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Tax Law

An Overview On the Joys of Federal Taxation

Main Sources of Federal Tax Law - A Primer for the Rest of Us

The US Constitution

  • Article I, Section 8
  • 16th Amendment

 

Tax Code/Internal Revenue Code (IRC) - Title 26 of the USC.

  • There are prior versions of the IRC, namely 1938, 1954, and 1986.  You'll see them referenced as 'IRC of 1954,' for example.  If you just see IRC listed, assume it's the current version.

 

Tax Regulations (Treasury Regs) - Title 26 CFR (See what they did there?  Good job, Government). 

  • They are issued by both the IRS and the Treasury Department, so that's fun.  Proposed and final rules and regs are printed under the heading of 'Treasury Decisions' (TD). 

 

Cases

  • Whoo boy, here we go.  In order of precedential value:
    • United States Supreme Court
    • Federal appellate courts (aka, the Circuit Courts)
    • US federal district courts
    • Tax Court.  They issue three types of opinion:
      • Regular/Formal Opinions.  Also called TC Opinions or Division Opinions.  This is the kind of judicial opinion we're used to.  Published in the Tax Court Reports, they are binding, precedential, and appealable. 
      • Memorandum (TC Memos or Memo Opinions).  Unpublished, but are still cited.
      • Summary decisions.  Kind of like the 'small claims court' of tax law.  Involves controversies below $50,000.  Not precedential.

 

Revenue Rulings (Rev. Rul.):   This is the IRS' interpretation of how the law applies in certain factual scenarios.  This is binding on everyone in that particular factual scenario.  Published in the IRB.

 

Treasury Decisions (TD).  Weirdly just contains the text of a final or temporary regulation.  Do you feel like it's a misnomer?  Me too.

 

Private Letter Rulings (PLR).  Also known as a "Letter Ruling."  This is how PLRs go:

  • Taxpayer/Attorney for the Taxpayer:  "Hey, IRS, me/my company/my client is thinking about doing this certain tax thing because we have this very specific situation.  Uh, how do you feel about that?  Would you, er, be mad at us?"
  • IRS's response:  "Thanks for asking.  We actually have a LOT of feelings about that.  Here they are…"
    • Then, if everything in the taxpayer's letter is correct or actually happens, that taxpayer is bound by the IRS' PLR.
    • THESE ARE NOT PRECEDENTIAL.  They are NOT binding on other taxpayers.  However, they're excellent sources of IRS thinking and are persuasive. 

 

Technical Advice Memoranda (TAM)

  • These are written by the Office of Chief Counsel.  They're triggered by an IRS director, appeals, or questions that get raised in a proceeding. 
  • TAMs are usually (but not always) made public after redacting identifying information. 
  • TAMs ARE binding on everyone.  It's a final determination of the IRS but they're limited to the (usually) small issue at hand.

 

Notice:  public pronouncements from the IRS.  Usually has substantive interpretations of tax law.  Includes things like "Heads up, everyone!  We're going to be doing this new tax thing in a couple years!"

 

Announcement:  sort of like a Notice's younger sibling?  They don't have any substantive interpretations.  Includes things like, "Don't forget to file your taxes!  Love, the IRS."  And, "Reminder!  We're doing that new tax thing pretty soon, everyone!"  They have "short term value."

 

Actions on Decisions (AOD):  The IRS describes it best:   "An Action on Decision (AOD) is a formal memorandum prepared by the IRS Office of Chief Counsel that announces the future litigation position the IRS will take with regard to the court decision addressed by the AOD.

 

Internal Revenue Manual (IRM):  Again, from the IRS itself:  "The IRM is the source of instructions to IRS staff, and includes policies, delegated authorities, procedures, instructions, and guidelines related to the operation of the Service." 

 

 

IRS Forms.  You know what these are!  They absorb your tears from all of the math involved.

 

 

Is that a lot?  Yes, it really is.  AND I'm not even going into the sources of tax law that the IRS has abandoned.