REPRESENTATION - TAX LAW Flashcards
The Authoritative Hierarchy of Tax law
RC
TR
RR
RP
Tax laws are not always clear and may not provide a definitive answer or guidance to all issues.
So, there are multiple sources of guidance to understand what is appropriate in a certain situation.
The IRC Internal Revenue Code (01) is at the top.
Then, the code is further interpreted administratively by
- Treasury Regulations (02),
- Revenue Rulings (03), and
- Revenue Procedures (03 too)
Challenging Tax Law
The IRS must follow their rulings; however, a taxpayer may contest them in tax court.
If laws are in dispute or need clarification, the tax court may hear the case to clarify the intent of the code.
Both JUDICIAL (court) and ADMINISTRATIVE interpretations of the code may be cited as precedent for future arguments in similar cases.
Internal Revenue Code (IRC) (Top Level 01)
Federal tax law begins with the Internal Revenue Code (IRC), enacted by Congress in Title 26 of the U.S. Code (26 USC.)
The Internal Revenue Code is the BASIS FOR ALL TAX LAW. Changes to tax law are proposed in the form of a “tax bill” and voted on in the U.S. House and Senate.
If the legislature approves the tax bill and the president signs it into law, the code is amended to include the new law.
The IRC is divided into “Sections”
Treasury Regulations (2nd Level)
TREASURY REGULATIONS interpret and give directions on complying with the law.
In its role in administering the tax laws enacted by the U.S. Congress, the IRS must take the specifics of these laws and translate them into detailed regulations, rules, and procedures.
TREASURY REGULATIONS pick up where the Internal Revenue Code leaves off by providing the official interpretation of (guidance for) the IRC by the U.S. Department of the Treasury.
A regulation is issued to provide guidance for new legislation or to address issues that arise with respect to existing Internal Revenue Code sections.
Consider these as an “IN-OTHER-WORDS.” Adding detail to the code.
Treasury Regulations are published in the FEDERAL REGISTER.
Revenue Rulings (3rd Level, Part 01)
A REVENUE RULING is an official interpretation by the IRS of the Internal Revenue Code, related statutes, tax treaties, and regulations.
Rulings indicate how the law applies to a specific set of facts.
This extra guidance is published in the “Internal Revenue Bulletin”
Revenue Procedures (3rd Level, Part 02)
A REVENUE PROCEDURE is an official statement of a procedure that affects the rights or duties of taxpayers or other members of the public under the IRC, related statutes, tax treaties, and regulations and that should be a matter of public knowledge.
The IRS also publishes Revenue Procedures in the Internal REVENUE BULLETIN.
These are very SPECIFIC instruction by the IRS.
Private Letter Rulings (PLR) (3rd Level, Part 03)
The IRS “Office of Chief Counsel” may issue a Private Letter Ruling (PLR) to a taxpayer, which is a written statement that interprets and applies tax laws to the taxpayer’s specific set of facts.
The IRS issues a PLR to establish with certainty the federal tax consequences of a particular transaction before the transaction is consummated or before the taxpayer files a return.
Written in RESPONSE to a written request by a TP. The IRS is bound by what is written in the PLR, as long as the TPs request was both accurate and complete. If not, then the IRS can’t be bound by the PLR.
Technical Advice Memorandum (TAM) (3rd Level, Part 04)
A Technical Advice Memorandum, or TAM, is guidance furnished by the “Office of Chief Counsel” upon the request of an IRS Director or an Area Director for appeals, in response to technical or procedural questions that develop during a proceeding.
The IRS asking for clarification. This is the IRS ruling on a specific issue in a specific case. A TAM is NOT broadly applicable.
IRS Forms, Instructions and Publications (3rd Level, Part 05)
IRS Forms’ instructions and IRS publications offer instructions in plain English to assist taxpayers with the preparation of returns.
READ THESE
Case Law (The Hierarchy level of Case Law is dependent on the court level it is decided.)
Case law is born out of the decisions of the courts interpreting the law.
A decision from the Supreme Court is higher up the chain, compared to rulings of lower courts.
Once a court arrives at a decision, a justice (or several justices) will write an opinion. This judicial decision may be cited as precedent, and any court lower in the pecking order must follow the decision as law.
The IRS can decide to follow or not follow a court ruling. But it is still precedent.
IRS Notices (4th Level, low level)
An IRS Notice is a PUBLIC PRONOUNCEMENT that may contain guidance involving substantive interpretations of the Internal Revenue Code or other provisions of the law.
This tells you something is coming, but the code and guidance is not yet developed. LOWEST LEVEL.
Treasury Dept. Circular 230 (Also low level, likely Level 04)
CIRCULAR 230 contains regulations governing the practice of attorneys, certified public accountants, enrolled agents, enrolled actuaries, enrolled retirement plan agents, and appraisers before the Internal Revenue Service.
The regulations in Circular 230 are found in the Code of Federal Regulations at 31 CFR 10.
Internal Revenue Bulletin
The INTERNAL REVENUE BULLETIN (IRB) is the authoritative instrument for announcing OFFICIAL RULINGS and procedures of the IRS and for publishing Treasury Decisions, Executive Orders, Tax Conventions, legislation, court decisions, and other items of general interest.
Internal Revenue Manual
The INTERNAL REVENUE MANUAL (IRM) is the single official source for IRS policies, directives, guidelines, procedures, and delegations of authority in the IRS.
