Cecily Zamora
Tax laws are complex and vary across different jurisdictions. In the United States, the Internal Revenue Code (IRC) forms the foundation of federal tax law. The IRC is a compilation of official federal tax laws passed by Congress and covers all aspects of federal taxation. It is supplemented by individual laws enacted by Congress and signed by the President. The IRC is interpreted by Treasury Regulations and court decisions. State tax laws may resemble federal tax laws, but each state has its own regulatory tax agency and may levy a variety of taxes unrelated to income, such as property and sales taxes. The U.S. Constitution, statutes, tax treaties, and judicial opinions are also sources of tax law.
| Characteristics | Values |
|---|---|
| Legislative sources of federal tax law | The U.S. Constitution, U.S. statutes, legislative histories, and U.S. tax treaties |
| Primary sources of federal tax law | Statutes, regulations, and case law |
| Legislative history | Judicial committee reports, documented debates in the House of Representatives or the Senate |
| Tax treaties | Relevant when taxpayers have ties with the U.S. and another country |
| Documents that are binding | Those published in the IRB |
| Judicial opinions | Federal courts publish judicial opinions that explain, supplement, and create new laws |
| State tax law | State legislature passes taxing statutes, similar to the Internal Revenue Code |
| State tax statutes | Found with the state code compilation for its respective state |
| Federal tax research | The Internal Revenue Code, Treasury regulations, case law, and agency guidance published by the Internal Revenue Service |
| Regulatory documents | Published in the Federal Register and republished in the Internal Revenue Bulletin |
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What You'll Learn
The US Constitution and federal tax law
The US Constitution, which came into effect in 1789, is the supreme law of the United States. It contains seven references to taxes, providing the basis for federal tax law. The Constitution's Sixteenth Amendment, ratified in 1913, established Congress's right to impose a federal income tax. This amendment was passed in response to the 1895 Supreme Court case of Pollock v. Farmers' Loan & Trust Co., which had struck down an earlier income tax law.
The Sixteenth Amendment authorises Congress to lay and collect taxes on income, but it does not specify how Congress should do so. As a result, Congress has enacted various statutes that provide for income, estate, gift, excise, and employment taxes. These statutes are the primary source of federal tax law and are published in Title 26 of the United States Code, also known as the Internal Revenue Code (IRC). The IRC is the cornerstone of federal tax law and covers all aspects of federal taxation.
The IRC is interpreted by Treasury regulations, tax cases, and IRS rulings. Tax cases refer to decisions made by courts that interpret and apply the IRC, including the US Tax Court, Federal District Courts, and Circuit Courts of Appeals. These courts also publish judicial opinions that explain, supplement, and sometimes create new laws. While these opinions are not binding on the IRS, they can disclose the IRS's position on specific issues.
In addition to the IRC and judicial opinions, other IRS documents, such as chief counsel advice, private letter rulings, and determination letters, contribute to federal tax law. While these sources are generally not binding on the courts, they can still be beneficial for taxpayers. The legislative history underlying the enactment of tax statutes is also important, as it may include relevant information such as judicial committee reports and documented debates in Congress.
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Tax treaties
The United States has tax treaties with a number of foreign countries. These treaties also work both ways, meaning that residents or citizens of the United States are taxed at a reduced rate or are exempt from foreign taxes on certain items of income they receive from sources within foreign countries.
If the treaty does not cover a particular kind of income, or if there is no treaty between your country and the United States, you must pay tax on the income in the same way and at the same rates shown in the instructions for Form 1040-NR, US Nonresident Alien Income Tax Return.
The texts of most US income tax treaties in force are available on the US Department of the Treasury website.
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IRS documents
The US Constitution, which came into effect in 1789, is the supreme law of the United States and the primary source of federal tax law. The Constitution gives Congress the power to levy taxes and contains seven references to taxes, providing the basis for federal tax law. The Sixteenth Amendment authorises Congress to levy and collect income taxes, but it does not outline the process for doing so. As a result, Congress has enacted various statutes that provide for income, estate, gift, excise, and employment taxes. These statutes are published in Title 26 of the United States Code, also known as the Internal Revenue Code (IRC), which is the cornerstone of federal tax law.
The IRC is a compilation of official federal tax laws passed by Congress and covers all aspects of federal taxation. It is interpreted by Treasury regulations, tax cases, and IRS rulings. The IRC is supplemented by individual laws passed by Congress and signed into law by the President, which amend the IRC and include additional information such as effective dates and special rules. These individual laws are assigned a Public Law number and published in the Statutes at Large.
In addition to the IRC, there are other IRS documents that establish federal tax law. These include chief counsel advice, private letter rulings, determination letters, technical advice memoranda, actions on decisions, general counsel memoranda, field service advice, and IRS publications. While these sources are generally not binding on the courts, some are binding on the IRS, and the courts often hold the IRS to positions taken in these documents.
Judicial opinions form another source of federal tax law. Federal courts that hear tax cases publish judicial opinions that explain, supplement, and sometimes create new laws. The authority of these opinions depends on the court that wrote the opinion and the time it was written. State tax laws also exist, and while they may resemble federal tax laws, they can include a variety of taxes unrelated to income, such as property and sales taxes.
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Judicial opinions
State courts also generate judicial opinions, although most states do not have an official tax court. State personal and corporate income tax issues can be researched in a similar way to federal tax research. However, states also engage in a variety of different taxes unrelated to income, such as property taxes, sales and use taxes, excise taxes, estate and inheritance taxes, and liquor taxes. To streamline the research process, specialized state tax resources can be used. For example, state tax statutes can be found with the state code compilation for the respective state.
Other IRS documents that establish federal tax law include chief counsel advice, private letter rulings, determination letters, technical advice memoranda, actions on decisions, general counsel memoranda, field service advice, technical expedited advice memoranda, service center advice, chief counsel bulletins, litigation guideline memoranda, chief counsel notices, IRS information letters, IRS compliance officer memoranda, IRS technical assistance, the internal revenue manual, and IRS publications. These sources are generally not binding on the courts, but some are binding on the IRS, and the courts often hold the IRS to positions taken in these documents.
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State tax law
The legislative history of state tax laws is an important source of understanding, including judicial committee reports and documented debates. These sources are not binding but can be beneficial for taxpayers to understand the IRS's position on particular issues.
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