Kara Sears
Statutory tax laws are created by federal, state, and municipal governments, with the specific laws varying between countries. In the United States, the U.S. Congress and state legislatures are responsible for creating the majority of tax laws, which are proposed and voted on before being signed into law by the president. The legislative history of these statutes is also important, and may consist of judicial committee reports or documented debates in the House of Representatives or the Senate.
| Characteristics | Values |
|---|---|
| Sources of tax law | Legislative, administrative, and judicial sources |
| Legislative sources | The U.S. Constitution, U.S. statutes and their legislative histories, and U.S. tax treaties |
| Administrative sources | Treasury regulations, also known as federal tax regulations |
| Judicial sources | Judicial opinions from federal courts that hear federal tax cases |
| Primary source of federal tax law | Statutes |
| Legislative body responsible for creating tax laws | U.S. Congress or legislature |
| Executive body responsible for signing tax laws | President |
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What You'll Learn
Federal, state and local governments
Federal, state, and local governments all play a role in creating statutory tax laws. These laws are the legal rules and procedures that govern how taxes are calculated and collected at each level of government.
Federal Government
The U.S. Congress is responsible for creating the majority of federal tax laws. These laws are proposed, debated, and voted on by Congress before being signed into law by the President. The Internal Revenue Code (IRC), which forms the basis of federal tax law, is enacted by Congress and can be found in Title 26 of the United States Code. The IRC covers various types of federal taxes, including income, estate, gift, and excise taxes. The Treasury Regulations, issued by the Department of Treasury, provide official interpretations of the IRC and give directions to taxpayers on compliance. Federal tax laws can also originate from tax treaties, judicial opinions, and legislative history.
State Governments
State governments have their own tax codes and laws, which are separate from federal laws. These laws may include property, inheritance, and sales taxes. While not every state imposes an income tax, they assess and collect taxes according to their own regulations. State legislatures are responsible for creating and updating these tax laws, which can vary across states.
Local Governments
Tax laws can even be created at the county and city levels. For example, residents of New York City are subject to federal, state, and city income taxes. Local governments have the authority to implement tax laws specific to their jurisdictions, which may include additional income, property, or other niche taxes.
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Legislative, administrative, and judicial sources
The sources of tax law can be divided into three categories: legislative, administrative, and judicial.
Legislative Sources
The legislative branch of government creates statutory tax law. In the United States, the Constitution is the primary legislative source of federal tax law, with the Sixteenth Amendment authorizing Congress to lay and collect taxes on income, estate and 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). The IRC has been amended three times: in 1939, 1954, and 1986. The legislative history underlying the enactment of these statutes is also important, including judicial committee reports and documented debates in the House of Representatives or the Senate. Tax treaties are another legislative source of law, relevant when taxpayers have ties to multiple countries.
Administrative Sources
The Internal Revenue Service (IRS), a division of the Treasury Department, is responsible for the day-to-day administration of tax laws. The Treasury Department interprets and provides guidance on complying with the IRC, with Treasury regulations published in the Federal Register and codified in Title 26 of the Code of Federal Regulations (CFR). The IRS publishes revenue rulings, revenue procedures, notices, and announcements to provide further guidance on the application of tax laws.
Judicial Sources
The federal courts that hear tax cases publish judicial opinions that explain, supplement, and sometimes create new laws. The authority of these opinions varies depending on the court and the timing of the opinion. The U.S. Tax Court, for example, issues regular opinions, memorandum opinions, and summary opinions, with the latter two having limited or no precedential value. Bankruptcy courts and U.S. District Courts also hear tax cases, with appeals going to the U.S. Court of Appeals and ultimately the U.S. Supreme Court.
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The role of the U.S. Constitution
The U.S. Constitution is a key source of federal tax law. It contains seven references to taxes, providing the basis for federal tax law. The Sixteenth Amendment of the Constitution authorizes Congress to lay and collect taxes on income, and Article I, Section 8, Clause 1 of the Constitution grants Congress broad authority to lay and collect taxes for federal debts, common defence, and general welfare.
Congress typically enacts federal tax law in the Internal Revenue Code (IRC) of 1986, which can be found in Title 26 of the United States Code. This includes statutes on income, estate, gift, excise, and employment taxes. The IRC is complex and must be interpreted in the context of the entire Code, Treasury Regulations, and court decisions.
Judicial opinions form another source of federal tax law. Federal courts hearing federal tax cases publish judicial opinions that explain, supplement, and sometimes create new laws. The authority of these opinions varies depending on the court and the timing. The courts may also interpret the statutes enacted by Congress and have developed rules of statutory construction for this purpose.
The Constitution has been a subject of debate in the context of progressive tax law reforms. Some scholars argue that the Constitution's provisions limiting federal taxing power should be abandoned or interpreted narrowly, while others advocate for a broader interpretation to dispute the constitutionality of tax reform proposals. There is a concern that the Supreme Court may strike down transformative reforms due to constitutional challenges. However, others argue that there is a long history of federal taxes similar to wealth taxes and a well-developed constitutional jurisprudence to support it.
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Congress proposes, votes, and passes
In the United States, Congress is responsible for creating and updating tax laws. The process begins with a proposal, which can originate from a local congressman or the Department of Treasury, which drafts recommendations for tax laws from the president. This proposal is then introduced to Congress, where it is debated and voted on. If the proposal passes the vote, it moves forward and can become a law.
The legislative history of these statutes is an important source of federal tax law. This legislative history may include judicial committee reports and documented debates in the House of Representatives or the Senate. The U.S. Constitution, U.S. statutes, and their legislative histories are all legislative sources of federal tax law. The Constitution's Sixteenth Amendment authorizes Congress to impose and collect income taxes, although 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.
The Internal Revenue Code (IRC) is the foundation of federal tax law in the United States, with 11 subtitles covering various types of taxes. The IRC is part of the United States Code, and Title 26 of the IRC contains the sections relevant to federal tax law. These sections are published and made available to the public by Congress. The IRC is complex, and its interpretation is facilitated by the Treasury Regulations, which provide official guidance from the U.S. Department of the Treasury. These regulations can be found in Title 26 of the Code of Federal Regulations.
Congress has the power to enact laws that are not part of the IRC but still impact federal tax law. All regulatory documents are published in the Federal Register and are also republished in the Internal Revenue Bulletin. The IRS publishes additional forms of official tax guidance, including revenue rulings, revenue procedures, notices, and announcements.
In summary, Congress plays a crucial role in proposing, voting on, and passing tax laws in the United States. The process involves input from various sources, including the Department of Treasury and the president, and results in the creation and amendment of federal tax laws, as outlined in the IRC and related regulatory documents.
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The President signs
In the United States, tax laws are created and updated through a standardised process. The U.S. Congress or legislature first proposes a tax law, after which a vote is taken on whether to pass it. If it passes the vote, the bill is sent to the President to be signed into law.
The process begins with the Department of Treasury drafting recommendations for tax laws from the president. The Department of Treasury then presents its recommendations to the House Committee on Ways and Means. This committee then creates the "House version" of the tax law, which is presented to the entire House of Representatives for a vote. If the bill passes the vote, it is sent to the President to be signed into law.
The President's signature on a tax bill enacts it as law. This is the final step in the process of creating tax law. The acts of Congresses and presidents over the past 100 years have created the tax law as it stands today. The Internal Revenue Service doesn't come into it until the tax law is already ratified by Congress and the president.
The U.S. Constitution, U.S. statutes and their legislative histories, and U.S. tax treaties are all legislative sources of federal tax law. The Constitution contains seven references to taxes, providing the basis for federal tax law. The Sixteenth Amendment, ratified in 1913, authorises Congress to lay and collect taxes on income. Congress has enacted various statutes providing for income, estate, gift, excise, and employment taxes. These statutes are published in Title 26 of the United States Code, often referred to as the Internal Revenue Code (IRC). The IRC is the basis of federal tax law in the United States, with 11 subtitles covering different types of taxes.
Tax laws can be updated or changed by Congress or the legislature, and may include temporary income tax cuts or adjustments to tax rates. State governments have their own tax codes, which serve the same purpose as the IRC for federal taxes. Tax laws can even be created at the county and city levels.
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Frequently asked questions
Statutory tax law is created by the U.S. Congress or legislature, which proposes a tax law, and then a vote is taken on whether to pass it. If it passes, the change becomes law.
The process begins with the Department of Treasury drafting recommendations for tax laws from the president. The Department of Treasury then presents its recommendations to the House Committee on Ways and Means. This committee then creates the "House version" of the tax law, which is presented to the entire House of Representatives for a vote.
The sources of statutory tax law are legislative, administrative, and judicial. Legislative sources include the U.S. Constitution, U.S. statutes, and tax treaties. Judicial sources include opinions from federal courts that hear tax cases, which can explain, supplement, or create new laws.
