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Beating Biden’s Day One Freeze Sparks Stampede to Lock in Rules (1)

Jan. 12, 2021, 6:30 PMUpdated: Jan. 13, 2021, 3:44 PM

The rush to get last-minute regulations out before President-elect Joe Biden halts any rules not in place before his inauguration exacerbates a logjam at the federal government’s daily journal.

The stakes are high: Incoming White House press secretary Jen Psaki said in late December that Biden will issue a memo effective on Inauguration Day to halt so-called “midnight regulations” that aren’t yet official. The process of rolling back already effective regulations generally requires either a time-consuming rulemaking effort in accordance with the Administrative Procedure Act or, for more recently-issued rules, Congress to pass a resolution of disapproval under the Congressional Review Act.

The regulatory agenda for the Trump administration’s last days includes wrapping up implementation of the 2017 tax law and politically contentious rules out of the Labor Department and the EPA. Locking in those policy changes means working with the Office of the Federal Register, which publishes the official daily journal of the federal government, to get thousands of pages of final rules edited and published by Jan. 20.

The normal processing time to get a regulation published is three business days, according to Miriam Vincent, a staff attorney in the office’s Legal Affairs and Policy Division. But Vincent told Bloomberg Tax that longer, more complex rules are taking more time than normal to publish thanks to an “unusually high volume” of documents filed since Jan. 1, compounded by emergency pandemic-related documents.

In order to cut down on delays, Vincent said the Office of the Federal Register worked with agencies on best practices for expediting review of their rules and temporarily reassigned employees from other agencies to review documents.

Already Across the Finish Line

Some agencies have successfully gotten final rules published in the Federal Register quickly in spite of the backlog.

The EPA was able to fast-track a rule limiting scientific studies that can be used when setting health safeguards—a move seen by environmental advocates as handcuffing the agency’s ability to tighten air and water pollution standards. That rule was effective immediately upon its publication on Jan. 6, just four business days after the EPA said the rule was finalized.

A controversial Labor Department rule making it easier for businesses to classify workers as independent contractors rather than employees entitled to overtime and minimum wage protections received similar treatment. The rule was published in the Federal Register Jan. 7, four business days after it cleared OMB review.

The Federal Register typically tries to process rules on a first-in, first-out system, but certain factors can hold or speed things up, including the number and scale of edits required, Vincent said. Also, Vincent confirmed that agencies get a say when it comes to picking which rules should move first.

“If an agency has multiple documents pending, the agency can set its own priority for processing,” she said.

Kevin Neyland, a former deputy administrator of OMB’s Office of Information and Regulatory Affairs, said that agencies trying to move multiple rules quickly will typically get some input from the White House’s regulatory office on what should be published first.

Challenges of One Term

It’s normal for outgoing administrations to see an influx of last-minute regulations, but some experts predict the numbers could be higher for President Donald Trump when all is said and done.

The three previous presidents—Barack Obama, George W. Bush, and Bill Clinton—were two-term presidents, and therefore more prepared for their time in office to end, said Patrick A. McLaughlin, director of policy analytics and a senior research fellow at the Mercatus Center at George Mason University.

For example, the Obama administration urged agencies in a December 2015 memo to strive to complete their highest-priority regulations by summer 2016 to avoid an “end-of-year scramble.” A May 2008 Bush White House memo advised department heads to aim to have all proposed regulations issued no later than June of that year and all final regulations in by November, “except in extraordinary circumstances.”

So far Trump is on par with past presidents when it comes to rules marked as “economically significant,” said Daniel R. Pérez, a senior policy analyst at the George Washington University Regulatory Studies Center.

The Trump administration is on track to issue three to four times as many economically significant regulations during its midnight period relative to its average rulemaking pace, similar to those prior presidencies, Pérez said. But there could be a spike this month that isn’t yet factored in, he said, noting Clinton’s administration saw an uptick in its final weeks.

“Even the final week in January could bring some surprises,” he said.

Long To-Do List

With time running out, agencies will likely focus their attention on getting highly-political or potentially controversial regulations published, said Susan Dudley, director of the GW Regulatory Studies Center and former OIRA administrator under Bush.

Agencies recently issued, but not yet successfully published, several regulations that the Biden administration may want to hold back, if possible.

The Environmental Protection Agency, for instance, may seek to speed up a final rule released online Jan. 5 that gives chemical companies a second chance to shield details on the chemicals they make or import from competitors and the public. The rule is opposed by environmental groups, such as the Environmental Defense Fund, which argues it gives companies that violated the chemicals law and regulations a “do-over” that thwart’s the law’s goal of letting the public know about the existence of chemicals, the first step towards understanding exposure and risk.

The Labor Department on Tuesday unveiled a revamped effort to reset prevailing wage rates for H-1B specialty occupation visa holders. The final rule, still awaiting publication in the Federal Register, comes after U.S. judges in Washington and California blocked a previous attempt to raise rates on the grounds that those rules didn’t comply with the Administrative Procedure Act.

The IRS released on its website Jan. 7 a high-profile regulation carrying out a provision of the 2017 tax law that limits the carried interest tax break favored by hedge fund managers. The final rule contains a number of taxpayer-favorable changes—potentially making them a target of the Biden administration, which has generally opposed the tax break.

“Anything that serves any ideological interest, that serves the interests of a favorite industry; anything that just makes life more difficult for the Biden administration—these are the kinds of things that will be priorities for the Trump administration,” said James Goodwin, interim executive director and senior policy analyst with the Center for Progressive Reform. “It’s all about scoring as many political points as you can on the way out.”

—With assistance from Stephen Lee, Ben Penn, Pat Rizzuto, Genevieve Douglas, and Paige Smith.

(Updated with additional details in the 20th paragraph.)

To contact the reporter on this story: Allyson Versprille in Washington at aversprille@bloombergtax.com

To contact the editors responsible for this story: Patrick Ambrosio at pambrosio@bloombergtax.com; Andrew Childers at achilders@bloomberglaw.com

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