Did Obama Admin Even Consider Whether Executive Action on Tax Inversions Would Be Legal? Maybe Not.

The Obama administration may not have sought an opinion from the Department of Justice’s Office of Legal Counsel before seeking a questionable executive-branch fix to prevent companies from reducing their tax burden by moving overseas, new reporting from National Review Online finds.

Some background: The Wall Street Journal editorial page noted earlier this month:

Mr. Obama has conceded [overseas tax inversions] are legal, and as recently as July 16 Mr. Lew told CNBC that “we have looked at the tax code. There are a lot of obscure provisions that we do not believe we have the authority to address this inversion question through administrative action. If we did, we would be doing more.”

But lo, on [Aug. 5] a spokeswoman announced that Treasury “is reviewing a broad range of authorities for possible administrative actions” to limit inversions “as well as approaches that could meaningfully reduce the tax benefits after inversions take place.”

Hello? That sure sounds like rewriting tax law by executive fiat, which violates the Constitution’s separation of powers. The rewrite is all the more legally suspicious since no one at Treasury or the Justice Department seems to have been aware of this power before Mr. Obama began denouncing the “unpatriotic tax loophole.” From where does Mr. Lew derive this power to act like a one-man Ways and Means Committee?

Then again this Administration doesn’t seem to care if it has a legal explanation for its unilateral actions. That stands in marked contrast to other recent Administrations, which typically consulted the Justice Department’s Office of Legal Counsel (OLC) for advice on controversial legal issues.

We were curious, too, whether the Obama administration had sought a legal opinion before its whiplash-inducing reversal on whether it had the authority to impose tax-inversion restrictions.

So we filed a records request asking for “all OLC memos prepared for any executive agency or department regarding consultation on administrative actions (i.e., executive actions) to limit tax inversions or reduce the tax benefits after inversions take place.”

Here was the Department of Justice’s response:

A search of OLC’s files has located no documents responsive to your request. For your information, Congress excluded three discrete categories of law enforcement and national security records from the requirements of the [Freedom of Information Act]. … This response is limited to those records that are subject to the requirements of FOIA. This is a standard notification that is given to all our requesters and should not be taken as an indication that excluded records do, or do not, exist.

Pardon?

The DOJ’s letter could reasonably be interpreted as an Obama administration admission that it never sought an OLC opinion on the legality of potential executive action before plowing forward.

Then again, given this administration’s poor track record on transparency, perhaps it’s playing linguistic games: For example, maybe any opinion offered wasn’t in a format a form the DOJ considers a “memo,” or perhaps the DOJ doesn’t consider certain records a “consultation.”

We’ll be doing some more exploring, so stay tuned.

— Jillian Kay Melchior writes for National Review as a Thomas L. Rhodes Fellow for the Franklin Center. She is also a Senior Fellow at the Independent Women’s Forum.