Ohio General Assembly’s passage of SB 221 over veto of Governor Kasich expands power of JCARR
The Republican-controlled Ohio General Assembly recently overrode Republican Governor John Kasich’s veto of SB 221, which confers additional powers on the Joint Committee on Agency Rule Review (JCARR) over state agencies. It also imposes additional duties on state agencies regarding the adoption of rules. While the new law applies to all state agencies, it has a particularly important impact on the Ohio Department of Taxation’s enforcement and offers taxpayers a new avenue of challenging burdensome interpretations of tax statutes.
Among the expanded powers of JCARR and duties of state agencies are:
If JCARR believes that an agency is relying on a principle of law or policy that should have been adopted as a rule, the chairperson may request the agency to appear before JCARR to explain why it is relying on the principle of law or policy that has not been restated in a rule.
Subsequent to the hearing, JCARR may, by majority vote, recommend to the agency that it adopt the principle of law or policy as a rule.If it so recommends, JCARR must support its recommendation with a brief rationale.
After receipt of the recommendation, the agency must commence the rule-making process as soon as possible, but no later than six months after receipt of the recommendation.The agency may continue to rely on the principle of law or policy while it is proceeding with the rule-making process, but not if it fails to commence the process by the six-month deadline or abandons the process.
If JCARR becomes aware that an agency is required by statute to adopt a rule but has not done so, the chairperson may request the agency to appear before JCARR to explain why the agency has not done so.
The agency shall appear and address why it has not adopted a rule.
Any person can appear and make comments.
JCARR may advise the agency to commence the rule-making process.
If the chairperson of JCARR becomes aware that an existing rule has an unintended effect on businesses that is not within the express or implied scope of the statute under which it was adopted, the chairperson may move JCARR to order the agency to submit the rule for review.JCARR may adopt the motion by majority vote.
Upon receiving the order, the agency must commence compliance as soon as possible but no later than thirty days after the order was sent.
JCARR may recommend to the House and Senate the adoption of a concurrent resolution invalidating the rule.
Adds an additional reason why a draft or existing rule has an adverse impact on businesses.
The rule would likely directly reduce the revenue or increase the expenses of the lines of businesses to which it applies.
Requires agencies, at regular intervals (at least once during a governor’s term), to review their operations to identify principles of law or policy that have not been stated in a rule and have been applied by the agency in conducting adjudications or other determinations and other written guidance.
The agency must determine whether the principle of law or policy has a general and uniform operation and establishes a standard that would not otherwise exist.
If so, the agency must determine whether the principle of law or policy should be adopted in a rule.
The statute sets forth eight factors the agency is to consider in making its determination.
If the principle of law or policy aids in the interpretation of a rule or statute, and clarifies an uncertainty in the rule or statute, the agency is to consider whether the principle of law or policy should be adopted in a rule.
If the agency determines that it should, the agency must commence the rule-making process as soon as possible, but no later than six months after the determination. The agency may continue to rely on the principle of law or policy while it is proceeding with the rule-making process, but not if it fails to commence the process by the six-month deadline or abandons the process.
A principle of law or policy that is relied upon directly or by clear implication from a statute does not need to be restated in a rule.
The bill allows a person to petition the agency to restate a principle of law or policy in a rule if (1) the person was a party to an agency determination and (2) the determination involved a principle of law or policy that should have been restated in a rule.
The petition must explain why the principle of law or policy should have been restated in a rule.
The petition must be sent to the agency within ninety days after the determination and a copy is to be sent to JCARR.
Within thirty days after receiving the petition, the agency shall notify the person in writing whether it grants or intends to deny the petition.
If the agency grants the petition, it must commence the rule-making process as soon as possible, but no later than six months after the determination.The agency may continue to rely on the principle of law or policy while it is proceeding with the rule-making process, but not if it fails to commence the process by the six-month deadline or abandons the process.
If the agency intends to deny the petition, it must send a notice to the petitioner affording the petitioner a hearing and explaining why it intends to deny the petition.
If the petitioner requests a hearing in writing within fifteen days after receiving the notice, the agency must notify the petitioner of the time and place of the hearing.
At the hearing the agency is to explain why it intends to deny the petition and the petitioner is to explain why it believes the denial would be erroneous.
The agency must grant or deny the petition within thirty days after the hearing.
If the agency grants the petition, it must commence the rule-making process as soon as possible, but no later than six months after the determination.The agency may continue to rely on the principle of law or policy while it is proceeding with the rule-making process, but not if it fails to commence the process by the six-month deadline or abandons the process.
If the petitioner failed to appear at the hearing or failed to persuade the agency that its intent to deny was erroneous, the agency shall deny the petition.
The agency must send notice to the petitioner of its decision and if it denies the petition, the notice must briefly explain why.
The petitioner cannot appeal the decision of the agency.
The statutes do not apply to the elected state officers (governor, lieutenant governor, secretary of state, auditor of state, treasurer of state, and attorney general), state institutions of higher education, and the state retirement systems.
ZHF Observations
As mentioned above, the Ohio Department of Taxation is one of the agencies subject to these new provisions, which may significantly impact its operations. As noted in Governor Kasich’s veto message, these provisions will likely impose some additional burdens and costs on the Department. It will also require the Department and other state agencies to be more thoughtful and careful when adopting burdensome and sometimes questionable interpretations of statutes.
The lack of definitions of certain terms in the new law may pose problems for agencies in implementing the law. For example, the term “principle of law” is not defined. It is a very abstract and general concept that would seem ill-fitted into a rule. Because of the ambiguity of the term, it will be difficult for agencies to determine whether a rule needs to be adopted. If the term is understood to include holdings by courts, would an agency that relied upon such a holding have to determine if that holding should be restated in a rule? That could seem unnecessary and potentially infringe upon the judicial branch.
Finally, the provision in the new law that allows persons to petition a state agency to restate a principle of law in a rule could be viewed as an exercise in futility. The provision creates a detailed procedure for the person to undertake, but at the end of it all the agency can simply deny the petition and the person cannot appeal that denial.
If you would like to discuss this article, please contact Rich Farrin or any of the other professionals at Zaino Hall & Farrin LLC.
