An Advance Notice of Proposed Rulemaking (ANPRM) describes a problem or situation, announces that the agency is considering regulatory action, describes the agency’s anticipated regulatory approach, and seeks input from the public about the issues, the need for regulation, and the adequacy of the agency’s proposed regulatory action. An ANPRM is issued, typically is issued early in the rulemaking process, but can be issued at any time in the regulatory process it becomes clear that an ANPRM would be the most appropriate form of guidance. See Exhibit 32.1.4-2 for a sample ANPRM.

A Notice of Proposed Rulemaking (NPRM) announces to the public that an agency is considering modifying regulations as published in the Code of Federal Regulations (CFR) or issuing rules on matters not addressed in existing regulations. In either circumstance, an NPRM sets out the proposed regulatory text. NPRMs contain a preamble that explains the rules and requests public comments on the suggested changes. NPRMs may also contain a Notice of Hearing. Unlike Treasury Decisions (TDs), NPRMs do not have full force and legal effect unless and until they are adopted as final regulations. Prior to adoption, proposed regulations may be withdrawn or modified at any time. See Exhibit 32.1.4-3 for a sample NPRM.

Taxpayers generally may not rely on proposed regulations for planning purposes, except if there are no applicable final or temporary regulations in force and there is an express statement in the preamble to the proposed regulations that taxpayers may rely on them currently. If there are applicable final or temporary regulations in force, taxpayers may only rely on proposed regulations for planning purposes in the limited circumstance if the preamble to the proposed regulations contain an express statement permitting taxpayers to rely on them currently, notwithstanding the existence of the final or temporary regulations.

If there are no final or temporary regulations currently in force addressing a particular matter, but there are proposed regulations on point, the Office of Chief Counsel generally should look to the proposed regulations to determine the office’s position on the issue. The Office of Chief Counsel ordinarily should not take any position in litigation or advice that would yield a result that would be harsher to the taxpayer than what the taxpayer would be allowed under the proposed regulations.

Temporary regulations are issued to provide immediate guidance to the public and IRS and Counsel employees prior to publishing final regulations. Temporary regulations are effective when published by the Office of the Federal Register. See Exhibit 32.1.4-5 for a sample temporary regulation.

Section 7805(e) requires the IRS to publish a cross-referencing NPRM when it publishes a temporary regulation. Section 7805(e) also provides that a temporary regulation expires (sunsets) within three years of issuance, which is the date the regulation is filed for public inspection with the Federal Register.

Final regulations are issued after considering the public comments on the proposed regulations. The preamble of a final rule also cites to the underlying NPRM and other rulemaking history (for example, an ANPRM), discusses and analyzes public comments received and explains the agency’s final decision. A final regulation is almost always preceded by an NPRM. See Exhibit 32.1.4-6 for a sample final regulation.

A Treasury Decision (TD) is a document that contains the text of a final or temporary regulation. The TD adds new text to or removes or revises text already published in the Code of Federal Regulations (CFR). It contains a preamble that explains the rule. It must state the applicability for the regulation and effective date for the change made to the CFR. A TD is cited as legal authority and is binding on taxpayers as well as the IRS, unless invalidated.

The Administrative Procedure Act (APA) exempts interpretative rules from the APA’s notice and comment requirements. Generally, rules or statements issued by an agency to advise the public of the agency’s construction of the statutes it administers are considered interpretative. Most IRS/Treasury regulations are considered interpretative because the underlying statute implemented by the regulation contains the necessary legal authority for the action taken and any effect of the regulation flows directly from that statute. See CCDM 32.1.1.2.7 and CCDM 32.1.1.2.8, below, and CCDM 32.1.5.4.7.5.1(2), Administrative Procedure Act, for further discussion on whether a regulation is interpretive or legislative.

Regulations required to follow the APA's notice and comment procedure are referred to as legislative rules or substantive rules. Legislative rules are required when Congress simply provided an end result, without any guidance as to how to achieve the desired result or when a statutory provision does not provide adequate authority for the regulatory action taken.

Whether a regulation is promulgated under a specific grant of authority in the Internal Revenue Code does not govern whether the regulation is interpretative or legislative.

If Congress simply provided anend result, without any guidance as to how to achieve the desired result, then regulations promulgated to achieve that result are considered to be legislative.

If Congress provided specific rules and merely left gaps for the Secretary to fill, regulations filling those gaps are considered interpretative.

If the regulation repeats law subsumed in the underlying legislation, then the regulation is considered interpretative.

The Department of Treasury Office of Tax Policy (OTP) includes the Office of Tax Legislative Counsel (TLC), the Office of Benefits Tax Counsel (BTC), and the Office of International Tax Counsel (ITC). OTP is responsible for

Information about the OTP, TLC, BTC, and ITC is available on the Department of Treasury web site at http://www.treasury.gov/about/organizational-structure/offices/Pages/Tax-Policy.aspx.

The Federal Register Act established the Office of the Federal Register (OFR) in 1935. The OFR informs citizens of their rights and obligations by providing ready access to the official text of Federal laws, Presidential documents, administrative regulations and notices, and descriptions of Federal organizations, programs and activities.

The OFR staff performs the final review of all Federal regulation documents (and other documents submitted for publication in the Federal Register) for compliance with OFR document drafting requirements prior to filing them for public inspection (the filing date) and publishing them in the daily Federal Register (FR) (the publication date). The OFR also maintains and revises the CFR.

The Office of Chief Counsel Publications and Regulations Branch, Legal Processing Division, Office of Associate Chief Counsel (Procedure and Administration) provides administrative and technical support to attorneys publishing regulations. The FRLs are part of this branch.

In addition, other staff members of this branch perform some of the same duties as the FRLs. The staff members also help attorneys prepare the forms and other material required by Federal administrative laws, obtain RINs, schedule public hearings, process public comments, and prepare correction notices and the IRS portion of the Unified Agenda.

The Office of Information and Regulatory Affairs within the Office of Management and Budget reviews IRS regulations in accordance with Executive Order 12866.

Each year the IRS and Treasury develop a Priority Guidance Plan (PGP). The PGP identifies the issues on which the IRS and Treasury will focus its resources during the published guidance plan year. The IRS and Treasury solicit recommendations from the public for items that should be included on the PGP. The IRS and Treasury also consider recommendations from within the IRS, the Office of Chief Counsel, and other government agencies. Interested parties may submit recommendations for guidance at any time during the year. The PGP is updated as needed. The updates provide the IRS and Treasury with greater flexibility to address the need for additional guidance that may arise during the published guidance plan year resulting from new legislation, changes in policy, or other emerging circumstances. If new projects must be added during the published guidance plan year, the Office of Chief Counsel and Treasury may have to reevaluate which projects must be published and those for which publication may be deferred. As the need arises, the IRS and Treasury work on published guidance projects that do not appear on the PGP.

Any petitions for rulemaking submitted to the IRS under section 5 U.S.C. § 553(e) will be considered during the PGP process, and the publication of the PGP will provide notice to the petitioner as to whether the IRS and Treasury intend to publish the requested guidance.

Executive Orders 13563, 13777, and 13879 direct agencies to consider how best to promote review of certain regulations. Consistent with Executive Order 13563, the IRS annually solicits public recommendations with respect to regulations that may be outmoded, ineffective, insufficient, or excessively burdensome and that should be modified, streamlined, expanded, or repealed. The responsible Associate Chief Counsel office should consider each recommendation for retrospective review and be prepared to justify a decision to not undertake a recommended project. Additionally, in formulating the PGP, each Associate office should independently consider whether, based on its knowledge and experience, there are any existing regulations within the Associate office's subject matter jurisdiction that meet the description set forth above and should be included on the PGP for appropriate action in accordance with the executive orders.

In response to a TIGTA audit dated March 31, 2003, the Office of Chief Counsel agreed to maintain files of stakeholders’ suggestions for published guidance and the office’s response to those requests. The Office of Chief Counsel also agreed to provide written acknowledgement of requests for published guidance with assurances that the requests will be given due consideration.

The Office of Chief Counsel receives suggestions for published guidance from many sources within the IRS, as well as from external sources, such as the American Bar Association, the Tax Executives Institute, the American Institute of Certified Public Accountants, industry representatives, and interested taxpayers. These suggestions should be given serious consideration in the process of selecting and prioritizing guidance initiatives for inclusion in the annual PGP.

The IRS and Treasury annually publish a Notice inviting recommendations from the public for items to be included on the PGP for the upcoming year. The Notice usually is published in the Internal Revenue Bulletin in late April or early May, and seeks comments by the end of May, but also reminds the public that suggestions may be submitted to the IRS at any time during the year. In addition to the Internal Revenue Bulletin, the Notice is posted on regualtions.gov, the IRS website, and is published in the popular tax press, as well as on scores of publicly accessible Internet web sites.

Each Associate Chief Counsel office should consider issuing published guidance concerning substantially similar matters that are repeated subjects of private letter ruling requests, technical assistance memoranda, or other requests for legal advice.

To facilitate the appropriate consideration of these suggestions, the Publications and Regulations Branch, Legal Processing Division, in the office of the Associate Chief Counsel (Procedure and Administration), will forward to the appropriate Associate office the stakeholder suggestions for published guidance sent to the Office of Chief Counsel or submitted and posted on regulations.gov.

Suggestions for published guidance from external sources that are received directly by attorneys or Associate offices should be sent to the Publications and Regulations Branch. The Publications and Regulations Branch will acknowledge receipt of all suggestions for published guidance received from external sources and will maintain a file of these suggestions.

Each Associate Chief Counsel office should maintain organized files regarding requests for published guidance from both internal and external sources that involve issues within that office’s subject matter jurisdiction. These files should be maintained in a way that facilitates retrieval of suggestions for consideration in selecting and prioritizing issues to be included on a future PGP or an update to the list. Each suggestion, whether from internal or external stakeholders, should be evaluated in light of the criteria described in CCDM 32.1.1.4.3 and the annual PGP solicitation Notice, and each Associate office should document the reasons for its decision to recommend for or against inclusion of a suggestion on the PGP.

When selecting projects for the PGP, the IRS and Treasury consider the following:

Matters should be recommended for publication only if they meet at least one of the above criteria.

In addition to the factors described above, the IRS and Treasury consider whether the guidance is required by statute, the number of taxpayers affected by the proposed guidance, and the resources available to complete all the guidance projects proposed for a particular year. The IRS and Treasury strive to include the most important suggestions for guidance on the PGP each year.

The current PGP is posted on https://www.irs.gov/uac/priority-guidance-plan.

Associate Chief Counsel offices are solely responsible for issuing published guidance. However, on some projects, members of Operating Divisions may be involved in the development of a project.

In some projects, a member of the Chief Counsel’s staff may also be closely involved with the analysis and drafting of the project. See CCDM 32.1.2, Procedural Requirements for Regulation Projects, for instructions for opening projects, maintaining files, and related matters.

OTP assigns a Treasury Attorney-Advisor to projects simultaneously with the assignment of the projects in Counsel. Treasury attorneys are involved in projects from the project’s earliest stages and provide assistance in developing published guidance. The Treasury attorney will ensure proper coordination and review in OTP and, in the case of regulations, the Office of the General Counsel.

If the project has issues that are not within the office with primary jurisdiction, the drafting team coordinates with the Associate office having jurisdiction of those issues.

The drafting team must also coordinate guidance projects with the relevant Division Counsel(s) and Operating Divisions. The drafting team should coordinate guidance projects with the Department of Justice where appropriate, for example if the regulation will impact pending litigation. Early in the published guidance plan year, the Associate and Division Counsel will discuss any projects of interest to the Division Counsel and its Operating Division client. In addition, the Associate informs the Division Counsel’s publication coordinator or designee of guidance developments during the year. This includes making sure that the Division Counsel office is apprised of any new project on which work has commenced. The Division Counsel publication coordinator or designee is responsible for further coordination both within Division Counsel and with the Operating Division. The role of Division Counsel is described more fully in CCDM 32.1.6.1 , Review, Approval, and Publication of Regulations.

During the development of the regulation, certain projects may need to be briefed to the Chief Counsel or Treasury for policy issues. Policy issues may be briefed informally, by memorandum, or otherwise. Some issues may be briefed formally to a Deputy Chief Counsel and senior Treasury officials, who will, if necessary, brief the Chief Counsel and the Assistant Secretary, respectively. Some projects may require a formal joint briefing of the Chief Counsel and the Assistant Secretary of the Treasury.

The drafting attorney prepares a Conference Memorandum to memorialize the decisions reached on the policy issues after any briefing. The Conference Memorandum should be circulated to everyone who attended the briefing. After a decision is reached on the policy issues, the draft regulation is circulated among the Associate offices, Division Counsel, and other interested parties (the "green" circulation package, see CCDM 32.1.6.7 for further discussion of the "green" circulation draft) for comment. The review process is discussed more fully in CCDM 32.1.6, Review, Approval, and Publication of Regulations.

After receiving comments, and incorporating comments to the extent possible on the green circulation package, the drafting team prepares a final draft for approval (the "pink" or "signature package," see CCDM 32.1.6.8 for further discussion of the signature package). All regulation projects, including ANPRMs, must be approved by the Chief Counsel, the Commissioner, and the Assistant Secretary of the Treasury (Tax Policy). The clearance process is described more fully in CCDM 32.1.6.8.4.