CHAPTER TWO
THE INTERNAL
REVENUE CODE
EXPECTED LEARNING
OUTCOMES
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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
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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
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Compilation of tax statutes
enacted by Congress
THE LEGISLATIVE
PROCESS
House Ways and Means Committee
House of Representatives
Senate Finance Committee
Senate
Conference Committee
Both Houses
President
FINDING LEGISLATIVE
HISTORY
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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
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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
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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
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Table of Contents – reference
noted is to Code Section
Index
Knowledge of pertinent
provision
Reference from a secondary
source
Analyzing the Code
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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
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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)
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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
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Print/Paper
CD-ROM
Modem
Web