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Federal Regulations Advisor Insight and Commentary on U.S. Government Regulatory Affairs

Monday Morning Regulatory Review – 2/4/13

Posted in Executive - OMB Review, Judicial Review & Remedies, Regulatory Process

Regulatory and judicial processes intersected last week to a greater extent than usual, with several departments addressing (or not) court decisions and ongoing litigation.  Highlights:

  • Department of Health and Human Services (HHS) proposing its promised rule on contraceptives and religious organizations that has been the subject of numerous cases, including direct challenges and injunctions;
  • Environmental Protection Agency (EPA) proposing new renewable fuel volume standards for 2013 on the heels of losing its current (2012) rule in the United States Court of Appeals for the District of Columbia Circuit;
  • National Labor Relations Board (NLRB)’s Representation – Case Procedures rule came under new fire in light of Noel Canning v. NLRB; and
  • Internal Revenue Service (IRS)’s received small clarification of the United States District Court injunction against implementing its tax preparer rule.

All these issues seem to raise as many questions as they answer.

Contraceptive Proposals and Litigation:  HHS will publish it’s proposed Coverage of Certain Preventive Services Under the Affordable Care Act, to exempt a somewhat broader group of religious organizations from the mandate that they provide contraceptive services through their insurers at no charge to the insured, in the Federal Register tomorrow, February 6, 2013, with comments due April 8, 2013.  As HHS describes the proposal:

The proposed rules would make two principal changes to the preventive services coverage rules to provide women contraceptive coverage without cost sharing, while taking into account religious objections to contraceptive services of eligible organizations, including eligible organizations that are religious institutions of higher education, that establish or maintain or arrange health coverage.  First, the proposed rules would amend the criteria for the religious employer exemption to ensure that an otherwise exempt employer plan is not disqualified because the employer’s purposes extend beyond the inculcation of religious values or because the employer serves or hires people of different religious faiths.  Second, the proposed rules would establish accommodations for health coverage established or maintained by eligible organizations, or arranged by eligible organizations that are religious institutions of higher education, with religious objections to contraceptive coverage.

The proposed rule summarizes some 200,000 comments on the advanced notice of proposed rulemaking in six short typescript pages, but the proposed rule does not address the substance of the comments.  Addressing the substance of all of the advanced notice of proposed rulemaking and the proposed rule public comments, and the constitutional and legal context and litigation, will weigh heavily on the final rule that HHS promises by August.  The District of Columbia Circuit has held two cases in abeyance pending this rule and required the Department of Justice to report on progress toward the final rule every 60 days; several other courts have followed suit.

HHS submitted the proposed rule to the Office of Management and Budget (OMB) on January 31, and OMB completed review on February 1, the day HHS submitted the rule to the Federal Register.  Although the legal and policy issues are highly significant, OMB review was either clearly abbreviated or under the radar.  The Unified Agenda entry is so opaque that only the Regulatory Information Number (RIN) connects the dots.

Extant Rules for For-Profits:  The HHS rules already apply to for profit organizations and do not apply to religious organizations only by dint of HHS’ enforcement hiatus.  In the for profit sector, the Seventh Circuit in Grote and Korte, and the Eighth Circuit in O’Brien have enjoined enforcement pending appeal, while the Sixth Circuit in Autocam and the Tenth Circuit in Hobby Lobby have denied injunctions pending appeal; the Supreme Court also declined a request for injunction pending appeal in Hobby Lobby.  All of these cases involve the extant rules applied to for-profit businesses, and none will be affected by the proposed and final rule, but each will test the substance of applying the existing mandate in the face of a First Amendment claim, some depending on whether a corporation can assert religious liberty interests of its owners.  If any injunction becomes permanent, the idea of universal coverage will erode appreciably.

Setting aside a litigant’s position, the Beckett Fund for Religious Liberty provides a complete listing (all in one place), with links.

Clean Air Act – Fuel Predictions:  OMB completed review of EPA’s proposed Renewable Fuel Standard (RFS) Volume Standards for 2013 on January 30.  The United States Court of Appeals for the District of Columbia Circuit set aside EPA’s 2012 rule just last week on the basis of EPA’s “methodology for making its cellulosic biofuel projection did not take neutral aim at accuracy, it was an unreasonable exercise of agency discretion.”

EPA may be in something of a tight spot, with an annual, time sensitive, rule with a judicial statutory interpretation that requires fixing the underlying methodology.  Because it is a methodology issue, EPA may need to propose a rule that meets the court’s interpretation or might risk running afoul of a logical outgrowth problem in the final rule.

Recess Appointments:  The courts are quickly facing the fallout from Noel Canning v. NLRB.  On the regulatory side, the Chamber of Commerce filed a notice of additional authority (a Rule 28(j) letter) with the D.C. Circuit arguing that Noel Canning’s alternative holding constitutes an additional reason to uphold the District Court order vacating the NLRB Representation – Case Procedures rule.  The district court held that the NLRB improperly promulgated the rule for lack of an actual quorum – only two members participating.  The letter argues that the Court “ruled that all intra-session Presidential recess appointments are unconstitutional” and that leaves no quorum at all.

Additionally, bankers may soon begin to attack the recess appointment of Richard Cordray to be Director the Consumer Finance Protection Bureau (CFPB), such as the recent Ability-to-Repay and Qualified Mortgage Standards under the Truth in Lending Act (Regulation Z) final rule.  This attack may invalidate some or all of the rules adopted by the CFPB from its beginning and may be a risking argument.  So far, no cases have become apparent, but that could change at any moment.

Tax Preparers:  The United States District Court for the District of Columbia clarified its decision barring the IRS from enforcing requirements of its tax preparer rule, explaining that it only barred the requirements that tax preparers pay fees and take continuing education courses, not that it could not offer them to preparers on a voluntary basis.  The original decision was clearly tied to the statutory authorization for the rulemaking and the IRS request for clarification is a little surprising.  Whatever the IRS may offer to preparers in “voluntary” continuing education and certification was not before the court – and raises different questions of authorization and appropriation.