In more detail
Enacted in 1996, the CRA effectively allows Congress to invalidate agency regulations that it does not like. For the first 20 years the statute was in effect, it was used only once (in 2001, newly-inaugurated President George W. Bush signed a resolution of disapproval invalidating an Occupational Health and Safety Administration rule addressing ergonomic hazards that was issued near the end of the Clinton Administration). The Trump administration ushered in a new era. A sweep of the White House, Senate and House of Representatives allowed Republicans to use the CRA 14 times in the first 100 days of the Trump administration and 16 times in total. The CRA was then used three times at the beginning of the Biden administration to overturn rules finalized in the last days of the Trump administration.
The CRA applies to final agency rules, including Treasury rules, that qualify as “major” rules. Before a final rule takes effect, the IRS Office of Chief Counsel must submit the rule, a plain-language summary, and a cost-benefit analysis to the House, the Senate, and the Comptroller General of the Government Accountability Office (GAO). The GAO determines whether a particular rule is subject to the CRA. As a general matter, the standard for whether a rule is subject to the CRA is broader than the standard for determining whether a rule is a “major” rule, subject to review by the Office of Information and Regulatory Affairs (OIRA) under Executive Order 12866 (a standard that many readers may be familiar with).1
Once an eligible rule is submitted, Congress has 60 legislative days (which is a day that either house of Congress is in session) to pass a “resolution of disapproval” if it objects to the rule. Both Houses of Congress must pass a resolution of disapproval with a majority vote. Then the President must sign the resolution of disapproval. This typically occurs only in a year when a new party gains control of the White House and both houses of Congress. While it is possible for a President to sign a resolution of disapproval disapproving his own agency’s regulations, it is highly unlikely. Thus, the CRA is largely viewed as a political instrument most likely to be used when one party gains political control of Washington.
If instead the President vetoes the resolution, Congress must override the veto for the resolution to be effective. Congress generally has not passed resolutions of disapproval up to a sitting president of the opposite party. Republicans have recently signaled their disapproval of Treasury regulations related to the Inflation Reduction Act by passing resolutions of disapproval under the CRA that were vetoed by President Biden.
Because the CRA is used during the transition after an election, the statute allows for a “lookback period” for changes to the elected members of Congress. During an election year, if the outgoing Congress does not get a full 60 legislative days to review a final regulation, the new Congress restarts the clock in mid-January with a new 60-day period. This provides a powerful tool for a well-prepared and united Congress.
When a resolution of disapproval passes, the relevant rule “shall have no force or effect” and “may not be reissued in substantially the same form . . . unless specifically authorized by a law enacted after the date of the joint resolution.” The CRA does not define what constitutes “substantially the same form,” and no court has decided the issue. While two rules that were overturned under the CRA were subsequently reissued, in both cases, the agencies took the legislative history from the resolutions of disapproval into account in revising and reissuing the regulations.
Observation: We noted above that no Treasury regulation has ever been overturned under the CRA. Because Republicans have signaled their willingness to challenge Treasury regulations under the CRA during the Biden administration, we expect this to change if the Republicans sweep the White House and both houses of Congress.
Rules at risk in 2025
Though it is difficult to project the exact cut-off date for regulations that will be subject to the lookback period in 2025 if the Republicans sweep the November elections, some project final rules passed as early as May could be at risk. These rules include:
This is not a theoretical risk—resolutions of disapproval have already been introduced relating to tax regulations. In May, 2024, Senator Manchin (I-WV), along with a bipartisan group of Senators (including Senator Deb Fischer (R-NE), Senator Sherrod Brown (D-OH), Senator Marco Rubio (R-FL), Senator Lisa Murkowski (R-AK), and Senator Mike Braun (R-IN)), introduced S.J. Res. 87, a resolution of disapproval under the CRA to overturn the final Treasury regulations implementing the clean vehicle credit under section 30D. A companion resolution was introduced in the House of Representatives by Representative Carol Miller (R-WV) and Representative Jared Golden (D-ME). The members who introduced the resolution of disapproval were generally concerned that the final regulations did not include sufficiently stringent prohibitions on the use of foreign materials in the production of EVs and were especially concerned about the possibility that Chinese companies might benefit providing materials for vehicles eligible for the credit. While these resolutions have been referred to the Senate Committee on Finance and the House Ways & Means Committee, respectively, no votes have been held on either resolution yet. Unless former President Trump wins his bid for election in November, a vote on this resolution in either House is unlikely, given that an incoming President Harris would be expected to veto the resolution.
Conclusion
As President Biden finishes his term in office, we can expect agencies to prioritize finalizing regulations. Treasury and the IRS, in particular, have a long to-do list of guidance projects to finalize. Many of these projects relate to the Inflation Reduction Act, which was enacted solely with Democratic votes, and therefore may be at higher risk of being overturned under the CRA. Taxpayers that are impacted by these various provisions should watch the Federal Register closely for the release of final regulations and should be sensitive to the impact of overturning such final regulations.
1 For a discussion of the current status of OIRA review for Treasury regulations, see our previous client alert, OIRA and Treasury finally end 40-year "it's complicated" relationship.
