Question

1. In addition to committee reports, which are byproducts to the development of tax legislation, what other report may be of value to the tax researcher analyzing a new provision of the tax law? Why?

2. How are the subtitles of the Internal Revenue Code identified? What is generally contained in a subtitle?

3.What is the evolution of today s Internal Revenue Code.

4.How are the subtitles of the Internal Revenue Code identified? What is generally contained in a subtitle?

Answer 1

1.

TAX of compliance interest to has individuals long been in a age subject of interest to individuals in agencies charged with raising revenue (e.g., state revenue departments and the Internal Revenue Service (1RS) in the U.S.). However, this topic has recently attracted the attention of the general public as budget deficits have grown and tales of a huge, growing and un taxed underground economy have been widely publicized. In its most recent report (U.S. Department of the Treasury, 1983), the 1RS estimates that the total revenue loss to the U.S. government as a result of tax non- compliance1 was over $90 billion in 1981.

Leading multinationals often shift the ownership of their intangibles, which generate a large share of their worldwide profits, to affiliates in very low tax jurisdictions, such as Ireland and Singapore. Through complex transactions, multinationals can then shift reported profits from these jurisdictions to countries with no corporate income tax, such as Bermuda and the Cayman Islands. Typically, multinationals generate very little real economic activity—as measured by output, employment, sales, or investments in plant and equipment—in tax-free jurisdictions.

Before the 2017 Tax Cuts and Jobs Act (TCJA), US multinationals booked a disproportionate share of their profits in low-tax locations. In 2015, US multinationals reported over one-third of their overseas profits in three low-tax countries: the Netherlands, Ireland, and Bermuda (figure 1). The top 10 foreign locations of their profits, including other low-tax countries such as Luxembourg, Switzerland, Singapore, the UK Caribbean Islands, and the United Kingdom, accounted for almost three-fourths of their non-US profits.

2. The Internal Revenue Code (IRC) is part of the United States Code, which is a codification of all the federal laws of the United States. The elements of the United States Code are organized alphabetically and assigned title numbers. The Internal Revenue Code constitutes Title 26 of the United States Code.

Subtitles of the IRC are assigned a capital letter to identify them. Generally, each subtitle contains all of the tax provisions that relate to a well-defined area of the tax law. The subtitles are broken down as follows:

Subtitle	Name	Beginning Code Section Number
A.	Income Taxes	Sec. 1
B.	Estate and Gift Taxes	Sec. 2001
C.	Employment Taxes	Sec. 3101
D.	Miscellaneous Excise Taxes	Sec. 4001
E.	Alcohol; Tobacco; Miscellaneous excise Taxes	Sec. 5001
F.	Procedure and Administration	Sec. 6001
G.	Joint Committee on Taxation	Sec. 8001
H.	Presidential Election Campaign Financing	Sec. 9001
I.	Trust Funds	Sec. 9501

Each subtitle contains a number of chapters, numbered, although not continuously, from 1 through 98. These chapter numbers do not start over at each subtitle, rather they are used in ascending order throughout the IRC. Each chapter contains the tax provisions that relate to a more narrowly defined area of the tax law than is addressed by the subtitles.

3. Evolution of Internal revenue code

History of the Internal Revenue Code

In 1919, a committee of the U.S. House of Representatives began a project to re-codify the U.S. Statutes. The completed version—which included Title 26, the Internal Revenue Code—was published in 1926. Congress has the authority to rewrite the tax code and add items to it every year. For example, in 2015, Congress passed an appropriation bill that made the first significant changes to a section of the small business portion of the Internal Revenue Code in 30 years.

The Internal Revenue Service, founded in 1862, governs the codes in Title 26. Based in Washington, D.C., the IRS is also responsible for collecting taxes. The IRS is granted the right to issue fines and punishments for violations of the Internal Revenue Code.

Campaigns to Abolish the Code

The Tax Cuts and Jobs Act (TCJA) of 2017 enacted significant changes to the previous laws. However, there have also been ongoing campaigns to abolish the entire system. The two most recent bills:

In 2017, the House of Representatives Bill H.R. 29, The Tax Code Termination Act, was filed to abolish the Internal Revenue Code of 1986 by the end of 2021. The H.R. 29 bill would require Congress to approve a new federal tax system by July 4, 2021, prior to abolishing the current system.

Bill H.R. 25, the Fair Tax Act of 2017, was introduced into Congress on January 3, 2017. The bill proposes imposing a national sales tax on the use or consumption of taxable property or services in the U.S. in place of personal and corporate income tax, employment and self-employment tax, and estate and gift taxes. The proposed sales tax rate would be 23% in 2019, with adjustments to the rate made in subsequent years. The bill includes exemptions for the tax for used and intangible property, property or services purchased for business, export or investment purposes and for state government functions. The Internal Revenue Service would be disbanded entirely, with no funding for operations authorized after 2021.

The Fair Tax Act would allow U.S. residents to receive a monthly sales tax rebate, based on household size and income and all states would be responsible for administering, collecting, and remitting sales tax to the federal government. Most significantly, the bill would terminate the national sales tax if the Sixteenth Amendment (which authorizes federal income tax) is not repealed within seven years following the bill’s enactment.

The Fair Tax Act has made little progress since its introduction. The passage of the TCJA, which made significant changes in the current tax system but reaffirmed its basic structure, makes the future of the Fair Tax Act (and the Tax Care Termination Act, as well) uncertain to unlikely.

4.

The Internal Revenue Code (IRC) is part of the United States Code, which is a codification of all the federal laws of the United States. The elements of the United States Code are organized alphabetically and assigned title numbers. The Internal Revenue Code constitutes Title 26 of the United States Code.

Subtitles of the IRC are assigned a capital letter to identify them. Generally, each subtitle contains all of the tax provisions that relate to a well-defined area of the tax law. The subtitles are broken down as follows:

Subtitle	Name	Beginning Code Section Number
A.	Income Taxes	Sec. 1
B.	Estate and Gift Taxes	Sec. 2001
C.	Employment Taxes	Sec. 3101
D.	Miscellaneous Excise Taxes	Sec. 4001
E.	Alcohol; Tobacco; Miscellaneous excise Taxes	Sec. 5001
F.	Procedure and Administration	Sec. 6001
G.	Joint Committee on Taxation	Sec. 8001
H.	Presidential Election Campaign Financing	Sec. 9001
I.	Trust Funds	Sec. 9501

Each subtitle contains a number of chapters, numbered, although not continuously, from 1 through 98. These chapter numbers do not start over at each subtitle, rather they are used in ascending order throughout the IRC. Each chapter contains the tax provisions that relate to a more narrowly defined area of the tax law than is addressed by the subtitles.

3. Evolution of Internal revenue code

History of the Internal Revenue Code

In 1919, a committee of the U.S. House of Representatives began a project to re-codify the U.S. Statutes. The completed version—which included Title 26, the Internal Revenue Code—was published in 1926. Congress has the authority to rewrite the tax code and add items to it every year. For example, in 2015, Congress passed an appropriation bill that made the first significant changes to a section of the small business portion of the Internal Revenue Code in 30 years.

The Internal Revenue Service, founded in 1862, governs the codes in Title 26. Based in Washington, D.C., the IRS is also responsible for collecting taxes. The IRS is granted the right to issue fines and punishments for violations of the Internal Revenue Code.