Exam 1 AC 593 Tax Law: Primary Authorities, Administrative Regulations, and Court Procedures

Three main statutory primary authorities

Constitution, Internal Revenue Code, and Tax Treaties.

Power of the 16th Amendment

To lay and collect taxes on income, from whatever source derived.

IRC §7701

It contains definitions for the terms of tax law. These definitions can be superseded by other Code sections.

Why is the Capital "A" used in IRC code sections?

To avoid duplication and allow placement of new sections in the most desirable location.

When Tax Legislation is passed, where does it originate?

In the House of Representatives, under the Ways and Means Committee.

After the Tax Legislation (bill) passes through the House, where does it go next?

The Senate, in the Senate Finance Committee

What is the Senate committee for Tax Legislation?

The Senate Finance Committee.

Committee Reports

Legislative intent behind a bill; they are primary authority and precedential before regulations are issued.

What happens when there are different versions of a bill between the Senate and House?

The Joint Committee on Taxation (JCT) reconciles differences into a compromise bill, which must pass both chambers.

Committee Reports vs. JCT Blue Book

Committee Reports = precedential authority.

Blue Book = not precedential (U.S. v. Woods).

What is the purpose of budget reconciliation?

To bypass the filibuster (50 vs. 60 votes). Tax laws passed this way cannot raise the deficit beyond 10 years → sunsetting provisions.

Negotiation and ratification of tax treaties:

Treasury negotiates; Senate ratifies with a 2/3 majority.

Primary purpose of tax treaties

Mitigate double taxation.

Conventions

The treaties themselves

Protocols

Amendments to treaties.

What are Treasury Technical Explanations?

Guidance documents accompanying treaties and protocols.

What are the issues covered in treaties?

Tax treatment of a citizen of one country earning income in another.

How are conflicts between the IRS and Treaty Provisions resolved?

The more recent of the two legislations is deemed correct.

Where are Regulations issued from?

Treasury Department, under the Executive Branch.

Advance Notice of Proposed Rulemaking

Public notice that Treasury is considering issuing regulations.

Notice of Proposed Rulemaking

Contains proposed regulations, which have no binding weight and are intended to solicit comments.

Is there any precedential weight behind Proposed Regulations?

No, they are not binding but show IRS/Treasury interpretation.

Importance of preambles in Proposed Regulations:

They explain received comments and whether they were incorporated.

How are Final Regulations issued?

Through a Treasury Decision (TD).

Temporary Regulations

They have the same weight as final regs but expire in 3 years; must also be issued as proposed regs.

General (Interpretive) vs. Legislative Regulations

General: under IRS authority to interpret the statute.

Legislative: issued under express congressional direction.

Significance of Mayo Foundation case

Ruled that General and Legislative regulations have the same technical weight. Prior, legislative regulations were seen as more important.

What is the general rule for the effective date of Regulations?

On release date in the Federal Register (after TD).

When can Regulations be retroactive?

1) Issued within 18 months of statute

2) to prevent taxpayer abuse

3) to correct procedural defect

4) when Congress directs retroactivity.

Importance if recent Corner Post case

Statute of Limitations to challenge a regulation begins when the party is damaged/injured.

Importance of Loper Bright case

Courts may rely on regs to interpret ambiguous statutes but are not required to.

What are Revenue Rulings?

IRS position on a taxpayer transaction. Precedential; highest sub-regulatory authority.

What are Revenue Procedures?

Outline how taxpayers apply IRS rules/procedures. Precedential, similar weight to Revenue Rulings.

What are the 3 types of Letter Rulings?

1. Private Letter Rulings

2. Technical Advice Memorandums

3. Determination Letters

What are Private Letter Rulings?

IRS response to a taxpayer request on a proposed transaction. Binding only for that taxpayer.

What are Technical Advice Memoranda (TAMs)?

IRS response to an agent's request during an audit. Only binding for that taxpayer.

What are Determination Letters?

IRS guidance for a taxpayer after a closed transaction. Only binding for that taxpayer.

Difference between Announcements and Notices

Announcements = short-term guidance.

Notices = substantive aspects of law.

Both precedential.

What are Chief Counsel Memoranda?

IRS legal interpretations, used internally.

What about IRS Publications, forms, instructions?

No precedential authority (informational only; similar to a BNA portfolio).

IRS Acquiescence vs. Nonacquiescence?

Acquiescence = IRS applies court decision broadly.

Nonacquiescence = IRS rejects it outside that case.

What are the 3 federal trial courts for tax cases?

Tax Court, District Courts, Court of Federal Claims.

Which courts allow jury trials?

District Court only.

Which courts have tax-specialist judges?

Tax Court = specialists; District and Federal Claims = generalists.

In which courts must tax be paid first?

District Court and Court of Federal Claims (pay, then sue for refund). Not in Tax Court.

Appellate paths for Tax Court & District Court?

Geographic Circuit Court of Appeals

Appellate paths for Federal Claims Court?

Court of Appeals for the Federal Circuit.

When in Tax Court, how much of the taxpayer's tax return is open examination?

Entire return is open for examination, not just contested items.

Memorandum Opinion

Routine and straightforward aspects of tax law; precedential.

Regular Opinion

Novel/important law issues; precedential.

What are the limitations on Small Tax Court cases?

1. <$50k; informal

2. No elaborate briefs

3. Cannot be appealed

Summary Opinion

Non-precedential rulings from Small Claims Tax Court

What is the Golsen Rule?

Tax Court must follow precedent of the taxpayer's Circuit Court of Appeals when statute is ambiguous.

How many judges typically hear appellate cases?

Three.

What is the certiorari process in the Supreme Court?

Parties apply for cert; which the Supreme Court rarely grants. Denial does not mean that the ruling in the lower court is affirmed.

What are case headnotes and syllabi?

Editorial summaries of decisions; not official opinions.

What are the typical parts of a case brief?

Citation, Issues, Facts, Holding, and Analysis.