General Information on Tax Law...
I. Internal Revenue Code
The Internal Revenue Code (IRC) is available from a number of sources. The IRC is contained in Title 26 of the United States Code. The official version of the U.S. Code is available free online from the Office of Law Revision Counsel, and linked from the main page of the House of Representatives web site (http://www.house.gov). The Office is charged with the task of editing the complete United States Code for publication. The web address for the official US Code is http://uscode.house.gov/. Another free source of the official U.S. Code is found via the GovInfo (the Gov't Printing Office's (GPO)) web site: https://www.govinfo.gov/app/collection/uscode.
Lexis Advance and Westlaw Edge publish annotated versions of the Code as part of their online offerings. The print versions are the United States Code Annotated (USCA, West) and the United States Code Service (USCS, Lexis).
One difference between the official and the unofficial versions of the Code is that the official version is published every six years. The government issues yearly supplements that update the text in the intervening years. Volumes comprising the Code appear well after their nominal cover date. For this reason, legal professionals rely on unofficial publications such as the United States Code Annotated (West) and the United States Code Service (Lexis) for timely statements of Code text. Moreover, editorial features such as annotations, historical notes, and cross-reference to commentary and law review articles make these editions valuable for research. Comprehensive tax treatises will reproduce the current versions of the IRC as part of their editorial content.
II. Internal Revenue Regulations
Internal Revenue Regulations are the rules implemented by the IRS under the authority of the Internal Revenue Code. They are referred to as Treasury Regulations and follow a numbering scheme similar to the Internal Revenue Code. These are located in Title 26 of the Code of Federal Regulations (CFR) (available on Hein Online as well) and are updated between editions of the CFR via the Federal Register (FR) (available on Hein Online as well). Regulations have preambles which summarize their purpose and implementation. Researchers rely on these preambles to determine whether a regulation is useful in analyzing a problem.
Proposed regulations will follow the standard path identified in the Administrative Procedure Act, with publication in the Federal Register accompanied by a period of time for comments by interested parties. Once this period passes, if the IRS decides to adopt the rule, it will publish the final text in the Federal Register and later in the next compilation of Title 26 of the Code of Federal Regulations.
Temporary regulations are issued without a notice and comment period, usually when the IRS needs to respond quickly due to changes in the tax laws. These may be followed with permanent regulations though a temporary regulation can be in place for up to three years.
III. Other Administrative Pronouncements - Types of Official materials issued by the Treasury and the IRS:
As mentioned earlier, Tax law is challenging to research because there are so many different types of agency documents. Because tax law applies to everyone, including corporations, there are many aspects of the law that are challenged and need to be clarified. The law itself is constantly being tinkered with as well. Regulations rest on the authority of the statute and further explain the statute. The Understanding IRS Guidance: A Brief Primer (text of Primer begins at Regulation and ends with Announcement paragraph here below) helps explain further some of the major IRS issuances (Revenue Rulings...etc.)
For anyone not familiar with the inner workings of the tax administration, the array of IRS guidance may seem, well, a little puzzling at first glance. To take a little of the mystery away, here's a brief look at seven of the most common forms of guidance.
In its role in administering the tax laws enacted by the Congress, the IRS must take the specifics of these laws and translate them into detailed regulations, rules and procedures. The Office of Chief Counsel fills this crucial role by producing several different kinds of documents and publications that provide guidance to taxpayers, firms and charitable groups.
A regulation is issued by the Internal Revenue Service and Treasury Department to provide guidance for new legislation or to address issues that arise with respect to existing Internal Revenue Code sections. Regulations interpret and give directions on complying with the law. Regulations are published in the Federal Register. Generally, regulations are first published in proposed form in a Notice of Proposed Rulemaking (NPRM). After public input is fully considered through written comments and even a public hearing, a final regulation or a temporary regulation is published as a Treasury Decision (TD), again, in the Federal Register.
A revenue ruling is an official interpretation by the IRS of the Internal Revenue Code, related statutes, tax treaties and regulations. It is the conclusion of the IRS on how the law is applied to a specific set of facts. Revenue rulings are published in the Internal Revenue Bulletin for the information of and guidance to taxpayers, IRS personnel and tax professionals. For example, a revenue ruling may hold that taxpayers can deduct certain automobile expenses.
A revenue procedure is an official statement of a procedure that affects the rights or duties of taxpayers or other members of the public under the Internal Revenue Code, related statutes, tax treaties and regulations and that should be a matter of public knowledge. It is also published in the Internal Revenue Bulletin. While a revenue ruling generally states an IRS position, a revenue procedure provides return filing or other instructions concerning an IRS position. For example, a revenue procedure might specify how those entitled to deduct certain automobile expenses should compute them by applying a certain mileage rate in lieu of calculating actual operating expenses.
Private Letter Ruling
A private letter ruling, or PLR, is a written statement issued to a taxpayer that interprets and applies tax laws to the taxpayer's specific set of facts. A PLR is issued to establish with certainty the federal tax consequences of a particular transaction before the transaction is consummated or before the taxpayer's return is filed. A PLR is issued in response to a written request submitted by a taxpayer and is binding on the IRS if the taxpayer fully and accurately described the proposed transaction in the request and carries out the transaction as described. A PLR may not be relied on as precedent by other taxpayers or IRS personnel. PLRs are generally made public after all information has been removed that could identify the taxpayer to whom it was issued.
Technical Advice Memorandum
A technical advice memorandum, or TAM, is guidance furnished by the Office of Chief Counsel upon the request of an IRS director or an area director, appeals, in response to technical or procedural questions that develop during a proceeding. A request for a TAM generally stems from an examination of a taxpayer's return, a consideration of a taxpayer's claim for a refund or credit, or any other matter involving a specific taxpayer under the jurisdiction of the territory manager or the area director, appeals. Technical Advice Memoranda are issued only on closed transactions and provide the interpretation of proper application of tax laws, tax treaties, regulations, revenue rulings or other precedents. The advice rendered represents a final determination of the position of the IRS, but only with respect to the specific issue in the specific case in which the advice is issued. Technical Advice Memoranda are generally made public after all information has been removed that could identify the taxpayer whose circumstances triggered a specific memorandum.
A notice is a public pronouncement that may contain guidance that involves substantive interpretations of the Internal Revenue Code or other provisions of the law. For example, notices can be used to relate what regulations will say in situations where the regulations may not be published in the immediate future.
An announcement is a public pronouncement that has only immediate or short-term value. For example, announcements can be used to summarize the law or regulations without making any substantive interpretation; to state what regulations will say when they are certain to be published in the immediate future; or to notify taxpayers of the existence of an approaching deadline.
IV. Courts and Tax Law
The United States Tax Court hears cases that only concern issues arising under the Internal Revenue Code after 1926. Prior to 1943, the Court was known as the Board of Tax Appeals, and was an administrative unit of the Treasury Department.
There are two types of decisions the Tax Court will issue. There are regular decisions and memorandum decisions. Regular decisions are those which cover new areas of law or novel issues under existing law. Memorandum decisions cover those issues that are applications of existing law. The distinction between the two is not so clear in substance.
Decisions of the Tax Court are appealable to the United States Courts of Appeal. This leads to an interesting situation where two or more Courts of Appeal may issue contradictory rulings on identical tax issues. As a consequence, the Tax Court has adopted the Golsen Rule, named after the case at 54 T.C. 742 (1970). Under Golsen, the Tax Court will interpret decisions based on the Circuit where the taxpayer resides. If no Circuit decisions are specifically applicable, then the Court will apply its own interpretation to the circumstances and application of the IRC. This is important as finding a Tax Court Decision without an awareness of its context may lead to an incorrect understanding of applicable tax law.
Tax Court opinions are published in the official Tax Court of the United States Reports (GPO), and unofficially by Wolters Kluwer and RIA. Memorandum decisions are published unofficially (only) by Wolters Kluwer & the Research Institute of America (RIA). Regular and Memorandum decisions are on Lexis Advance, Westlaw Edge, and the Wolters Kluwer & RIA databases. The U.S. Tax Court has a web site where decisions are available. Go to http://www.ustaxcourt.gov/ for more information.
V. Tax Publications
The Service issues numerous tax publications for the assistance of taxpayers in preparing their returns, or offering compliance advice on certain tax provisions. The ubiquitous Pub. 17, Your Income Tax, for example, is the general guide to figuring tax application and submitting forms by individuals for a given tax year. These are available in paper from the Service, and in PDF form on the IRS web site through publications and forms links (www.irs.gov/forms-instructions).