-chevron-by-william-yeatman/) [repeatedly](https://www.yalejreg.com/nc/ninth-circuit-review-reviewed-supreme-court-puts-wind-in-sails-of-courts-critics-of-morally-turpitudinous-crimes-in-immigration-law-by-william-yeatman/), the court routinely calls out the nonsensical nature of the prevailing CIMT framework in immigration law. It’s well past time for the Supreme Court to step in and clean up this confusion.

**Court KOs Class Action**

On November 21st, a unanimous panel affirmed the district court’s dismissal of class actions brought by spectators against boxers and the promoters of the 2015 Mayweather-Pacquiao fight.

Judge Jacqueline Nguyen’s opinion threw above its weight, and she kept it clean of undue boxing jokes. In pulling her “pun”ches, she showed considerable ring savvy, unlike the author of this post.

On a serious note, I bought that fight, and empathize with the putative class.

##### About the Author 

[![William Yeatman](/sites/cato.org/files/styles/author_picture/public/2021-01/Will%20Yeatman.jpg?itok=cX7wRQR4)](/people/william-yeatman) 

##### [William Yeatman](/people/william-yeatman)

Senior Legal Fellow, Pacific Legal Foundation