The U.S. House of Representatives today approved, by a vote of 238 to 184, H.R. 21, the “Midnight Rules Relief Act of 2017.”
H.R. 21 would amend the provisions in the U.S. Code popularly known as the Congressional Review Act to allow the Congress to pass a single resolution disapproving any number of regulations issued near the end of a president’s term—rather than passing separate resolutions for each regulation of which it disapproves.
The Congressional Review Act (CRA) provides an expedited process for Congress to pass a joint resolution disapproving of regulations that were issued near the end of a president’s term. If the president signs the joint resolution (or his veto is overridden by a two-thirds supermajority of both the House and Senate), the regulation at issue “shall be treated as though such rule had never taken effect.”
Further, under the Congressional Review Act, the regulation “may not be reissued in substantially the same form, and a new rule that is substantially the same as such a rule may not be issued, unless the reissued or new rule is specifically authorized by a law enacted after the date of the joint resolution disapproving the original rule.”
The new Congress could use the CRA to attempt to nullify regulations issued on or after June 13, 2016. If Trump were to sign those joint resolutions once he becomes president on January 20, the underlying regulations would be nullified. Refer to a report from the Congressional Research Service, Agency Final Rules Submitted on or After June 13, 2016, May Be Subject to Disapproval by the 115th Congress, December 15, 2016 (IN10437).
Under current law, each joint resolution can be used to invalidate only one final rule in its entirety. In other words, a separate resolution would have to be passed for each regulation sought to be invalidated.
The Congressional Review Act provides a limited time period for regulatory review. Under the provisions of the CRA, it appears that Congress would have until mid-May (and possibly longer, depending on the congressional calendar) to act upon a joint disapproval resolution to invalidate a regulation and to send the resolution to President Trump.
H.R. 21 would allow a joint resolution of disapproval to address more than one regulation. Thus, if H.R. 21 passed the Senate (following today’s vote in the House) and were signed into law by then-President Trump, it would be possible to bundle together a host of regulations issued near the end of the Obama Administration into one resolution of disapproval.
H.R. 21 would need to pass the Senate next, if it were to become law. Given that Republicans have fewer than 60 seats in the Senate, some believe that H.R. 21 could be subject to filibuster and would likely require the support of a minimum of eight Democratic Senators. As a result, passage by the Senate is highly uncertain.
If H.R. 21 is not passed by Congress, the current rules of the CRA would remain in effect—meaning that each resolution of disapproval would have to address only one final rule, thereby requiring Congress to expend legislative floor time to each and giving opponents an opportunity to highlight the effects of repeal.
Keep in mind that the CRA can be used for regulations in general; it is not limited to tax regulations. Although a number of tax regulations have been finalized since June 13, 2016 (including the section 385 regulations), it is not clear whether Congress may attempt to nullify any tax regulations under the CRA.
Read more information on possible legislative action on regulatory matters in TaxNewsFlash-Legislative Update
For more information, contact a member of KPMG’s Washington National Tax (WNT) Federal Legislative and Regulatory Services group:
John Gimigliano | +1 (202) 533-4022 | firstname.lastname@example.org
Carol Kulish | +1 (202) 533-5829 | email@example.com
Tom Stout | +1 (202) 533-4148 | firstname.lastname@example.org
Jennifer Bonar Gray | +1 (202) 533-3489 | email@example.com
© 2017 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
The KPMG logo and name are trademarks of KPMG International. KPMG International is a Swiss cooperative that serves as a coordinating entity for a network of independent member firms. KPMG International provides no audit or other client services. Such services are provided solely by member firms in their respective geographic areas. KPMG International and its member firms are legally distinct and separate entities. They are not and nothing contained herein shall be construed to place these entities in the relationship of parents, subsidiaries, agents, partners, or joint venturers. No member firm has any authority (actual, apparent, implied or otherwise) to obligate or bind KPMG International or any member firm in any manner whatsoever. The information contained in herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's Federal Tax Legislative and Regulatory Services Group at: + 1 202 533 4366, 1801 K Street NW, Washington, DC 20006.