The Rule Of Law As A Law Of Standards

internal revenue codes

In the first instance, however, the responsibility for construing the Code falls to the IRS. Since Congress cannot be expected to anticipate every conceivable problem that can arise or to carry out day-to-day oversight, it relies on the administrators and on the courts to implement the legislative will.

internal revenue codes

It is important to see that the IRS’s reading of “corporation” was an interpretation, even if incorrect, because it was justified in terms of the tax value of substance over form; the IRS sought to disregard corporations that were formed exclusively for the purpose of tax avoidance. The correct interpretation of “reorganization” was also grounded in tax values—again, the value of having tax follow economics so that particular tax consequences obtain only when a transaction is economically significant, i.e., when it has economic effects outside of tax. If Congress does not act, then a pro-taxpayer agency determination remains because, as Professor Zelenak points out, no one has standing to challenge it.

Administrators, like judges, are under oath to do so. But because taxation has a potentially significant impact on just about every facet of our lives. Thus, for example, we have argued that the American love of baseball is a relevant value in deciding whether to regard baseballs caught by fans at games as gross income. To be successful, provisions of law within the field must promote some set of values from among the universe of those that define the field. However, income is not constructively received if the taxpayer’s control of its receipt is subject to substantial limitations or restrictions. 26 (12th ed. 2012); see also Zelenak, supra note 1, at 834 (noting “the sweeping language of I.R.C. § 61”); Glenshaw Glass, 348 U.S. at 432 (“The definition of gross income has been simplified, but no effect upon its present broad scope was intended.”). Finally, there is a long libertarian tradition in this country of distrust of government and resentment of the taxing authority in particular , so constraining the power of IRS officials seems important.

Progressivity Of The 1954 Code

One can only speculate, but it is plausible that the § 382 notices never would have been issued but for the precedent of the § 61 customary deviations. On the ground that § 269 had proved to be ineffectual as a weapon against the traffic in loss corporations because it had required proof that tax avoidance was the primary purpose of the transaction, in 1954 Congress enacted two new restrictions on the net operating loss carryover. The business-continuity requirement of § 382 presented many factual difficulties and resulted in extensive litigation, with often conflicting opinions that were difficult to reconcile. The second restriction was § 382, applicable only to changes of ownership to a tax-free reorganization, under which the carryover was reduced proportionately if the old owners received less than 20 percent of the stock of the reorganized corporation .

Related sections are often cross-referenced to each other. Therefore, it is often useful to read the table of contents to the IRC or to a subchapter in order to get an overview of the structure of a topic. Many, if not most, Code sections contain a general rule followed, followed by specific conditions internal revenue codes that must be satisfied in order to apply the provision, and situations under which you are excepted from the general rule. Some exceptions to a Code section are addressed not within the same section, but in another section of the Code. Therefore it is very important to read the section carefully.

In addition, he notes that the new tax reform plan evolved to alleviate concerns that the original plan was designed to benefit the wealthy and that trying to replace it with a sales tax would raise similar issues of whether this would benefit wealthier Americans more. “Distributionally, replacing all federal taxes with a consumption tax would heighten those arguments,” Buhl says. Using Census data and the Survey of Income Program participation , the authors use social science methodology to show that blacks pay more federal income tax than whites at the same income levels. The Joint Committee on Taxation is a nonpartisan committee that assists members of both houses of Congress with tax legislation and writes explanations of tax legislation. While these explanations are written after enactment and therefore are not part of the legislative history per se, the Joint Comittee’s analyses can be very helpful for explaining and tracing the path of legislation through Congress and giving the researcher an overview of adopted legislation. Compiled legislative histories for some federal statutes are available on Proquest Legislative Insight and HeinOnline’s U.S. Federal Legislative History Library.

James v. United States, 366 U.S. 213, 222 . The government won in the District Court and Court of Appeals. United States v. James, 273 F.2d 5, 7 (7th Cir. 1959). It won again when the Supreme Court overruled its previous decision in Wilcox and affirmed the lower courts’ decisions, holding that embezzled funds are income to the embezzler. The revisions to section 382 demonstrate the congressional desire to move from judicial doctrines and statutory provisions whose application depends on specific facts and circumstances to an administrable, if very complicated, rule.

Individual And Corporate Income Tax

It is, of course, possible to anchor the interpretation of section 61 in language, legislative history, or case law, and we do not deny that doing so is an appropriate interpretive technique. But nothing requires that interpretation stop with that. For instance, Learned Hand did not limit himself to consideration of statutory language, legislative history, or case law to conclude that what Mrs. Gregory did did not constitute a reorganization.

On the other hand, predictability is also achieved by the consistent application of the values that animate the field—a task that standards perform especially well. Finally, administrability emphasizes clarity and simplicity in the service of predictability—a function served well by rules. But rules can produce injustice, which can generate resistance, which can undermine the efficiency and effectiveness that are the hallmarks of administrability. You should be aware that you may not find all of the answers to a specific tax question in the IRC, so you may have to turn to other sources such as administrative rulings, judicial decisions, or secondary sources of the law. Administrative rulings are the official interpretations of IRC sections by the IRS. Judicial decisions are the interpretations of individual sections by the courts.


For Internal Revenue Code citations, see R 12.9 (20th ed. p. 129). For example, section 61 of the Internal Revenue Code would be cited I.R.C. § 61 . Archived IRC sections are available on Checkpoint (from the Search tab, under “Archives”), Bloomberg Law’s Tax Practice Center , CCH’s Intelliconnect (under “Federal Tax Primary Sources”), and other commercial tax research databases. International tax largely focuses on bilateral tax treaties and conventions.

internal revenue codes

The date of enactment, bill number, public law number, and chapter number, shall be printed as a headnote. PLEASE NOTE. Rulings and procedures reported in the IRB do not have the force and effect of Treasury tax regulations, but they may be used as precedents. In contrast, any documents not published in the IRB cannot be relied on, used, or cited as precedents in the disposition of other cases. Treasury regulations (26 C.F.R.)–commonly referred to as Federal tax regulations– pick up where the Internal Revenue Code leaves off by providing the official interpretation of the IRC by the U.S. Any such changes shall be effective for purposes of this chapter to the same extent, at the same time and for the same taxable years as such changes are effective for federal purposes. The Bluebook has special citation formats for tax materials.

Regulation 840 Cmr 3: Internal Revenue Code Compliance Provisions

Old Colony Trust Co. v. Comm’r, 33 F.2d 891, 891 (1st Cir. 1929). With the exception of a modification to the pool of capital approach, these objectives were clearly evident in the final version of § 382. We developed the idea that standards are especially sensitive to values in Defining Income, where we offered an account of the rules-standards distinction. A field of law is constituted by a unique collection of values. Professor Staudt observes that “the Court has gone so far as to suggest that it has a role to play in raising the revenue necessary to meet the nation’s wartime needs.” Id. at 2. Professor Staudt uses the Court’s own words to support this assertion.

Moreover, some values play a significant role in all fields of law—that is, they are transcendent law values. They are things important to law generally and include justice, administrability, and the rule of law.

The Electronic Code Of Federal Regulations

Often the tax treaties will deal with preventing double taxation and hiding assets offshore to avoid paying taxes. There are numerous periodicals such as law reviews and journals that address topics and issues important in the tax area.

  • Once final regulations are issued they are announced in the Federal Register and codified in the Code of Federal Regulations .
  • I.e., to follow the dictates of the statute.
  • One can only speculate, but it is plausible that the § 382 notices never would have been issued but for the precedent of the § 61 customary deviations.
  • Another codification was undertaken in 1878.
  • In addition to participating in the promulgation of Treasury Regulations, the IRS publishes a regular series of other forms of official tax guidance, including revenue rulings, revenue procedures, notices, and announcements.
  • The version of the Code that was in effect at the time the relevant event took place governs a particular tax issue, so researchers may sometimes need to consult archived versions of the IRC.
  • Thus, for example, we have argued that the American love of baseball is a relevant value in deciding whether to regard baseballs caught by fans at games as gross income.

Finally, see the Applicable Federal Rates page for a series of revenue rulings providing certain prescribed rates for federal income tax purposes. These AFR revenue rulings are always released before they are officially published in the IRB. Whenever used in this chapter, the term “laws of the United States” means the provisions of the Internal Revenue Code of 1954, as amended as interpreted by Treasury regulations, rulings and other material of the Internal Revenue Service, by the courts of the United States and by the courts of Virginia. Subtitle B deals with ESTATE AND GIFT TAXES. The rules and regulations concerning the taxation of probate estates and gifts are very complicated. This subtitle contains chapters on taxing generation-skipping transfers and rules on special valuation of property.

Understanding The Internal Revenue Code Irc

The Law library contains a number of compiled legislative histories on major tax acts as well as the United States Code Congressional and Administrative News (U.S.C.C.A.N.). Temporary Regulations are regulations that are issued for a maximum period of three years. During this three year period the regulations are as authoritative as the final regulations. Information and documentation can be found in our developer resources.

Many are rules—but not the definition of income. U.S. tax laws began to be codified in 1874, but there was no central, comprehensive source for them at that time. The IRC was originally compiled in 1939 and overhauled in 1954 and 1986. This code is the definitive source of all tax laws in the United States and has the force of law in and of itself. The entire Federal Tax Code, and its complete history, is at your fingertips with theComplete Internal Revenue Code. This convenient, easy-to-use volume provides you with the complete legislative history and a comprehensive topic index to speed your tax research. Cautions from our editorial experts provide you with key information about special rules and effective dates needed to properly apply the Code Section.

Subtitle C contains the law of employment taxes. It consists of chapters on general provisions relating to employment taxes and other sections dealing with federal insurance contributions, railroad retirement taxes, and federal unemployment taxes. Subtitle A of the Code contains five chapters on income taxes. The chapters cover normal income taxes and surtaxes, taxes on self-employment income, withholding of taxes on nonresident ALIENS and foreign corporations, taxes on transfers to avoid INCOME TAX, and consolidated returns. When statutory ambiguity arises in the interpretation of an IRC section, courts will look to the legislative history to help determine legislative intent. Thus, it is sometimes necessary to do legislative history research for an IRC section.

Federal Tax Law Research

FindLaw Codes are provided courtesy of Thomson Reuters Westlaw, the industry-leading online legal research system. For more detailed codes research information, including annotations and citations, please visit Westlaw. John Buhl, manager of media relations for the Tax Foundation, says that the recent adoption of changes to the tax code may reduce the appetite for pursuing a larger overhaul of the tax system.

Congress since 1954, is identical to the organization of the Internal Revenue Code separately published as Title 26 of the U.S. 1297, added subtitle H heading “Financing of Presidential election campaigns”.

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