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Primary Source of Federal Tax Law

Instructor: Morgan Gannarelli
In this lesson, we will discuss the primary sources of federal tax law. This includes the Internal Revenue Code, other non-codified federal tax statutes, final and temporary regulations, judicial decisions on tax matters, revenue rulings, revenue procedures, and other published Internal Revenue Service (IRS) positions.

Primary Sources of Federal Tax Law

Taxes; we all pay them, but have you ever wondered where the primary sources of federal tax law come from? These primary sources carry a high weight of authority within the tax laws. When researching federal tax law, you may need to review the following primary sources: Internal Revenue Code, other non-codified federal tax statutes, final and temporary regulations, judicial decisions on tax matters, revenue rulings, revenue procedures, and other published IRS positions.

Internal Revenue Service Collects Taxes and Administers Internal Revenue Code
IRS

Internal Revenue Code

You are probably familiar with the Internal Revenue Code, or have at least heard of it. This is where federal tax law begins. The code is comprised of multiple tax statutes that are located under Title 26 of the United States Code. The code was first published by the House of Representatives in 1926 and is the most authoritative source. You may find yourself in need of the Internal Revenue Code if you are researching laws that apply to gift, estate, sales, and income taxes. Congress has the authority to make changes in the Internal Revenue Code each year. So, if you have an old version of the code, it may not be applicable to the current tax laws.

Non-Codified Federal Tax Statutes

Although you will find most of the tax statutes in the Internal Revenue Code, there are some types (like tax treaties) that you will not find within the Internal Revenue Code. Other federal statutes may contain the relevant rules. For example, you will find the tax law for bankruptcy in the United States Code Title 11. These tax laws must be followed even though they are not in the Internal Revenue Code.

Final and Temporary Regulations

These regulations are referred to as Treasury Regulation and are used to interpret the Internal Revenue Code (IRC). The IRC can be difficult to interpret, so these regulations are vital. These regulations are published in the Federal Register, which is the official publication for rules, proposed rules, and notices of federal agencies and organizations. Believe it or not, this register is published every business day. It includes both temporary and final regulations, which we will discuss below.

Temporary Regulations

These regulations have the same authority as a final regulation. Temporary regulations are effective as soon as the Federal Register is published. The regulations are valid for three years from issuance. You will know a temporary regulation when you see it, because it will have a 'T' at the end of the regulation number.

Final Regulations

Final regulations are issued by the Internal Revenue Service via a document called a Treasury Decision. Once approved by the Secretary of the Treasury, the regulations are published in the Code of Federal Regulations. The main purpose of these regulations is to provide tax professionals with a guide to tax compliance and planning.

Judicial Decisions on Tax Matters

Did you know that there is a designated U.S. Tax Court? This is where the majority of tax cases are litigated. The president appoints nineteen Tax Court judges who travel nationwide. There is also a United States Court of Federal Claims that has nationwide jurisdiction over specific types of cases. These cases include claims for monetary damages against the United States, dealing mostly with tax refund suits.

Revenue Rulings

Revenue rulings are an official interpretation of the Internal Revenue Code, related statues, tax treaties, and regulations. These are published in the Internal Revenue Bulletin that is issued from the National Office at the IRS. The IRS decides on how the laws are applied. For example, a revenue ruling regarding the taxation of business expenses helps tax professionals make necessary recommendations to their clients. They can inform their clients of expenses that are tax deductible.

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