Civil monetary penalties: agency assessment discretion makes it difficult to estimate the impact of inflation adjustments

In December 2012, the Administrative Conference adopted Recommendation 2012-8, Inflation Adjustment Act. This recommendation addresses three anomalous provisions of the Federal Civil Penalties Adjustment Act of 1990 (the Inflation Adjustment Act), which was amended in 1996 to require agencies to make initial inflation adjustments to civil monetary penalties as well as quadrennial adjustments thereafter.[1] Recommendation 2012-8 asks Congress to revisit the statutory framework for inflation adjustments in light of these distortions. 

Over the course of the project, several Conference members asked about the cumulative impact of these distortions on civil monetary penalties collected by the U.S. Government.[2]  Unfortunately, the fiscal impacts of distorted inflation adjustments under the Inflation Adjustment Act are difficult to determine. First, as discussed in the previous blog post, there are serious gaps in public information about agency civil monetary penalty assessments and collections; and second, as set forth below, there is a trend towards agency discretion in assessment of civil monetary penalties. 

Variable penalties and agency discretion:  Even if the previously identified data gaps could be resolved—such as for a small sample of agencies with excellent penalty reporting practices, like the Environmental Protection Agency, the Federal Railroad Administration, the Federal Energy Regulatory Commission, the Office of the Comptroller of Currency, and several others— it would still be extremely difficult to determine the impact of inflation adjustments.  Conference staff took a closer look at twelve agencies with enforcement data that seemed sufficient to render them practicable case studies and found that:

  • Agency penalties are often fixed at a congressionally specified minimum and/or maximum amount, with agency discretion to determine precise assessments.  For instance, such variability is common in regulatory penalties for violations of laws administered by the Environmental Protection Agency.[3]
  • Congress frequently provides agencies with settlement, negotiation, or mitigation authority.  For example, 30 U.S.C. § 1719(g), authorizes the Secretary of the Interior to “compromise or reduce civil penalties” assessed as part of federal royalty management and enforcement on a case-by-case basis.[4]

These basic findings are consistent with the results of Colin Diver’s 1979 report to the Administrative Conference on Agency Assessment and Mitigation of Civil Monetary Penalties, which found that “fixed-penalty statutes are increasingly giving way to variable-penalty statutes…” and that Congress had authorized agencies to mitigate or compromise almost 80 percent of the nearly 350 civil penalties then in force.[5]  In 1979, 57 percent of these civil penalty statutes specified fixed penalty amounts[6]; anecdotal evidence from the twelve agencies examined in-depth indicates that this percentage might well be even lower today.

Agencies often publish policies generally explaining their penalty calculation practices, and the discretionary choices contained therein (as the Conference urged them to do in Recommendation 79-3, based on Professor Diver’s report).[7]  However, the twelve agencies reviewed rarely provide the public with online access to specific information about discretionary adjustments in individual cases, much less in a standard or aggregated fashion that would make case studies of the fiscal impacts of inflation adjustments to civil monetary penalties feasible.


[1] Pub. L. 101-410, 104 Stat. 890 (1990), codified as amended at 28 U.S.C. § 2461 note.

[2] While civil monetary penalties are not government revenue, they are ordinarily deposited into the General Fund of the U.S. Treasury under the Miscellaneous Receipts Act, 31 U.S.C. § 3302(b), and thereafter may be made available for congressional appropriations.  In 1993, the National Performance Review estimated that initial adjustments to civil monetary penalties made in accordance with actual inflation—rather than in the anomalous fashion eventually required by the amended Inflation Adjustment Act—would increase federal receipts by nearly $200 million between fiscal years 1994-1999.  Report of the National Performance Review, From Red Tape to Results: Creating a Government That Works Better and Costs Less 145 (Washington, D.C.: Sept. 1993).

[3] E.g., 40 C.F.R. § 34.400 (establishing a civil monetary penalty range of $10,000 to $100,000 for violating EPA lobbying restrictions,  requiring that first-time offenders pay the minimum $10,000 penalty); 40 C.F.R. § 90.1006(a) (maximum penalty amounts for certain Clean Air Act violations); 40 C.F.R. § 122.41(a) (maximum penalties for National Pollutant Discharge Elimination System permit violations); 40 C.F.R. § 271.16 (minimum penalties for certain violations in state enforcement of hazardous waste programs); 40 C.F.R. § 281.41(a)(3) (maximum penalties for state enforcement of underground storage tank program violations); 40 C.F.R. § 1068.101 (maximum penalties for violations of certain motor vehicle emission and fuel standards).

[4] See also 30 C.F.R. § 250.1476 (providing the Director of the Bureau of Safety and Environmental Enforcement—within the Department of Interior—with general authority to “compromise or reduce civil penalties assessed” in accord with 30 U.S.C. § 1719(g)).

[5] Colin Diver, The Assessment and Mitigation of Civil Monetary Penalties, 79 Colum. L. Rev. 1435, 1443 (1979) (based on a report to the Administrative Conference of the U.S.).

[6] Id. at 1440.

 

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