Tax regulations are subject to the Administrative Procedure Act (APA), and taxpayers are entitled to the protections afforded under the Act.
In addition to the rulemaking requirements discussed above, the APA requires that federal agencies determine procedures for formal and informal adjudication of alleged violations of a particular law or rule and that they conduct agency-level adjudication per a uniform standard. The APA also requires agencies to follow certain procedures in the granting of licenses that are within their purview.
Adjudication is the process by which agencies issue orders to resolve particular rights and duties. As in rulemakings, they can be formal or informal.
With few exceptions, formal adjudications are subject to the same requirements as formal rulemakings:
- Notice must be provided (time, location, nature, facts asserted, jurisdiction and legal authority of the hearing)
- A judge presides over the proceedings
- Evidence must be introduced
- Decisions are subject to judicial review
Most adjudications are informal, and their process is not clearly defined in the APA. Prescribed procedures for informal adjudications may vary greatly depending on the relevant statute; they may be explicit or implied, a hearing may or may not be required, and if it does take place it may or may not be oral or adversarial. Decisions made through informal adjudication are usually subject to judicial review.
Due process protection is afforded during the adjudicative process whenever a person may be deprived of their property or liberty, and where the outcome may effect a small, particular group.
The licensing of individuals and/or entities to engage in certain activities is an effective governmental regulatory device. By creating and maintaining standards, licensing generally provides the general public with a certain level of protection.
Where a federal agency grants permits, certificates, approvals, registrations, charters, memberships, statutory exemptions, or other forms of permission to an individual or entity, it must comply with the same APA procedures that pertain to formal rulemaking and adjudication. The same applies to licensing renewals, denials, suspensions, and revocations. For example:
- Uniform standards for the granting of licenses must be established and adhered to
- Notice must be provided where appropriate
- A licensee must be provided an opportunity to correct a rule violation prior to having their license revoked