The Anti-Inversion Rule is Invalidated

Remember that one of the BHO Admin’s “70 day temporary regulations” was the “Anti-Inversion Rule?”

It was designed to keep American entities from merging with foreign companies to avoid American taxation, and from manipulating fungible items so that the American portion of the merged entity would show minimized income, or even losses.

As a temporary rule it stymied one drug company’s merger. The Admin believed that while it engaged in full APA review it could indefinitely extend its temporary regs pending same.

My friend of 50 years, Lee Yeakel, just said “No”. As the USDCt for the Western District of Texas, Austin Division, he ruled that the Anti-Inversion Rule was invalid because the APA had not been followed.

This business of avoiding the lengthy procedures required to vet a far reaching regulation got out of hand with BHO – remember the immigration regulations that the USDCt for the Southern District of Texas invalidated? As with that decision, In this case, the Judge agreed that the proposed rule was not inherently arbitrary or capricious, but that it just could not be a valid exercise by the Executive branch without the benefit of publication in the Federal Register, comment, and plenty of the back and forth that the APA requires.

Remember that Congress also gets the benefit of notice and prep time when the APA is followed, and can stop a proposed reg cold if it determines the proposal violates rather than applies the statute. Perhaps as important, the public, the interest groups, and those whom the reg is going to affect get their lawyers in gear.

The DJT Admin is also abusing the temporary reg loophole to try to avoid the cumbersome APA, as with its own “temporary” immigration regs.

But the cumbersome APA is in fact the legal mechanism that we have in place to tame executive bureaucratic overreach.

Here is an article on the Austin case:

https://www.davispolk.com/files/2017-10-02_court_invalidates_anti-inversion_regulation.pdf

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