Question

What is the most important aspect of legislative primary authority for tax research? Also, discuss whether or not we have to always follow the administrative authority that comes from the Treasury Dept/IRS.

Answer 1

Tax Law Authority There are three basic types of authoritative documents: statutory, administrative and judicial. A. Statutory Authority (1) The Internal Revenue Code The Internal Revenue Code is the statutory foundation of all federal tax authority, except for occasional uncodified provisions and certain international issues covered in tax treaties with foreign countries. Prior to 1939, each individual revenue act passed by Congress amounted to a complete reenactment of the entire tax law. In 1939, however, all federal tax law was consolidated into Title 26 of the United States Code as the Internal Revenue Code of 1939, and subsequent revenue acts were used to amend the 1939 Code. By 1954, the growth of federal taxation led Congress to completely revise the 1939 Code. The Internal Revenue Code of 1954 was that revision. Despite frequent amendments, the designation "1954" remained fixed with the Code until the Tax Reform Act of 1986 replaced it with "1986." Reading the Code can, on occasion, become difficult because of references to "subsections," "paragraphs," "subparagraphs," etc. The various Code divisions of IRC 170(b)(1)(A)(vi) are set forth below for illustrative purposes: Title 26 Subtitle A Chapter 1 Subchapter B Part VI Subpart None Section 170 Subsection (b) Paragraph (1) Subparagraph (A) Clause (vi) Inferior Clause None (An inferior clause would be shown as (I), (II), etc., in italics) Section numbers are of particular importance since they run consecutively through the entire Code, thus allowing a particular provision to be identified by section number alone. (2) The Tax Legislative Process To understand statutory tax law and the committee reports that aid in its interpretation, it is necessary to be familiar with the process by which a tax bill becomes law. By virtue of Article I, section 7, of the Constitution, all revenue bills must originate in the House of Representatives. As a practical matter, however, much tax law actually originates in the Senate and is attached to House legislation in the form of amendments. Legislative tax proposals are frequently received from the President as well as from members of Congress. Before any tax bill can be considered by the entire membership of the House, it must first clear the Ways and Means Committee. In the case of major bills, public hearings are scheduled where anyone can request permission to present views. By tradition, the first witness during these hearings is usually the Secretary of the Treasury, or his representative such as the Assistant Secretary for Tax Policy or the Tax Legislative Counsel, representing the President and his administration. Upon conclusion of the hearings, the committee goes into executive session from which the public is excluded and, after tentative conclusions have been reached, prepares the House Ways and Means Committee report. The report includes the proposed bill drafted in legislative language, an assessment of its effect on revenue and a general explanation of the provisions in the bill. Since the report is the only written document that details the reasons for the committee's actions, it is useful in interpreting Congressional intention underlying those provisions of the bill eventually passed into law. With the approval of the Rules Committee of the House, tax bills are sometimes debated under a "closed rule," whereby amendments cannot be made on the floor of the House unless approved by the Ways and Means Committee. When the debate is not under a closed rule, however, floor amendments are permitted. Insight into amended portions of tax bills can sometimes be obtained by consulting the transcripts of the floor debate as reported in the Congressional Record. After approval by the House, a tax bill is sent to the Senate where it is referred to the Senate Finance Committee. If it is a major bill, the Finance Committee schedules its own hearings and prepares its own committee report. Since the Senate version of a bill will often differ substantially from the House bill, the Senate Finance Committee report is also of importance for tax research purposes. Since the Senate has no closed rule, amendments on the floor are more common than on the floor of the House. Again, it may be necessary to refer to the Congressional Record to determine the intent of any amendments. If the House and Senate pass different versions of the same bill, which is not uncommon, the Joint Conference Committee on Taxation, consisting of selected members of both Houses of Congress, must produce a compromise. Like the House Ways and Means Committee and the Senate Finance Committee, the Conference Committee may prepare its own committee report, concentrating on the areas of disagreement. In addition, statements (or "colloquies") made on the floor of either House prior to the final vote on the conference report are entered in the Congressional Record and provide additional legislative history. After approval of the conference bill by both the House and the Senate, the bill is sent to the President for either approval or veto. If signed, the bill becomes law. If vetoed, it is returned to the Congress for a possible override, which requires a two/thirds majority in both Houses. However passed, the result is a new or changed portion of the Internal Revenue Code. Committee reports can be obtained in a number of ways. The official report of each committee is published by the Government Printing Office. The reports are also reprinted in the weekly Internal Revenue Bulletin (I.R.B.) and, subsequently, in the semi-annual Cumulative Bulletin (C.B.). In addition, major revenue acts such as the Tax Reform Act of 1986 are published with full or partial texts of the accompanying committee reports by commercial publishers such as Commerce Clearing House, Inc. (CCH) and Prentice-Hall, Inc

The Code, Treasury Regulations and published revenue rulings state the position of the Service and are the prime authority for Service personnel. (2) Court decisions are some authority. Generally, the higher the court, the greater the weight of the precedent. In the interest of achieving uniform application of the tax laws, the Service is under no obligation to follow, on a nationwide basis, the decisions of any court other than the Supreme Court. (3) Private Letter Rulings and G.C.M.s apply only to the particular taxpayer involved. IRC 6110 expressly prohibits their use as legal precedents by either the Service or taxpayers.