CHAPTER TWO

THE INTERNAL REVENUE CODE

EXPECTED LEARNING OUTCOMES

Appreciate and understand:• The significance of the Internal

Revenue Code • The legislative process• How to find legislative history• How to locate and analyze Code

provisions• How to properly cite the Code

Sources of tax law

Sixteenth Amendment ratified in 1913 created income tax.

Internal Revenue Code was created in 1939 and subsequently revised in 1954 and 1986.

Statutory authority = Internal Revenue Code (Legislative)

Administrative authority (Executive) Judicial authority (Judicial)

THE SIGNIFICANCE OF THE INTERNAL REVENUE CODE

Compilation of tax statutes enacted by Congress

THE LEGISLATIVE PROCESS

P re s id e n t

B o th H o u s e s

C o n fe re n c e C o m m itte e

S e n a te

S e n a te F in a n c e C o m m itte e

H o u s e o f R e p re s e n ta tive s

H o u s e W a ys a nd M e a n s C o m m itte e

FINDING LEGISLATIVE HISTORY

Each act is a “Public Law” and given a designated number – pg. 54

Recent public laws (CCH and RIA) Older legislation

• Cumulative Bulletins• BNA’s Primary Sources

Joint Committee On Taxation

Created by the IRC Works with W&M committee and SFC

committee – Brings tax law knowledge to the process.

Provide explanations of the law: Blue Book

Do not confuse with conference committee in the legislative process

ORGANIZATION OF THE CODE

Title 26 of the United States Code Organized into segments See Illustration on pg. 58 Citation of Code: Sec. #, subsection,

paragraph, subparagraph, clause: Sec 162(g) (1)(A)(i) – see pg. 62-63.

Flush language---

LOCATING RELEVANT PROVISIONS

Table of Contents – reference noted is to Code Section

Index Knowledge of pertinent provision Reference from a secondary

source

Analyzing the Code

Logical skimming Terms of art: special meaning when using the

IRC• Determining the tax context and relative importance

of words.• IRC Sec 7701 – useful definitions

Connecting words: or v. and to assess if criteria are met.

Measuring words: less than, equal to, greater than etc.

Use of male pronoun: used for brevity

Analyzing the Code(Continued)

Limiting language: For purposes of a) this title v. b) this section

Pinballing: reference to other sections rather than repeat of provisions

Sunset provisions: time limitation of section, requiring future reenactment.

Transition provisions: safe harbors during pending legislation.

Historical notes: insight into previous versions of the code section.

Accessing the Code

Print/Paper CD-ROM Modem Web