Income Tax in The United States - Sources of U.S. Income Tax Laws

Sources of U.S. Income Tax Laws

United States income tax law comes from a number of sources. These sources have been divided into three tiers as follows:

• Tier 1
  • United States Constitution
  • Internal Revenue Code (IRC) (legislative authority, written by the United States Congress through legislation)
  • Treasury regulations
  • Federal court opinions (judicial authority, written by courts as interpretation of legislation)
  • Treaties (executive authority, written in conjunction with other countries)
• Tier 2
  • Agency interpretative regulations (executive authority, written by the Internal Revenue Service (IRS) and Department of the Treasury), including:
    • Final, Temporary and Proposed Regulations promulgated under IRC § 7805;
    • Treasury Notices and Announcements;
  • Public Administrative Rulings (IRS Revenue Rulings, which provide informal guidance on specific questions and are binding on all taxpayers)
• Tier 3
  • Legislative History
  • Private Administrative Rulings (private parties may approach the IRS directly and ask for a Private Letter Ruling on a specific issue – these rulings are binding only on the requesting taxpayer).

Where conflicts exist between various sources of tax authority, an authority in Tier 1 outweighs an authority in Tier 2 or 3. Similarly, an authority in Tier 2 outweighs an authority in Tier 3. Where conflicts exist between two authorities in the same tier, the "last-in-time rule" is applied. As the name implies, the "last-in-time rule" states that the authority that was issued later in time is controlling.

Regulations and case law serve to interpret the statutes. Additionally, various sources of law attempt to do the same thing. Revenue Rulings, for example, serves as an interpretation of how the statutes apply to a very specific set of facts. Treaties serve in an international realm.