Presidential transitions bring extreme changes within the Treasury Office of Tax Policy and the IRS Office of Chief Counsel, usually starting the day after the election results are in and continuing through the date of inauguration of a new president. I saw this play out once in 1992-1993 when serving on the staff of the Treasury Office of Tax Policy. The Treasury transition team usually asks to be briefed on all on going key guidance projects, and usually work stops moving forward at that point other than routine and necessary administrative guidance.
A brief example. In November 1992, we were working on final regulations under section 704(c), reg. §1.704-3. At the time of the election of Bill Clinton as president, we had an approved and final version of these regulations ready to be published but they had not yet been sent over to the federal register. We were visited shortly after the election by a transition team, one of whom now is a Tax Court judge. We were told at that time that after we briefed them on the regulations, we would then be allowed to send the regulations over to the federal register for publication.
That did not happen. After spending several weekends briefing these officials on pending regulations, no regulation was allowed to proceed. The section 704(c) regulations sat for about six months after first talking to the transition team, and it was not until a new Assistant Secretary for Tax Policy, Les Samuels, came on board and a new Tax Legislative Counsel, Glen Kohl, and his handpicked new staff member that the regulations were ultimately finalized and published.
If this prior experience is any guide, and I believe it is, the tax transition team will review with current Treasury:
● Regulations currently at the federal register but not yet filed or published there.
● Regulations currently posted on the IRS website but not yet sent to the federal register.
● Regulations currently at OIRA for review and not yet sent back to Treasury.
● Regulations that have cleared the national office of IRS Chief Counsel and are currently awaiting Treasury approval.
● All other important regulations and rulings somewhere in the pipeline. Decisions previously made by staff relating to on going guidance projects will, most likely, need to be revisited.
Although there is no legal requirement to follow the directives of the transition team, that is the traditional and respectful practice, with limited exceptions.
Finally, what happens to the current Chief Counsel, Michael Desmond, and David Kautter, the current Assistant Secretary for Tax Policy, in the near term? They are the only two presidential appointees serving on the tax side because the IRS Commissioner, Charles Rettig, has a fixed term by federal law with time remaining on it. Traditionally, the Chief Counsel and the Assistant Secretary for Tax Policy resign as soon as a new president is announced. Even if the Commissioner asks the current Chief Counsel to stay on for a period of time, it would break with custom and tradition if the new administration allows the status quo to remain on other than a temporary basis.
New officials are eventually nominated and confirmed, but that could, and not infrequently does, take months. In the meantime, there is a succession process at the Office of Chief Counsel and at Treasury as a stop-gap measure but experience indicates that those officials are limited in what they can do in the interim.
An uncertain but exciting time.