U.S. GOVERNMENT PUBLISHING OFFICE

30–600 PDF WASHINGTON : 2018

S. Hrg. 115–275 

REVIEWING THE OFFICE OF INFORMATION AND 

REGULATORY AFFAIRS 

HEARING 

BEFORE THE

SUBCOMMITTEE ON 

REGULATORY AFFAIRS AND FEDERAL 

MANAGEMENT 

OF THE

COMMITTEE ON 

HOMELAND SECURITY AND 

GOVERNMENTAL AFFAIRS 

UNITED STATES SENATE 

ONE HUNDRED FIFTEENTH CONGRESS 

SECOND SESSION 

APRIL 12, 2018 

Available via http://www.fdsys.gov 

Printed for the use of the Committee on Homeland Security 

and Governmental Affairs 

( 
(II) 

COMMITTEE ON HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS 

RON JOHNSON, Wisconsin, Chairman 

JOHN MCCAIN, Arizona 

ROB PORTMAN, Ohio 

RAND PAUL, Kentucky 

JAMES LANKFORD, Oklahoma 

MICHAEL B. ENZI, Wyoming 

JOHN HOEVEN, North Dakota 

STEVE DAINES, Montana 

CLAIRE MCCASKILL, Missouri 

THOMAS R. CARPER, Delaware 

HEIDI HEITKAMP, North Dakota 

GARY C. PETERS, Michigan 

MAGGIE HASSAN, New Hampshire 

KAMALA D. HARRIS, California 

DOUG JONES, Alabama 

CHRISTOPHER R. HIXON, Staff Director 

MARGARET E. DAUM, Minority Staff Director 

LAURA W. KILBRIDE, Chief Clerk 

SUBCOMMITTEE ON REGULATORY AFFAIRS AND FEDERAL 

MANAGEMENT 

JAMES LANKFORD, Oklahoma, Chairman 

JOHN MCCAIN, Arizona 

ROB PORTMAN, Ohio 

MICHAEL B. ENZI, Wyoming 

STEVE DAINES, Montana 

HEIDI HEITKAMP, North Dakota 

THOMAS R. CARPER, Delaware 

MAGGIE HASSAN, New Hampshire 

KAMALA D. HARRIS, California 

JOHN CUADERES, Staff Director 

JAMES MANN, Counsel 

ERIC BURSCH, Minority Staff Director 

ANTHONY PAPIAN, Minority Counsel 

MALLORY NERSESIAN, Subcommittee and Document Clerk 
(III) 

C O N T E N T S 

Opening statement: Page 

Senator Lankford .............................................................................................. 1 

Senator Heitkamp ............................................................................................ 3 

Senator Portman .............................................................................................. 7 

Senator Hassan ................................................................................................. 10 

Senator Harris .................................................................................................. 15 

Prepared statement: 

Senator Lankford .............................................................................................. 29 

WITNESSES 

THURSDAY, APRIL 12, 2018 

Hon. Neomi Rao, Administrator, Office of Information and Regulatory Affairs, 

Office of Management and Budget ..................................................................... 4 

Hon. Brent J. McIntosh, General Counsel, U.S. Department of Treasury ......... 6 

ALPHABETICAL LIST OF WITNESSES

McIntosh, Hon. Brent J.: 

Testimony .......................................................................................................... 6 

Prepared statement .......................................................................................... 36 

Rao, Hon. Neomi: 

Testimony .......................................................................................................... 4 

Prepared statement .......................................................................................... 31 

APPENDIX 

Alliance for Competitive Taxation Letter .............................................................. 39 

Responses to post-hearing questions for the Record from: 

Ms. Rao .............................................................................................................. 41 

Mr. McIntosh .................................................................................................... 123 

(1) 

1The prepared statement of Senator Lankford appears in the Appendix on page 29. 

REVIEWING THE OFFICE OF INFORMATION 

AND REGULATORY AFFAIRS 

THURSDAY, APRIL 12, 2018 

U.S. SENATE, SUBCOMMITTEE ON REGULATORY, AFFAIRS AND FEDERAL MANAGEMENT, OF THE COMMITTEE ON HOMELAND SECURITY

AND GOVERNMENTAL AFFAIRS, Washington, DC. 

The Subcommittee met, pursuant to notice, at 10:21 a.m., in 

room 342, Dirksen Senate Office Building, Hon. James Lankford, 

Chairman of the Subcommittee, presiding. 

Present: Senators Lankford, Portman, Heitkamp, Hassan, and 

Harris. 

OPENING STATEMENT OF SENATOR LANKFORD1

Senator LANKFORD. Good morning, everyone. Welcome to today’s 

Subcommittee hearing on Reviewing the Office of Information and 

Regulatory Affairs’ (OIRA) role in reviewing agency rulemaking. 

Today we will review Federal regulations primarily through the 

eyes of the ultimate regulator, that is the Office of Information and 

Regulatory Affairs, or as I like to say, the most important agency 

no one has ever heard of. In this hearing today, we hope to get a 

better understanding of OIRA’s accomplishments during the first 

year of this administration. 

We also have with us today the Treasury Department, who is 

here to discuss their longstanding exemption from OIRA’s oversight 

and their obligations for basic regulatory practices. 

Created by Congress in 1980, OIRA performs the essential role 

of reviewing proposed regulations before they bind the American 

people. Over the years, OIRA’s responsibilities have grown to include implementing numerous Executive Orders (EO) to ensure all 

Federal agencies comply with basic regulatory steps, such as cost 

benefit analysis, consideration of regulatory alternatives, and fair 

public consultation. OIRA’s role continues to expand under this administration. 

Ten days after the President took office, he issued an Executive 

Order, directing Executive Branch agencies to remove at least two 

regulations for each newly issued regulation, and, most importantly, the order directed any added regulatory costs must be offset 

by the removal of existing regulatory costs. I look forward to hear-
2 

ing how agencies have fared during the first year of this Executive 

Order and the outlook going forward. 

Properly issued guidance is necessary and helpful in clarifying 

regulatory requirements, but when abused, agencies circumvent 

congressionally mandated procedure and pursue their agenda without the input of the American people. Under both Republican and 

Democrat administrations, OIRA has proven to be a neutral gatekeeper and a check on Executive Branch agencies. However, under 

a long-standing agreement, Internal Revenue Service (IRS) regulations have not gone through centralized review like every other Executive branch agency. 

In 1983, when this agreement was signed, OIRA was a new office 

with limited scope. Since then, the nature of both OIRA and the 

IRS has changed. OIRA’s mission goes far beyond the review of information collection under the Paperwork Reduction Act (PRA) and 

the IRS does a lot more than simply apply the tax code. They determine issues as varied as religious exemptions to the implementation of the Affordable Care Act (ACA). 

All Executive Branch agencies must comply with OIRA review, 

Regulatory Flexibility Analysis (RFA), and the Congressional Review Act (CRA). But for decades the IRS has been exempted from 

these checks put in place to protect the American people. 

In 2016, the IRS proposed a rule regarding the valuation of interest in closely held partnerships or corporations for a estate gift and 

generation-skipping transfer taxes. As the Small Business Office of 

Advocacy outlined in a comment letter, the IRS failed to perform 

an Initial Regulatory Flexibility Analysis (IRFA) and they certified 

the rule would not have a significant economic impact on small 

businesses, despite applying almost exclusively to the small businesses. 

The rule was so deeply flawed that this administration withdrew 

the rule last fall. Absent a change in administrations, taxpayers 

would likely be bound by a regulation that did not receive economic 

analysis or input from those small businesses who would have been 

most affected by the rule. 

Another rule, issued in 2016, regarding corporate tax inversion, 

was labeled as ‘‘temporary’’ and completely ignored the Administrative Procedures Act (APA) notice and comment requirement because it was considered temporary. Last year, a Federal court 

found the rule to be legislative, and struck it down for being arbitrary and capricious. 

The point of the Administrative Procedures Act, the Regulatory 

Flexibility Act, and the Congressional Review Act is to ensure rules 

are thoroughly scrutinized and reviewed by a third party and Congress before they bind the American people. It is unacceptable for 

taxpayers to have to wait for a change in administration or judicial 

review to overturn a rule that could have been addressed by OIRA 

prior to it ever being promulgated. 

The Government Accountability Office (GAO), former OIRA Administrators, and administrative law experts have called on Treasury and OIRA to reconsider this agreement. I understand a new 

agreement has been reached to ensure IRS regulations are held to 

the same standard as other agencies. I look forward to hearing the 

details of the agreement, particularly how IRS plans to handle the 
3 

requirements under the Regulatory Flexibility Act and the Congressional Review Act. 

With that I would recognize Ranking Member Heitkamp for her 

opening remarks. 

OPENING STATEMENT OF SENATOR HEITKAMP 

Senator HEITKAMP. Thank you, Mr. Chairman, and thank you for 

starting the hearing. I want to thank Mr. McIntosh and the Administrator for joining us today. I always appreciate our chance to 

check in with OIRA. OIRA has been called many things—a gatekeeper, a dispassionate and analytical second opinion, and even 

one of Washington’s most powerful offices, and I would add to that 

that no one has ever heard of. 

OIRA plays a critical role in ensuring that Federal agencies develop rules the right way. Administrator Rao, I have a lot to ask 

about your first year on the job, but also would like to say I am 

very disappointed that the Department of Labor (DOL) did not decide to join us today. I was very much looking forward to hearing 

from Labor about the decisions they have made in developing the 

tip rule under the Fair Labor Standards Act. I have been assured 

that my questions on the subject can be answered today, and I very 

much hope that this is the case. I also have questions for the Administrator regarding OIRA’s role in that development. 

Again, I look forward to your testimony. I thank you both for appearing today. I think that we always kind of point out that a lot 

of really important work gets done in these Subcommittee hearings, but yet not a lot of attention, and running government is really an important job, and understanding the nuts and bolts and 

making sure that that people are playing the right role is a critical 

component of that. And I want to thank the Administrator, I want 

to thank Mr. McIntosh for coming, and I look forward to the hearing. 

Senator LANKFORD. At this time we will proceed with testimony 

from the witnesses. The Honorable Neomi Rao is the Administrator 

of the Office of Information and Regulatory Affairs. Prior to her 

confirmation, Administrator Rao served as professor of structural 

constitutional law, administrative law, and legislation and statutory interpretation at the Scalia Law School at George Mason University (GMU), where she founded the Law School’s Center for the 

Study of the Administrative State. She has served Associate Counsel and Special Assistant to President George W. Bush and is 

Counsel to the U.S. Senate Committee on the Judiciary. Thank you 

for being here. 

The Honorable Brent McIntosh is the General Counsel (GC) for 

the Department of the Treasury and serves as the head of the 

Treasury Legal Division. Prior to his confirmation, Mr. McIntosh 

was a partner in the law firm of Sullivan & Cromwell, where he 

was a member of the firm’s litigation and financial services practice 

groups and co-led the firm’s cybersecurity practice. From 2006 until 

2009, Mr. McIntosh served as the Associate Counsel to President 

George W. Bush, first as Deputy Assistant to the President and as 

Deputy Staff Secretary. 

Thank you both for being here, and all the preparation and the 

work that has gone into leading up even to this conversation today. 
4 

1The prepared statement of Ms. Rao appears in the Appendix on page 31. 

It is a custom of the Subcommittee, as I am sure both of you are 

aware, that we swear in all the witnesses before they appear before 

us, so if you would please stand and raise your right hand. 

Do you swear that the testimony you are about to give before 

this Subcommittee is the truth, the whole truth, and nothing but 

the truth, so help you, God? 

Ms. RAO. I do. 

Mr. MCINTOSH. I do. 

Senator LANKFORD. Thank you. Please be seated. Let the record 

reflect both witnesses have answered in the affirmative. 

We are using a timing system today, but this is a conversation 

between both of you and all of the Committee, so we will try to be 

able to honor that time. You will have a 5-minute countdown clock 

on it. If you go a couple of seconds past it we will not protest. But 

we do want to be able to leave plenty of time for dialogue and conversation in the moments ahead. 

Ms. Rao, you are first. 

TESTIMONY OF THE HONORABLE NEOMI RAO,1 ADMINISTRATOR, OFFICE OF INFORMATION AND REGULATORY AFFAIRS, OFFICE OF MANAGEMENT AND BUDGET 

Ms. RAO. Thank you very much. Chairman Lankford, Ranking 

Member Heitkamp, and Members of the Committee, thank you for 

the opportunity to appear before you today to discuss the activities 

of the Office of Information and Regulatory Affairs, and our efforts 

in implementing regulatory reform. 

The administration’s reform efforts have focused on developing a 

lawful, fair, and limited regulatory system that allows the economy 

to grow and innovation to flourish. We look first to private market 

solutions and trust in ordinary Americans to make decisions that 

will result in greater prosperity through ingenuity and hard work. 

The success of our economy depends, at least in part, on a regulatory system that does not stand in the way of progress. And, 

speaking of progress, just last night the Office of Management and 

Budget (OMB) and the Treasury Department signed a memorandum of agreement (MOA) for significant tax rules to go through 

the process of centralized regulatory review at OIRA. 

President Trump directed OMB and Treasury to reconsider the 

scope of an exemption for certain tax regulations that dates back 

to 1983. The Executive Order focused on reducing the burdens of 

tax regulations in order to provide tax relief and useful, simplified 

tax guidance. The agreement that we signed brings tax regulatory 

actions into the same framework for regulatory review as other 

agencies while also providing for some expedited review and a definition of economic significance that recognizes the revenue-raising 

function of Treasury. 

In this administration, OIRA has led the charge to eliminate unnecessary regulatory burdens. The process of centralized regulatory 

review provides an important check to ensure that agencies take 

actions that yield meaningful benefits to the American people and 

that impose the least possible burdens. 
5 

Even tax relief regulations may be improved by consideration of 

the costs and benefits of alternatives, and the OIRA process is well 

suited to help Treasury promote, in the words of the President, ‘‘a 

tax system that is simple, fair, efficient, and pro-growth.’’ We look 

forward to working with Treasury on this transition to improve tax 

regulatory policy in a manner that provides timely guidance to taxpayers. 

With respect to the administration’s broader regulatory reform 

agenda, one of the primary vehicles for reform has been Executive 

Order 13771, which addresses the problem of accumulated regulatory burdens. In administrations of both parties, regulations have 

piled on top of regulations, without a systematic consideration of 

which regulations are no longer effective. To reduce this burden, 

EO 13771 requires that agencies eliminate two regulations for each 

new one, and for fiscal year (FY) 2017, to keep new regulatory costs 

to zero. And as the administration’s central regulatory office, OIRA 

has worked closely with agencies to meet the President’s very ambitious goals in a manner that is consistent with legal requirements. 

Across the government, we have achieved very substantial success. Through the end of fiscal year 2017, agencies have issued 67 

deregulatory actions and 3 significant regulatory actions, a ratio of 

better than 22 to 1. 

Moreover, these deregulatory actions have led to meaningful cost savings of over $8 billion in fiscal year 2017. This represents the 

first time an administration has imposed any type of regulatory 

budget. The regulatory budget provides an important backstop to 

make sure that deregulatory actions are not just paper revisions 

and repeals but actions that generate real cost savings for the 

American people. 

Looking ahead to fiscal year 2018, agencies have projected a ratio 

of at least 3-to-1 deregulatory-to-regulatory actions and cost savings of over $10 billion. 

OIRA continues to work with agencies to ensure that regulatory 

and deregulatory actions are consistent with law, have benefits 

that outweigh the costs, and that are promoting the President’s priorities. Importantly, all deregulatory actions have to meet the same 

standards as regulatory actions. Deregulatory actions must result 

in net benefits for the public and so agencies are only repealing 

those regulations that are not working. 

While the reforms are new, OIRA continues to apply longstanding principles for regulatory review rooted in Executive Order 

12866. In our already highly regulated society, the public can often 

realize substantial benefits from lifting unnecessary burdens in the 

form of outdated regulations, guidance documents, and paperwork 

requirements. 

OIRA’s regulatory reform initiatives have also focused on promoting the rule of law through improving fair notice, public participation, and due process. In coordination with the White House 

Counsel’s Office, OIRA has directed a regulatory policy that emphasizes the rule of law. At the outset, we carefully consider 

whether an agency has authority for a proposed action, in this respect, the law-making power of Congress. OIRA also ensures that 

agencies are following the correct statutory procedures for rule-
6 

1The prepared statement of Mr. McIntosh appears in the Appendix on page 36. 

making, because, indeed, much of the legitimacy of the administrative action derives from notice and comment rulemaking that allows for meaningful participation by the public. 

In light of these principles, we have cabined the inappropriate 

use of guidance and stressed that agencies should not use guidance 

to impose new obligations on the public. As part of reducing burdens, OIRA encourages and incentivizes agencies to identify guidance that can be repealed, modified, or reissued through a rulemaking. By rolling back regulatory burdens and following the rule 

of law, the administration’s reform benefits the American people by 

promoting individual liberty and by encouraging economic growth, 

job creation, and innovation. 

Thank you again for inviting me to participate in this hearing. 

I look forward to your questions. 

Senator LANKFORD. Thank you. Mr. McIntosh. 

TESTIMONY OF THE HONORABLE BRENT J. MCINTOSH,1

GENERAL COUNSEL, U.S. DEPARTMENT OF THE TREASURY 

Mr. MCINTOSH. Chairman Lankford, Ranking Member Heitkamp, 

Members of the Subcommittee, thank you for the opportunity to 

discuss Treasury’s role in advancing one of the administration’s 

chief policy priorities, regulatory reform. 

Let me begin, though, by touching on another of the President’s 

chief policy priorities, tax reform. Treasury has, of course, played 

a leading role in advancing the once-in-a-generation tax reform 

pass late last year. The new law contains hundreds of provisions 

to provide relief to American families and make American businesses more competitive. Swift and successful implementation of 

tax reform, through prompt, straightforward rules and guidance is 

critical to unlocking the full benefits of the law and carrying out 

the will of Congress. 

Consistent with the President’s regulatory reform agenda, Treasury’s goal in implementing tax reform is to provide timely and necessary clarity that alleviates the burden of uncertainty for taxpayers without imposing needless regulatory costs or delays. 

Yesterday, Treasury and OMB adopted a new framework for review of proposed tax regulations that will allow us to continue 

doing just that. We are extremely pleased with this new framework, which brings the review of tax regulations back in line with 

the original intent of the Reagan era agreement. Our new framework enhances review and analysis of the subset of tax regulations 

most likely to impose undue costs, while fully preserving Treasury’s 

ability to issue clear, timely rules and guidance that taxpayers 

need. 

Any tax regulation that adds major new compliance costs will 

now undergo cost benefit analysis as well as centralized review, exactly as it should be. On the other hand, tax regulations that do 

not meaningfully alter the cost of laws they implement will not undergo this time-consuming analysis. 

Critically, all of this will be done in an efficient timeframe, as 

American taxpayers demand. OMB has committed to review most 

proposed tax regulations in 45 days or less, and when expedited re-
7 

view is appropriate, OMB will complete its review in 10 business 

days or less. 

Because this new framework is smartly tailored to tax regulations, Treasury is confident that it will enable us to continue to 

successfully implement the historic tax reform legislation enacted 

by Congress while advancing the President’s regulatory reform 

agenda. 

Tax reform is far from the only regulatory reform effort Treasury 

has undertaken to advance the President’s priorities. Under Secretary Mnuchin, Treasury has identified more than 300 regulations 

to eliminate, in whole or in part. On the other side of the ledger, 

Treasury has issued exactly zero regulatory actions within the 1- 

in, 2-out framework set forth in the President’s Executive Order 

13771. 

Treasury has also produced reports setting forth more than 250 

specific recommendations for reducing regulatory burdens and advancing the administration’s core principles for regulation of capital markets, banks and credit unions, and the insurance and asset 

management industries. Those recommendations have addressed 

issues ranging from alleviating the burdens on community banks, 

simplifying the extraordinarily complex Volcker Rule, and bringing 

much-needed accountability to the Consumer Financial Protection 

Bureau (CFPB). 

Thank you for the opportunity to testify today, and I look forward to members’ questions. 

Senator LANKFORD. Thank you, and thank you both for your 

preparation on the work leading up into this. I recognize Senator 

Portman. Senator Heitkamp and I are going to defer our questions 

to the end. 

OPENING STATEMENT OF SENATOR PORTMAN 

Senator PORTMAN. First of all, I thank the Chair for doing that. 

It is his style and I always appreciate it, and I try to reciprocate. 

We have got three hearings going on at once in this place, but this 

is a really important one and I thank you for holding the hearing 

on OIRA, and specifically on this issue of tax regulations being subject to OIRA review. 

It is a tricky issue, and, you know, I come at this as someone 

who believes in regulatory reform. In fact, Senator Heitkamp and 

I are co-authors of the Regulatory Accountability Act, which goes 

right at some of these regulatory reform issues that were talked 

about broadly, and the Chairman has been very involved in these 

issues. But also as someone who was a strong advocate of tax reform and understands the need for us to give guidance quickly, and 

so that the pro-growth aspects of tax reform are actually implemented, as you have noted. 

In my role at OMB, I found that OIRA was a critical agency to 

try to avoid problems, you know, by giving agencies a heads-up as 

to potential issues, and so I do think there is a appropriate role 

there. And, by the way, I am told that Treasury Department does 

subject a lot of what they do to OIRA. I think the average, in the 

agencies, is about 8 percent of their rules that have come in for 

OIRA. I think your average is, what, Mr. McIntosh, about 5.7 percent? 
8 

1The Alliance for Competitive Taxation letter appears in the Appendix on page 39. 

Mr. MCINTOSH. It is between 5 and 6 percent, as long as you do 

not include Office of Comptroller of Currency, whose regulations we 

at main Treasury do not control. 

Senator PORTMAN. Yes. So it is not that nothing gets to OIRA, 

but there is a difference, and this memorandum or understanding 

(MOU) that was put together back in the 1980s, has been the guidance we have all used. I do think it needed to be updated. And I 

want to thank you all, because my understanding is despite the 

fact that you are sitting far apart this morning—I think your 

chairs were placed before they knew you were going to come together—you can now be closer. 

And to Mr. McIntosh and to Administrator Rao, thanks for rolling up your sleeves and trying to figure this out, because it is complicated. I see Brian Callanan is behind you, too, your deputy. I 

know he played a big role in this. We talked a lot about it. And 

it sounds like you have come up with something that I can support, 

and that does walk that fine line between having the oversight but 

also being able to get things out. 

I would like to, if I could, Mr. Chairman, submit for the record 

a letter by the Alliance for Competitive Taxation (ACT).1 This is a 

group of businesses and employees, millions of people, probably, 

overall, but certainly thousands in each of our States, and they 

were critical to getting tax reform across the line. Without objection, I would like to have that submitted to the record. 

Senator LANKFORD. Without objection. 

Senator PORTMAN. This letter states that they are concerned 

about being sure that any changes to the MOU recognize the need 

for immediate interpretive guidance implementing the Tax Cuts 

and Jobs Act (TCJA), and I think that is a legitimate concern. They 

sent it to Secretary Mnuchin, your boss, and they sent it to OMB 

Director Mulvaney, and I think probably the line that is most important is ‘‘the growth impact of the legislation will not be fully realized if businesses are uncertain about how the tax cut legislation 

will be implemented, thus delay in issuing guidance would impose 

a cost on taxpayers and the American economy.’’ 

So I think there is a balance here to be reached. Obviously, important for regulations, implementing a tax reform to be implemented as soon as possible for the pro-growth elements of the bill 

to actually work, particularly the regulations surrounding the 

international provisions, which are incredibly complicated, and 

companies have to respond very quickly, and that we made the tax 

reform legislation immediately applicable and enforceable. 

And I would say the second one probably is the small business 

deduction. That is one that is very difficult for some companies to 

understand. 

So I guess my first question would be to Mr. McIntosh. Can you 

guarantee that the revised MOU will not lead to any unnecessary 

delays in the regulations that are implementing the tax reform legislation? 

Mr. MCINTOSH. Senator, thanks for that question. It is obviously 

an urgent one for us and a terribly important one for us. 
9 

We do not believe it will lead to undue delays. There will obviously be some amount with regard to some of these regulations, 

that there will be some amount of additional analysis. But we have 

committed, in the memorandum of understanding, or memorandum 

of agreement, as we phrased it, to expedited review on a particular 

set of regulations. So, for example, we would expect that those you 

discussed, that are necessary to implement the tax reform bill, 

would be subject to designation as expedited and a 10-business-day 

review at OIRA. 

Senator PORTMAN. Let me be specific. Right away you got the 

withholding tables out. More accurately, I guess the IRS got the 

withholding tables out, which was very helpful to my constituents, 

because they were hearing all these different things about how this 

was going to affect them. The proof is in the paycheck, and until 

you see actually what happens to your own paycheck you really do 

not know. And I think it was important for human resources (HR) 

executives all over the country and small businesses to be able to 

have that information. That is one example. 

Another would be deemed repatriation, because, as you know, 

that went into effect and companies, including Apple, was one that 

has been before this Committee. You know, they had to make decisions right after the passage of the legislation. With those two, 

deemed repatriation and the withholding tables being altered, 

would those have been able to have been done as quickly as they 

were if the new MOU that you all now put together were in effect? 

Mr. MCINTOSH. Senator, I think we probably could have gotten 

them out as quickly as we did, assuming that OIRA would have 

worked with us to expedite the review. Obviously, those were 

things, in particular on the deemed repatriation, that had to be 

done very rapidly, and I believe the guidance came out something 

like 7 days after the law was passed. Obviously, I am confident 

OIRA would work with us very carefully to expedite those, and I 

know Administrator Rao is committed to that. 

On the withholding tables those were obviously important to get 

those out quickly and they were very well received, and businesses 

and individuals were very happy to see them get out, and I believe 

that under the MOU that they could have been put out very substantially about the same time that they came out. I believe that 

OIRA would have expedited its review on those as well. 

Senator PORTMAN. So Administrator Rao, how would you answer 

those two questions? Do you agree or disagree? 

Ms. RAO. Yes, I would agree, Senator Portman. Part of the compromise that was struck in the memorandum of agreement is that 

we would have an opportunity to review and add value to make 

sure that the regulations were going in the right direction and consistent with law, and meeting our standards. But, when appropriate, we can do that very quickly. We have committed to a 10- 

business-days turnaround for subsets of rules that are particularly 

important or sensitive. So we believe that we can accomplish that 

goal. 

Senator PORTMAN. We look forward to seeing more about the 

agreement you all reached last night. Again, I commend you for 

that, and it sounds like we have reached, from what I understand 
10 

from the briefing that I got this morning, a balance in, again, a 

tricky area, but a really important area. 

And thank you, Mr. Chairman, for your indulgence. Thank you, 

guys, for being here. 

Senator LANKFORD. Thank you. Senator Hassan. 

OPENING STATEMENT OF SENATOR HASSAN 

Senator HASSAN. Well, thank you, Mr. Chair, and Ranking Member Heitkamp, and thank you both for being here today and for 

your work. I know it takes a lot to prepare for a hearing like this, 

in addition to everything else you do, so thank you. 

Administrator Rao, I wanted to start with a couple of questions 

for you. 

As public officials, we often have disagreement about policy 

issues, but I would like to think that we are all committed to making sure we have the best information available to us when we are 

evaluating and discussing those issues. That is why I was concerned to read reports about the process by which the Department 

of Labor rolled back the 2011 tipped wage rule last year. 

Fortunately, Congress has largely blocked the worst effects of 

this rollback, but I still have concerns about the agency process. 

The Department provided the public with no quantitative economic 

analysis of its proposed changes, stating that it actually lacked 

data. But reports have since come out that the Department of 

Labor did conduct this quantitative analysis and found that the 

proposed change would result in workers losing billions of dollars. 

Instead of making that information public, the Department reportedly chose to bury the analysis and propose the changes to the 

2011 rule while stating that the uncertainties were too great to 

conduct such an analysis. 

My understanding is that OIRA was a part of that process. Can 

you explain how this happened? 

Ms. RAO. Thank you, Senator Hassan, for that question. So we 

were reviewing the tip pooling rule from the Department of Labor, 

and it was always our view that should that rule be finalized that 

there would be a full quantitative analysis in the final rule. 

Senator HASSAN. OK. So reports I have seen suggest that you, 

yourself, tried to stop the Labor Department from proposing these 

changes without those quantitative estimates, but that you were 

overridden. Can you speak to that? 

Ms. RAO. I cannot speak to the internal deliberative process surrounding the rule, but at OIRA we are, you know, very committed 

to having quantitative analysis, whenever possible, for a rule. Secretary Acosta has said, in some of his hearings to Congress, that 

he believed that the data that was available was not sufficient, it 

might be misleading to be put forward in the proposed rule. And 

he was also committed to having a full quantitative analysis in the 

final rule. 

Senator HASSAN. Well, I understanding your point about the deliberative process. I am concerned, because I think the public, in 

a proposed rule, deserves to understand what information the Department has and what happened here. 

So let me ask you something more general, and I think you have 

begun to answer it. Do you think it is important to include quan-
11 

titative analyses when issuing regulations, if it is possible to conduct them? 

Ms. RAO. Yes, I do. 

Senator HASSAN. Then why would not the Labor Department 

issue these proposed changes without including that quantitative 

analysis that it had? 

Ms. RAO. I believe that the Secretary made a determination that 

the data that was available was not sufficient, as part of that process, and was concerned about releasing information that might be 

misleading. And I think they were also hampered by the fact that 

the 2011 rule that was proposing to be repealed also lacked a quantitative analysis, so there was not really a starting point for this 

new rule. 

Senator HASSAN. And I have a couple of more questions that I 

want to get to. I understand that point but I actually do not think 

it is particularly relevant whether the 2011 had enough quantitative analysis. We are talking about money in the pockets of people who really need it, of working people who often are working at 

very low-level wages, sub-minimum wage because they are expected to get tips, and I think it was a real mistake, and I think 

it showed a disregard for quantitative analysis. And I hope very 

much that OIRA will continue to stand up for the importance of 

quantitative analysis, which I hear you commit to. But in this particular instance I am very concerned that what seems to many of 

us political considerations overtook appropriate quantitative analysis, in a really important regulation to millions of working people 

in our country. 

So I look forward to continuing to work with you on that, and 

I hope OIRA will stand up for quantitative analysis, even in proposed rules, where appropriate. 

I wanted to move on to another issue, which, again, goes to kind 

of what kind of information we are basing our regulations on. Do 

you think it is important to have the best available evidence inform 

decisions that agencies make about regulatory and deregulatory actions? 

Ms. RAO. Yes, I do. I think having proper scientific and other economic analysis is very important to the rulemaking process. 

Senator HASSAN. Do you think that during your time as Administrator agencies have used the best available evidence to make these 

kinds of decisions? 

Ms. RAO. We have certainly sought to work with agencies to ensure that that occurs. 

Senator HASSAN. Environmental Protection Agency (EPA) Administrator Scott Pruitt is reportedly considering a proposal that 

would prevent the EPA from using a scientific study unless it is 

perfectly replicable and all the underlying raw data is released to 

the public. That is problematic for a whole host of reasons. For example, it could require the release of confidential medical information, which, in turn, may reduce participation in studies. But it 

would also prevent the EPA from considering some of the best evidence we have available to us when making regulatory and deregulatory decisions. 

Have you and your office provided any input to Administrator 

Pruitt on this proposal? 
12 

Ms. RAO. Thank you, Senator. The questions about information 

quality are very important to us, and that is something that my 

staff has been working with EPA on, to develop best practices in 

that area. 

Senator HASSAN. Thank you. Do you think such a proposal, as 

the one I just described, the one from the EPA, that would limit 

the information agencies can use by preventing them from considering best available evidence makes sense? 

Ms. RAO. Well, I think we want to make sure that we do have 

the best available evidence. I think it is also important for the public to have notice and information about the types of studies which 

are being used by agencies for decisionmaking. So I think that 

there is a balance to be struck there, and I think that is something 

that the EPA is working toward. 

Senator HASSAN. Would you generally support agencies changing 

their procedures in ways that prevent them from using the best 

available evidence when making these decisions? 

Ms. RAO. No, I would not. 

Senator HASSAN. I am very glad to hear that, because one of the 

concerns about the EPA proposal is that it seems like basic common sense to use best evidence that make decisions. But what we 

are looking at is the agency really describing a move away from the 

scientific process. There is not perfect data or perfect science. Scientific evaluation and data and analysis is an ongoing process. 

As you know, we have talked about one of my priorities is the 

response to the opioid crisis in my State and across this country. 

If we wait for so-called perfect science we are not going to have evidence-based practices out there that are saving lives. And so I 

think it is critically important that we continue to honor scientific 

process and make sure that we are using best available data when 

we make policy. 

Thank you, Mr. Chair, for letting me go over. 

Senator LANKFORD. Thank you. Ranking Member Heitkamp. 

Senator HEITKAMP. Thank you, Mr. Chairman. Administrator, let 

us just kind of go back to what you said. Is there any opportunity 

for the public to comment after a rule is final? 

Ms. RAO. After a rule is final, no. 

Senator HEITKAMP. Well, then, why would we wait until a rule 

was final to provide quantitative analysis? 

Ms. RAO. Well, while we definitely believe that it is the best 

practice to provide the quantitative analysis with the proposed rule 

there may be circumstances in which an agency determines that 

that information is not available. 

Senator HEITKAMP. Do you think that you can give a proper notice without giving that quantitative analysis on the front end? Because I would like to comment on it if I were an interested party. 

I would like to see all the evidence that went into it. It does not 

help me to get it at that stage, does it? 

Ms. RAO. Well, I do think it is better if reliable quantitative analysis is available at the proposed rulemaking stage. I think there is 

a balance between providing that information and ensuring that it 

is robust enough to support the comments. 

I mean, one of the utilities of having a proposed rulemaking process, of course, is that the agency brings in information from the 
13 

public which will help inform their analysis going forward, and if 

they receive a lot of comments that affect their analysis they could 

go out with another proposed rule. 

Senator HEITKAMP. Yes. Great. And one of my great criticisms of 

the Waters of the United States rule was that they did not take 

into consideration that additional information, reissue a proposed 

rule, and allow for comment. 

Ms. RAO. Yes. 

Senator HEITKAMP. I think, back to Senator Hassan’s point, this 

is the difference of whether people can put food on the table. 

Ms. RAO. Yes. 

Senator HEITKAMP. This is not some ethereal academic study 

that we are talking about here. This is about what goes into the 

purse at the end of the night, that helps people live. And yet the 

attitude seems to be fairly cavalier about this rule. And, we understand, and, I said in my front comment, the Department of Labor 

did not want to come today, for whatever reason. I am pretty sure 

I know why they did not want to come today. So you are stuck sitting there, defending what the Department of Labor did. I get it. 

But this is not any way to run the railroad, and we need to lay 

down a marker right now, that we are going to be watching for this 

kind of backhanded, ham-handed, irresponsible kind of rulemaking 

process, especially when it hits some of the hardest-working Americans that we know. And so I am deeply concerned. 

And, you and I have had long discussions about the administration’s attitude toward rulemaking, and I have been probably one of 

the most interested people in the Democratic caucus in reforming 

that process, getting rid of unnecessary regulation. But I have assured my colleagues that this is going to be done professionally, 

and it is hard to take a look at this rule and say this was done 

professionally. And it is hard to say this is not a political rule, this 

was not a political process. And I know you are cut in the middle 

of it, and I regret that for you because I know this is not how you 

would do it. 

But we need to make a statement right now, and you need to be 

able to go back to other agencies that want to take this kind of 

shortcut, and tell them, ‘‘I do not want to go in front of that committee unless you are going to be with me. Do not try and do it.’’ 

Ms. RAO. Well, I appreciate that sentiment, Senator Heitkamp, 

and I can tell you that I am very committed to having full notice 

to the public in rulemakings and providing as much analysis as 

possible for the rulemaking process to be as robust as it can be. 

Senator HEITKAMP. So I understand that we are kind of through 

this now, there was some corrective action taken by Congress. It 

should not take Congress to take that corrective answer. But I am 

not going to belabor this point any more. 

But I do want to ask you about the policy of OIRA when it comes 

to productions of cost benefit analysis that does not comport with 

deregulation goals. And by that I mean I believe there needs to be 

a robust cost benefit analysis for any major rule, or any major deregulation, and I tend to see if you are going to promulgate a rule, 

we want this robust process, but if you are going to deregulate, just 

throw up your hands and not go through the process. I mean, how 

are you impressing up on agencies that, when they are amending 
14 

or engaging in a deregulation process, you expect the same kind of 

robust analysis that you would expect had they been proposed a 

new rule? 

Ms. RAO. Yes, thank you, Senator Heitkamp. We have been very 

clear in our guidance and our interactions with the agencies that 

the deregulatory rules need to meet the same standards. I think 

that is one of the reasons that some of the most significant deregulatory actions are still underway, agencies are working on developing robust analysis, gathering data following the appropriate notice and comment rulemaking period. 

And so we have really been working with agencies to ensure that 

those standards are met for deregulatory as well as regulatory actions. 

Senator HEITKAMP. Yes. And one thing you and I have also 

talked about is transparency, and I think we have maybe a little 

different perspective, because you understand that your ability to 

work with agencies, if everything that you tell them becomes public 

it may limit your ability to do your job. I think at a time when 

there is an incredible amount of distrust about what is happening, 

especially in the regulatory environment, transparency is better 

than no transparency. 

Can you talk a little bit about the role of transparency here, to 

the regulated community and to the American public, and where 

you think those boundaries are? 

Ms. RAO. Thank you. So I consider transparency to be very important and really an essential part of good regulatory practices. I 

think the centralized review process at OIRA is one of the most 

transparent processes currently in the Executive Branch. At the 

end of a rulemaking process, members of the public are able to obtain a copy of the rule as it was proposed by the agency, as well 

as the final rule. They can compare the difference and understand 

that the review process is what happened in between. So I think 

that is very transparent. 

We have also, with respect to our regulatory reform efforts, 

sought to be very transparent. On our website, Reginfo.gov, we 

have listed all of our deregulatory and regulatory actions. We have 

listed how the agencies have done their cost allocations. So we have 

really sought to be as transparent as possible in our reform efforts. 

Senator HEITKAMP. And that leads to maybe another area that 

is not as comfortable, and that is the Bloomberg stories under the 

tip rule. Basically the administration’s position was that that was 

false reporting, fake news once again. But yet I think it is pretty 

fair to say that if it was, indeed, a false news story we would not 

have had to have an agreement in the omnibus to fix it. 

And so according to their series on this proposed rule, you, your 

agency, attempted to stop the publication of the notice of proposed 

rulemaking without the quantitative data. In all seriousness, I 

would say, thank you. But I want to say I appreciate your willingness to stand up and say this is wrong, and I respect your courage, 

but it does not help when one agency is saying, look, we put the 

brakes on this. We tried to stop this. Bloomberg is not exactly 

known for a bias in news reporting. And the answer to that kind 

of reporting on a rule, which is critical to transparency, is fake 

news, nothing to see here, walk away. 
15 

And so I think it is really important that we look at transparency 

not only in terms of what is available but also commenting and 

being honest with our First Amendment friends in the press, to 

make sure that we are telling the public exactly what is happening. 

And so I am curious about any comment you have about the 

Bloomberg story, about the reporting that this was somehow fake 

news or false reporting, and what role you think the press has in 

all of this. 

Ms. RAO. Thank you, Senator. It is hard for me to comment on 

the deliberative process that takes place around a rulemaking, but 

I can tell you that I, in my role as the OIRA Administrator, am 

very committed to ensuring that this type of analysis is available 

to the public, and I will continue to endeavor—— 

Senator HEITKAMP. But the truth—when issues are raised about 

the process, and issues are raised about how did this happen—— 

Ms. RAO. Yes. 

Senator HEITKAMP [continuing]. The public has a right to know 

that this is maybe where it went across the rails. And that public 

accountability leads to a greater accountability, and that is the concern that I have, and the reason why I am focused on the tip rule, 

in part, because you guys came to an agreement on the rest of this. 

But the reason why I am focused is that this is the first kind of 

major examination of this relationship that you have with other 

agencies, or in the process of doing things, that I might agree with, 

as a substantive matter. But that process has to be accountable, 

and the media has to have access to information so they can fairly 

report to the public. And it does not help us to say it is false reporting or fake news. 

And so I just want to make that point. I know that did not come 

from you, but I wanted that point on the record. 

Thank you, Mr. Chairman. 

Senator LANKFORD. Thank you. Senator Harris. 

OPENING STATEMENT OF SENATOR HARRIS 

Senator HARRIS. Thank you. Administrator Rao, I want to discuss with you the Paperwork Reduction Act, and it stipulates that 

OMB, as you know, must review and approve Federal collections of 

information before they are conducted. So, specifically, I want to 

discuss with you the 2020 Census. We had a separate hearing regarding that. 

After reviewing the agency request, OMB, as you know, may approve or disapprove a request or define conditions that must be 

met for approval of any question that goes out. 

Ms. RAO. Yes. 

Senator HARRIS. The Census Bureau submitted to OMB a proposal to combine race and ethnicity, to combine the two questions 

on the 2020 Census, which years of testing and research have 

showed would likely increase an accurate count of minority populations with a specific emphasis on Latino populations. 

Were you involved at all in the review of this proposal? 

Ms. RAO. The End-to-End Test for the Census was submitted to 

our office for approval, yes. 

Senator HARRIS. And on this specific subject? 
16 

Ms. RAO. Well, that was one of the questions in the test that was 

proposed by the Department of Census. 

Senator HARRIS. And was there an affirmative decision by you or 

Director Mulvaney or any other OMB official to not include a combined race-ethnicity question on the Census? 

Ms. RAO. Well, Senator Harris, the race and ethnicity collections 

by the government are governed by a 1997 OMB directive—— 

Senator HARRIS. Yes. 

Ms. RAO [continuing]. Statistical directive on race and ethnicity 

standards, and the End-to-End Test, the format of that question 

followed those long-standing standards. So it was consistent with 

existing policy for how race and ethnicity questions would be worded on government collections. 

Senator HARRIS. And so on this issue, was there an affirmative 

decision by you or Director Mulvaney or any other OMB official to 

not include the combined race and ethnicity question? 

Ms. RAO. No. I mean, the Census used the format that is required under the current directives on race and ethnicity standards. 

Senator HARRIS. So is it your opinion, then, that OMB did not 

have to review the decision and affirm the decision or deny it? 

Ms. RAO. Well, we reviewed the End-to-End Test but that particular question is just consistent with the existing standards so 

there was no need to make a specific determination on how that 

question was phrased. 

Senator HARRIS. So you made a decision, then, that it did not 

need to be changed. Is that it? I am a bit confused. What is the 

decision that you made on the issue of the race and ethnicity? 

Ms. RAO. We reviewed the test, the End-to-End Test, to ensure 

that it complied with the requirements of our statistical directives 

and the Paperwork Reduction Act, and it did satisfy those standards, and so the Census was allowed to move forward with that 

End-to-End Test. 

Senator HARRIS. OK. And was there any memo or documentation 

of this finding in the analysis that led to this finding? 

Ms. RAO. I do not believe there was, no. 

Senator HARRIS. Can you check, and if there was, supply it to us? 

Ms. RAO. I would be happy to look into that. 

Senator HARRIS. Thank you. And, additionally, Commerce Secretary Ross announced the addition of a citizenship question to the 

full 2020 Census, and there, I am sure you know, have been major 

concerns expressed about raising that, and bringing that question 

up, especially without proper testing and vetting. And the concern 

is that it will decrease the responses to the Census, which, of 

course, we do only ever 10 years and we make a lot of decisions 

based on the numbers that are produced. So it is critically important that it is accurate. 

What role, if any, did OIRA have regarding this decision? 

Ms. RAO. We did not play any role in that decision. 

Senator HARRIS. And is it your opinion that you do not have a 

role to play in affirming or reviewing that decision? 

Ms. RAO. The decision about what questions would go on the 

Census and be submitted to Congress was a decision made by the 

Department of Commerce. When those questions are finalized, 
17 

after review by Congress, we expect to receive the entire package 

of questions for the Census as part of the Paperwork Reduction Act 

process, and that collection will come to us, likely, we expect, sometime in the fall of this year. So we will review the collection at that 

time. 

Senator HARRIS. So I am clear on the system and the process—— 

Ms. RAO. Yes.. 

Senator HARRIS [continuing]. So are you saying, then, that you 

do not have a responsibility to review it before it comes to Congress? 

Ms. RAO. That is correct. 

Senator HARRIS. And then after it comes to Congress, you will review it, and then what is the purpose of your review at that point? 

Ms. RAO. Well, the purpose of that review is the same time, it 

is the same purpose of any Paperwork Reduction, the Census is essentially a very significant information collection. 

Senator HARRIS. Sure. 

Ms. RAO. And so it has to go through our ordinary process under 

the Paperwork Reduction Act, and it will do so after they have 

been submitted to Congress. 

Senator HARRIS. And what is the purpose of your process? 

Ms. RAO. I think the purpose of our process is to make sure that 

we are gathering reasonable information from the public and we 

are doing it in a way that has integrity and serves the underlying 

purpose of the collection. 

Senator HARRIS. OK, great. Well I think—— 

Ms. RAO. And follows—— 

[Overlapping speakers.] 

Senator HARRIS [continuing]. Those are very important purposes. 

And so I look forward to hearing from you once you receive it, on 

those questions that I have presented, and those changes that we 

are making to the Census for 2020. 

Ms. RAO. Yes. 

Senator HARRIS. I know that Senator Hassan asked you some 

questions earlier, and just in follow up to the reference that she 

made to the tips rule, have there been any other instances where 

agency heads have gone around OIRA in seeking regulatory approval? 

Ms. RAO. Senator, I am not sure I would characterize it that way. 

We have a process where OIRA works closely with the agencies 

and others around the EOP to resolve these issues. 

Senator HARRIS. OK. So you are not concerned that there are 

other instances? 

Ms. RAO. I am not. 

Senator HARRIS. OK. Great. Thank you very much. I have no further questions. 

Senator LANKFORD. Thank you, Senator. Kind of walk through a 

few things with us, just in trying to be able to pull some things together from this memorandum of agreement, and to be able to get 

some definitions here. The three areas are very typical on the scenario where a tax regulation would be subject to OIRA review. 

The first one, create a serious inconsistency or otherwise interfere with an action taken, or planned by an action by another agency. Who determines that, whether that moves? Is that Treasury 
18 

that determines that or is that OIRA determines that? Because 

sometimes finding that it interferes with another agency cannot be 

seen by single agency. It has to be seen by OIRA to know someone 

else is doing something similar or this may interfere. Who does 

that determination? 

Mr. MCINTOSH. Senator, I am happy to address that. In the first 

instance, Treasury identifies all of its proposed regulatory actions 

to OIRA. The ultimate decision on that is made by the OIRA Administrator. 

Senator LANKFORD. OK. Talk to me about the speed of that. How 

quickly can they get an answer back? Is that within this 45- and 

10-day window, or does it take longer because that is a larger batch 

that is going to them to say, hey, we need to know whether we 

need to even go through this process? 

Mr. MCINTOSH. That is a different process from the 10- and 45- 

day window, which is upon designation as significant for OIRA review. The process for determining whether OIRA should review 

under the criteria of Paragraph 1 of last night’s memorandum of 

agreement is one where Treasury submits, periodically, a notice informing OIRA of the review, and OIRA then has the ability to designate things that it believes would hit the 1A criteria that you just 

described. 

Senator LANKFORD. So what is Treasury’s expectation of how 

quickly they get an answer back before it needs to go through this 

longer process or before they can move forward? 

Mr. MCINTOSH. I do not know how long it takes to get that answer back. 

Senator LANKFORD. Well, let us ask OIRA, shall we? What is a 

good expectation for a time period, because clearly, as we have discussed before, and Senator Portman brought up, there is no goal 

here of trying to slow down the process with IRS, because many 

people need answers to questions quickly as they are going through 

the tax process. Especially this week, of all weeks, people are interested in rapid answers, to be able to get everything in. 

So the question is, how quickly can they expect an answer back 

on some of these things? 

Ms. RAO. We make significance determinations often, just within 

a couple of days. As long as we have sufficient information from the 

agency about what the rule hopes to accomplish we can make those 

determinations. And I would say usually that determination, as we 

have worked with other agencies, is fairly uncontroversial. Agencies often flag things they believe are significant and usually we accept their designations. Sometimes there may be disagreement, 

which we can usually work out pretty expeditiously. 

Senator LANKFORD. OK. Great. So do not anticipate any kind of 

slowdown in the process or anything that would be atypical. How 

far in advance would you anticipate that they would need to submit 

this to make sure that there is no slowdown in the process? 

Ms. RAO. I think it just depends on the rule, the size of the rule. 

The agreement provides for kind of a quarterly process, so we have 

some anticipation of the rules that are coming up, and then significance determinations can be made as they have further information about the rules that they plan. 
19 

Senator LANKFORD. OK. I had brought up, in my opening statement, a couple of examples that we have seen, that I think if this 

process would have been in place would have been picked up by 

OIRA earlier, would have gone through some review and had some 

opportunity for conversation. 

And let me just reiterate what Senator Heitkamp was saying as 

well. We do anticipate that OIRA is forward leaning, that when an 

agency is trying to go faster or to circumvent the process, or not 

using complete information, we anticipate that OIRA is going to 

lean in and is going to say back to an agency head, publicly or privately or both, ‘‘You need to slow down. We need better information.’’ This will have a court challenge and cost the taxpayers millions of dollars, so let us get it right the first time rather than us 

go through millions of dollars on the taxpayer, or this will cause 

a lot of turmoil in the economy. We need to be able to resolve it 

earlier rather than later. That is why we like you being in that 

spot, to be in that role. 

So I mentioned a couple of examples earlier that I thought would 

have been picked up. Are there examples that you can already see 

now to think, in the future, these are things that I think are going 

to go through this process? Obviously it was just settled last night, 

but are there any examples you can think of with Treasury or IRS 

that would go through this process you see in the coming days? 

Mr. MCINTOSH. Mr. Chairman, thanks for that question. We do 

have anticipation that certain of the rules we have to promulgate 

under the tax reform bill will go through this process. I can give 

you specific examples. I would note, though, that whether they end 

up going through the process or not will depend on the regulatory 

choices that Treasury proposes to make. If, for example, Treasury 

proposes to hew very closely to the text of a statute, and so does 

not create any additional compliance costs, or very de minimis additional compliance costs, then one of the rules I cite here may not 

end up triggering the economically significant test here. It might 

still trigger one of the other prongs of the new MOA. 

So, for example, I think we think that some of the pass-through 

guidance would presumably hit these triggers. We think some of 

the guidance on the base erosion and anti-abuse provisions would 

hit it. The limitation on interest expense deductions could conceivably hit it, depending on the choices Treasury makes in promulgating those rules. 

Senator LANKFORD. OK. I can see it, by the way, and part of the 

OIRA process is helping think through, back and forth, and having 

someone outside of the entity thinking through what are other alternatives, which is exceptionally important in this process, to say 

this is the way this will be implemented, to think what else, how 

else could it be done and why. Why is that the best one? Why is 

that the easiest one to be able to implement? Is there a better way 

to do it? 

OK. Thank you. Any other ideas on that? 

Mr. MCINTOSH. I actually have a list here, but most of them are 

references to sections that would, I think, not probably be interesting to the listener in this hearing. But I am happy to come 

back—— 
20 

Senator LANKFORD. I am quite confident someone that is listening to this hearing would be exceptionally interested in that. 

Mr. MCINTOSH. So we think that, for example—I referenced the 

199(a) regulations. We think the 100 percent bonus depreciation 

under 168(k) probably would, depending on the judgments made. 

Senator LANKFORD. Can I do a quick pause? The 199, is that the 

one that came to the omnibus, with the original one, or both? Because there was a revision of that, that happened in the omnibus 

vote as well. 

Mr. MCINTOSH. I do not know the answer to that, Mr. Chairman. 

I will have to take that—— 

Senator LANKFORD. Hopefully the last one, because that was 

cleaning up the mess from the first one, but that is a whole different issue. OK. Go ahead. 

Mr. MCINTOSH. Yes. So I think we think that, for example, the 

512(a), the regulations under 512(a), which deal with investments 

in partnerships, and the unrelated business taxable income being 

separately computed for each trade of business activity could conceivably, depending on the regulatory choices that are hit. 

I mentioned the 163(j) limitation on interest expense deduction. 

Conceivably, Section 59(a), which is the base erosion anti-abuse 

that I referenced earlier. Conceivably, 951(a), which is what we call 

the global, intangible, low-tax income (GILTI) provisions could conceivably hit these triggers. There are others beyond that. 

Senator LANKFORD. OK. All right. That is extremely helpful to 

get the context on this. 

This determination on a rule having a revenue effect on the econ- omy of $100 million or more, is that something Treasury will have 

the responsibility to be able to examine, or is that part of this early 

review process that you would anticipate happens? 

Mr. MCINTOSH. Mr. Chairman, if you are talking about the question of whether something hits the economic significance threshold 

that we have set forth in the memorandum of understanding, 

Treasury, in the first instance, would be obliged to make that calculation and provide it to OIRA, and OIRA would review that, and 

the ultimate decision would be the administrators. 

Senator LANKFORD. OK. So that is in this advance process, before 

you determine whether it goes in at all. 

Mr. MCINTOSH. That is correct, Mr. Chairman. 

Senator LANKFORD. All right. Which, by the way, is a very reasonable process on this. 

One of the things that Senator Heitkamp and I have had a lot 

of conversations about, dealing with the regulatory issues, is small 

business and how that actually works. One of the concerns that I 

have is the Small Business Advocate—it is my understanding, 

whatever year that that was, stopped sending issues over to IRS, 

basically saying they are not responding back to us anyway, they 

are not hearing us out. And even things like on estate tax and 

things that clearly hit small business, IRS has, in the past, said, 

well, this does not really apply and so we are going to keep moving. 

How are you going to get input from small business on these 

things when regulations actually do affect small businesses, and 

obviously multiple of these regulations will hit them disproportionately? 
21 

Mr. MCINTOSH. Mr. Chairman, I think you are talking about the 

requirements of the Regulatory Flexibility Act? 

Senator LANKFORD. I am. 

Mr. MCINTOSH. So although you cited an instance in which IRS 

apparently got that calculation wrong, according to the Small Business Administration (SBA), the IRS Chief Counsel Manual, in Part 

32.1, actually sets forth a regulatory flexibility checklist that IRS 

is obliged to undertake for every regulation it promulgates, and go 

through and determine whether it actually is subject to the Regulatory Flexibility Act calculations analysis or not. 

And so while that the IRS got it wrong in a prior year, there is 

a provision of the Chief Counsel Manual that is required to be applied to every rule. 

Senator LANKFORD. So how is there input back and forth between small business and IRS on things that affect small business? 

Mr. MCINTOSH. Mr. Chairman, I do not have the specifics of 

those interactions. I would be happy to take that back. 

Senator LANKFORD. Yes. Let us talk about that. This may be an 

ongoing conversation with Small Business Administration and others that just want to be able to have people at the table, to make 

sure when rules are promulgated that affect them directly they are 

able to raise their hand and say, ‘‘Have you considered this?’’ That 

is a reasonable part of it. They are going to see the same statute 

come out and think when the regulation is promulgated on that 

there will be issues, and in our particular business we want to 

make sure it is correct. 

We believe it is reasonable for those individuals to be able to be 

at the table so that when the regulation is made, it is consistent 

with law, but obviously consistent with common sense for application as well, and that only happens when you have people that are 

affected at the table, in that conversation, especially on the small 

business side, because it is so unique for that type of business trying to be able to operate under statute. Senator Heitkamp. 

Senator HEITKAMP. I want to just follow on. When you do not pay 

attention to small business, we do not get the information we need 

to make the corrections. And we can classify a lot in tax, appropriately so, based on big and small business. And so this is not just 

about being responsive in following the current law. It is getting 

that information to us about impacts on small business so we can 

respond appropriately. And so, obviously, I am very concerned. 

I just want to kind of make a point. You are outgunned, Mr. 

McIntosh. Not you, personally. The IRS is outgunned. There are literally thousands and thousands of thousand-dollar-an-hour lawyers 

right now combing through this new tax bill, and what they are 

looking for is those glitches and these glitches, and you are down 

20,000 employees at the IRS. Twenty thousand people have left 

since 2010. You are outgunned, and I am deeply concerned. 

That is their job. I am not criticizing $1,000 tax lawyers. I am 

not criticizing that. I was the tax commissioner in North Dakota. 

I know how this goes. 

But we will have an impact on the debt and deficit in this country unless you get this right, unless you fulfill—I mean, I will tell 

you that—we can debate. You opened it up, bragging about the tax 

bill. We can debate a trillion-dollar deficit over 10 years, which is 
22 

where this thing is headed if you believe some of our analysis. I 

know you do not agree with that analysis. Let us put that aside. 

This bill has the potential of having a Mack truck driven through 

it, in terms of revenue, because of the changes, because those 

changes were not vetted in a meaningful way here. They are going 

to have to be analyzed there. And the speed to which you do it and 

help us identify those loopholes, that will be loopholes that were 

unintended, is absolutely critical moving forward. 

I mean, Congress has spoken. This bill has passed. We know 

what the legislative history and the intent of this is. I am deeply 

concerned, like the problem with 199(a), that we are going to see 

more and more glitches. In fact, they have been reported. And so 

if the language—this, probably is more appropriate for a Finance 

Committee hearing—but if the language of this bill provides the 

ambiguity that gets you in litigation over various deductions, various exemptions, various transfers, we need to know so that we can 

react here. 

And so I cannot impress upon you enough how important it is 

to staff up, even if it means you rob from Peter to pay Paul. We 

cannot let the IRS just prioritize these things based on what they 

think is the biggest mess, allowing a major loophole or a major 

problem on the back door. And the pass-through stuff is complicated, and I am deeply concerned about what is going to happen 

with the potential for revenue loss that goes beyond what was intended here with pass-through entities and with transfers. I am 

deeply concerned about what could happen with multinational allocations. 

And so just know that we need to know, as an oversight body on 

regulation, if you do not have enough people. We need to go make 

that argument, because no one wants this to be a bigger deficit 

problem than what we currently have, a bigger debt problem. 

And so I am concerned about the lack of staffing at IRS to implement this statute. And Senator Portman raised the withholding tables. Good. I hope they are right, because people who usually get, 

$2,000 or $3,000 of withholding, of refund, they are not going to be 

very happy if, in April, their refund is only $200. 

So this is critically important that this get done right. And, I am 

not saying that is going to happen. I am not saying—it could be 

that they double their refund. I do not know. But it is really important that we stay on top of this rulemaking process, and it is really 

important that you rely on your counterpart, and that is why I am 

grateful for the solution that you guys worked out. I think it is important. 

But we are going to be monitoring that, because it is just not 

enough for your eyes to be on this stuff. Her eyes need to be on 

it. And it is a plus multiplier for the IRS to be able to use that excellent staff that we have at OIRA to help you guys implement this 

huge bill. 

So I just want to make that comment that we are on your team. 

Ask for help if you need it. Identify things that you go, ‘‘Whoa, 

whoa, whoa, that was not intended. We need a fix.’’ Even though 

this was a highly partisan process—I am not commenting either 

way—the fixing it should not be partisan if, in fact, we run into 

those problems. So we are very interested in what can happen in 
23 

oversight and very interested in how we can help you fix unintended consequences in this bill. 

Senator LANKFORD. Let me ask some specific questions on this. 

On the memorandum of agreement that you settled last night, in 

the last part of it, this MOA will have immediate effect except that 

Paragraph 2(b) will take effect on the earlier of 12 months from the 

date of this agreement or when Treasury obtains reasonably sufficient resources, with the assistance of OMB, to perform the required analysis. 

Help me understand that part, especially the part about ‘‘with 

the assistance of OMB.’’ What is the agreement at this point about 

trying to get you assistance faster than 12 months, or do you anticipate it will take 12 months to be able to actually rule this out? 

Where will those individuals be housed? Will they be at OMB, that 

Treasury will tap on, or will they be at Treasury that OMB will 

help facilitate? 

Mr. MCINTOSH. Mr. Chairman, this was a provision that was 

carefully crafted between the Administrator and myself because of 

the importance of getting this right. 

Our expectation will be able to go into effect before 12 months. 

Our concern is it takes a certain set of economists to produce a regulatory impact analysis. We have one pending before OIRA right 

now where the primary author spent over 1,000 hours on the impact analysis. And it is, perhaps, a good thing that Treasury does 

not have economists sitting around with nothing to do. We deploy 

them as best we can. 

Senator LANKFORD. They are dangerous people when they have 

nothing to do. Yes. 

Mr. MCINTOSH. I have no comment on that. [Laughter.] 

So we are going to need, and want to bring in additional resources to bear, to produce these regulatory impact analyses. And 

in terms of what is the agreement between Treasury and OMB on 

getting those more resources, it is essentially what is on the page 

here. We need to work on it, we both recognize we need to work 

on it, and we hope to solve that problem in the very near future. 

Senator LANKFORD. So help me understand, from OMB’s perspective, what this section means and where the staffing will go. Treasury needs to add additional people. Will OMB and OIRA need to 

add additional people as well? What does that mean? 

Ms. RAO. We will need to add additional people. We have been 

looking into that. We have actually recently brought on Kristin 

Hickman, who is a professor at the University of Minnesota, as a 

Special Assistant to the Administrator. She is one of the Nation’s 

leading tax and administrative law experts who will help us with 

this transition. 

I think this provision also recognizes the fact that there are 

things that both OIRA and Treasury need to learn about the process, since we have not been doing this type of work together, and 

to figure out what types of analysis we need to meet our standards 

for economically significant rules. And, so we want to do that in a 

way that is responsible, and understanding the kind of work they 

are already doing, what type of additional work may be required. 

But I would also just highlight that in the meantime, for rules, 

Treasury will still be providing us with analysis of costs and bene-
24 

fits, just not a full regulatory impact assessment, which kind of has 

a particular meaning. So we will still be receiving analysis from 

Treasury while we work out the details of these more elaborate requirements for economically significant rules. 

Senator LANKFORD. Do you anticipate it will take a year? 

Ms. RAO. I certainly hope it will not. 

Senator LANKFORD. OK. So how many staff do you think you will 

have to add? Is this 100? Is this 5? 

Ms. RAO. Probably somewhere between those two. 

Senator LANKFORD. There is a lot between those two. 

Ms. RAO. I think it would be great for the review of Treasury 

rules if we could have maybe 10 additional staffers. I think that 

would be reasonable as a start depending on the volume, which 

was something that we will need to work out as we go along. 

Senator LANKFORD. OK. What about Treasury? How many people 

do you think you will add? 

Mr. MCINTOSH. I think we are in about the same—— 

Senator LANKFORD. Ten-ish? 

Mr. MCINTOSH [continuing]. Same area, Mr. Chairman, although 

I do not want to speak for our Offices of Tax Analysis, which would 

have much greater expertise on that. 

Senator LANKFORD. I get that. No, I am not going to hold you to 

it, as we are going through some of the possibilities for review. It 

is early to be able to determine how many things will be affected 

by that, so I am not going to try to hold you to every single one 

of those. But it is helpful to be able to get some context on the 

things you are already looking at. 

How is that—and do you anticipate this will have a gain to the 

taxpayer? When we are talking about adding 20 people in the process to be able to review this, what do you think is the gain to the 

taxpayer? 

Mr. MCINTOSH. We would expect that it would be beneficial to 

the taxpayer, Mr. Chairman. We clearly believe that there are a set 

of rules that have not gone through OIRA review that ought to. We 

do not think it is the majority of tax rules. 

Senator LANKFORD. Right. 

Mr. MCINTOSH. We think it is something along the lines of what 

other agencies send through OIRA, and I believe the Administrator 

agrees with that. 

But the tax code has changed over the past 40 years, since this 

agreement was first struck. The tax code is now used for some 

things that are not primarily designed to raise revenue. They are 

designed to incentivize conduct by imposing a tax. So, for example, 

certain of the ACA regulations that are promulgated are not primarily about raising revenue to bolster the fisc. And so those are 

the sorts of things where we think there is a clear role for OIRA 

to review. 

The things that are just—— 

Senator LANKFORD. There is a wide variety of how those things 

can be imposed, and it will make a tremendous difference. 

Mr. MCINTOSH. We agree—— 

Senator LANKFORD. Just going through the alternatives will 

make a significant difference of the least burdensome but most effective methods. 
25 

Mr. MCINTOSH. We agree completely, Mr. Chairman. We also 

think there is a set of things that are pure—I will not say boring 

tax rules, but do not impose significant costs on the regulation 

itself, does not impose significant incremental costs beyond what 

the statute does, and they are not being used in this sort of conduct-inducing way that I described. And so for those we do not 

think there would be an advantage, and so that is reflected in the 

way we set forward the prongs under Paragraph 1 of the new 

MOA. 

Senator LANKFORD. Talk to me about the Congressional Review 

Act and the engagement with Treasury and IRS on the CRA and 

what it will take, obviously that can slow the process down significantly. What areas will IRS still be engaged in CRA requirements? 

Mr. MCINTOSH. Mr. Chairman, I am afraid I am a little baffled 

by a lot of the reporting about the Congressional Review Act. IRS 

actually over-complies with the Congressional Review Act. Whether 

a rule goes through OIRA review—I am sorry, IRS over-complies. 

I hope I did not misspeak there. Whether a rule goes through OIRA 

review or not does not determine whether we at Treasury comply 

with the Congressional Review Act. 

In addition to all rules, we submit all notices, all revenue procedures, and other guidance from IRS to Congress and to the Comptroller General so as to comply with the Congressional Review Act. 

The determination by OIRA as to whether a rule is major or not 

has a timing effect on when it can to into effect. But in terms of, 

for example, the concern that rules might hang out there for years 

and then be repealed by a Congress many Congresses away, that 

is actually—the over-compliance of IRS with the Congressional Review Act should prevent that. Makes it an impossibility, actually. 

Senator LANKFORD. OK. Additional elements that need to be addressed in this memorandum of agreement that are unaddressed, 

is where in the process, this was resolved last night, are there additional outstanding elements still yet to be resolved, that you 

would anticipate continuing on the negotiations on in the days 

ahead? 

Mr. MCINTOSH. Mr. Chairman, I do not think anything from the 

terms of the memorandum of understanding, or memorandum of 

agreement. I do think that—I would commend to you a column by 

Adam Looney at Brookings today, or maybe it was yesterday, 

where he explained that there is going to need to be some work between Treasury and OIRA to have the analysis conformed to what 

OIRA does, and have OIRA’s analysis conform to what tax rules do, 

because tax rules are not easily analyzed under the usual cost benefit analysis, because they do impose costs, and they do raise revenue, and often there is no cognizable non-revenue benefit. 

And so the normal cost benefit analysis, people who are tax 

economists think it does not map on well, and I think we and OIRA 

are both cognizant of the fact that we are going to need to work 

with OIRA to get that to conform the review we do and the specifics of tax regulations, and confirm OIRA’s analysis of those 

things to the specifics of the Internal Revenue Code. 

Senator LANKFORD. Which, by the way, I do not think you are 

getting any disagreement from us on that. We understand that 

completely. That is the nature of it. But there are times that regu-
26 

lations are promulgated that there are variations of how they can 

be implemented that do affect people dramatically. Small businesses, corporations overseas, individuals, there is a great variety 

in how things are actually implemented—timing, focus. Those decisions are wild cards in the decision, and everyone is trying to think 

through the right way to be able to do it. It is helpful to be able 

to get a second opinion and to be able to say this is a very significant rule; what are the other options and how are they actually implemented? How will this affect small businesses? Those conversations, I think, are beneficial. 

We do understand the cost benefit analysis a different dynamic, 

other than the way that it is actually being implemented, if that 

makes sense. So we understand that. 

Other things that you want to add into the agreement? 

Ms. RAO. No, I would agree with Mr. McIntosh, and I would also 

just add that our career economists and staffs have been working 

together during this process while we have been talking about the 

MOA, and, we believe that there is a lot of common ground in the 

analysis that Treasury is already conducting. And so those are 

questions that will have to be worked out as we go along, and we 

learn more about the work that each agency is doing and how that 

comes together. 

But we are quite confident that we can do this in a way that is 

expeditious. 

Senator LANKFORD. The issue about an interpretive rule and 

whether something is economically significant, saying this is what 

the statute said and so we are just implementing that, so this is 

really not a regulation, it is really not a economically significant, 

that is an area that I would see that the two of you are going to 

have to spend a lot of time talking and trying to figure out what 

is this. Because you are right. There are some areas of tax code, 

a tax table coming out, it is just, that is what the statute says and 

you are following right through with it. But there are other times 

it is economically significant. There were other options in the decisionmaking process that will require some back-and-forth to be 

able to make sure that is done. 

So what I do not want to have is a time, 2 years from now, when 

we are talking about saying, well, we do not have any options to 

be able to put out because they are all just the statute. Every agency could say that, that our regulations are just the statute. But 

when there are options and variables, there needs to be some outside conversation on it. Senator Heitkamp. 

Senator HEITKAMP. I just want to add to that, because I think 

it is critically important, once you issue one of these rules, the reliance on a rule, the reliance on an interpretation pretty much cements it, and that is why it is so critical that you come back to 

Congress if it is not clear. That is why it is so critical that we know 

when the interpretations are not clear, when you need clarification, 

because if you get out there with an interpretation, we are looking 

at litigation, we are looking at reliance. It is possible to roll that 

back after the interpretation, and that is why it is so critical that 

we have an ongoing dialogue, especially as it relates to implementation of the new tax law. 

Final comments from either one of you. 
27 

Mr. MCINTOSH. Nothing from me, Mr. Chairman. Thanks for 

holding the hearing. 

Senator LANKFORD. No. Thanks for being here. 

Ms. RAO. Yes, thank you, Mr. Chairman. Thank you. 

Senator HEITKAMP. Thank you. 

Senator LANKFORD. We appreciate you being here and doing the 

hard work. You all have done a lot of work behind the scenes to 

be able to get to this point, to be able to do this, and we do appreciate it. This will be helpful long term for everyone going through 

tax policy, which is everyone’s favorite subject. 

May I remind everyone that there is only days left until filing. 

Would that be helpful to you, to be able to get that done? 

Mr. MCINTOSH. We appreciate the notice, all the notice we can 

get, Mr. Chairman. 

Senator LANKFORD. As that approaches, all Americans are thinking about tax policy now. We just want to be able to make it as 

clear and as accurate as we can, from the IRS coming out to the 

American people, to be able to make sure that there is the least 

amount of ambiguity. 

That concludes today’s hearing. I do want to thank both of you 

for your participation and your engagement in this. The hearing 

record will remain open for 15 days until the close of business on 

April 27, for the submission of statements and questions for the 

record. 

This hearing is adjourned. 

[Whereupon, at 11:38 a.m., the Subcommittee was adjourned.] 

(29) 

A P P E N D I X 
30 

In 1983, when this agreement was signed, OIRA was a new office with a limited scope. Since 

then, the nature of both OIRA and the IRS has changed. 

OIRA's mission goes far beyond review of information collection under the Paperwork 

Reduction Act, and the IRS does more than simply apply the tax code- they determine issues 

such as who receives religious exemptions and implementation of the Affordable Care Act. 

All Executive branch agencies must comply with OIRA review, Regulatory Flexibility Analysis, 

and the Congressional Review Act, but for decades the IRS exempted themselves from these 

checks put in place to protect the American people. 

In 2016, the IRS proposed a rule regarding the valuation of interests in closely held partnerships 

or corporation for estate, gift, and generation-skipping transfer taxes. 

As the Small Business Administration Office of Advocacy outlined in a comment letter, the IRS 

failed to perform an Initial Regulatory Flexibility Analysis and they cettified the rule would not 

have a significant economic impact on small businesses despite applying almost exclusively to 

small businesses. 

The rule was so deeply flawed, this administration withdrew the rule last falL Absent a change 

in administrations, taxpayers would likely be bound by a regulation that did not receive 

economic analysis or input from those small businesses, whom would have been the most 

affected by the rule. 

Another rule, issued in 2016, regarding corporate tax inversion was labeled as "temporary" and 

completely ignored the Administrative Procedure Act's notice-and-comment requirement. 

Last year, a federal court found the rule to be "legislative" and struck it down for being "arbitrary 

and capricious." 

The point of the Administrative Procedure Act, the Regulatory Flexibility Act, and the 

Congressional Review Act is to ensure rules are thoroughly scrutinized and reviewed by a thirdparty and Congress before they bind the American people. 

It is unacceptable for taxpayers to have to wait for a change in administration or judicial review 

~.o overturn flawed rules that should have been corrected by analysis every other agency is 

required to perform. 

The Government Accountability Office, former OIRA Administrators, and administrative law 

experts have called on Treasury and OIRA to reconsider this agreement. 

I understand a new agreement has been reached to ensure IRS regulations are held to the same 

standard as other agencies. I look forward to hearing the details of the agreement Particularly 

how the IRS plans to handle the requirements under the Regulatory Flexibility Act and the 

Congressional Review Act. 

With that, I recognize Ranking Member Heitkamp for her opening remarks. 
31 

Testimony of Neomi Rao 

Administrator of the Office of Information and Regulatory Affairs 

Before the Senate Committee on Homeland Security and Governmental Affairs, 

Subconunittee on Regulatory Affairs and Federal Management 

Apri112, 2018 

Chairman Lankford, Ranking Member Heitkamp, and Members of the Conunittee, 

thank you for the opportunity to appear before you to discuss the activities of the Office of 

Information and Regulatory Affairs (OIRA) in implementing the regulatory reform efforts 

of this Administration. 

The Administration's reform efforts focus on developing a lawful, fair, and limited 

regulatory system that allows the economy to grow and innovation to flourish. We look first 

to private market solutions and trust ordinary Americans to make decisions that will result in 

greater prosperity through ingenuity and hard work. The success of our economy depends, 

at least in part, on a regulatory system that does not stand in the way of progress. 

As President Trump explained, "We've begun the most far-reaching regulatory 

reform in American history." Pursuant to a series of executive orders, OIRA has worked 

closely with agencies to achieve meaningful reform and to implement a regulatory budget 

resulting in significant regulatory cost savings in fiscal year 2017. In addition to revising and 

repealing unnecessary regulatory actions, OIRA continues to work on structural reforms 

related to eliminating the inappropriate use of sub-regulatory guidance, improving 

transparency, and promoting good regulatory practices. 

Regulatory Reform and Executive Orders 13 771 and 13 777 

At OIRA, we start with longstanding principles for regulatory review, ideas rooted in 

Executive Order (EO) 12866.1 We respect private markets and look to regulate only when 

necessary, such as due to a substantial market failure. Regulation should not be a solution in 

search of a problem. In our already highly regulated society, the public can often realize 

substantial benefits when the federal government lifts unnecessary burdens from ineffective 

and outdated regulations, guidance documents, and paperwork requirements, 

Soon after taking office President Trump initiated significant regulatory reform 

through a series of executive orders directing agencies to tackle regulatory burdens and to 

reconsider and revise regulations in specific sectors such as energy, the environment, tax, 

and labor. As noted in Executive Order 13771,2 "[I]t is essential to manage the costs 

1 "Regulatory Planning and Review," Exec. Ordet No. 12866, 58 Fed. Reg. 51735 (Oct. 4, 1993). 2 "Reducing Regulation and Controlling Regulatory Costs," Exec. Order No. 13771, 82 Fed. Reg. 9339 (Feb. 3, 2017). 
32 

associated with the governmental imposition of private expenditures required to comply 

with Federal regulations."3 

Executive Order 13771 focused attention on the problem of accumulated regulatory 

burdens by requiring agencies to eliminate two regulations for each new one and, for fiscal 

year 2017, to keep the net costs of new regulations to zero. These two simple directives 

pushed against the inertia favoring more regulation by requiring agencies to consider the 

revision or repeal of unnecessary regulatory actions. As the Administration's central 

regulatory office, OIRA works closely with agencies to implement EO 13771 and to achieve 

the President's ambitious goals in a manner consistent with legal requirements, 

Across the government, we achieved substantial success. Through the end of fiscal 

year 2017, agencies issued 67 deregulatory actions and 3 significant regulatory actions, a ratio 

of 22 to 1. In guidance issued in Apri12017, OIRA indicated that it would count as 

deregulatory a range of different actions, such as the repeal of regulations, guidance 

documents, and papenvork burdens. 4 This guidance sought to incentivize agencies to 

eliminate regulatory burdens of all types, and it used lessons learned in the United Kingdom 

and Canada, which have successfully implemented similar deregulatory requirements. 

Moreover, these deregulatory actions led to meaningful cost savings of $8.1 billion 

dollars in fiscal year 2017, substantially exceeding EO 13771's requirement to keep net 

regulatory costs to zero. This also represents the first time an administration imposed any 

type of regulatory budget The regulatory budget provides an important backstop to make 

sure deregulatory actions are not just paper revisions and repeals, but actions that generate 

real regulatory cost savings for the American public, In a memorandum, OIRA explained the 

process of setting cost allocations and called on agencies to set a negative cost allocation for 

fiscal year 2018. 

The success of these reforms is reflected in the Fall2017 Unified Agenda of Regulatory 

and DerrJgulatory Actions. In the Unified Agenda, OIRA publishes rulemakings anticipated by 

agencies for the upcoming year. For fiscal year 2018, agencies project a ratio of at least three 

to one, deregulatory to regulatory actions, and cost savings of over $10 billion. In the spring 

update to the Unified Agenda, currently being compiled, OIRA continues to work with 

agencies to ensure they are on track to meet their regulatory reform goals. Agencies have 

identified potential reforms through the regulatory reform task forces established by EO 

13777,5 regular public engagement, requests for information, public listening sessions, and 

meetings with stakeholders. 

The process of implementing these new requirements has represented a tremendous 

effort for OIRA, which has used existing staff to encourage serious and systematic reform, 

3Jd § 1. 4 Office ofMgmt. & Budget, "Guidance Implementing Executive Order 13771" (Apr. 5, 2017). 

~ "Enforcmg the Regulatory Refonn Agenda," Exec. Order No. 13777, 82 Fed. Reg. 12285 (lvfar. 1, 2017). 
33 

set new cost allocations, track agency progress, and make publicly available the results of 

these developments. The career policy officials and economists at OIRA have done an 

excellent job thinking through the complexity of these tasks, solving problems of 

measurement and analysis, and promoting transparency, all in a short period of time. For the 

spring update to the Agenda, OIRA continues to advance improvements such as enhanced 

transparency and search capabilities. For example, the Agenda now is searchable by whether 

an action is regulatory or deregulatory; and agencies have withdrawn or postponed hundreds 

of rules, providing a more accurate depiction of rules likely to be issued in the coming year. 

OIRA also remains committed to longstanding principles and requirements of EO 

12866 and OMB CiJ:cular A-4. Executive Order 12866 states that "The American people 

deserve a regulatory system that works for them, not against them: a regulatory system that 

protects and improves their health, safety, environment, and well-being and improves the 

performance of the economy without imposing unacceptable or unreasonable costs on 

society; regulatory policies that recognize that the private sector and private markets are the 

best engine for economic growth."6 OIR.l\ helps to promote and develop such a regulatory 

system. 

Through the process of centralized review, OIRA ensures that regulatory and 

deregulatory actions are consistent with law, have benefits that outweigh the costs, and are 

promoting the President's priorities. Importantly, all deregulatory actions have to meet the 

same standards as regulatory actions, which means that agencies must demonstrate that a 

proposed deregulatory action produces more benefits than costs. Deregulatory actions must 

result in net benefits for the public, and so agencies are eli:tninating only those regulations 

that are not working. 

Requiring agencies to generate regulatory cost savings has also placed greater 

emphasis on retrospective re\>iew of regulations. Previous administrations have consistently 

advocated for more systematic retrospective review. When a regulation is issued an agency 

can only predict the likely costs and benefits, but after the rule is in place, agencies can 

gather information about the actual costs and benefits, and such analysis might suggest the 

need to revise or repeal the rule. By requiring the elimination of two regulatory actions for 

each new regulation and also the offsetting of regulatory costs, EO 13771 provides a strong 

incentive for retrospective review to identify regulations that impose unnecessary and 

unjustified burdens. 

Guidance and the Rule of Liw 

OIRA's regulatory reform initiatives have also focused on promoting the rule of law 

through improving fair notice, public participation, and due process. In coordination with 

the White House Counsel's Office, OIRA has directed a regulatory policy that emphasizes 

6 Exec. Order No. 12866 pnnbl. 
34 

the rule of law in several ways. At the outset, we carefully consider whether an agency has 

authority for a proposed action-we ensure that regulatory and deregulatory actions are 

consistent with the best reading of the law. This respects the lawmaking power of Congress 

to set parameters for regulatory action. 

In addition, OIRA ensures that agencies follow the correct statutory procedures for 

rulemaking. Much of the legitimacy of administrative action derives from notice and 

comment rulemaking that allows for meaningful participation by stakeholders. Agencies 

rarely have the information they need to understand the effects of regulation without input 

from the public and stakeholders. 

In light of these principles, we have cabined the inappropriate use of guidance and 

stressed that agencies should not use guidance to impose new obligations on the public. 

Guidance can play an important role when it truly provides guidance about an existing 

regulatory or statutory obligation. Agencies, however, have sometimes used guidance to 

impose new legal obligations. When reviewing a guidance document that purports to impose 

new obligations, OIRA counsels agencies to follow the appropriate process, for instance, by 

issuing a notice of proposed rulemaking. This allows the public an opportunity to comment 

and ensures that agencies are taking regulatory action with a fuller understanding of the 

consequences. Proper administrative procedures protect values of fair notice and provide 

essential due process. 

As part of our reform efforts, OIRA encourages and incentivizes agencies to identifY 

guidance that can be repealed, modified, or reissued through a rulemaking. We have also 

prompted agencies to begin identifying existing guidance documents and to start making 

such documents more readily available to the public, such as on agency websites. The 

identification process can be a first step to eliminating outdated or unnecessary guidance and 

streatnlining existing requirements. 

Department of the Treasury and Executive Order 13 789 

Under Executive Order 13789,7 President Trump directed the Office ofl\:lanagement 

and Budget and the Department of the Treasury to <(review, and if appropriate, reconsider 

the scope and implementation of the existing exemption for certain tax regulations from the 

review process set forth in Executive Order 12866 and any successor order." Those 

exemptions were initially set forth in a Memorandum of Agreement of Apri129, 1983, and 

reaffirmed in a letter exchange in November and December of 1993. OMB and Treasury 

continue to work together on a new process for review of tax regulations. 

As the President recognized in EO 13789, ''Immediate action is necessary to reduce 

the burden existing tax regulations impose on American taxpayers and thereby to provide tax 

7 "Identifymg and Reducing Tax Regulatory Burdens," Exec. Order No. 13789, 82 Fed. Reg. 19317 (Ap:r. 21, 2017). 
35 

relief and useful, simplified tax guidance."' In this Administration, OIRA lias led the charge 

to eliminate unnecessary regulatory burdens. The process of centralized regulatory review 

provides an important check to ensure that agencies take actions that yield meaningful 

benefits to the American people and impose the least burdens. Even regulations that have a 

deregulatory focus may be improved by a consideration of the costs and benefits of 

alternatives. The OIRA process is well-suited to help promote a tax system that L-; "simple, 

fair~ efficient, and pro-growth."9 

The Administration remains committed to responsible and comprehensive regulatory 

reform that benefits the American people by promoting individual liberty and by 

encouraging economic growth, job creation, and innovation. Thank you for the opportunity 

to testifY here today. 

'Id§ !. 

'Id 
36 

Statement of 

Brent J. Mcintosh 

General Counsel 

United States Department of the Treasury 

before the 

Senate Committee on Homeland Security and Government Affairs 

Subcommittee on Regulatory Affairs and Federal Management 

Aprill2, 2018 

Chainnan Lankford, Ranking Member Heitkamp, and Members ofthe Committee, thank 

you for the opportunity to discuss the Treasury Department's role in advancing one of the 

Administration's chief policy priorities-regulatory reform. 

Under Secretary Mnuchin's leadership, Treasury's regulatory reform efforts have 

significantly advanced the President's priorities. As you know, the President issued Executive 

Order 13771--entitled "Reducing Regulation and Controlling Regulatory Costs"-just days 

after Inauguration. As the Office of Management and Budget has explained, this Executive 

Order requires two regulations to be eliminated for every one new regulation deemed significant 

under Executive Order 12866. Executive Order 13771 also requires that an agency's regulatory 

actions during Fiscal Year 2017 impose zero incremental cost. 

Treasury has taken several deregulatory actions under Executive Order 1377!. 

Additionally, pursuant to the policies stated in Executive Orders 13777 and 13789, Treasury 

issued one Notice of Proposed Rulemaking to eliminate 298 ''deadwood'' regulations that are 

ineffective, unnecessary, or out of date. Treasury has taken zero new regulatory actions within 

the meaning of Executive Order 13771. And Treasury reduced the total number of regulations 

that appeared on its Fall 2017 Regulatory Agenda by approximately 100 regulations, on net, 

from its Fall2016 Regulatory Agenda. 

The President has also advanced his regulatory refonn agenda through Executive Orders 

specifically directed to Treasury. On February 3, 2017, the President issued Executive Order 

13 772, instructing the Secretary to report on the extent to which existing financial regulations 

promote the Administration's "Core Principles" of financial regulation, which include 

empowering Americans to make independent financial decisions, save for retirement, and build 

wealth; prevent taxpayer-funded bailouts; promote American competitiveness at home and 

abroad; and make regulation efficient, effective, and appropriately taiJored. In response to the 

President's Executive Order, Treasury has issued a series of reports setting forth more than 250 

specific recommendations for reducing regulatory burdens and advancing the Core Principles. 1 

Those recommendations have addressed issues ranging from alleviating the burdens on 

1 See Department of the Treasury, A Financial System That Creates Economic Opportunities: Banks and Credit 

Unions, available at https://www.treasury.gov/press·center/press.releasestDocuments/ A %20Financial%20 

System.pdf(June 12, 2017); Department of the Treasury,A Financial System That Creates Economic Opportunities: 

Capital Markets, available at https://www.treasury.gov/press·center/press~releases/DocumentsiA-Financiai·System· 

Capital-Markets-FINAL-FINAL.pdf(Oct. 6, 2017); see Department of the Treasury, A Financial System That 

Creates Economic Opportunities: Asset Management and Insurance, available at https://www.treasury.gov/presscenter/press-releases/Documents/A-Financiai·System-That-Creates·Economic·Opportunities·Asset_Managementlnsurance.pdf(Oct. 26, 2017). 

Embargoed until Thursday, Aprill2, 2018 at 10:00 a.m. ET 
37 

community financial institutions, simplifYing the extraordinarily complex Volcker Rule, bringing 

accountability to the Consumer Financial Protection Bureau, and ensuring competitive U.S. 

engagement in international standard setting bodies. And we have been pleased to see concrete 

progress on many fronts already. 

On April21, 2017, the President issued Executive Order 13789-"ldentif)'ing and 

Reducing Tax Regulatory Burdens." This Executive Order mandated a retrospective review of 

all significant tax regulations Treasury had issued since January I. 2016 through its Office of 

Tax Policy or the IRS. It ordered Treasury to identifY any such regulations that impose an undue 

financial burden on taxpayers; add undue complexity to the Federal tax laws; or exceed the 

statutory authority of the Internal Revenue Service. In a report to the President on October 2, 

Treasury identified eight such regulations for modification or revocation.2 One such regulation 

under Section 2704 of the Internal Revenue Code would have hurt family-owned and operated 

businesses by making it more costly to transfer a business to the next generation. Another 

proposed regulation under Section l 03 would have imposed new requirements on municipalities 

that issue tax-exempt municipal bonds. Treasury withdrew both of these proposed regulations in 

Octoher. 

Executive Order 13789 also directed the Secretary and the Director of the Office of 

Management and Budget to review and, if appropriate, reconsider the exemption of certain tax 

regulations from the OMB review process under a Reagan~era agreement entered into in 1983. 

Treasury has actively engaged in that review with OMB. Throughout the process, Treasury and 

OMB have prioritized two of the President's chief policy objectives-ensuring appropriatelytailored regulation and successfully implementing the once·in-a-generation tax reform bill to 

deliver all the benefits the new law promises the American economy. 

In addition to these efforts in support of the President's regulatory reform agenda, 

Treasury has of course played a leading role in advancing tax reform. The Tax Cuts and Jobs 

Act contains hundreds of provisions designed to provide relief to American families and make 

American businesses more competitive. Swift and successful implementation of tax reform 

through guidance is critical to unlocking the full economic benefits of the law and carrying out 

the will of Congress. As one major business coalition recently observed, "the growth impacts of 

the [President's tax reform] legislation will not be fully realized if businesses are uncertain about 

how the [legislation) wiH be implemented. Thus, delay in issuing guidance will impose a cost on 

taxpayers and the American economy." 

That is why implementing the new law in a timely fashion is one of the Department's 

highest priorities. Taxpayers and their advisors rely on timely guidance from Treasury for 

certainty and clarity in managing their family budgets and business affairs. The U.S. Taxpayer 

Advocate-our nation's statutory voice for taxpayers-has said that prompt publication of 

regulatory guidance is "very taxpayer-friendly, reflecting the IRS's effort to offer advance 

2 See Department of the Treasury, Second Report to the President on Identifying and Reducing Tat Regulatory 

Burdens, available at https://www .treasury .gov /press~center /press~releasess/Documents/2 0 18-

03004_Tax_EO_report.pdf(Oct. 2, 2017). 

2 

Embargoed until Thursday, Aprill2, 2018 at 10:00 a.m. ET 
38 

guidance on a complex law, well before many provisions even take effect. Simply put, advance 

guidance enables taxpayers and businesses to plan."3 

We at Treasury agree. As just one example. Treasury and IRS had to begin issuing 

guidance about taxation ofunrepatriated earnings and profits only seven days after the law was 

passed in order to provide companies and individuals with certainty for purposes of their yearend financial statements. In addition, in early January the IRS released new withholding tables 

to reflect the changes made by the tax reform legislation so that individual taxpayers could begin 

to see the impacts of the new law in their paychecks. The new withholding tables were designed 

to work with the Forms W -4 that people had already filed with their employers to claim 

withholding allowances. This was done to minimize burden on taxpayers and employers. Since 

then Treasury and IRS have continued to produce a steady stream of guidance to assist taxpayers 

in understanding the new tax law and the benefits available thereunder. This work will continue. 

Consistent with the President's regulatory reform agenda, Treasury's goal in 

implementing tax reform is to provide timely and necessary clarity that alleviates the burden of 

uncertainty for taxpayers, without imposing needless regulatory costs and delays. Thank you for 

the opportunity to testify today, and I look forward to the Subcommittee's questions. 

3 See IRS: Enforcing Obamacare's New Rules and Taxes: Hearing before the Committee on Oversight and 

Government Refonn, House ofRepresentatives, 112th Cong. at 6 (2012), available at 

https://www.irs.gov/pub/tas/testimony_house_oversight_aca_080212.pdf. 

3 

Embargoed until Thursday, Aprill2, 2018 at 10:00 a.m. ET 
39 

llf'_T_\ ~ 

A CTAIIiance for Compelilive la>alion 

Member Companies 

3M 

Abbott Laboratories 

Alcoa Corporation 

Bank of America Corp. 

Boston Scientific Corp. 

Caterpillar Inc. 

The Coca~Cola: Company 

Danaher Corporation 

The Dow Chemica! Company 

DuPont 

Eli Lilly and Company 

Emerson Electric Co. 

Exxon Mobil Corporation 

General Electric Company 

General Mills Inc. 

Google, Inc 

Honeywell International Inc. 

IBM Corporation 

International Paper Company 

Johnson & Johnson 

Johnson Controls, Inc. 

JPMorgan Chase & Co. 

Kellogg Company 

Kimberly-Clark Corp. 

MasterCard Inc 

McCormick & Company. Inc. 

Morgan Stanley 

Oracle Corporation 

PepsiCo, Inc. 

Procter & Gamble Co. 

Prudential Financial lnc. 

S&P Global Inc. 

State Street Corporation 

Texas Instruments, Inc. 

United Parcel Service, inc. 1 ~Jit~d T~chMI:ogies Corporation 

Verizon Communications Inc. 

The Walt Disney Company 

AprilS, 2018 

The Honorable Steven Mnuchin 

Secretary of the Treasury 

U.S. Department of the Treasury 

1500 Pennsylvania Avenue, N.W. 

Washington, D.C. 20220 

Dear Secretary Mnuchin and Director Mulvaney: 

The Honorable Mick Mulvaney 

Director 

Office of Management and Budget 

725 17th Street, N.W. 

Washington, D.C. 20503 

The Alliance for Competitive Taxation (ACT), a coalition of leading American 

companies from a wide range of industries, strongly supported the enactment of the 

Tax Cuts and Jobs Act (Public Law 115-97). Since President Trump signed the 

legislation into law, ACT members have been engaged in analyzing the legislation, 

identifying the issues requiring regulatory guidance from the Treasury Department, 

and preparing to implement the legislation. To that end, ACT has filed comments 

with Treasury identifying a number of issues and areas where immediate regulatory 

guidance is urgently needed, and we are continuing to work on further comments. 

As you know, this important legislation fundamentally restructures the corporate 

income tax system. It includes several entirely new provisions such as Global 

Intangible Low-Taxed Income, Foreign Derived Intangible Income, and the Base 

Erosion and Anti-Abuse Tax, for which the Treasury Department now has the 

massive task of issuing comprehensive and timely guidance so that taxpayers can 

comply with the new law. 

As most provisions ofTCJA took effect on January 1, 2018, taxpayers urgently need 

guidance to comply with the new law. In addition, the growth impacts of the 

legislation will not be fully realized if businesses are uncertain about how the TCJA 

will be implemented. Thus, delay in issuing guidance will impose a cost on taxpayers 

and the American economy. 

Recent press reports indicate changes are being considered to the 1983 Memorandum 

of Agreement (MOA) between the Treasury Department and the Office of 

Management and Budget that was agreed to in the Reagan administration (and 

followed by each successive administration) regarding the review procedures for 

Treasury regulations and rulings under Executive Order (EO) 12291 (and reaffirmed 

under EO 12866). 

The MOA exempts interpretive regulations from EO review; however, Treasury is 

responsible for notifying OMB of any regulation for which EO review is waived. 

There is no exemption under the MOA for "major" legislative regulations. 
40 

The OMB plays an important role in the regulatory process through its efforts to minimize the 

regulatory burden and eliminate unnecessary paperwork burdens. In the context of the tax laws, 

however, any regulatory burden generally flows directly from the statute itself and not from 

Treasury regulations implementing the statute, except in the case of "major" legislative 

regulations, such as the section 385 regulations promulgated in 2016. As a general matter, 

Treasury regulations are interpretive and provide the guidance taxpayers need in order to comply 

with the tax laws. 

ACT members believe it is prudent to review and periodically update longstanding procedures 

and appreciate the Treasury Department and OMB taking on the task of reviewing the MOA. 

As the Treasury Department and OMB consider changes to the MOA, ACT members urge that 

recognition be given to the urgent need for immediate interpretive guidance implementing the 

new provisions ofTCJA. 

In that regard, we believe it is important to recognize the MOA has functioned well for more than 

three decades by striking a reasonable balance that provides OMB the opportunity to review 

major legislative regulations while allowing Treasury to issue important and much needed 

interpretive regulations in a timely manner. 

Moreover, regardless of the timeline for issuing guidance, taxpayers must comply with the law. 

In ACT members' view, it would be unfortunate if changes to the long-standing MOA had the 

effect of slowing the issuance of the TCJA guidance they need to comply with the new law. 

As House Ways and Means Chairman Kevin Brady has stated, the Treasury Department is well 

prepared to provide interpretive guidance on the new law given the deep tax policy expertise and 

experience of its staff and its substantial involvement with Congress throughout the legislative 

process. ACT members share that view. 

To the extent another layer of review slows the guidance process and diverts resources that would 

otherwise be committed to drafting guidance, then that additional review is likely to impede the 

smooth and timely implementation of the TCJA and risk blunting the pro-growth impacts of this 

historic legislation. 

We would be pleased to meet with you to discuss changes to the MOA and the need for TCJA 

guidance. 

Yours sincerely, 

Alliance for Competitive Taxation 

cc: 

The Honorable Paul Ryan, Speaker of the House 

The Honorable Kevin Brady, Chairman, House Ways and Means Committee 

The Honorable Mitch McConnell, Senate Majority Leader 

The Honorable Orrin Hatch, Chairman, Senate Committee on Finance 

2 
41 

EXECUTIVE OFFICE OF THE PRESIDENT 

OFFICE OF MANAGEMENT AND BUDGET 

WASHINGTON, D.C. 20503 

ADMINISTRATOR OFFICE OF 

INFORMATION AND 

REGUlATORY 

AFFAIRS 

The Honorable Thomas R. Carper 

United States Senate 

Washington, DC 20510-0803 

Dear Senator Carper: 

Junell,2018 

Thank you for your letter about several regulatory and information collection policy 

concerns. Your letter raised questions about the role of the Office of Information and Regulatory 

Affairs {OIRA) in setting government-wide regulatory and information policy and about OIRA's 

role in the implementation of Executive Order (EO) 13771. Please find responses to your 

questions below. 

1. What specific role do you believe OIRA should play with regard to regulations 

promulgated by independent agencies such as the Securities and Exchange 

Commission or the Nuclear Regulatory Commission? 

All agencies should ensure that regulations are based on sound analysis and robust 

engagement with affected stakeholders. The Administration is considering the issue of 

whether to review the rules of traditionally independent agencies. OJRA currently 

interacts with independent agencies through major determinations under the 

Congressional Review Act (CRA), information collection review under the Paperwork 

Reduction Act (PRA), and small business review panels pursuant to the Small Business 

Regulatory Enforcement Fairness Act (SBREFA). Moreover, independent agencies 

participate in the Unified Agenda of Regulatory and Deregulatory Actions under EO 

12866. 

2. Do you agree that OIRA must maintain complete analytic integrity and continue to 

rely on evidence-based methodologically excellent analysis notwithstanding any 

competing objectives sought by other elements of the Executive Office of the 

President? 

OIRA is committed to objective and robust analysis based on long-established principles 

reflected in statutes, executive orders, and OMB guidance. 

3. Do you agree that benefits from regulations that may not be necessarily monetizable 

should be taken into account when reviewing regulations? 
42 

Yes. Executive Order 12866 and OIRA's longstanding guidance make clear that 

qualitative benefits can be taken into account in regulatory analysis. 

4. Since the beginning of this Administration, President Trump has issued a series of 

Executive Orders, seemingly aimed at reducing and eliminating the "costs" of 

federal regulations across the board. For example, agencies are required to identify 

two regulations for repeal for every one regulation that is promulgated, set a 

regulatory budget, and establish regulatory review teams to identify regulations for 

repeal. 

What do you envision as OIRA's role in these efforts? How do you plan to ensure 

that these orders do not interfere with the need for agencies to follow the direction 

of Congress and the courts in establishing rules that protect the health and safety of 

all Americans? Further, how do you plan to ensure that the benefits, economic and 

otherwise, are accounted for when reviewing regulations for repeal? Do you agree 

that regulations that are mandated by statute, including those that are required by 

statute to be promulgated once a scientific or other determination by an Executive 

branch agency is made, should be exempted from being subject to the "two for one" 

Executive Order? 

OlRA works closely with agencies to implement EO 13 771 and to achieve the 

President's ambitious goals in a manner consistent with legal requirements. Executive 

Order 13771 does not prevent agencies from implementing statutory mandates. To the 

contrary, the requirements of EO 13771 apply only to the extent permitted by law. As 

stated in OMB guidance issued in Apri12017, EO 12866 remains the primary governing 

executive order regarding regulatory planning and review. 1 Nothing in EO 13771 

prevents an agency from issuing regulations mandated by statute. OIRA has implemented 

EO 13771 with flexibility, in recognition oflegal requirements and public need. For 

example, agencies may seek waivers from the requirements of EO 13771, offset new 

regulatory costs with carryover cost savings from previous fiscal years, or offset the costs 

of a regulation in a future year. 

5. Do you agree that agencies whose mandate is to collect data in support of providing 

statistical and other data-dependent analyses must continue to be permitted to 

independently propose and obtain access to information needed to perform their 

mission? Will you commit to ensure that these agencies such as the Census Bureau 

have the resources, support, and independence needed to perform their missions? 

OIRA supports the work of statistical agencies through a branch dedicated to Statistical 

and Science Policy, headed by the Chief Statistician of the United States. OIRA has long 

1 Office ofMgmt. & Budget, Memorandum No. M-17-21, "Guidance Implementing Executive Order 13771" (Apr. 

5, 20 17), !:!l.tP!!:IIww.,~.,wJJi~!Jolli~~,g.ovlsites/whitehou:;e,govlfi leslomb.lmemoranda/20 171M::! 7-21-QMB.!)df. 
43 

worked with statistical agencies and programs to ensure that they comply with the 

Paperwork Reduction Act, OMB statistical policy directives, and information quality 

guidelines. Specifically, OIRA is committed to upholding the existing guidance outlined 

in OMB's statistical policy directives and is responsible for coordinating with the budget 

side of OMB to ensure funding for the statistical agencies sufficient to meet their 

missions. 

Thank you again for sharing your important perspective on rulemaking and information policy. 

If you or your staff have any questions, please contact the Office of Management and Budget's 

Legislative Affairs office at LegislativeAffairs@omb.eop.gov. 

Sincerely, 

NeomiRao 

Administrator 

Office of Information and Regulatory Affairs 
44 

Post-Hearing Questions for the Record 

"Reviewing the Office of Information and Regulatory Affairs" 

From Senator Thomas R. Carper 

On April 24,2018, EPA announced that it was requesting public connnents to a policy that 

would drastically change the way EPA uses scientific information. The proposed new policy will 

require EPA to use only data that are public and reproducible. The new policy is very similar to 

Congressional efforts to require that all raw data from scientific studies is available to the public 

before EPA can use it to act. Those efforts were previously embodied in two fuiled bills: the 

HONEST Act and its predecessor the Secret Science Act. Reports from 2017 also indicate that 

EPA's leadership prevented analysis conducted by EPA career staff analysts of the HONEST 

Act from being transmitted to the Congressional Budget Office. That staff analysis found that the 

HONEST Act would cost $250 million per year to implement. 

During the hearing on April 12,2018, Senator Hassan asked whether "you and your office 

provided any input to Administrator Pruitt" on EPA's anticipated proposal You responded: 

"You know, the questions about information quality are very important to us, and that is 

something that my staff has been working with EPA on, to develop best practices in that area .... 

Well, I think we want to make sure that we do have the best available evidence. I think it is also 

important for the public to have notice and information about the types of studies that are being 

used to--which are being used by agencies fur decision-making. So I think that there is a balance 

to be struck there, and I think that is something that the EPA is working towards." 

!. It is unclear from your response whether you and your staff provided specific input to 

EPA on the proposal. Did you or your staff provided input to EPA on that proposal? Did 

you review the proposal at any stage of its development? If so, please provide all 

documents (including emails, connnents, memos, white papers, meeting minutes and 

correspondence) containing any discussions between EPA and the Office oflnformation 

and Regulatory Atfuirs (OIRA) regarding the proposed policy. 

Answer: OIRA reviewed the notice of proposed rulemaking (NPRM) for EPA's 

"Strengthening Transparency in Regulatory Science" as a significant regulatory action 

pursuant to Executive Order (EO) 12866. The version of the NPRM that EPA originally 

submitted to OIRA is available at https:l/www.rcgulations.gov/documcnt?D=EPA-HQOA-20 18-0259-000 I, as is the final document on which OIRA concluded review. 

2. What is your understanding of how EPA will be able to comply with both this policy and 

the Administrative Procedure Act's mandate that EPA consider and respond to every 

study submitted to it through notice and connnent? 

Answer: The NPRM would not limit EPA's consideration of such studies. Agencies are 

currently required, under the Information Quality Act, to consider the quality of any 
45 

submitted studies. The proposed rule discusses a variety of ways in which data can be 

made public while still protecting sensitive and confidential information. If EPA 

concludes that the data cannot be made public consistent with those obligations, the 

proposed rule would allow the EPA Administrator to grant an exemption. 

3. Do you believe the rigorous peer review process that is currently used in the scientific 

community to vet scientific studies is adequate for agency reliance on those studies? If 

not, why not? 

Answer: The Office of Management and Budget (OMB) 2005 Information Quality 

Bulletin for Peer Review1 sets out requirements for peer reviews for "scientific 

information the agency reasonably can determine will have or does have a clear and 

substantial impact on important public policies or private sector decisions." The Bulletin 

requires additional procedures because journal peer review varies in rigor and 

transparency and does not always address the questions relevant to regulatory 

policymaking. The Bulletin explains: 

[1]he intensity of peer review is highly variable across journals. There will be 

cases in which an agency determines that a more rigorous or transparent review 

process is necessary. For instance, an agency may determine a particular journal 

review process did not address questions (e.g., the extent of uncertainty inherent 

in a finding) that the agency determines should be addressed before disseminating 

that information. As such, prior peer review and publication is not by itself 

sufficient grounds fur determining that no further review is necessary. 

We continue to endorse the longstanding additional procedures laid out in the 2005 

Bulletin for Peer Review for the proper use of scientific information in public 

policymaking. 

4. Generally, does EPA consult with you and your staff about its various deregulatory and 

regulatory actions before publicly announcing its intention to take those actions? For the 

period January 20, 2017 to the present, please provide a complete list of every regulatory 

or deregulatory EPA action for which 0 IRA has provided substantive input prior to EPA 

publicly announcing its intention to take that action. 

Answer: OIRA consults with EPA about deregulatory and regulatory actions through 

EPA's submissions to the Unified Agenda ofRegulatory and Deregulatory Actions 

(Agenda), which is published twice each year. The Agenda lists the regulatory and 

deregulatory actions that each agency anticipates taking in the coming year. OIRA' s prepublication review of the Agenda submissions provides an opportunity to discuss with 

1 Office ofMgmt. & Budget, Memorandum No. M-05-03, "Final lnfo1111ation Quality Bulletin for Peer Review" 

(Dec. 16, 2004), https :/.\vw\" .whitehouse.gov/s ites/whitehouse.govi files/omb!memoranda/2005/rn05-03 .pd [ 
46 

agencies their upcoming regulatory actions. EPA's Spring Agenda can be fomd at this 

link, https:l/www.rcginlil. govipub lic/do/cAgendaMa in. 

Last November, EPA Administrator Scott Pruitt proposed to repeal emission standards for called 

"glider" vehicles. See 82 FR 53,442 (Nov. 16, 2017). New glider trucks are often refurred to as 

"zombie trucks" because, while they look new on the outside, on the inside they have old, dirty 

diesel engines that, according to the EPA's own 20 17 estimates, can emit up to 450 times the 

particulate matter of a modem truck. (There is no mention of this in the notice of proposed 

rulemaking.) On March 12, 2018, Senator Udall and I sent a public letter to Administrator Pruitt 

urging him to withdraw rule. Among many other concerns, our letter noted that Administrator 

Pruitt appeared to have made his initial decision to revisit the glider rules based on a potentially 

fraudulent academic study financed by the glider industry. 

5. In your opinion, should agencies generally avoid making regulatory decisions based on 

scientific studies that have been withdrawn pending the completion of an official 

university investigation into research misconduct? If not, why not? 

Answer: In generaL agencies should make use of the best available science in 

rulemaking. Assessing the best available science may include evaluating the integrity of 

scientific studies. 

6. According to documents posted to the rulemaking docket, draft versions of the repeal had 

labeled it an "economically significant" rule pursuant to E.O. 12866.2 Interagency 

corrnnenters expressed concerns that the rule did not adequately discuss costs and 

benefits, including as they relate to small businesses that will compete for sales witb 

polluting glider vehicles. Instead of developing a cost-benefit analysis of the proposed 

economically significant rule, a track -changes file in the rulemaking docket shows that, ill 

the afternoon the day before Administrator Pruitt signed the proposal, the word "not" was 

added before "economically significant. "3 As a result of these changes, the rule was no 

longer required to comply witb E.O. 12866,4 or witb E.O. 13045, "Protection of Children 

from Environmental Health Risks and Safety Risks."5 

a. As the OIRA Administrator, were you personally aware that the rule would be 

downgraded from "economically significant"? If yes, when? 

Answer: OIRA works witb each agency as early as possible to discuss EO 12866 

significance designations of rules. During the EO 12866 interagency review 

process, additional infurmation may be shared bearing on that designation. In 

2 https :l/www.regul a ti ons .gov/document?D-EPA· HQ-OAR-2014-0827 ·2406. 

3 https :l/www.regul a ti ons .gov/document?D=EPA· HQ-OAR-2014·0827 -2402. 4 See id. (showing a 12:05pm, 11/8/2017 change from "an economically significantregulatory action" to merely "a 

significant regulatory action"). 

5 See id. (showing a 12:16pm, 11/8/2017 change in characterization of the proposal from "an economically 

significant regulatory action" to "not an economically significant regulatory action"). 
47 

some circumstances that infurmation leads to a change in designation between 

submission and conclusion of a regulatory action. 

b. Under your leadership at 0 IRA, is it connnon practice to make decisions the day 

before signature on whether a rule is economically significant? 

Answer: Designation decisions involve extensive discussions between OIRA and 

other Federal agencies during the period of EO 12866 review. Changes in the text 

reflect decisions and edits made over the course of the review period, even though 

they may be compiled and posted on a single date. 

c. Are you aware of any other instances in which the economic significant of a rule 

was downgraded the day before signature? If so, please list and briefly descnbe 

each of them 

Answer: While in 11XlSt cases it is clear at the time of submission whether a rule is 

economically significant, sometimes this determination changes during 

interagency review of the rule. In addition, the designation sometimes changes 

between the proposed and final rule based on public comments. 

d. As you know, under E.O. 12866, "economically significant" regulatory actions 

include those having an annual effuct on the economy, environment, or public 

health and safety of at least $100 million. In 2016, EPA estimated that 

unrestricted glider vehicles impose $6 to $14 billion in annual costs on society. 

See 81 FRat 73,943. The proposed repeal would exempt new glider vehicles 

from Clean Air Act regulation. On what basis did EPA and/or OIRA detennine 

that the proposed rule is not an economically significant regulatory action under 

E.O. 12866? 

Answer: The estimate referenced above provides a range of air quality benefits 

that assumed all glider vehicles were required to comply with the new standards; 

however, not all glider vehicles were required to comply with the 2016 final rule. 

In section 12.4 of EPA's Regulatory Impact Analysis fur the 2016 final 

rulemaking, the agency states that the vast majority of the glider manufucturers 

would qualifY as small businesses. Small businesses were granted exemptions 

from the new glider standards up to a certain production number. As EPA did not 

have accurate numbers for the production of gliders by small businesses who 

would be exempted, the agency did not separate the estimated costs and benefits 

for the glider portion ofthe rulemaking. 

e. Because the original Phase 2 RuJe was itself deemed economically significant, 

EPA evaluated that rule's impact on the environmental health risks and safety 

risks to children, pursuant to E.O. 13045. See 81 FRat 73966-67. Among many 

other things, that analysis discussed how children's physiology, breathing rates, 

brain and body development, and behavior increase their susceptibility to air 

pollution compared to aduJts. For example, infimts breathe five times fuster than 
48 

adults, breathe more through their mouths, and have less ability to remove 

pollutants inhaled through their nasal passages, a larger fraction of the soot and 

other pollutants they inhale is deposited in their hmgs. Id. at 73967. Children are 

more susceptJble to developing cancer tumors than adults are, and early-life 

exposure to carcinogenic vehicle polh.rtion puts them at a higher risk of 

developing cancer later in life. !d. Children who live by the roadways these 

unregulated glider vehicles would travel are more likely to develop asthma and, 

after that, more likely to suffur asthma attacks when they literally struggle to 

breathe-a frightening fueling for anyone, all the more for a small child. On top 

of that, children's susceptibility is fi.nther increased because they spend more time 

outdoors. Id. In the notice of proposed repeal of emission standards fur glider 

vehicles, the section on E.O. 13045 merely asserts, without any fi.nther analysis or 

apparent concern, that "Some of the benefits fur children's health as descnbed in 

the [Phase 2 Rule] would be lost as a result of this action" As if highlighting the 

total lack of concern fur human health, the next (and final) paragraph talks about 

criteria polh.rtion reduction under the Clean Power Plan- most likely a sloppy 

copy/paste job that illuminates the level of concern with which your office 

reviewed this notice. Under your leadership at 0 IRA, would this analysis have 

been adequate to satiszy E.O. 13045 if the rule had remained economically 

significant? 

Answer: For economically significant rules that may have a disproportionate 

impact on health and safety risks to children, agencies are required to conduct a 

meaningful analysis of those risks. In the 2016 rule, EPA concluded that it was 

justif~ed to exempt many glider kits from the emissions requirements. Agencies 

often conduct a more thorough and detailed analysis of impacts at the final rule 

stage, after they have received comments from the public. 

7. The Phase 2 Heavy Dnty rule established regulations emission standards under Clean Air 

Act section 201. On August 8, 2017, EPA annollllCed "its intent to revisit provisions of 

the Phase 2 Greenhouse Gas Emissions and Fuel Efficiency Standards fur Medium- and 

Heavy-Dnty Engines"-specifically, the "updated standards" as applied to "gliders."6 

EPA reiterated this message in a press release accompanying Administrator Pruitt's 

signature of the proposed repeal on November 9, 2017. 7 Clean Air section 317 provides 

that, before publishiug a proposed rule revising "any regulation establishiug emission 

standards mder section [201 ofthe Clean Air Act] and any other regulation promulgated 

tmder that section,"8 the Administrator "shall prepare an economic impact assessment 

respecting such standard or regulation .... "9 Not only must that economic impact 

assessment be placed in the rulemaking docket, but the "[n]otice of proposed 

6 httpsJ/www.epa. go vIne wsre leases/epa-announces- intent -revisit-provisions-phase-2-IJea vvdutv-rules. 

7 htlps:l/www.epa. go vine wsrc leases/ad mi nistra tor-pruitt-ad vances-e 11ort-keep-epa- wilhinrq_•ulatorv-lanc-proposed-repea I. 

8 42 U.S.C. § 7617(a)(5). 9 42 u.s.c. § 7617(b). 
49 

rulemaking" itself must "include notice of [the] availability" of that assessment and "an 

explanation ofthe extent and manner in which the Administrator has considered the 

analysis contained in such an economic impact assessment in proposing the action." 10 

The rulemaking docket includes a memorandum purporting to contain the analysis 

required under CAA section 317 titled, "Assessment of Economic Factors Associated 

with the Proposed Repeal of Emissions Requirements" for gliders. 11 

a. The memorandum is dated November 16, 2017. The Administrator signed the 

proposal on November 9, 2017. Was OIRA aware of this memorandum prior to 

the Administrator signing the proposal? 

b. The memorandum states, "In many rulemakings promulgated under Section 202, 

EPA would address the above topics in the Draft Regulatory Impact Analysis 

(RIA) document prepared to support a Notice of Proposed Rulemaking. However, 

EPA is not including a Draft RIA for this proposed rule." Why did EPA not 

develop a Draft RIA for the proposed repeal of glider requirements? How does 

your office decide whether a Draft RIA should be developed fur a proposed rule? 

c. Where is this memorandum cited in the "notice of proposed rulemaking," as 

required by Clean Air Act section 317? Given that OIRA's role is to ensure that 

agencies comply with legally required economic analyses, will you ensure that 

EPA fixes this legal defect does not finalize the proposed repeal based on a 

legally derective proposal? 

d. Extraordinarily, the memorandum's perfimctory economic assessment states that 

while EPA considered information submitted as part of the original Phase 2 

rulemaking, "EPA did not, however, consider this economic impact assessment 

itself in proposing this action."12 Does OIRA typically encourage agencies to 

prepare economic assessments of proposed rulemakings that the agency will "not 

consider" when proposing the action? Absent a statutory command to ignore 

costs, why would EPA assess the economic impacts of a proposed rule but ignore 

the substance of that assessment? 

Answers a-d: OIRA will review with the agency how best to address the need for 

appropriate economic analysis in any final rulemaking. 

8. Last year, the Department of Labor proposed a rule to weaken beryllium exposure 

standards for workers in a subset of industries otherwise regulated by the rule. See 82 FR 

29182. In its notice, the Department of Labor made clear that although it was exempting 

two industrial standards from the rule, it was still required to go through the Paperwork 

Reduction Act (PRA) process because revocation of the rule would revoke the rule's 

requirement to collect information from those industries. The Department ofLabor 

explained that, "Under the PRA, a Federal agency cannot conduct or sponsor a collection 

of information unless OMB approves it, and the agency displays a currently valid OMB 

control number (44 U.S. C. 3507)." Accordingly, OSHA submitted a revised Information 

Jo Id 

11 hllps:i/www.rcQukttions. gov/document?D=FP A-HQ-OAR-2014-0827-2407. 12 Id at 2. 
50 

Collection Request to OMB, and solicited comment on a number of topics related to "the 

removal of the collection of information requirements." lbat rule was proposed on June 

27, 2017, before you were confirmed as OIRA Administrator. 

a. The Phase 2 Rule included a number of reporting and recordkeeping 

requirements, which OMB approved pursuant to the PRA. See 81 FRat 74155. 

As with OSHA's partial repeal of beryllium standards fur a subset of regulated 

industries, the proposed repeal of the glider requirements would repeal the Phase 

2 standards for a subset of regulated industries. Despite that, the proposed glider 

repeal asserts that the requirements of the PRAdo not apply. See 81 FRat 53448. 

For Paperwork Reduction Act purposes, what is the substantive or legal difference 

between these two rules? 

Answer: The Paperwork Reduction Act requirements apply to the Heavy Duty 

Phase 2 rulemaking. The information collection requirements in the Phase 2 final 

rule were pending review at the time of the reconsidered proposal on glider kits. 

EPA chose to withdraw the collections in light of the new proposal. 

b. Has OIRA's policy regarding PRA approval changed since you became OIRA 

Administrator? If so, did you order that change? If so, why? 

Answer: No, OIRA's policy regarding PRA approval has not changed since I 

became Administrator. 

9. On July 13, 2017 I wrote to you with a series of questions regarding your view on 

OIRA's role in several regulatory and infurmation collecting policy matters. 13 To date, I 

have not received a response to this Jetter. Please provide an update on the status of the 

response to this Jetter. 

Answer: Please find a response attached. 

13 Senator Tom Carper to Administrator Neomi Rao,July 13 2017. 
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6560·50-P 

40 CFR Part 1037 

[EPA-HQ-OAR-2014-0827; FRL-xxxx-xx-OAR[ 

[RIN 2060-AT79J 

Repeal of Emission Requirements for Glider Vehicles, Glider Engines, and Glider Kits 

AGENCY: Environmental Protection Agency (EPA). 

ACTION: Proposed rule. 

SUMMARY: The Environmental Protection Agency (EPA) is proposing to repeal the emission 

standards and other requirements for heavy-duty glider vehicles, glider engines, and glider kits 

based on a proposed interpretation of the Clean Air Act (CAA) under which glider vehicles 

wwid be found not to constitute "new motor vehicles" within the meaning of CAA section 

216(3), glider engines would be found not to constitute "new motor vehicle engines" within the 

meaning ofCAA section 216(3), and glider kits would not be treated as "incomplete" new motor 

vehicles. Under this proposed interpretation, EPA would lack authority to regulate glider 

vehicles, glider engines, and glider kits under CAA section 202(a)(l). 

DATES: 

Comments: Comments on all aspects of this proposal must be received on or before [INSERT 

DATE 30 DAYS AFTER THE PUBLIC HEARING]. 

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Public Hearing: EPA will hold a public hearing on the following date: [INSERT DATE 15 

DAYS AFTER PUBLICATION]. The hearing will be held __ . To attend the hearing, 

individuals will need to show appropriate ID to enter the building. The hearing will start at 10 

a.m. local time and continue until 5 p.m. or until everyone has had a chance to speak. More 

details concerning the hearing can be found at https://www.epa.gov/regulations-emissionsvehicles-and-engines/petitions-reconsideration-phase-2-ghg-emissions-and-fuel. 

ADDRESSES: Submit your comments, identified by Docket ID No. EPA-HQ-OAR-2014-

0827, at http://www.regulations.gov. Follow the online instructions for submitting comments. 

Once submitted, comments cannot be edited or removed from Regulations.gov. The EPA may 

publish any comment received to its public docket. Do not submit electronically any information 

you consider to be Confidential Business Information (CBI) or other information whose 

disclosure is restricted by statute. Multimedia submissions (audio, video, etc.) must be 

accompanied by a written comment. The written comment is considered the official comment 

and should include discussion of all points you wish to make. The EPA will generally not 

consider comments or comment contents located outside of the primary submission (i.e. on the 

web, cloud, or other file sharing system). For additional submission methods, the full EPA public 

comment policy, information about CBI or multimedia submissions, and general guidance on 

making effective comments, please visit http://www.epa.gov/dockets/commenting-epa-dockets. 

Docket: All documents in the docket are listed on the www.regulations.gov web site. Although 

listed in the index, some information is not publicly available, e.g., confidential business 

information or other information whose disclosure is restricted by statute. Certain other material, 

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such as copyrighted material, is not placed on the Internet and will be publicly available only in 

hard copy form. Publicly available docket materials are available either electronically through 

www.regulations.gov or in hard copy at the following location: 

Air and Radiation Docket and Information Center, EPA Docket Center, EPA/DC, EPA 

WJC West Building, 1301 Constitution Ave., N.W., Room 3334, Washington, DC. The 

Public Reading Room is open from 8:30a.m. to 4:30p.m., Monday through Friday, 

excluding legal holidays. The telephone number for the Public Reading Room is (202) 

566-1744, and the telephone number for the Air Docket is (202) 566-1742. 

FOR FURTHER INFORMATION CONTACT: 

SUPPLEMENTAL INFORMATION 

Does this Action Apply to Me? 

This action relates to a previously promulgated Final Rule that affects companies that 

manufacture, sell, or import into the United States glider vehicles. Proposed categories and 

entities that might be affected include the following: 

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Category pies of Potentially Affected Entities I 

Industry 336110 Motor Vehicle Manufacturers, Engine 

336111 Manufacturers, Engine Parts Manufacturers, 

336112 Truck Manufacturers, Automotive Parts and 

333618 Accessories Dealers 

336120 

441310 

Note: 

a North American Industry Classification System (NAICS). 

This table is not intended to be exhaustive, but rather provides a guide for readers regarding 

entities likely covered by these rules. This table lists the types of entities that we are aware may 

be regulated by this action. Other types of entities not listed in the table could also be regulated. 

To determine whether your activities are regulated by this action, you should carefully examine 

the applicability criteria in the referenced regulations. You may direct questions regarding the 

applicability of this action to the persons listed in the preceding FOR FURTHER 

INFORMATION CONTACT section. 

I. Introduction 

The pas is for the proposed repeal of those provisions of the Final Rule entitled Greenhouse Gas 

Emissions and Fuel Efficiency Standards for Medium- and Heavy-Duty Engines and Vehicles 

Phase 2 (the Phase 2 rule) 1 that apply to glider vehicles, glider engines, and glider kits is EPA's 

proposed interpretation ofCAA section 202(a)(l) and sections 216(2) and 216(3), which is 

discussed below. EPA is proposingJQ interpret those statutory provisions as not authorizing the 

Agency (I) to treat glider vehicles as "new motor vehicles," (2) to treat glider engines as "new 

1 81 FR 73478 (Oct 25, 2016). 

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motor vehicle engines," or (3) to treat glider kil'> as "incomplete" new motor vehicles. Under 

this proposed interpretation, EPA would thereby lack authority to regulate glider vehicles, glider 

engines, and glider kits under CAA section 202(a)(l). 

This proposed interpretation is a departure from the position taken by EPA in the Phase 2 rule, in 

which the Agency interpreted the statutory definitions of"new motor vehicle" and "new motor 

vehicle engines" in CAA section 216(3) as including glider vehicles and glider engines, 

respectively. The proposed interpretation correspondingly departs from EPA's position in the 

Phase 2 rule that CAA section 202(a)(1) authorizes the Agency to treat glider kits as 

"incomplete" new motor vehicles. 

It is settled law that EPA has inherent authority to reconsider, repeal, or revise past decisions to 

the extent pennitted by law so long as the Agency provides a reasoned explanation. This 

authority exists in part because EPA's interpretations of the statutes it administers "are not 

carved in stone." Chevron U.S.A. Inc. v. NRDC, lnc. 467 U.S. 837, 863 (1984). Rather, an 

agency, if it is to "engage in infonned rulemaking, must consider varying interpretations and the 

wisdom of its policy on a continuing basis." ld at 863-64. This is true when, as is the case here, 

review is undertaken "in response to ... a change in administration." National Cable & 

Telecommunications Ass 'n v. Brand X Internet Services, 545 U.S. 967,981 (2005). As has been 

observed, a "change in administration brought about by the people casting their votes is a 

programs and regulations," and so long as an agency "remains within the bounds established by 

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Congress," the agency "is entitled to assess administrative records and evaluate priorities in light 

of the philosophy of the administration." Motor Vehicle Manufacturers Ass'n. v. State Farm 

Mutual Automobile Insurance Co., 463 U.S. 29, 59 (1983) (Rehnquist, J., concurring in part and 

dissenting in part). 

After reconsidering the statutory language, EPA proposes to adopt a reading of the relevant 

provisions of the CAA under which the statutory terms "new motor vehicle" and "new motor 

vehicle engine" would not include glider vehicles and glider engines, respectively. Further, 

glider kits would not be treated as "incomplete" new motor vehicles. Under this proposed 

reading, EPA would lack authority under CAA section 202(a)(l) to impose requirements on 

glider vehicles, glider engines, and glider kits and therefore proposes to remove the relevant rule 

provisions. 

II. Background 

A. Factual Context 

A glider vehicle (sometimes referred to simply as a "glider") is a truck that utilizes a used (and 

typically refurbished) powertrain (including the engine, the transmission, and usually the rear 

axle) but which has new body parts. When these new body parts (which generally include the 

tractor chassis with frame, front axle, brakes, and cab) are put together to form the "shell" of a 

truck, the assemblage of parts is referred to collectively as a "glider kit."2 The final 

manufacturer of the glider vehicle, i.e., the entity that takes the assembled glider kit and 

2 Because a glider kit lacks an engine, it is neither capable of self-propulsion nor does it emit any air pollutants. 

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combines it with the used powertrain salvaged from some other "donor" truck, is most often a 

different manufacturer than the original manufacturer of the glider kit. See 81 FR 73512-13. 

Comments submitted to EPA during the Phase 2 rulemaking state that gliders are approximately 

25% less expensive than new trucks,3 which makes them popular with small businesses and 

owner-operators.4 For those businesses and drivers who cannot afford to purchase a new truck, a 

I glider provides an attractive alternative to the continuing use..Qfan older vehicle. In contrast to 

the older vehicle. a glider requires less maintenance and thus yields less downtime. Having the 

same braking, lane drift devices, dynamic cruise control, and blind spot detection devices that are 

found on 

compared to the older truck that it is replacing. 

B. Statutory and Regulatory Context 

Section 202(a)(1) of the CAA directs that "EPA shall by regulation prescribe," in "accordance 

with the provisions" of section 202, "standards applicable to the emission of any air pollutant 

from any ... new motor vehicles or new motor vehicle engines." 42 U.S.C. § 752l(a)(l). 

Section 216(2) defines "motor vehicle" to mean "any se!f~propelled vehicle designed for 

transporting persons or property on a street or highway." 42 U.S.C. § 7550(2). In tum, a "new 

motor vehicle" is defined in section 216(3) to mean a "motor vehicle the equitable or legal title 

to which has never been transferred to an ultimate purchaser." 42 U.S. C.§ 7550(3) (emphasis 

added). Similarly, a "new motor vehicle engine" is defined as an "engine in a new motor 

'See Response to Comments for Joint Ru!emaking, EPA-426-R-16-901 (August 2016) at 1846. 4 Doc. EPA-HQ-OAR-2014-0827-1964 

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vehicle" or a "motor vehicle engine the equitable or legal title to which has never been 

transferred to the ultimate purchaser." !d. 5 

In issuing the Phase 2 rule, EPA found that it was "reasonable" to consider glider vehicles to be 

"new motor vehicles" under the definition in CAA section 216(3). See 81 FR 73514. Likewise, 

the Agency found that the previously owned engines utilized by glider vehicles are properly 

considered to be "new motor vehicle engines" within the statutory definition. Based on these 

interpretations, EPA determined that it had authority under CAA section 202(a) to subject glider 

vehicles and glider engines to the standards of the Phase 2 rule and to impose on them certain 

other requirements. As for glider kits, EPA found that if glider vehicles are new motor vehicles, 

then the Agency was authorized to regulate glider kits as "incomplete" new motor vehicles. !d. 

C. Petition for Reconsideration 

Following promulgation of the Phase 2 rule, EPA received from representatives of the glider 

industry a joint petition requesting that the Agency reconsider the application of the Phase 2 rule 

to glider vehicles, glider engines, and glider kits.6 In their petition, the representatives of the 

glider industry warned that the Phase 2 rule "would significantly curtail American 

manufacturing" and "effectively shut down the glider industry and the nearly 20,000 jobs it 

supports across the nation." Petition at 2. For example, the Fitzgerald company represented that 

' Further, with "respect to vehicles or engines imported or offered for importation," CAA section 216(3) provides 

that "new motor vehicle'' and "new motor vehicle engineH mean a '"motor vehicle and engine . .. manufactured after 

the effective date of a regulation issued under section 7521 of this title which is applicable to such vehicle or engine 

(or which would be applicable to such vehicle or engine had it been manufactured for importation into the United 

States)." 42 U.S.C. § 7550(3). 6 See Petition for Reconsideration of Application of the Final Rule Entitled "Greenhouse Gas Emissions and Fuel 

Efficiency Standards for Medium- and Heavy-Duty Engines and Vehicles- Phase 2 Final Rule" to Gliders, from 

Fitzgerald Glider Kits, LLC; Harrison Truck Centers, Inc.; and Indiana Phoenix, Inc. (July 10, 2017) (Petition). 

Available at https ://www.epa. gov/sites/production/files/20 17 -07/documents/hd-ghg-fr-fitzgerald-recons-petition20 17-07-1 O.pdf. 

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it was "currently responsible for 1,600 direct and indirect jobs" in the states of Tennessee and 

Kentucky alone, and "several thousand more associated with suppliers across the country." Id at 

2. Fitzgerald further represented that, with the Phase 2 rule in effect, by the end of 2017 the 

company would be "forced to cut production and its workforce by 90%." Jd 

The petitioners made three principal arguments in support of their petition. First, they argued 

that CAA section 202(a)(l) does not authorize EPA to regulate glider kits, glider vehicles, or 

glider engines. Petition at 3-4. Second, the petitioners contended that in the Phase 2 rule EPA 

"relied upon unsupported assumptions to arrive at the conclusion that immediate regulation of 

glider vehicles was warranted and necessary." Id at 4. Third, the petitioners asserted that 

reconsideration was warranted under Executive Order 13783. ld at 6. 

Regarding their second contention, the petitioners took particular issue with what they 

characterized as EPA's having "assumed that the nitrogen oxide ("NOx") and particulate matter 

("PM") emissions of glider vehicles using pre-2007 engines" would be "at least ten times higher 

than emissions from equivalent vehicles being produced with brand new engines. Petition at 5, 

citing 81 FRat 73942. According to the petitioners, EPA had "relied on no actual data to 

support this conclusion," but had "simply relied on the pre-2007 standards." Jd In support, the 

petitioners included as an exhibit to their petition a letter from the President of the Tennessee 

Technological University ("Tennessee Tech"), which described a study recently conducted by 

Tennessee Tech. This study, according to the petitioners, had "analyz[ed] the NOx, PM, and 

carbon monoxide ... emissions from both remanufactured and OEM engines," and "reached a 

contrary conclusion" regarding glider vehicle emissions. Petition at 5. 

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Petitioners maintained that the results of the study "showed that remanufactured engines from 

model years between 2002 and 2007 performed roughly on par with OEM 'certified' engines," 

and "in some instances even out-performed the OEM engines." Jd The petitioners further 

claimed that the Tennessee Tech research '"showed that remanufactured and OEM engines 

experience parallel decline in emissions efficiency with increased mileage."' ld, quoting 

Tennessee Tech letter at 2. Based on the Tennessee Tech study, the petitioners asserted that 

"glider vehicles would emit less than 12% of the total NOx and PM emissions for all Class 8 

heavy duty vehicles .. , not 33% as the Phase 2 Rule suggests." ld, citing 81 FRat 73943. 

ftirt!iet/.li>~·Pi'Ut~9ijers¢i>mplllin<:d.tha:f lli~P!ulS~ :Z~li.t\Mll!'ail~'tti!¢i>fls\d~ll1~iillldil:i<liiiJ 

envl\'Ql\ill.~i>'!lil'b~li/!.tlli~s!l~:Ve!\IC!W~li!~~ll.'~ll'~~i:li!Rl!at\l!'.jjl;ltiiJt.)f1~i~!l!i 

VO!iic)e~ti~~!>ini$Sll>tl!'~·ti:lisll1ll!> tll~~9f.(!l!M~~~~-tiDI'!IIIl~ll~~~¥\ii!W~ilM~\l~:til 

gild~\t~i!lt;fil~\~i!lil!t.w.~,iUid.tne'lciiil>QIID)~~~ill~~~1\lli~~i!l!~.l\yrl1!e 

S;tlting;,'<l~1ii<!'PY~<lYWri~iil~terl~ls.~'.i<t ·Re~l\lli~l~,_,il!i!)\t;<tliimtl!ii>li~ 

~il~~ihaf,l'!&lli<!~'ta~se\;11>1eris'~u~w!iml(lt!t~~i§\'~~-~P'A .. ~~~~·1rt:Jb<> 

ienillilut~~~~~~tr;r~cl\ld\ni'~~:M!lll~~.'IQI''\!ll!:!o•~~W!a1l>.n~;)•l£d ... 

petitioners pointed out that "[r]eusing these components avoids the environmental impact of 

casting steel, including the significant associated NOx emissions." !d. This "fact," the 

petitioners argued, is something that EPA should have been considered but was "not considered 

in the development of the Phase 2 rule." !d 

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EPA responded to the glider industry representatives' joint petition by separate letters on August 

17,2017, stating, among other things, that the petition "raises significant questions regarding the 

EPA's authority under the Clean Air Act to regulate gliders. "

7 EPA further indicated that it had 

"decided to revisit the provisions in the Phase 2 Rule that relate to gliders," and that the Agency 

"intends to develop and issue a Federal Register notice of proposed rulemaking on this matter, 

consistent with the requirements of the Clean Air Act." 

III. Basis for the Proposed Repeal 

A. Statutory Analysis 

EPA is proposing to conclude that the statutory interpretations on which the Phase 2 rule 

predicated its regulation of glider kits, glider vehicles, and glider engines were incorrect. EPA is 

proposing to interpret the relevant language of the CAA as excluding glider vehicles from the 

statutory term "new motor vehicles" and glider engines from the statutory term "new motor 

vehi~le engines," as both terms are defined in section 216(3). Consistent with this interpretation 

of the scope of "new motor vehicle," EPA is further proposing that it has no authority to treat 

glider kits as "incomplete" new motor vehicles under CAA section 202(a)(l). Based on these 

proposed interpretations, EPA is proposing to find that it has no authority under CAA section 

202(a)(l) to set standards for, or otherwise to regulate or to impose requirements on, glider 

vehicles, glider engines, and glider kits. 

7 See, e.g., Letter from E. Scott Pruitt, EPA Administrator, to Tommy C. Fitzgerald, President, Fitzgerald Glider Kits 

(Aug. 17, 2017). Available at https:!lwww.epa.gov/sites/production/files/2017-08/documentslhd-ghg-phase2-ttmaltr-2017-08-17.pdf. 

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Under EPA's proposed interpretation, the statute is clear that EPA has no authority to regulate 

glider kits under CAA section 202(a)(l). If glider vehicles are not "new motor vehicles," which 

is the interpretation of section 2 I 6(3) that EPA is proposing here, then the Agency entirely lacks 

authority to regulate glider kits as "incomplete" new motor vehicles. Furthermore, given that a 

glider kit lacks a powertrain, a glider kit does not even meet the definition of "motor vehicle," 

which, in relevant part, is defined to mean "any self-propelled vehicle." 42 U.S.C § 7550(2) 

(emphasis added). EPA is further proposing therefore that the Phase 2 rule was incorrect when it 

interpreted CAA section 202(a)(l) as giving the Agency authority to regulate glider kits as 

"incomplete" motor vehicles See 81 FRat 73514. 

CAA section 202(a)(l) provides as follows: 

(I) The Administrator shall by regulation prescribe (and from time to time 

revise) in accordance with the provisions of this section, standards applicable 

to the emission of any air pollutant from any class or classes of new motor 

vehicles or new motor vehicle engines, which in his judgment cause, or 

contribute to, air pollution which may reasonably be anticipated to endanger 

public health or welfare. Such standards shall be applicable to such vehicles 

and engines for their useful life (as determined under subsection (d) of this 

section, relating to useful life of vehicles for purposes of certification), whether 

such vehicles and engines are designed as complete systems or incorporate 

devices to prevent or control such pollution. 

42 U.S.C. § 752I(a)(l) (emphases added). At issue here is the second sentence of paragraph 

(a)(l ), including, specifically, the words: "[s]uch standards shall be applicable to such vehicles 

... whether such vehicles ... are designed as complete systems." 42 U.S.C. § 752l(a)(l). In the 

Phase 2 rule, EPA took the position that the words "whether such vehicles ... are designed as 

complete systems" can be interpreted as authorizing the Agency to regulate glider kits as 

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"incomplete vehicles." See 81 FR at 73515 ("[I]t is evident that ... glider kits should be treated 

as vehicles, albeit incomplete ones."). The Agency had reasoned that a glider kit "is not a few 

assembled components; rather, it is an assembled truck with a few components missing." /d. Of 

course, among those "few" missing components is the powertrain, which enables self-propulsion 

and which is responsible for the emission of air pollutants. 

In any event, the phrase "such vehicles" from the second sentence of clause (a)(l) is a reference 

back to the first sentence of clause (a)(l), which states that the Administrator "shall by regulation 

prescribe (and from time to time revise) ... standards applicable to the emission of any air 

pollutant from any class or classes of new motor vehicles." 42 U.S.C. § 752l(a)(l) (emphasis 

added). Because an engine-less glider kit, incapable of self-propulsion, does not explicitly fit 

within the definition of a "motor vehicle," the fact that the second sentence of clause (a)(l) 

makes reference to "whether such vehicles" [i.e., "new motor vehicles"] ... are designed as 

complete systems" cannot support the claim that EPA is authorized to regulate glider kits as 

"incomplete" motor vehicles. The assertion that CAA section 202(a)(l) authorizes the regulation 

of glider kits as "incomplete" vehicles is based solely on the presupposition that glider kits are 

"such vehicles"- i.e., "new motor vehicles." But a glider kit does not meet the definition of 

"motor vehicle," much less "new motor vehicle." Accordingly, EPA is here proposing to 

determine that the Phase 2 rule wrongly construed this language from CAA section 202(a)(l) 

when it interpreted that language as giving EPA authority to regulate them as "incomplete" 

vehicles. EPA solicits comment on this interpretation. 

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With respect to glider vehicles- i.e., a glider kit in which a previously owned powertrain has 

been installed - EPA is proposing to interpret the definition of "new motor vehicle" in CAA 

section 216(3) as not including glider vehicles. The principal components of a glider vehicle 

(i.e., the powertrain elements, including the engine and the transmission) are components that 

have been previously owned and, typically, rebuilt. Therefore, the "equitable or legal title" to 

the most significant parts of the glider vehicle- and the components that actually produce air 

pollutant emissions- have previously been "transferred to an ultimate purchaser," i.e., the 

original owner of the donor truck. For this reason, EPA is proposing to find that glider vehicles 

should not be considered to be ''new," and that the statutory language in CAA § 216(3) does not 

include glider vehicles.~ I 

In taking the contrary position, the Phase 2 rule is effectively claiming that the act of installing a 

previously owned powertrain into a glider kit- i.e., something that is not itself a "motor vehicle" 

-results in the creation of a new "motor vehicle." This counterintuitive result, at a minimum, 

suggests that, in defining "new motor vehicle" generally to mean a "motor vehicle the equitable 

or legal title to which has never been transferred to an ultimate purchaser," Congress did not 

intend that a glider vehicle, comprised of a new outer shell conjoined to a previously owned 

powertrain, should be treated as a "new" vehicle, due solely to fact that a glider vehicle may be 

3

Underscoring the fact that this is the natural understanding of the tenns that Congress used to define "new motor 

vehicle" is that, for their part, the National Highway Traffic Safety Administration's regulations establish that a 

truck is not considered to be "newly manufactured" if the "engine, transmission, and drive axle(s)(as a minimum) of 

[an] assembled vehicle are not new" and at least two of those three components come from the same donor vehicle 

See 49 C.F .R. § 571.7(e). And while it may be the case that some glider manufacturers have marketed their products 

as being like ''new trucks," see 81 FRat 73514, the relevant consideration is the text of the CAA itself, which 

precludes a truck from being deemed "new" where title has already been transferred to an "ultimate purchaser." 

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assigned a new title following the assembly of components, some of which are new and some of 

which were previously owned. 

Where the "traditional tools of statutory construction" allows one to "ascertain[] that Congress 

had an intention on the precise question at issue," that "intention is the law and must be given 

effect." See Chevron, 467 U.S. at 843 n.9. At the same time, where "Congress has not directly 

addressed the precise question at issue," and the "statute is silent or ambiguous with respect to 

the specific issue," it is left to the agency charged with implementing the statute to provide an 

"answer based on a permissible construction of the statute." Id at 843. In this case, EPA 

proposes to interpret the relevant statutory language as authorizing the Agency to exclude glider 

vehicles from being treated as "new motor vehicles." 

Regarding glider engines, EPA proposes that, since a glider vehicle does not meet the 

statutory definition of a "new motor vehicle," it follows that a glider engine is not a "new motor 

vehicle engine" within the meaning ofCAA section 216(3). Under that provision, a motor 

vehicle engine is considered "new" in either of two circumstances: (I) the engine is "in a new 

motor vehicle," or (2) the "equitable or legal title" to the engine has "never been transferred to 

the ultimate purchaser." The second of these circumstances can never apply to a glider engine, 

which is invariably an engine that has been previously owned. 

As to the first circumstance, a glider engine is installed in a glider kit, which in itself is not a 

"motor vehicle." A glider kit becomes a "motor vehicle" only after an engine (and the balance of 

the powertrain) has been installed. But while adding a previously owned engine to a glider kit 

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may result in the creation of a "motor vehicle," the assert that the previously owned engine 

thereby becomes a "new motor vehicle engine" within the meaning ofCAA section 216(3), due 

to the engine's now being in a "new motor vehicle," reflects circular thinking. It presupposes 

that the installation of a (previously owned) engine in a glider kit creates not just a "motor 

vehicle" but a "new motor vehicle." This is not the case. EPA is proposing to interpret the 

relevant statutory language in a manner that rejects the Agency's prior reliance on the view that 

(1) installing a previously owned engine in a glider kit transforms the glider kit into a "new 

motor vehicle," and (2) that, thereafter, the subsequent presence of that previously owned engine 

in the supposed "new motor vehicle" causes that engine to become a '"new motor vehicle engine" 

within the meaning ofCAA section 216(3). 

EPA believes that its proposed interpretation is the correct reading of the relevant statutory 

language, and that its proposed determination, based on this interpretation, that regulation of 

glider vehicles, glider engines, and glider kits is not authorized by CAA section 202(a)(l) is 

reasonable. Comments submitted in the Phase 2 rulemaking docket leads the Agency to 

understand that a glider vehicle is a suitable and affordable option for those small businesses and 

independent operators who cannot afford to purchase a truly new vehicle, but who otherwise 

wish to replace an older vehicle with a vehicle that is equipped with up-to-date safety features 

and, as well, may produce fewer emissions than the older vehicle. ~il othet,~Ot$":~p~ 

<i<Wl~J!lat;ai ~suii;ii~io.!s·nbl'%o tiiucl) whejl)el;tlte.avai\a~llitjnoflili~~~fe{!icle$Y?ill:~(i ln 

rewe\Ci!"*tr\tc~'b(o1!1g!ii\tc~)IS~a lnil,roth.,_;,~et)t~.ll®'llllg·ihioa'Vliilalltllt){i\tglii:l¢?\te\ill;l<!S 

wl!l.!llriPIYrei!\11~lii\Sllle1.'t~~~ii!O;!!ii>rei-P<ii!lll:lris~m~:te!ha~l)&o!lill~~~ !ll~!il~\ill 

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EPA welcomes comments on its proposed interpretation. The Agency also seeks comment on 

the matter of the anticipated purchasing behavior on the partofthe smaller trucking operations 

and independent drivers if the regulatory provisions at issue were to repealed. Further, EPA 

seeks comment on the relative expected emissions impacts if the regulatory requirements at issue 

here were to be repealed or were to be left in place. 

EPA also solicits comment on whether, in lieu of regulation under CAA section 202(a)(l), it 

might be reasonable for EPA to establish'standards for glider kits, glider vehicles, and glider 

engines pursuant to authority the Agency may have under other provisions of the CAA, such as 

rebuilding practices" with respect to heavy duty engines. See 42 U.S.C. § 7521(a)(3(D). 

B. Conclusion 

EPA has a fundamental obligation to ensure that the regulatory actions it takes are authorized by 

Congress, and that the standards and requirements that it would impose on the regulatory 

community have a sound and reasonable basis in law. See Louisiana Pub. Serv. Comm 'n v. 

FCC, 476 U.S. 355, 374 (1986) ("[A]n agency literally has no power to act ... unless and until 

Congress confers power upon it."). EPA is now proposing to find that the correct reading of the 

relevant provisions of the CAA, including CAA section 202(a)(1), 216(2), and 216(3) is that 

glider vehicles should not be regulated as "new motor vehicles," that glider engines should not 

be regulated as '"new motor vehicle engines," and that glider kits should not be regulated as 

"incomplete" new motor vehicles. Based on this proposed interpretation, EPA is proposing to 

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repeal those provisions of the Phase 2 rule applicable to glider vehicles, glider engines, and 

glider kits. 

IV. Public Participation 

We request comment by [INSERT DATE 30 DAYS AFTER THE PUBLIC HEARING] 

on all aspects of this proposal. This section describes how you can participate in this process. 

Materials related to the Heavy-Duty Phase 2 rulemaking are available in the public docket 

noted above and at https://www.epa.gov/regulations-emissions-vehicles-and-engines!regulationsgreenhouse-gas-emissions-commercial-trucks. 

1. How Do I Prepare and Submit Information? 

Direct your submittals to Docket ID No. EPA-HQ--OAR-2014-0827. EPA's policy is that all 

submittals received will be included in the public docket without change and may be made 

available online at www.regulations.gov, including any personal information provided, unless 

the submittal includes information claimed to be Confidential Business Information (CBI) or 

other information whose disclosure is restricted by statute. 

Do not submit information to the docket that you consider to be CBI or otherwise protected 

through www.regulations.gov. The www.regulations.gov web site is an "anonymous access" 

system, which means EPA will not know your identity or contact information unless you provide 

it in the body of your submittal. If you submit an electronic submittal, EPA recommends that you 

include your name and other contact information in the body of your submittal and with any disk 

or CD-ROM you submit. Electronic files should avoid the use of special characters, any form of 

encryption, and be free of any defects or viruses. For additional information about EPA's public 

docket visit the EPA Docket Center homepage at http://www.epa.gov/epahome/dockets.htm. 

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EPA will hold a public hearing on the date stated in the DATES Section. The hearing will be 

held at __ . To attend the hearing, individuals will need to show appropriate ID to enter the 

building. The hearing will start at 10 a.m. local time and continue until 5 p.m. or until everyone 

has had a chance to speak. More details concerning the hearing can be found at 

https://www.epa.gov/regulations-emissions-vehicles-and-engineslpetitions-reconsiderationphase-2-ghg-emissions-and-fuel. 

2. Submitting CBI 

Do not submit this information to EPA through www.regulations.gov or e-mail. Clearly mark 

the part or all of the information that you claim to be CBI. For CBI information in a disk or CD 

ROM that you mail to EPA, mark the outside of the disk or CD ROM as CBI and then identify 

elt:etronically within the disk or CD ROM the specific information that is claimed as CBI). In 

addition to one complete version of the comment that includes information claimed as CBI, a 

copy of the comment that does not contain the information claimed as CBI must be submitted for 

inclusion in the public docket. Information so marked will not be disclosed except in accordance 

with procedures set forth in 40 CFR part 2. 

3. Tips for Preparing Your Comments 

When submitting comments, remember to: 

Identify the action by docket number and other identifying information (subject heading, 

Federal Register date and page number). 

Explain why you agree or disagree; suggest alternatives and substitute language for your 

requested changes. 

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Describe any assumptions and provide any technical information and/or data that you used. 

If you estimate potential costs or burdens, explain how you arrived at your estimate in sufficient 

detail to allow for it to be reproduced. 

Provide specific examples to Hlustrate your concerns, and suggest alternatives. 

Explain your views as clearly as possible, avoiding the use of profanity or personal threats. 

Make sure to submit your comments by the comment period deadline identified in the DATES 

section above. 

V. Statutory and Executive Order Reviews 

(1) Executive Order 12866: Regulatory Planning and Review and Executive Order 

13563: Improving Regulation and Regulatory Review 

Management and Budget (OMB) for review. 

recommendations have been documented in the docket. 

(2) Executive Order 13771: Reducing Regulations and Controlling Regulatory Costs 

I This proposed ruleaeti<m is expected to be an Executive Order 13771 deregulatory action.ltl\i.s 

~1<\p<ls.edruh\ JS.·ex~1\ ro J>rilvld¢ meiiP!pgfi!J &u~~li:i®IiCtili:~;~~~~iiill!~tiris~Iilt!l& 

~lll~~li!fi>~&a<lermaitullictur<>tsl ... 

(3) Paperwork Reduction Act (PRA) 

!nii~"~itilll~p!llmlPd~:)Ul li)t\ltni~~on:<i>!tee~~n.~:~~~~·r~~~~~~~~\i!~~~·wl 

e<\nll!IOI~iJn!'qiti\i\tlGit<i>t)eC!lq((~!\iit!!os, lt\tl>\iM'<i~t§~~~~•~i\oll\1~~~~ii!lti!;tqi 

slld~r ma~tirilctUielil .. 

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(4) Regulatory Flexibility Act (RFA) 

I certify that this action will not have a significant economic impact on a substantial number of 

small entities under the RF A. In making this determination, the impact of concern is any 

significant adverse economic impact on small entities. An agency may certify that a rule will not 

have a significant economic impact on a substantial number of small entities if the rule relieves 

regulatory burden, has no net burden, or otherwise has a positive economic effect on the small 

entities subject to the rule. Small glider manufacturers would be allowed to produce glider 

vehicles without meeting new motor vehicle emission standards. We have therefore concluded 

that this action will have no adverse regulatory impact for any directly regulated small entities. 

(5) Unfunded Mandates Reform Act (UMRA) 

This action does not contain any unfunded mandate as described in UMRA, 2 U.S.C. 1531-

1538, and does not significantly or uniquely affect small governments. The action imposes no 

enforceable duty on any state, local, or tribal governments. 

(6) Executive Order 13132: Federalism 

This action does not have federalism implications. It will not have substantial direct effects on 

the states, on the relationship between the national government and the states, or on the 

distribution of power and responsibilities among the various levels of government. 

(7) Executive Order 13175: Consultation and Coordination with Indian Tribal 

Governments 

This action does not have tribal implications as specified in Executive Order 13175. This 

proposed rule will be implemented at the Federal level and affects glider manufacturers. Thus, 

Executive Order 13175 does not apply to this action. 

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This action is subject to Executive Order 13045 because it is an economically significant 

regulatory action as defined by Executive Order 12866. The Emission Requirements for Glider 

Vehicles, Glider Engines, and Glider Kits was anticipated to lower ambient concentrations of 

PM2.s and some of the benefits of reducing these pollutants may have accrued to children. Our 

evaluation of the environmental health or safety effects of these risks on children is presented in 

Section XIV.H. of the HD Phase 2 Rule.9 Some of the benefits for children's health as described 

in that analysis would be lost as a result of this action. 

In general, current expectations about future emissions of pollution from these trucks is difficult 

to forecast given uncertainties in future technologies, fuel prices, and the demand for trucking. 

Furthermore, the proposed action does not affect the level of public health and environmental 

protection already being provided by existing NAAQS and other mechanisms in the CAA. This 

proposed action does not affect applicable local, state, or federal permitting or air quality 

management programs that will continue to address areas with degraded air quality and maintain 

the air quality in areas meeting current standards. Areas that need to reduce criteria air pollution 

to meet the NAAQS will still need to rely on control strategies to reduce emissions. To the extent 

that states use other mechanisms in order to comply with the NAAQS, and still achieve the 

criteria pollution reductions that would have occurred under the CPP, this proposed rescission 

will not have a disproportionate adverse effect on children's health. 

9 81 FR 73478 (October 25, 2016). 

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(9) Executive Order 13211: Actions Concerning Regulations That Significantly Affect 

Energy Supply, Distribution, or Use 

This action is not a "significant energy action" because it is not likely to have a significant 

adverse effect on the supply, distribution, or use of energy. 

(10) National Technology Transfer and Advancement Act (NTTAA) 

This rulemaking does not involve technical standards. 

(11) Executive Order 12898: Federal Actions to Address Environmental Justice in 

Minority Populations, and Low-Income Populations 

The EPA believes that this action may have disproportionately high and adverse effects on some 

minority populations, low-income populations and/or indigenous peoples, as specified in 

Executive Order 12898 (59 FR 7629, February 16, 1994. EPA's evaluation of human health and 

environmental effects on minority, low-income or indigenous populations for the HD Phase 2 

Rule is presented in preamble Section XIV.K. 10 We have not evaluated the specific impacts on 

minority, low-income or indigenous populations of the emission increases that would occur as a 

result of the proposed action to rescind emissions standards for heavy-duty glider vehicles and 

engines. 

We also have not considered how cost savings to the trucking industry are passed on to 

consumers. To the extent trucking becomes cheaper and these costs savings translate into lower 

cost consumer goods, the purchasing power of low income and minority populations increases, 

Also expected, as a result of the Emission Requirements for Glider Vehicles, Glider Engines, and 

Glider Kits, were shifts in regional workforces and involuntary unemployment impacts, 

particularly in the Glider Vehicle and Engine sector. While employment effects are not 

10 81 FR 73478 (October 25, 2016). 

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experienced uniformly across the population and may be offset by new opportunities in different 

sectors, localized impacts could have adversely affected individuals and their communities. 

Workers losing jobs in regions or occupations with weak labor markets would have been most 

vulnerable. With limited re-employment opportunities, or if new employment offered lower 

earnings, then unemployed workers could face extended periods without work, or permanently 

reduced future earnings. In addition, past research has suggested that involuntary job loss may 

increase risks to health, of substance abuse, and even of mortality. These adverse impacts may be 

avoided with the proposed repeal of the Emission Requirements for Glider Vehicles, Glider 

Engines, and Glider Kits Consistent with the proposed determination that EPA lacks statutory 

authority to establish requirements for glider vehicles and glider engines, the agency also 

believes it does not have discretionary authority to address any potential associated 

environmental justice effects. 

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Repeal of Emission Requirements for Glider Vehicles 

Page 25 o{28l6 

List of Subjects in 40 CFR Part 1037 

Environmental protection, Administrative practice and procedure, Air pollution control, 

Confidential business information, Incorporation by reference, Labeling, Motor vehicle 

pollution, Reporting and recordkeeping requirements, Warranties. 

Dated:------------------

E. Scott Pruitt, 

Administrator. 

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For the reasons set out in the preamble, title 40, chapter I of the Code of Federal Regulations is 

proposed to be amended as set forth below. 

PART 1037-CONTROL OF EMISSIONS FROM NEW HEAVY-DUTY MOTOR 

VEHICLES 

1. The authority for part 1037 continues to read as follows: 

Authority: 42 U.S.C. 7401-767lq. 

Subpart B- [Amended[ 

2. Section 1037.150 is amended by revising paragraph (t) to read as follows: 

§1037.150 Interim provisions. 

* * * * 

(t} [Reserved] 

* * * * * 

Subpart G- [Amended[ 

§1037.635 [Removed) 

3. Remove §1037.635. 

Subpart I-[Amended) 

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4. Section 1037.801 is amended by removing the definitions "glider kit" and "glider 

vehicle" and revising the definitions of "manufacturer" and "new motor vehicle" to read as 

follows: 

§ 1037.801 Definitions. 

* * * * * 

Manufacturer has the meaning given in section 216( 1) of the Act. In general, this term includes 

any person who manufactures or assembles a vehicle (including a trailer or another incomplete 

vehicle) for sale in the United States or otherwise introduces a new motor vehicle into commerce 

in the United States. This includes importers who import vehicles for resale. 

* * * * * 

New motor vehicle has the meaning given in the Act. It generally means a motor vehicle meeting 

the criteria of either paragraph (l) or (2) of this definition. New motor vehicles may be complete 

or incomplete. 

(1) A motor vehicle for which the ultimate purchaser has never received the equitable or legal 

title is a new motor vehicle. This kind of vehicle might commonly be thought of as "brand new" 

although a new motor vehicle may include previously used parts. Under this definition, the 

vehicle is new from the time it is produced until the ultimate purchaser receives the title or places 

it into service, whichever comes first. 

(2) An imported heavy-duty motor vehicle originally produced after the 1969 model year is a 

new motor vehicle. 

* * * * * 

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£012866 Repeal o(Emission Requiremenrs fOr Gliders 2060-AT79 NPRM 

FRN 201 711118-J.docx 

***EO 12866 Review- DraO- Do Not Cite. Ouote, or Release During Review *** 

6560-50-P 

ENVIRONMENTAL PROTECTION AGENCY 

40 CFR l!artParts 1037 and 1068 

[EPA-HQ-OAR-2014-0827; FRL xxxx xx9970-61 OAR] 

tRIN 2060-A T79f 

Repeal of Emission Requirements for Glider Vehicles, Glider Engines, and Glider Kits 

AGENCY: Environmental Protection Agency (EPA). 

ACTION: Proposed rule. 

SUMMARY: The Environmental Protection Agency (EPA) is proposing to repeal the emission 

standards and other requirements for heavy-duty glider vehicles, glider engines, and glider kits 

based on a proposed interpretation of the Clean Air Act (CAA) under which glider vehicles 

would be found not to constitute "new motor vehicles" within the meaning of CAA section 

216(3), glider engines would be found not to constitute "new motor vehicle engines" within the 

meaning of CAA section 216(3 ), and glider kits would not be treated as "incomplete" new motor 

vehicles. Under this proposed interpretation, EPA would lack authority to regulate glider 

vehicles, glider engines, and glider kits under CAA section 202(a)(1). 

DATES: 

Comments: Comments on all aspects of this proposal must be received on or before~ 

DATE 30 DAYS ArTER THf~ PUBLIC HEARJNG].Januarv 5. 2018. 

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Public Hearing: EPA will hold a public hearing on the follov.ing date: [IN8ERT Dsn; 15 

DA¥8 AFTER PIJBLICATION].Monday, December 4, 2017. The hearing will be held= 

To attend the hearing, individuals v. ill need to show appropriate !D to enter the building. at 

EPA's Washington. DC campus located at 1201 Constitution Avenue, NW, Washington, DC. 

The hearing will start at I 0:00 a.m. local time and continue until 5:00p.m. or uetil everyone has 

had a chance to speak. More details concerning the hearing can be found at 

https://www.epa.gov/regulations-cmissions-vehicles-and-engines/regulations-greenhouse-gasemissions-commercial-truckshttps://\;"NW.epa.gov/regulatioes emissions vehieles and 

engiees/petitions reeoesideratioe phase 2 ghg emissioes and fuel. 

ADDRESSES: Submit your comments, identified by Docket ID No. EPA-HQ--OAR-2014-

0827, at http://www.regulations.gov. Follow the online instructions for submitting comments. 

Once submitted, comments cannot be edited or removed from Regulations.gov. The EPA may 

publish any comment received to its public docket. Do not submit electronically any information 

you consider to be Confidential Business Information (CBI) or other information whose 

disclosure is restricted by statute. Multimedia submissions (audio, video, etc.) must be 

accompanied by a written comment. The written comment is considered the official comment 

and should include discussion of all points you wish to make. The EPA will generally not 

consider comments or comment contents located outside of the primary submission (i.e. on the 

web, cloud, or other file sharing system). For additional submission methods, the full EPA public 

comment policy, information about CBI or multimedia submissions, and general guidance on 

making effective comments, please visit http://www.epa.gov/dockets/commenting-epa-dockets. 

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*** E.O. 12866 Review Draft Do Not Cite, Quote, or Release During Review *** 

Docket: All documents in the docket are listed on the www.regulations.gov web site. Although 

listed in the index, some information is not publicly available, e.g., confidential business 

information or other information whose disclosure is restricted by statute. Certain other material, 

such as copyrighted material, is not placed on the Internet and will be publicly available only in 

hard copy form. Publicly available docket materials are available either electronically through 

www.regulations.gov or in hard copy at the following location: 

Air and Radiation Docket and Information Center, EPA Docket Center, EPA/DC, EPA 

WJC West Building, 1301 Constitution Ave., N.W., Room 3334, Washington, DC. The 

Public Reading Room is open from 8:30a.m. to 4:30p.m., Monday through Friday, 

excluding legal holidays. The telephone number for the Public Reading Room is (202) 

566-1744, and the telephone number for the Air Docket is (202) 566-1742. 

FOR FURTHER INFORMATrON CONTACTt 

FOR FURTHER INFORMATION CONTACT: .Julia MacAllister. Office of Transportation 

and Air Ouality, Assessment and Standards Division, Environmental Protection Agencv, 2000 

Traverwood Drive. Ann Arbor. Ml 48105: telephone number: 734-214-4131; email address: 

hearing registration-asd@epa.gov. 

SUPPLEMENTAL SUPPLEMENTARY INFORMA TIONl 

Does this Action Apply to Me? 

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This action relates to a previously promulgated Hnal-final R±tle-rule that affects companies that 

manufacture, sell, or import into the United States glider vehicles. Proposed categories and 

entities that might be affected include the following: 

Category NAICS Code" Examples of Potentially Affected Entities 

Industry 336IIO Motor Vehicle Manufacturers, Engine 

336ll1 Manufacturers, Engine Parts Manufacturers, 

336112 Truck Manufacturers, Automotive Parts and 

333618 Accessories Dealers 

336120 

441310 

Note: 

a North American Industry Classification System (NAICS). 

This table is not intended to be exhaustive, but rather provides a guide for readers regarding 

entities likely covered by these rules. This table lists the types of entities that we are aware may 

be regulated by this action. Other types of entities not listed in the table could also be regulated. 

To determine whether your activities are regulated by this action, you should carefully examine 

the applicability criteria in the referenced regulations. You may direct questions regarding the 

applicability of this action to the persons listed in the preceding FOR FURTHER 

INFORMATION CONTACT section. 

I. Introduction 

The basis for the proposed repeal of those provisions of the Hnal-final R±tle-rule entitled 

Greenhouse Gas Emissions and Fuel Efficiency Standards for Medium- and Heavy-Duty 

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Engines and Vehicles- Phase 2 (the Phase 2 rule) 1 that apply to glider vehicles, glider engines, 

and glider kits is EPA's proposed interpretation ofCAA section 202(a)(l) and sections 216(2) 

and 216(3), which is discussed below. EPA is proposing inte!Jlret those statutory provisions as 

not oothorizing the Ageney Under this proposed interpretation.: fl) ffi..treftt-glider vehicles would 

not be treated as "new motor vehicles," f2) te-treat-glider engines would not be treated as "new 

motor vehicle engines," emnd f3) ffi..treftt-glider kits would not be treated as "incomplete" new 

motor vehicles. ~Based on this proposed interpretation, EPA would-thereby lack authority 

to regulate glider vehicles, glider engines, and glider kits under CAA section202(a)(l). 

This proposed interpretation is a departure from the position taken by EPA in the Phase 2 rule,ffi 

whieh the Ageney. There, EPA interpreted the statutory definitions of "new motor vehicle" and 

"new motor vehicle engines" in CAA section 216(3) as including glider vehicles and glider 

engines, respectively. The proposed interpretation eorrespondinglyalso departs from EPA's 

position in the Phase 2 rule that CAA section 202(a)(l) authorizes the Agency to treat glider kits 

as "incomplete" new motor vehicles. 

It is settled law that EPA has inherent authority to reconsider, revise, or repeal, or revise past 

decisions to the extent permitted by Jaw so long as the Agency provides a reasoned explanation. 

This authority exists in part because EPA's interpretations of the statutes it administers "are not 

carved in stone." Chevron U.S.A. Inc. v. NRDC, Inc. 467 U.S. 837, 863 (1984). Rather,!f an 

agency,-if-it is to "engage in informed rulemaking,-- " it "must consider varying 

I 1 81 FR 73478 (~October 25, 2016). 

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interpretations and the wisdom of its policy on a continuing basis." Id at 863-64. This is true 

when, as is the case here, review is undertaken "in response to ... a change in administration." 

National Cable & Telecommunications Ass 'n v. Brand X Internet Services, 545 U.S. 967, 981 

(2005). As haB been observed, aA "change in administration brought about by the people casting 

their votes is a perfectly reasonable basis for an executive ageney!sagency' s reappraisal of the 

costs and benefits of its programs and regulations," and so long as an agency "remains within the 

bounds established by Congress," the agency "is entitled to assess administrative records and 

evaluate priorities in light of the philosophy of the administration." Motor Vehicle 

Manufacturers Ass'n. v. State Farm Mutual Automobile Insurance Co., 463 U.S. 29,59 (1983) 

(Rehnquist, J., concurring in part and dissenting in part). 

After reconsidering the statutory language, EPA proposes to adopt a reading of the relevant 

provisions of the CAA under which the statutory tenas "aev• motor '<'ehiele" aad "new motor 

;•ehicle engine" woHid not include glider vehieles and glider engiaes, respecti; ely. Further, 

glider l\its would not be treated as ''incomplete" new motor vehieles. Under this proposed 

reading, IOPAAgency would lack authority under CAA section 202(a)(l) to impose requirements 

on glider vehicles, glider engines, and glider kits and therefore proposes to remove the relevant 

rule provisions. At the same time. under CAA section 202(a){3)(D), EPA is authorized to 

"prescribe requirements to control" the "practice of rebuilding heavy-duty engines,'' including 

"standards applicable to emissions from any rebuilt heavy-duty engines." 42 U.S.C. § 

7521(a)(3)(D)2 If the interpretation being proposed here were to be finalized, EPA's authoritv 

1 EPA has adopted regulations that address engine rebuilding practices. See, e.g:, 40 CFR 1068.120. EPA is not 

Qr.9P.Osing in thjs action tQJJdopt additional rcg,ulatorv requirements pursuant to 42 U.S:C~ § 752l(g}QllillJh~ 

would apply to rebuilt engines in_italled in g!iQer vehicles~ 

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to address heavy-duty engine rebuilding practices under CAA section 202(a)(3)(D) would not be 

II. Background 

A. Factual Context 

A glider vehicle (sometimes referred to simply as a "glider") is a truck that utilizes a~ 

typically refurnished)previouslv owned powertrain (including the engine, the transmission, and 

usually the rear axle) but which has new body parts. When these new body parts (which 

generally include the tractor chassis with frame, front axle, brakes, and cab) are put together to 

form the "shell" of a truck, the assemblage of parts is referred to collectively as a "glider kit."> 

The final manufacturer of the glider vehicle, i.e., the entity that takes the assembled glider kit and 

combines it with the used powertrain salvaged from some othera "donor" truck, is moot 

eft:eRtypicallv a different manufacturer than the original manufacturer of the glider kit. See 81 

FR 73512-137 (October 25, 2016). 

Comments submitted to EPA aming the Phase 2 rulemaking state tHat gliders are !lflpro;dmately 

25% less e)(pensi'< ethan new trueks,4 v.hieh make,; them popular with small businesses ana 

owner operators." For those businesses and drivers who cannot afford to purchase a new truck, a 

glider provides an attractive alternative to the eontint~ing use an older vehiele. In contrast to the 

older vehie!e, a glider reqt~ires less maintenance and thus yields less aowntirne. Having the same 

braking, lane drift devices. dynamic cmise eo!ltrol, and blina spot detection devices that are 

' BeeaHse a gliaer kit lacl<S ae ee,;ille, it is Reitl>er earable of self FrerHlsien eor <lees it emit ""l air poiiHtaHts. 4 See RespeHse to Comments for Jeiot Relerftaking, [PA 42e R 16 901 (AHgHst 20 16) at l84e. 

'Doe. 1'\P•, HQ OAR 2014 0827 1961. 

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found on cuffent model year heavy duty trueks, the glider is also a safer vehicle to operate, 

compared to the older truck that it is replacing. 

B. Statutory and Regulatory Context 

Section 202(a)(l) of the CAA directs that '-'EPA :::shall by regulation prescribe," in "accordance 

with the provisions" of section 202, "standards applicable to the emission of any air pollutant 

from any ... new motor vehicles or new motor vehicle engines." 42 U.S.C. § 752l(a)(l). 

8e€-ti.ooCAA section 216(2) defines "motor vehicle" to mean "any self-propelled vehicle 

designed for transporting persons or property on a street or highway." 42 U.S.C. § 7550(2). ffi 

tum.;-aA "new motor vehicle" is defined in CAA section 216(3) to mean, as is relevant here, a 

"motor vehicle the equitable or legal title to which has never been transferred to an ultimate 

purchaser." 42 U.S. C. § 7550(3) (emphasis added). Similarly, aA "new motor vehicle engine" 

is similarlv defined as an "engine in a new motor vehicle" or a "motor vehicle engine the 

equitable or legal title to which has never been transferred to the ultimate purchaser." Jd 6 

In issuingComments submitted to EPA during the Phase 2 rulemaking stated that gliders are 

approximately 25% less expensive than new trucks,7 which makes them popular with small 

businesses and owner-operators8 In contrast to an older vehicle. a glider reguires less 

6 FHrther, "'ith ·'res~eot te .enieles er engines imported er effere<l for importation," CAA seetion 216(3) p•w·ides 

that "nev. meter vehicle'' and ''nev. motor \ehie:le engine:-:-n1ean a .. motor·, ehiele aH:Ef engine . .. man~:~:faetHreel after 

the effeeti• e date of a regulation is.mecl Hnder .;eetien 7521 eftllis title '"llieh is applicable to sueh 'ehiele or engine 

(or¥ hiell ,•,ould be applieallle te sueh \ehiele er engiHe had it been manufactHred fer impertalien inte the Uoitecl 

State.;)." 12 U.S.C. § 7550(3). The definitions of both "new motor vehicle" and "new motor vehicle engine" are 

contained in the same paragraph (3), reflecting the tact that ''[w)henever the statute refers to 'new motor vehicle' the 

ohrase is fOllowed by 'or new motor vehicle engine."' See Afutor and Equipment ManuFacturers Ass'n v. EPA. 627 

F.2d I 095 I l 02 n.5 (D.C. Cir. 1979). As Title II currentlv reads, the term "new motor vehicle" appears some 32 

times. and in all but two instances, the tem1 is accompanied by "new motor vehicle engine." indicating that. at the 

incepti011_0fTit1e II~-QJ1gress understood thatthe regulation of engines was essential to control emissions from 

"motor vehicles." 7 Response to Comments for Joint Rulemaking EPA-426-R- I 6-901 (August 20 I 6) at 1846. 8 EPA.::HO-OAR-'014-0827-1964. 

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maintenance and yields less downtime.9 A glider has the same braking, lane drift devices, 

dynamic cmise controL and blind spot detection devices that are found on current model year 

heavy-duty tmcks, making it a safer vehicle to operate. compared to the older tmck that it is 

replacing. 10 

Some commenters questioned EPA's authority to regulate glider vehicles as "new motor 

vehicles," to treat glider engines as ·'new motor vehicle engines." or to impose requirements on 

glider kits. Commenters also pointed out what they described as the overall environmental 

benefits of gliders. For instance, one commenter stated that "rebuilding an engine and 

transmission uses 85% less energy than manufacturing them new." 1 1 Another commentcr noted 

that the use of glider vehicles "improves utilization and reduces the mtmber of trucks required to 

haul the same tonnage of freight." 12 This same commenter further asserted that glider vehicles 

utilizing "newlv rebuilt engines'' produce less "particulate, NOx, and GHG emissions ... 

compared to [a] worn oil burning engine which is bevond its usefullife." 13 

.!n the Phase 2 mle, EPA found that it was "reasonable" to consider glider vehicles to be "new 

motor vehicles" under the definition in CAA section 216(3). See 81 FR 73514, (October 25, 

20 16). Likewise, the AgencyEP A found that the previously owned engines utilized by glider 

vehicles are properlyshould be considered to be "new motor vehicle engines" within the statutory 

definition. Based on these interpretations, EPA determined that it had authority under CAA 

9 EPA-HQ-OAR-2014-0827-1005. 

10 ld 

iTJ:'P A-HQ-OA R-20 l 4-0827-1964. 12 EPA-HQ-OAR-2014-0827-1005. 

IJ /d. 

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section 202(a) to subject glider vehicles and glider engines to the staOOaffisrcquirements of the 

Phase 2 rule and to impose on them eertaiH other requiremeHts. As for glider kits, EPA found 

that if glider vehicles are new motor vehicles, then the Agency was authorized to regulate glider 

kits as "incomplete" new motor vehicles. /d 

C. Petition for Reconsideration 

Following promulgation of the Phase 2 rule, EPA received from representatives of the glider 

industry a joint petition requesting that the Agency reconsider the application of the Phase 2 rule 

to glider vehicles, glider engines, and glider kits. 14 In their petitio11. the represe11tatives of the 

glider industry warned that the Phase 2 rule '\vould ;;igHitlcafltly curtail American 

maRufacturiHg" and "'effecti' el) shHt dowH :he glider industry and the nearly 20,000 jobs it 

Sllj3j30rts across the nation." Petition at 2. For e"ample, the Fitzgerald company represented that 

if;.V-as "currently responsible for 1,600 direct and indirect jobs" in the states of Tennessee and 

Kefltucky alone, and ''several thousaRd mere associated with suppliers across the emmtry." Id at 

2. Fitzgerald further represented that, with the Phase 2 rule in effect, by the end of2017 the 

company would be ·'forced to cut production and its worlcforee by 90%." !d. 

The petitioners made three principal arguments in support of their petition. First, they argued 

that EPA is not authorized by CAA section 202(a)(l) doe;; not authorize EPA to regulate glider 

kits, glider vehicles, or glider engines. Petition at 3-4. Second, the petitioners contended that in 

the Phase 2 rule EPA "relied upon unsupported assumptions to arrive at the conclusion that 

14 See Petition for Reconsideration of Application of the Final Rule Entitled "Greenhouse Gas Emissions and Fuel 

Efficiency Standards for Medium- and Heavy-Duty Engines and Vehicles- Phase 2 Final Rule" to Gliders, from 

Fitzgerald Glider Kits, LLC; Harrison Truck Centers, Inc.; and Indiana Phoenix, Inc. (July I 0, 20 17) (Petition). 

Available in the rulemaking docket. EPA HQ-OAR 2014 0827 and at 

https:/ /www .epa.gov/sites/productionifiles/20 17-07 /documents/hd-ghg-fr-fitzgerald-recons-petition-20 17-07-10. pdf. 

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immediate reguliltion of glider vehicles was warranted and necessary." ld. at 4. Third, the 

petitioners asserted that reconsideration was warranted under Executive Order 13783. !d. at 6. 

Reganliag their seeoad eentention, theThe petitioners took particular issue with what they 

characterized as EPA's having "assumed that the nitrogen oxide ~('NOx') and particulate 

matte~ ~('PM') emissions of glider vehicles using pre-2007 engines" would be "at least ten 

times higher than emissions from equivalent vehicles being produced with brand new engines~~ 

Petition at 5, citing 81 FR at-73942. According to the petitioners, EPA had "relied on no actual 

data to support this conclusion," but had "simply relied on the pre-2007 standards." !d. In 

support, the petitioners included as an exhibit to their petition a letter from the President of the 

Tennessee Technological University ("Tennessee Tech"), which described a study recently 

conducted by Tennessee Tech. This study, according to the petitioners, had "analyz[ed] the 

NOx, PM, and carbon monoxide ... emissions from both remanufactured and OEM engines," 

and "reached a contrary conclusion" regarding glider vehicle emissions. Petition at 5. 

PetitionersThe petitioners maintained that the results of the study "showed that remanufactured 

engines from model years between 2002 and 2007 performed roughly on par with OEM 

'certified' engines," and "in some instances even out-performed the OEM engines." !d. The 

petitioners further claimed that the Tennessee Tech research '"showed that remanufactured and 

OEM engines experience parallel decline in emissions efficiency with increased mileage."' !d., 

quoting Tennessee Tech letter at 2. Based on the Tennessee Tech study, the petitioners asserted 

that "glider vehicles would emit less than 12% of the total NOx and PM emissions for all Class 8 

heavy duty vehicles ... not 33% as the Phase 2 Rule suggests." !d., citing 81 FR at-73943. 

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Further, the petitioners complained that the Phase 2 rule had "failed to consider the significant 

environmental benefits that glider vehicles create." Petition at 6 (emphasis in original). "Glider 

vehicle GHG emissions are less than those of OEM vehicles," the petitioners contended, "due to 

gliders' greater fuel efficiency," and the "carbon footprint of gliders is further reduced by the 

savings created by recycling materials." !d. Regarding this latter point, the The petitioners 

represented that "[g]lider assemblers reuse approximately 4,000 pounds of cast steel in the 

remanufacturing process," including "3,000 pounds for the engine assembly alone." !d. The 

petitioners pointed out that "[r]eusing these components avoids the environmental impact of 

casting steel, including the significant associated NOx emissions." !d. This "fact," the 

petitioners argued, is something that EPA should have been considered but was "not considered 

in the development of the Phase 2 rule." !d. 

EPA responded to the glider industry representatives' joint petition by separate letters on August 

17, 2017, stating,-among other things, that the petition "ratseshad "raise[ d) significant questions 

regarding the EPA's authority under the Clean Air Act to regulate gliders." 15 EPA further 

indicated that it had "decided to revisit the provisions in the Phase 2 Rule that relate to gliders," 

and that the Agency "intends to develop and issue a Federal Register notice of proposed 

rulemaking on this matter, consistent with the requirements of the Clean Air Act."l!i 

III. Basis for the Proposed Repeal 

" See, e.g., Letter from E. Scott Pruitt, EPA Administrator, to Tommy C. Fitzgerald, President, Fitzgerald Glider 

Kits (Aug. 17, 2017). Available in the rulemaking docket EPA-HO-=OAR 2014 0827, and at 

https:l/www .epa.gov/sites/production/files/20 17 -08/documentslhd-ghg-phase2-ttma-ltr-20 I 7-08-1 7 .pdf. 16 /d 

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A. Statutory Analysis 

EPA is proposing to conclude that the statutory interpretations on which the Phase 2 rule 

predicated its regulation of glider kits, glider vehicles, glider engines, and glider tmgffieskits were 

incorrect. EPA is proposing to interpretproposcs an interpretation of the relevant language of the 

CAA as e;wludingunder which glider vehicles are excluded from the statutory term "new motor 

vehicles" and glider engines are excluded from the statutory term "new motor vehicle engines," 

as both terms are defined in CAA section 216(3). Consistent with this interpretation of the scope 

of "new motor vehicle," EPA is further proposing that it has no authority to treat glider kits as 

"incomplete" new motor vehicles under CAA section 202(a)(l). Based on these proposed 

interpretations, EPA is preposing to find that it has no authority tmder CAA section 202(a)(l) to 

set standards for, or otherwise to regulate or to impose requirements on, glider vehicles, glider 

engines, and glider kits. 

Under EPA's proposed interpretation, the statute is clear that EPA has no authority to regulate 

glider kits under CAA section 202(a)( I). If glider vehicles are not As was noted, a "new motor 

vehieles," v.hieh is the interpretation of section 216(3) that EPA is proposing here, then the 

Ageaey entirely lacks a~o~thority to regulate glider kits as ·'incomplete'' new motor vehieles. 

Furthem1ore. given that a glider kit laeks a powertrain, a glider kit does aot even meet the 

defiaition of"motor vehicle~" is defined by CAA section 216(3) to mean, in relevant 

part, is de lined to mean "any sellprvpeUed vehicle." 12 U.S.C § 7550(2) (emphasis added). 

EPA is further proposiag therefore that the Phase 2 rule was ineon·eet v.tlea it interpreted CAA 

~;eetioa 202(a)( l ) as giving the Agency authority to regHlate glider kits as 

"incomplete'' motor' ehieles See 8 I I'R at 73514. 

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CAA section 202(a)(l) provides as follows: 

( l) 'I 'he Administrator shall b;, regulation prescribe (ana from time to time 

revise) in accordance with the provisions ofthis section, stanEiarEis applicable 

to the emission of any air pollutant from any class or classes of new motor 

vehicles or new motor vehiele engines, vvilich in his jaEigment eaase, or 

contribate to, air pollution which may reasonahly be anticipates to endanger 

public health or welfare. Such standards shall be applicahle to such vehicles 

ana engines for their useful life (as EletenHined under subsection (d) of this 

section. relating to useful life of vehicles for purposes of eertifieatien), '>'ihether 

such }'Chicles and engines ere designed as complete SJ•stem& or incorporate 

devices to prevent or control such pollution. 

12 U.S.C. § 752l(a)(l) (emf1l'las@8 ad€le8). At issue here is the second sentence of paragraph 

(a)( I), including, speeitically, the 'NorEis: "[s]uch standards shall be applicable to such vehicles 

... whether nuch vehieles ... are Elesigned as con1plete systen:s_•· 42 U.8.C. § 752l(a)(l). ln the 

Phase 2 rule, EPA took the position that the words "v•hether such vehicles ... are designed as 

complete systems" can be interpreted as authorizing the Agency to regulate glider kits as 

·'incomplete vehieles." See 81 FRat 73515 (''[l]t is e~·ident that ... glider kits should be treated 

as vehieles, albeit incomplete ones."). The Agency had reasoned that a glider kit "is not a few 

assembled components; rather. it is an assembles truck with a few components missing." Jd. Of 

course. among those "fev.'' missing components is the powertrain. v<hich enallles self propulsion 

ana which is responsible for the emission of air pollutants. 

In any event, the phrase "such vehicles" ti>om the second senterwe of clause (a)( l) is a reference 

back to the first senteAce of elause (a)( I), which states that the Administrator "shall by regulation 

prescribe (and ti>om time to time revise) ... standards applieahle te the emission of any air 

pol!Htant from any class or elasses of new motor veh.'des." 42 U.8.C. § 752l(a)(l) (emphasis 

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added). Beeoose an engine less glider kit, inelljlae!e of self propulsion, does not el[plieitly fit 

•. ,ithin the definitioa of a "motor vehiele," the laet that the seeoad seatenee ofelaHse (a)(l) 

makes reference to ''whether .wch vehicles" [i.e., "nev<' motor vehicles"] ... are designed as 

complete systems" cannot support the claim that BPA is aHthoriced to regH!ate glider kits as 

"inenmple~e" motor vehicle.;. The at<sertien ~hat CAA section 202(a)(l) authorizes the regulation 

of glider kits as '·incomplete., vehicles is based solely on the presupposition that glider kits are 

"sHell vellieles" l.c., "new motor vellicles." But a glider kit does not meet the definition of 

"motor vehicle.•· mHeh less "nev< motor vehicle." Accordingly, EPA is here proposing to 

determine that the Phase 2 rule wrongly construed this language from CAA section 202(a)(l) 

when it interpreted tllat langHage as giving BPA authority to regulate them as "incomplete" 

vehicles. EPA solicits eomment 011 this interpretation. 

\Vitll respect to glider vehicles i.e .. a glider kit in v;hiell a previously owned powertrain has 

been installed EPA is proposing to interpret the defiaition of "new motor vehicle" in CAA 

section 216(3) as not including glider vehicles. The principal components of a glider vehicle 

(i.e .. the pewe11rain elements, ineluding tile engine and tile transmitlsion) are components that 

have aeeR preYiously owned and, typically, rebuilt. Therefore, the "equitable or legal title" to 

tile most significant parts of the glider vehicle and tile components that aett~ally produce air 

pollutant emissions nave pre,·ioHsly aeen ''transfen-ed to Hn ultimate pureilaser.'' i.e .. the 

original DINner of tile donor truck. For this reason, EPA is proposing to tind that glider vehicles 

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sheula rwt be eeRsiaerea to be "Hew," aHa that the tJtatutory laRguage iR CAA § 216(3) aoes Rot 

ineluae gliaer vehicles.~7 

IR taking the contrary positioR, the Phase 2 rule is etieetively claiming that the aet of installing a 

previeusly awned pmvertrain in~o a glider kit i.e., something that is not itself a "motor vehicle'' 

resHlts in the ereation of a ne~r "motor vehicle." This eoHnterintHitive result, at a minimHm, 

suggests that, iR aefiRiRg ''new meter vehicle" generally to mea!l a "motor vehicle the equitable 

or legal title to which has never been transferred to an ultimate purchaser." 4:2U.£..C ,'2 

Congress did Hot iHtend that§ 7550(3). In basic tem1s. a glider vehicle, comprised consists of 

athe new outer shell conjoined to components that make up a glider kit, into which a previously 

owned powertrain, should be treated as has been installed. Prior to the time a ~completed 

glider vehicle. due solely to taet is sold. it can be said that the vehicle's ··equitable or legal title'' 

has yet to be "transferred to an ultimate purchaser.'' It is on this basis that the Phase 2 rule found 

that a glider vehicle may be assigned a new title t'ollowiHg the asGembly11ts within the definition 

of eomponents, some of which are new and some of v>hich were previously owned:'new motor 

vehicle." 81 FR 73514 (October 25, 2016). 

EPA's rationale for applying this reading of the statutory language was that "[g llider vehicles are 

typically marketed and sold as 'brand new' trucks.'' 81 FR 73514 (October 25. 2016). EPA took 

rit)ie of one glider kit manufacturer's own advertising materials that represented that the 

"Underseering4he fuel that this is the natoral Ullderstanding efthe terms that Congress used te define "neY. meter 

vehiele" is that, fer their part, the National Highv •) Traffie Safe!) Adminis!ratien's regolatieRs establish that a 

tmek is net eensidered te be "ne•A ly manHfaetnred'' iftfie "engine, transmissiefl, and drive axle(s) (as a minimHm) ef 

[an] assembled\ e!liele are net ne.,,. and at least two·ef.these three eemponents eo me from the same ao1~ 

:we 49 C.F.R. § 571.7(e). And-w!lile it may be th<H>ase that some glider maAufae!Hrers ha•, e marketed the~ 

as beiRg lil<e "ne•1 tmoks," see 81 fRat 7B++,tll~~As~ is the teJ<t oftlle CAA itself, v,hieh 

f*e'OlHde: a tnwli: fmm Being deemed "nev" .,,,here title has alread) been tran_'fen·ed to an "ultimate purehaser." 

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companv had "'mastered the process of taking the 'Glider Kit' and installing the components to 

work seamlesslv with the new truck."' !d. (emphasis added in original). EPA stated that the 

"purchaser of a 'new truck' necessarily takes initial title to that truck." !d. (citing statements on 

the glider kit manufacturer's website). EPA rejected arguments raised in comments that ''this 

'new truck' terminology is a mere marketing ploy," Jd. . Where the "lraditional tools of statutory 

eonstmetion" allo·.vsRather, EPA stated, "it obviously reflects reality." !d. 

In proposing a new interpretation of the relevant statutory language, EPA now believes that its 

prior reading was not the best reading, and that the Agency failed to consider adequately the 

most important threshold consideration: i.e., whether or not Congress, in defining ''new motor 

vehicle" for purposes of Title II, had a specific intent to include within the statutory definition 

such a thing as a glider vehicle- a vehicle comprised both of new and previously o"Wned 

components. See Chevron, 467 U.S. at 843 n.9 (Where the "traditional tools of statutory 

construction" allow one to "ascertain[] that Congress had an intention on the precise question at 

issue," that "intention is the law and must be given effect" See Che'PI'(J/'1, 467 U.S. at &43 n.9. 

At the sarne tirne, where."). Where "Congress has not directly addressed the precise question at 

issue," and the "statute is silent or ambiguous with respect to the specific issue," it is left to the 

agency charged with implementing the statute to provide an "answer based on a permissible 

construction of the statute." Id. at 843. In this ease, EPA proposes to interpret tile relevant 

statutory language as authorizing the Ageney to e1celude glider \'ehie!es frorn being treated as 

"rlew·-rnetor vehicles." 

Regarding 

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Focusing solely on that portion of the statutorv definition that provides that a motor vehicle is 

considered "new" prior to the time its "equitable or legal title" has been "transfeJTed to an 

ultimate purchaser." a glider vehicle would appear to qualify as "new." As the Supreme Court 

has repeatedly counseled, however, that is just the beginning of a proper interpretive analysis. 

The "definition of words in isolation," the Court has noted. "is not necessarily controlling in 

statutmy constmction." S'ee Dolan v. United Stares Postal Service, 546 U.S. 481.486 (2006). 

Rather, the "interpretation of a word or phrase depends upon reading the whole statutory text 

considering the purpose and context of the statute." and "consulting any precedents or authorities 

fullt inform the analysis." Jd. Similarly. in seeking to "determine congressional intent. using 

traditional tools of statutory construction." the "starting point is the language of the statute." See 

Dole v. United Steelworkers o(America. 494 U.S. 26. 35 (1990) (emphasis added) (internal 

citation omitted). At the same time. ''in expmmding a statute," one is not to be "guided by a 

single sentence or member of a sentence," but is to "look to the provisions of the whole law, and 

to its object and policy." Id. (internal citations omitted). 

Assessed in light of these principles, it is clear that EPA's reading of the statutory definition of 

"new motor vehicle" in the Phase 2 rule fell short. First, that reading failed to account for the 

fact that. at the time this definition of ''new motor vehicle" was enacted, it is likely that Congress 

did not have in mind that the definition would be constmed as applying to a vehicle comprised of 

new body parts and a previously owned powertrain. The manufacture of glider vehicles to 

salvage the usable powertrains of trucks wrecked in accidents goes back a number of years. 18 But 

I "EPA-HQ-OAR-2014-0827-1964. 

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only more recently- after the enactment of Title II- have glider vehicles been produced in any 

great number. 

Furthennorc, the concept of deeming a motor vehicle to be ·•new" based on its "equitable or legal 

title" not having been transferred to an "ultimate purchaser" appears to have originated with an 

otherwise unrelated federal statute that predated Title II by a few years- i.e., the Automobile 

Infom1ation Disclosure Act of 1958, Pub. L. No. 85-506 (Disclosure Act). 19 The history of Title 

II' s initial enactment and subsequent development indicates that. in adopting a definition of "new 

motor vehicle" for purposes of the Clean Air Act, Congress drew on the approach it had taken 

originally with the Disclosure Act. 

Among other things, the Disclosure Act requires that a label be affixed to the windshield or side 

window of new automobiles, with the label providing such information as the Manufacturer's 

Suggested Retail Price. See 15 U.S.C. § 1232 ("Everv manufacturer of new automobiles 

distributed in commerce shall, prior to the delivery of any new automobile to any dealer, or at or 

prior to the introduction date of new models delivered to a dealer prior to such introduction date, 

securely affix to the windshield, or side window of such au/omobi/e a label .... "Helnnhase~s 

llil.sL~~The Disclosure Act defines the term "automobile" to ''include[] any passenger car or 

station wagon." and defines the term ''new automobile" to mean ''an automobile the equitable or 

legal title to which has never been transferred by a manufacturer, distributor, or dealer to an 

ultimate purchaser." See 15 U.S.C. § 1231(c),(d). 

I ~Jheprovisionsofthe Disc1osureActaresetforth(lt 15 U.S.C. §§ 1231-1233. 

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In 1965, Congress amended the then-existing Clean Air Act, and for the first time enacted 

provisions directed at the control of air pollution from motor vehicles. See Clean Air Act 

Amendments of 1965, Pub. L. 89-272 (1965 CAA). Included in the 1965 CAA was a brand new 

Title II, the ''Motor Vehicle Air Pollution Control Act," the structure and language of which 

largelv minored key provisions of Title lias it exists todav. Section 202(a) of the 1965 CAA 

provided that the "Secretary !of what was then the Department of Health, Education and 

Welfare] shall by regulation. giving appropriate consideration to technological feasibility and 

economic costs, prescribe ... standards applicable to the emission of any kind of substance. from 

any class or classes of new motor vehicles or new motor vehicle engines, which in his judgment 

cause or contribute to, or are likely to cause or to contribute to, air pollution which endangers the 

health or welfare of any persons .... '' Pub. L. 89-272, 79 Stat. 992 (emphasis added). 

Scction208 of the 1965 CAA defined "motor vehicle" in terms identical to those in the CAA 

todav: "any self-propelled vehicle designed for transporting persons or property on a street or 

highway." Pub. L 89-272. 79 Stat. 995. The 1965 CAA defined "new motor vehicle" and "new 

motor vehicle engine" to mean, as relevant here, ·'a motor vehicle the equitable or legal title to 

which has never been transferred to an ultimate purchaser: and the term ·new motor vehicle 

engine'" to mem1 ·•an engine in a new motor vehicle or a motor vehicle engine the equitable or 

legal title to which has never been transferred to the ultimate purchaser.'' !d. Again, in relevant 

part. the 1965 CAA definitions of these tenns were identical to those that currently appear in 

CAA section216(3). 

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While the legislative history of the 1965 CAA docs not expresslv indicate that Congress based its 

definition of"new motor vehicle" on the delinition of"new automobile" first adopted by the 

Automobile Information Disclosure Act of 1958, it seems clear that such was the case. The 

statutory language of the two provisions is identical in all pertinent rcspects.20 and there appears 

to be no other federal statute, in existence prior to enactment of the 1965 CAA. from which 

Congress could have derived that terminology. 

Subsequently. the statutory language from the 1965 CAA. defining the terms ''motor vehicle." 

''new motor vehicle," '·new motor vehicle engine." "ultimate purchaser," and "manufacturer" 

was incorporated verbatim in the Air Quality Act of 1967 ( 1967 AQA). See Pub. L. No. 148, 81 

Stat. 503. The Clean Air Act Amendments of 1970 (1970 CAAA) did not change those 

definitions, except to add the language regarding "vehicles or engines impmied or offered for 

importation'' that currently appears in CAA section216(3). See Pub. L. No. 91-604.84 Stat. 

1694. 1703.21 

The fact that Congress, in first devising the CAA's definition of"new motor vehicle'' for 

purposes of Title 11, drew on the pre-existing definition of"new automobile" in the Automobile 

!nfonnation Disclosure Act of 1958 serves to illuminate congressional intent. As with the 

Disclosure Act, Congress in the 1965 CAA selected the point of first transfer of"eguitable or 

2

° Further, the I 965 CAA 's definition of"ultimate purchaser," as set forth in section 208(5). for the most part tracks 

the Di;;closure Act's earlier-enacted definition: "The term 'ultimate purchaser' means. with respect to anv new 

automobile, the first person, other than a dealer purchasing in his capacity as a dealer, who in good faith purchases 

such new automobile tor pumoses other than resale." Compare 1965 CAA section 208(5), Pub. L. 89-272, 79 Stat. 

995 with 15 U.S.C. § 1231 (g). Such is the case too, with respect to the !965 CAA 's detinition of"manufacturer.'' 

Compare 1965 _CAA section 208( I) Pub. L. 89-272 79 Stat. 994-995 with 15 U.S.C. § 123l(a). 

" The legislative history of both the 1967 AQA and 1977 CAAA is silent with respect to the origin of Title II's 

definitions of"new motor vehicle," "'ne\V motor vehicle engine," ''ultimate purchaser." and "manufacturer." which 

further underscores that Congress had originally derived tho§e detinitions from the Disclosure Act. 

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legal title'' to serve as a bright line- i.e., to distinguish between those ''new" vehicles (and 

engines) that would be subject to emission standards adopted pursuant to CAA section 202(a)(l) 

and those existing vehicles that would not be subject. Insofar as the 1965 CAA definition of 

"new motor vehicle" was based on the Disclosure Act definition of"ncw automobile," it would 

seem clear that Congress intended. for purposes of Title IL that a "new motor vehicle" would be 

understood to mean something equivalent to a "new automobile''- i.e., a true '"showroom new" 

vehicle. It is implausible that Congress would have had in mind that a ''new motor vehicle'' 

might also include a vehicle comprised of new body parts and a previously owned powertrain. 

Given this. EPA docs not believe that congTessional intent as to the meaning of the term "new 

motor vehicle" can be clearly ascertained on the basis of an isolated reading of a few words in 

the statutory definition, where that reading is divorced from the structure and history of the CAA 

as a whole. Based on that structure and history, it seems likely that Congress understood a "new 

motor vehicle,'' as defined in CAA § 216(3). to be a vehicle comprised entirely of new parts and 

certainly not a vehicle with a used engine. At a minimum, ambiguity exists. This leaves EPA 

with the task of providing an "answer based on a pcnnissiblc construction of the statute." 

Chevron 467 U.S. at 843. 

L Glider vehicles 

EPA is proposing to interpret ''new motor vehicle." as defined in CAA § 216( 3 ), as not including 

glider vehicles. This is a reasonable interpretation- and commonsense would agree- insofar as 

it takes account of the reality that significant elements of a glider vehicle (i.e., the powertrain 

clements, including the engine and the transmission) are previously owned components. Under 

the Phase 2 rule's interpretation, in contrast, the act of installing a previously owned powertrain 

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into a glider kit i.e., something that, as is explained further below, is not a '·motor vehicle" as 

defined by the CAA results in the creation of a new ·'motor vehicle." EPA believes that 

Congress. in adopting a definition of"new motor vehicle" for purposes of Title II. never had in 

mind that the statutory language would admit of such a counterintuitive result. 

ln other words, EPA now believes that, in defining "new motor vehicle," Congress did not intend 

that a vehicle comprised of a new outer shell conjoined to a previously owned powcrtrain should 

be treated as a "new'' vehicle, based solely on the fact that the vehicle may have been assigned a 

new title following assemblv.;;;; In this regard, insofar as Title ll's regulatory regime was at its 

inception directed at the emissions produced by new vehicle engines.23 it is not at all clear that 

Congress intended that Title IT's reach should extend to a vehicle whose outer parts may be 

"new" but whose engine was previouslv ovvned. 

2. Glider engines 

EPA proposes to find that, since a glider vehicle does not meet the statutory definition of a "new 

motor vehicle," it necessarily follows that a glider engine is not a "new motor vehicle engine" 

within the meaning of CAA section 216(3). Under that provision, a motor vehicle engine is 

coosidereddeemed to be "new" in either of two circumstances: -fl) the engine is "in a new motor 

vehicle," or f2) the "equitable or legal title" to the engine has "never been transferred to the 

ultimate purchaser." The second of these circumstances can never apply to a glider engine, 

which is invariably an engine that has been previously owned. 

"l''urther eenfirming that this is net a na!ural reading efthe terms that Congress usee to define "new meter '>'ehiele" 

is that fer taeir part the ~latienal Highv,ay Traffie Safe!) Administration's regulations. in a su~seetion entitled 

"Combining new and used eempeoents." ostabli<R taat a tmek is net eoosieereel te ee "nen·ly manufaetureel" if IRe 

'ifflgine transmission. aa<l el:h e aJde(s) (as a minimum) ef fan] assemalee "•hiele are aot ae·v" aae at least tv, o of 

these three eomponents eeme ITem the same donor vehiele. See 49 CfR 571 .7(e). 

:!l See footnote 3, supra. 

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As to the first circumstance, a glider engine is installed in a glider kit, which in itself is not a 

"motor vehicle." A glider kit becomes a "motor vehicle" only after an engine (and the balance of 

the powertrain) has been installed. But while adding a previously owned engine to a glider kit 

may result in the creation of a "motor vehicle," the assffiassertion that the previously owned 

engine thereby becomes a "new motor vehicle engine" within the meaning of CAA section 

216(3), due to the engine's now being in a "new motor vehicle," reflects circular thinking. It 

presupposes that the installation of a (previously owned) engine in a glider kit creates not just a 

"motor vehicle" but a "new motor vehicle." This is Rot the ease. EPA is proposing to interpret 

the relevant statutory language in a marmer that rejects the Agency's prior reliance on the view 

that (I) installing a previously owned engine in a glider kit transforms the glider kit into a "new 

motor vehicle," and (2) that, thereafter, the subsequent presence of that previously owned engine 

in the supposed "new motor vehicle" eaHSeStransforms that engine to 13eeomeinto a "new motor 

vehicle engine" within the meaning ofCAA section 216(3). 

3. Glider kits 

Under EPA's proposed interpretation, EPA would have no authority to regulate glider kits under 

CAA section 202(a)(1 ). If glider vehicles are not ''new motor vehicles,'' which is the 

interpretation of CAA section 216(3) that EPA is proposing here, then the Agency lacks 

authority to regulate glider kits as "incomplete" new motor vehicles. Further. given that a glider 

kit lacks a powertrain, a glider kit does not explicitly meet the definition of"motor vehicle.'' 

which, in relevant part, is detined to mean "anv sezt:propelled vehicle.'' 42 U.S.C § 7550(2) 

(emphasis added). It is not obvious that a vehicle without a motor could constitute a "motor 

vehicle.'' 

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..f.. Issues {Or ~which EPA seek\- comment 

EPA believes that its proposed interpretation is the ~most reasonable reading of the 

relevant statutory language, and that its proposed determination, based on this interpretation, that 

regulation of glider vehicles, glider engines, and glider kits is not authorized by CAA section 

202(a)(l) is reasonable. Comments submitted in the Phase 2 rulemaking docket leads the 

Agency to understand that a glider vehicle is a suitable and affordable option fer those small 

businesses and independent operators who eanRot aff'ord to purchase a truly nov<' vehicle, but 

who otherwise wish to replace an older vehicle with a vehicle that is equipped with up to Elate 

safety features and, as well, may produce fev>er emissions than the older vehicle. In ether worEls, 

EPA considers that at issue here is not so much 'Nhether the availability of glider vehicles will 

result iR fewer new trucks being purchased but, rather, v•hether limiting the availability of glider 

'• ehieles will simply result in older, less safe, more polluting trucks remaining OR the road that 

much Ienger. EPA seeks eomn1ent en this understanEling of the situatienalso reasonable. EPA 

seeks comment on this inten)retation. 

EPA weleornes eomments en its proposed interpretation. The AgeneyComments submitted in 

the Phase 2 rulemaking docket lead EPA to believe that a glider vehicle is often a suitable option 

for those small businesses and independent operators who cannot afford to purchase a new 

vehicle. but who wish to replace an older vehicle with a vehicle that is equipped with up-to-date 

safety features. EPA solicits comment and further information as to this issue. EPA also solicits 

j;ommcnt and information on whether limiting the availability of glider vehicles could result in 

older, less safe. more-polluting trucks remaining on the road that much longer. EPA particularly 

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seeks information and analvsis addressing the question whether glider vehicles produce 

signiticantlv fewer emissions overall compared to the older trucks they would replace. 

EPA also seeks comment on the matter of the anticipated purchasing behavior on the part of the 

smaller trucking operations and independent drivers if the regulatory provisions at issue were to 

repealed. Further, EPA seeks comment on the relative expected emissions impacts if the 

regulatory requirements at issue here were to be repealed or were to be left in place. 

EPA also solicits comment on •.vhether, in lieu of regulation under CAA section 202(a)(l ), it 

might be reasonable for EPA to establish standards for glider kits, glider vehicles, and glider 

engines pursttant to authori ly the Agency 1nay ha\ e under other provisions of the CAA, such as 

CAA section 202(a)(3)(D), which authorizes EPA to "prescribe requirements to control 

rebuilding practices'' with respect to heavy dut) eRgines. See 12 U.S.C. ~ 752l(a)(3(D). 

Finally, EPA seeks comment on whether. if the Agency were to determine not to adopt the 

interpretation ofCAA sections 202(a)(l) and 216(3) being proposed here. EPA should 

nevertheless revise the "interim provisions" of Phase 2 rule. 40 CFR 1037.150(t)(l)(ii). to 

i..ncrcase the exemption available for small manufacturers above the current limit of 300 glider 

vehicles per vear. EPA seeks input on how large an increase would be reasonable, were the 

Agency to increase the limit in taking final action. Further. EPA seeks comment on whether, if 

the Agency were to determine not to adopt the statutory interpretation being proposed here, EPA 

should nevertheless extend by some period of time the date for compliance for glider vehicles, 

glider engines, and glider kits set forth in 40 CFR I 037.635. EPA seeks comment on what 

would be a reasonable extension of the compliance date. 

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B. Conclusion 

EPA has a fundamental obligation to ensure that the regulatory actions it takes are authorized by 

Congress, and that the standards and requirements that it would impose on the regulatory 

community have a sound and reasonable basis in law. See Leuisiarw Pub. Ser11. Comm 'n v. 

FCC 476 U.S. 355, 37·1 (1986) ("[A]n agency literally has no power to act ... \mless and until 

Congress confers power upon it.'} EPA is now proposing to find that the eerreetmost 

reasonable reading of the relevant provisions of the CAA, including CAA 5€€#ensections 

202(a)(l), 216(2), and 216(3) is that glider vehicles should not be regulated as "new motor 

vehicles," that glider engines should not be regulated as "new motor vehicle engines," and that 

glider kits should not be regulated as "incomplete" new motor vehicles. Based on this proposed 

interpretation, EPA is proposing to repeal those provisions of the Phase 2 rule applicable to 

glider vehicles, glider engines, and glider kits. 

IV. Public Participation 

We request comment by [INSERT DATE 30 DAYS AFTER THE PUBLIC 

HCARING]January 5, 2018 on all aspects of this proposal. This section describes how you can 

participate in this process. 

Materials related to the Heavy-Duty Phase 2 rulemaking are available in the public docket 

noted above and at~ https://www.epa.gov/regulations-emissions-vehicles-andengines/regulations-greenhouse-gas-emissions-commercial-trucks. 

1. How Do I Prepare and Submit Information? 

Direct your submittals to Docket ID No. EPA-HQ-OAR-2014-0827. _EPA's policy is that all 

submittals received will be included in the public docket without change and may be made 

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available online at www.regulations.gov, including any personal information provided, unless 

the submittal includes information claimed to be Confidential Business Information (CBI) or 

other information whose disclosure is restricted by statute. 

Do not submit information to the docket that you consider to be CBI or otherwise protected 

through www.regulations.gov. The www.regulations.gov web site is an "anonymous access" 

system, which means EPA will not know your identity or contact information unless you provide 

it in the body of your submittal. If you submit an electronic submittal, EPA recommends that you 

include your name and other contact information in the body of your submittal and with any disk 

or CD-ROM you submit. Electronic files should avoid the use of special characters, any form of 

encryption, and be free of any defects or viruses. For additional information about EPA's public 

docket visit the EPA Docket Center homepage at http://www.epa.gov/epahome/dockets.htm. 

EPA will hold a public hearing on the date and at the location stated in the DATES Section. 

=the hearing will be held at~-· To attend the hearing, individuals will need to show 

appropriate ID to enter the building. The hearing will start at I 0:00 a.m. local time and continue 

until 5 p.m. or until everyone has had a chance to speak. More details concerning the hearing can 

be found at https://www.epa.gov/regulations-emissions-vehicles-and-engines/regulationsgreenhouse-gas-emissions-commercial-truckshttps:Nwww.epa.go·dregulations emissions 

vehicles and engines'petitions reconsideration phase 2 ghg emissiens and fuel. 

2. Submitting CBI 

Do not submit this information to EPA through www.regulations.gov or e-mail. Clearly mark 

the part or all of the information that you claim to be CBI. For CBI information in a disk or CD 

ROM that you mail to EPA, mark the outside of the disk or CD ROM as CBI and then identify 

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electronically within the disk or CD ROM the specific information that is claimed as CBI). In 

addition to one complete version of the comment that includes information claimed as CBI, a 

copy of the comment that does not contain the information claimed as CBI must be submitted for 

inclusion in the public docket. Information so marked will not be disclosed except in accordance 

with procedures set forth in 40 CFR part 2. 

3. Tips for Preparing Your Comments 

When submitting comments, remember to: 

Identify the action by docket number and other identifying information (subject heading, 

Federal Register date and page number). 

Explain why you agree or disagree; suggest alternatives and substitute language for your 

requested changes. 

Describe any assumptions and provide any technical information and/or data that you used. 

If you estimate potential costs or burdens, explain how you arrived at your estimate in sufficient 

detail to allow for it to be reproduced. 

Provide specific examples to illustrate your concerns, and suggest alternatives. 

Explain your views as clearly as possible, avoiding the use of profanity or personal threats. 

Make sure to submit your comments by the comment period deadline identified in the DATES 

section above. 

V. Statutory and Executive Order Reviews 

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(1) Executive Order 12866: Regulatory Planning and Review and Executive Order 13563: 

Improving Regulation and Regulatory Review 

This action is an eeonomieally significant regulatory action that was submitted to the Office of 

Management and Budget (OMB) for review. Any changes made in response to OMB 

recommendations have been documented in the docket. 

(2) Executive Order 13771: Reducing Regulations and Controlling Regulatory Costs 

This action is expected to be an Executive Order 13 771 deregulatory action. This proposed rule 

is expected to provide meaningful burden reduction by eliminating regulatory requirements for 

glider manufacturers. 

(3) Paperwork Reduction Act (PRA) 

This action does not impose an information collection burden under the PRA because it does not 

contain any information collection activities. It would only eliminate regulatory requirements for 

glider manufacturers. 

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{4) Regulatory Flexibility Act (RFA) 

I certify that this action will not have a significant economic impact on a substantial number of 

small entities under the RF A. In making this determination, the impact of concern is any 

significant adverse economic impact on small entities. An agency may certizy that a rule will not 

have a significant economic impact on a substantial number of small entities if the rule relieves 

regulatory burden, has no net burden, or otherwise has a positive economic effect on the small 

entities subject to the rule. Small glider manufacturers would be allowed to produce glider 

vehicles without meeting new motor vehicle emission standards. We have therefore concluded 

that this action will have no adverse regulatory impact for any directly regulated small entities. 

(5) Unfunded Mandates Reform Act (UMRA) 

This action does not contain any unfunded mandate as described in UMRA, 2 U.S.C. 1531-

1538, and does not significantly or uniquely affect small governments. The action imposes no 

enforceable duty on any state, local, or tribal governments. 

(6) Executive Order 13132: Federalism 

This action does not have federalism implications. It will not have substantial direct effects on 

the states, on the relationship between the national government and the states, or on the 

distribution of power and responsibilities among the various levels of government. 

(7) Executive Order 13175: Consultation and Coordination with Indian Tribal 

Governments 

This action does not have tribal implications as specified in Executive Order 13175. This 

proposed rule will be implemented at the Federal level and affects glider manufacturers. Thus, 

Executive Order 1317 5 does not apply to this action. 

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(8) Executive Order 13045: Protection of Children from Environmental Health Risks and 

Safety Risks 

This action is not subject to Executive Order 13045 because it is not an economically significant 

regulatory action as defined by Executive Order 12866. However. +!he Emission Requirements 

for Glider Vehicles, Glider Engines, and Glider Kits was anticipated to lower ambient 

concentrations ofPM2.5 and some of the benefits of reducing these pollutants may have accrued 

to children. Our evaluation of the environmental health or safety effects of these risks on children 

is presented in Section XIV.H. of the HD Phase 2 Rule.24 Some of the benefits for children's 

health as described in that analysis would be lost as a result of this action. 

In general, current expectations about future emissions of pollution from these trucks is difficult 

to forecast given uncertainties in future technologies, fuel prices, and the demand for trucking. 

Furthermore, the proposed action does not affect the level of public health and environmental 

protection already being provided by existing NAAQS and other mechanisms in the CAA. This 

proposed action does not affect applicable local, state, or federal permitting or air quality 

management programs that will continue to address areas with degraded air quality and maintain 

the air quality in areas meeting current standards. Areas that need to reduce criteria air pollution 

to meet the NAAQS will still need to rely on control strategies to reduce emissions. To the extent 

that states use other mechanisms in order to comply with the NAAQS, and still achieve the 

criteria pollution reductions that would have occurred under the CPP, this proposed rescission 

will not have a disproportionate adverse effect on children's health. 

24 81 FR 73478 (October 25, 2016). 

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(9) Executive Order 13211: Actions Concerning Regulations That Significantly Affect 

Energy Supply, Distribution, or Use 

This action is not a "significant energy action" because it is not likely to have a significant 

adverse effect on the supply, distribution, or use of energy. 

(10) National Technology Transfer and Advancement Act (NTTAA) 

This rulemaking does not involve technical standards. 

illL_Executive Order 12898: Federal Actions to Address Environmental Justice in 

Minority Populations, and Low-Income Populations 

The EPA believes that this action may have disproportionately high and adverse effects on some 

minority populations, low income populations and/or indigenous peoples, as specified in 

Pursuant to Executive Order 12898 (59 FR 7629, February 16, 1994), EPA considered 

environmental justice concerns of the final HD Phase 2 rule. EPA's evaluation of human health 

and environmental effects on minority, low-income or indigenous populations for the final HD 

Phase 2 RuJ.erule is presented in j'lfeftl1lblethe Preamble, Section :XOWJ·~ci''Vlii.A.8 and 9 (81 FR 

73844-7, October 25, 2016 ). We have not evaluated the speeilfe-impacts on minority, lowincome or indigenous populations of the emission increases that weuhl!lli!Y occur as a result of 

the proposed action to rescind emissions staHdafdsrequirements for heavy-duty glider vehicles 

and engines. EPA likewise has not considered the economic and employment impacts of this rule 

specifically as they relate to or might impact minority, low-income and indigenous populations. 

We also have flot considered how cost savings to the trucking industry are passed on to 

consumerr,. To the eJttent tn1eking becomes eheaper and these eosts savings translate into !ewer 

"81 l'R 73178 (0eteller25, 20!6). 

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cost consumer goods, the purchasing power of lew income and minority populations increases, 

Also expected, as a result of the Emission RequiremeiJts for Glider Vehie!es, Glider Engines, and 

Glider Kits, were shifts in regional workforees and iBvoluiJtary tmemploymeiJt impaets, 

particularly iB the Glider Vehicle aiJd Ic:Bgine sector. While employment effects are not 

eJtperieneed uiJiformly aeross the populatioB aod may be offset by nev, opportunities iiJ different 

sectors, loealized impacts could have adversely affected iBdividuals and their comnmnities. 

Workers losing jobs in regions or occupations with weak labor markets 'NO Hid have been most 

vulnerable. With limited reemployment opporhmities, or if !lew employmellt offered lower 

earnings, then U!lemployed vmrkers could faee e1ltended periods witho11t work. or permanelltly 

red11ced future earnings. In addition, past research has suggested that involulltary job loss may 

increase risks to health, of substance abuse. aod eveH of mortality. These adveme impacts may be 

avoided with the proposed repeal of the EmissioH Requirements for Glider Vehicles, Glider 

Ellgilles, aod Glider Kits Co!lsistellt with the proposed determillatioll that EPA lacks statutory 

authority to establish requirements for glider vehicles and glider engiHes, the agency also 

b~iieves it does !lOt have discretionary authority to address any potelltial associated 

enviroame!ltal justice effects. 

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Repeal of Emission Requirements (or Glider Vehicles, Glider Engines, and Glider Kits 

Page 35 o(38J8.l6J.l 

I List of Subjects in 40 CFR l!MtParts 1037 and 1068 

Environmental protection, Administrative practice and procedure, Air pollution control, 

Confidential business information, Incorporation by reference, Labeling, Motor vehicle 

pollution, Reporting and recordkeeping requirements, Warranties. 

E. Scott Pruitt, 

Administrator. 

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For the reasons set out in the preamble, title 40, chapter I of the Code of Federal Regulations is 

proposed to be amended as set forth below. 

PART 1037-CONTROL OF EMISSIONS FROM NEW HEAVY-DUTY MOTOR 

VEHICLES 

!._--The authority for part 1037 continues to read as follows: 

Authority: 42 U.S.C. 7401-7671q. 

Subpart B- [Amended] 

2.--_Section 1037.150 is amended by ~removing and reserving paragraph (t) te-Tea4 

as follows: 

§1037.150 _Interim provisions. 

* * * * * 

(t) [Reserved] 

* * * * * 

Subpart G- [Amended] 

§ 1037.635 _-[Removed] 

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3. Remeve §Section 1037.635 is removed. 

Subpart I- [Amended] 

4. Section 1037.801 is amended by removing the definitions "glider kit" and "glider 

vehicle" and revising the definitions of"manufacturer" and "new motor vehicle" to read as 

follows: 

§ 1037.801 _Definitions. 

* * * * * 

Manufacturer has the meaning given in section 216(1) of the Act. In general, this term includes 

any person who manufactures or assembles a vehicle (including a trailer or another incomplete 

vehicle) for sale in the United States or otherwise introduces a new motor vehicle into commerce 

in the United States. This includes importers who import vehicles for resale. 

* * * * * 

New motor vehicle has the meaning given in the Act. It generally means a motor vehicle meeting 

the criteria of either paragraph (1) or (2) of this definition. New motor vehicles may be complete 

or incomplete. 

(I) A motor vehicle for which the ultimate purchaser has never received the equitable or legal 

title is a new motor vehicle. This kind of vehicle might commonly be thought of as "brand new" 

·alth~ugh a new motor vehicle may include previously used parts. Under this definition, the 

vehicle is new from the time it is produced until the ultimate purchaser receives the title or places 

it into service, whichever comes first. 

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(2) An imported heavy-duty motor vehicle originally produced after the 1969 model year is a 

new motor vehicle. 

* * * * 

5. The authority for part 1068 continues to read as follows: 

Authority: 42 U.S.C. 7401-7671g. 

Subpart B -(Amended) 

6. Section 1068.120 is amended by revising paragraph (0(5) to read as follows: 

§I 068.120 Requirements for rebuilding engines. 

* * 

CD * * 

(5)The standard-setting part may apply fUrther restrictions to situations involving installation of 

used engines to repower eguipment. 

* * * * 

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Post-Hearing Questions for the Reconl 

Submitted to Hon. Neomi Rao 

From Senator Heitkamp 

Examining the Office oflnforrnation and Regulatory Affairs' Role in Reviewing Agency 

Rule making 

Thursday, April 12,2018 

1. Executive Order 13771 has fimdamentally altered the regulatory process at all Executive 

Agencies. As noted in a recent opinion piece, "Benefit-Cost Analysis Should Promote 

Rational Decisionmaking," for The Regulatory Review, by former OIRA Administrator 

Sally Katzen, the Executive Order "mentions 'costs' 17 times and never mentions 

benefits.'" In order to ensure a regulatory process that works for all Americans, it is 

important that there is a full accotmting of costs and benefits for all agency actions -

whether they be regulatory or deregulatory. 

a. While Executive Order 13771 and Office of Management and Budget (OMB) 

Memorandum M-17-21 both note the continuation of Executive Order 12866 as 

the "primary governing EO regarding regulatory planning and review," there is 

concern that not enough attention is focused toward measuring foregone societal 

benefits which succumb to deregulatory actions. For the 67 Fiscal Year 2017 

deregulatory efforts highlighted in the Fall 2017 Unified Agenda of Regulatory 

and Deregulatory Actions, what were the total estimated benefits forgone for each 

dere1,'1llatory effort? 

Answer: Most of the 67 deregulatory actions issued pursuant to Executive Order 

(EO) 13771 were not significant and not subject to OIRA review. Significant 

deregulatory actions have to meet the same standards as regulatory actions tmder 

EO 12866, which means that the benefits of deregulation must substantially 

justifY the costs. Accordingly, by definition, completed significant deregulatory 

actions have net benefits for society. 

b. Included with the Fall2017 UnifiedAgendaofRegulatoryandDeregulatory 

Actions a link was included to a document titled "Accotmting Methods for 

Calculating Costs tmder Executive Order 13771." This document lays out a 

system to create standardized calculation rates for costs, so that comparisons 

between the costs of regulatory actions and the cost savings of deregulatory 

actions can be made. Has OIRA provided agencies with directives to account for 

foregone benefits in the same manner? 

Answer: The benefits and costs of regulatory actions will be converted to annual 

values using consistent assumptions. All regulatory and deregulatory actions 
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remain subject to EO 12866, under which the benefits of an action nrust justifY its 

costs. 

2. OMB Memorandum M-17-21 states that "[a]n "EO 13771 regulatory action" is: (i) [a] 

significant regulatory action as defined in Section 3(f) of EO 12866 that has been 

finalized and that imposes total costs greater than zero; or (ii) A significant guidance 

docl.llrent (e.g., significant interpretive guidance) reviewed by OIRA under the 

procedures of EO 12866 that has been finalized and that imposes total costs greater than 

zero." 1he Memorandum further states that a deregulatory action are those that "ha[ ve] 

total costs of less than zero" and are not limited to those as defined as significant under 

E012866. 

a. How many non-significant final rules were published in the Federal Register 

between noon on January 20, 2017 and the close of FY20 17? 

Answer: OIRA does not review or track the number of rules that are not 

significant published by federal agencies in the Federal Register. 

b. What percentage of deregulatory eftorts, not including those rules rescinded 

through the Congressional Review Act, were considered significant under 

Executive Order 12866? 

Answer: lbirteen of the 67 deregulatory actions issued through the end of fiscal 

year 2017 were considered significant under EO 12866 and were not the resuh of 

a Congressional Review Act rescission. 

3. OMS Memorandum M-17-21defines astaMorily required rulemaking asarule "for 

which Congress has provided by statute an explicit requirement and explicit time frame 

tor rulemaking." From the example given, it seems as though both the action and time 

frame requirements must be satisfied in order for the rule to be considered statutorily 

required. What is OMS's legal justification to say that a regulatory action required by 

law, but that does not include a timeframe, is not a staMorily required regulation? 

Answer: This definition is only for purposes of implementing EO 13771. In general, 

regulations may be required by statute even without an explicit time frame. 

4. Under the newly signed Memorandum of Agreement between OIRA and Treasury, the 

Internal Revenue Service (IRS) will lose some ability to promulgate regulations and 

guidance without the review of OIRA. One issue that was not discussed in the agreement 

is if IRS rules and guidance docl.llrents will be subject to Executive Order 13 771. Will 

IRS rules and guidance docl.llrents be subject to Executive Order 13 771? 
119 

Answer: Yes. Executive Order 13 771 applies to (1) a "significant" regulatory action 

under Section 3(t) of EO 12866 that has been finalized and imposes total costs greater 

than zero; and (2) a significant guidance document reviewed by OIRA under the 

procedures of EO 12866 that has been finalized and imposes total costs greater than 

zero. 1 This includes IRS regulations and guidance documents that fit in these categories. 

1 Office ofMgmt. & Budget, Memorandum No. M-17-21, "Guidance Implementing Executive Order 13771" (Apr 

5, 2017), https::; \\'l.VW.\\'hitelwu~e.£!0\·:'sites/whitelwuseYov. files/omb/memonuH.Ia.':2017:Vt~ 17-21-0:'vf Rpd f. 
120 

Question for the Record 

"Reviewing the Office of Information and Regulatory Affairs" 

April 12, 2018 

Senate Homeland Security and Governmental Affairs Committee 

Question for the Record to Administrator Neomi Rao from Senator Michael B. Enzi. 

Administrator Rao, you mention in your testimony that the Administration had taken 67 

deregulatory actions since 2017. Could you tell me how many of those were related to tax 

regulations? 

Answer: There were four (EO 13 771) deregulatory actions issued through fiscal year 2017 

related to tax regulations. These are identified below. 

• Dividend Equivalents from Sources within the Uuited States 

• IRS Notice 2017-36, One Year Delay in Application ofiRS's 385 rule (§ 1.385-2) 

• Transactions Involving the Transfer of No Net Value 

• Withholding on Payments of Certain Gambling Winnings 
121 

Post-Hearing Questions for the Record 

Submitted to Administrator of the Office oflnfonnation and Regulatory Affairs (OIRA) 

NeomiRao 

From Senator Kamala Hanis 

"Reviewing the Office of Information and Regulatory Affairs" 

April 12, 2018 

For OIRA Administrator Neomi Rao 

On February 28,2017, the Census Bureau released the 2015 National Content Test Race 

and Ethnicity Analysis Report. This report, among other things, presented the National Content 

Test research on how question format affects data on race and ethnicity. The National Content 

Test specifically tested the format required under current OMB standards that uses separate race 

and ethnicity questions (separate-question format) agaiost two question formats that combined 

the race and ethnicity questions and offured either a write-in response or detailed checkboxes 

with the option to write-in a response. The report found that, "The results of this research 

indicate that the optimal question format is combined question with detailed checkboxes." 

On March 1, 2017, OMB released a Federal Register Notice requesting comments on the 

proposals that it received from the Federal Interagency Working Group for Research on Race 

and Ethnicity (Working Group) fur revisions to OMB's Standards fur Maintaining, Collecting, 

and Presenting Federal Data on Race and Ethnicity. The Working Group sought comments in 

four areas, including the Working Group's initial plan to "continue its review of current Federal 

agency practices to determine whether or how a revised question fOrmat might improve the 

collection, tabulation, and utility ofrace/ethnicity statistics for Federal programs and policies," 

and the Working Group's initial proposal "that a Middle Eastern or North African (MENA) 

classification be added to the standards." 

1. Did the Interagency Working Group for Research on Race and Ethnicity prepare a report 

after the release of the above-mentioned Federal Register Notice and submit it to the 

Office oflnfurmation and Regulatory Affuirs? If a report was prepared, please provide it 

to the Committee. 

2. In developing the 1997 Standards for Maintaining, Collecting, and Presenting Federal 

Data on Race and Ethnicity, OMB responded to all comments received. 1,862 comments 

were submitted to the March 1, 2018 Federal Register Notice, including a number of 

comments from members of Congress. Wben will OMB respond to the corrnnents it 

received in response to the March 01, 2017 Federal Register Notice? 

3. In the March l, 2017 Federal Register Notice, OMB wrote that it, "plans to announce its 

decision in mid-2017 so that revisions, if any, can be reflected in preparations for the 

2020 Census." When will OMB announce a decision on the Working Group's report and 

proposa~ including whether it will modey or reject any of the proposals? 
122 

4. The National Content Test Race and Etlmicity Analysis Report found that a combinedquestion fonnat on the race/ethnic ity question is the optimal question fonnat. What is 

preventing the OIRA from changing the Standards for Maintaining, Collecting, and 

Presenting Federal Data on Race and Etlmicity to allow for the use of this combinedquestion funnat for the 2020 Census? 

5. The Census Bureau's professional staff also recommended to senior officials, based on 

results from the 2015 NCT, that a new category in a combined race/etlmicity question, for 

persons ofMiddle Eastern/North African (MENA) ancestry/origin would improve the 

collection of accurate data on race and etlmicity for an increasingly diverse population. 

OMB's 2017 Federal Register notice included a proposal to add a MENA category and 

requested comments on this proposed change. In light of the Census Bureau's findings 

that a new MEN A category would offur respondents choices that more accurately reflect 

the way they identifY themselves, will OMB revise the Standards to include a new 

MENA category? If not, please explain the reasons for rejecting this proposal 

Answers 1-5: OMB issued updated race and etlmicity standards in 1997 fur all Federal 

infurmation collections to ensure that federal furrns and surveys, including the Census, 

collect this information consistently. In September 2016, OMB announced in a Federal 

Register notice an effort to examine whether the standards needed to be updated. It did 

not contain specific proposals, but rather options for consideration OMB subsequently 

issued a March 2017 Federal Register notice to solicit further input from the public. 

0 MB is still considering issues raised by the March notice. At present, agencies should 

continue to follow the longstanding current race and ethnicity standards in their 

infurmation collections. 
123 

Post-Hearing Questions for the Record 

Submitted to The Honorable Brent Mcintosh 

From Chairman James Lankford 

"Reviewing the Office of Information and Regulatory Affairs" 

Thursday April12, 2018 

United States Senate, Subcommittee on Regulatory Affairs and Federal Management 

Committee on Homeland Security and Governmental Affairs 

On Compliance with the Regulatory Flexibility Act: 

Question: The Regulatory Flexibility Act (RFA) requires agencies to measure the economic 

impact of its regulation if it is likely to have a "significant economic impact on a substantial 

number of small entities." In a 2016 report, GAO found "Treasury and IRS rarely perform a 

regulatory flexibility analysis assessing a regulation's impact on small businesses and other small 

entities as generally required by the [RF A]." The Internal Revenue Manual (Section 

32.1.5.4.7.5.4.3) states "to the extent the significant economic impact on a substantial number of 

small entities contained in the regulation flows directly from the underlying statute or other legal 

authority, a regulatory flexibility analysis is not required." 

Does the IRS intend to re-evaluate how the economic effect of a regulation is measured, 

particularly as it relates to how IRS regulations impact small businesses? Please fully explain 

why or why not. 

Answer: The RF A generally requires that an agency complete a regulatory flexibility analysis 

when it ( 1) publishes a proposed or final rule that is required to be submitted for notice and 

comment under 5 U.S.C. § 553; or (2) publishes a proposed or final interpretive rule involving 

the internal revenue laws and the rule imposes a collection of information requirement on small 

entities. 5 U.S.C. §§603, 604. These RFA requirements do not apply if the agency certifies that 

the proposed or final rule will not "have a significant economic impact on a substantial number 

of small entities." 5 U.S.C. § 605(b). The certification and a statement providing the factual 

basis for the certification must be published in the Federal Register at the time the proposed or 

final rule is published. 

Section 32.1.5 of the Internal Revenue Manual provides detailed guidance on how the RF A 

applies, when a regulatory flexibility analysis is required, and examples of regulatory flexibility 

analyses. To assist in compliance with the RF A, the Manual also requires the completion of a 

RF A Checklist for every proposed or final regulation. 
124 

Æ 

It has been the longstanding practice of the IRS to evaluate the economic impact of the 

regulation based on the regulation itself and not the statute that it is implementing, consistent 

with the statutory requirements of the RF A. In addition, the IRS submits all proposed and final 

regulations to the Chief Counsel for Advocacy of the U.S. Small Business Administration for 

comment on the impact of the regulations on small business pursuant to 26 U.S.C. § 7805(f). 

Question: If a rule is determined not to have a "significant economic impact on a substantial 

number of small entities," what analysis is performed to inform that decision? 

Answer: The analytical process for the RF A is described in the Internal Revenue Manual at 

32.1.5.4.7.5.4 and in the RFA Checklist at Exhibit 32.1.5-2. First, the IRS must determine 

whether the regulation involves the internal revenue laws, because if the regulation does not 

involve the internal revenue laws, it is not subject to RF A. 

Second, the IRS determines whether the regulation is interpretive. If the regulation is 

interpretive, the RF A applies only if the regulation imposes a collection of information 

requirement on small entities. 

Third, the IRS determines whether the regulation imposes a collection of information 

requirement on small entities. The term "collection of information requirement" is defined in the 

RFA and is synonymous to the term as defined in the Paperwork Reduction Act, 44 U.S.C. 

§3502. The RF A defines "small entities" to include businesses that satisfy the Small Business 

Administration's size standards. 

Fourth, the IRS determines whether the regulation imposes a significant economic impact on a 

substantial number of small entities. Whether the number of affected small entities is substantial 

is based on all relevant facts and circumstances, and the IRS obtains statistical and other data to 

determine the number of affected entities. The economic impact of the regulation is based on all 

relevant facts and circumstances, including the hours necessary to comply with the regulation 

and the costs of compliance. 

2