The Justice Department has ruled that the Office of Management and Budget does not have the authority to approve or disapprove many record-keeping and reporting requirements imposed by federal regulations on businesses and individuals before 1980.
The ruling, part of a testy turf fight between OMB and the Internal Revenue Service, potentially threatens OMB's ability to cut into the so-called "paperwork burden" that was the target of the Paperwork Reduction Act of 1980, according to OMB sources.
The ruling by Justice's legal counsel Theodore B. Olson clearly upholds OMB's right to review new regulations that require record-keeping and to approve all government forms, including all tax forms, no matter when they were created.
But the ruling also says that record-keeping or reporting requirements in place at the time the act was passed in 1980 are beyond the scope of OMB's charter unless, of course, they involve a federal form.
The issue is important to OMB because it is under a congressional mandate to reduce by 25 percent within two years the number of hours people and businesses spend on government-ordered paperwork. Unless it could attack existing regulations, OMB argued, it could not make that cut.
In fact, officials at the Treasury Department, OMB and Justice said yesterday, they do not know what percentage of government-imposed paperwork is the result of existing regulations. Further, Olson's opinion said, there is no "insuperable barrier" that would prevent OMB from seeking changes in existing regulations.
Business groups have been particularly active in supporting OMB oversight of federally imposed paperwork and have been particularly concerned that some IRS record-keeping and reporting requirements would be exempt from review. It is estimated that 50 percent of all federally required paperwork stems from IRS rules and regulations.
The probability is high, an OMB official said yesterday, that the issue will ultimately be settled in court.