Tax Law

Question 1

Origin

Answer 1

House Ways and Means in House of Reps –> voted in House –> Senate Finance Committee –> US Senate vote –> President (if vetoed, congress can override but need 2/3 from both)

Question 2

Tax Reasearch

Answer 2

Committee Reports that explain provision of proposed legislation
- valuable tool in tax research
- explain intent

Question 3

Authority

Answer 3

1913 - 16th Amendment gave Congress the ability to tax US citizens and US businesses

• Primary Authority: Constitution
• Legislative Authority: Congress
• Administrative Authority: IRS & Treasury Regulations
• Judicial Authority: Tax Court Cases
• Secondary Authority: IRS Publications, CPA journal and other tax publications written by authors in professional tax journals

Question 4

Administrative Sources of tax law

Answer 4

Treasury Regulation - PRIMARY

LIP - Legislative, Interpretive and Procedural

Legislative: Treasury dept fills in the blanks deliberately left by congress on regulation.
- Highest source of administrative regulation

Interpretive: Treasury Dept to interpret IRS Code and make it easier for tax preparers and Tax Advisors to understand and apply by issuing INTERPRETIVE REGULATIONS

Procedural: When a return should be filed and how

Final Regulation: full effect of the law and we use them everyday

Temporary: full effect of the law but only for 3 years and then they expire
- taxpayers need guidance on it quickly

Proposed: no effect of law, may be available for comment by IRS and tax preparers to provide feedback

Revenue Rulings:
- administrative sources of tax authority
- specific scenarios and the IRS gives its opinion on given set of facts and can be relied on and cited
- less authority than treasury

Private Letter Ruling:
- more specific than revenue ruling
- issued at the request of a taxpayer who requests a decision for a transaction that has not yet occurred
- IRS agrees or disagrees with what the tax payer wants, or not respond
- binding ONLY on tax payer that requested it
- IRS would publish so that others can see what IRS would rule on something
- can be used as “substantial authority”