United States Internal Revenue Code

United States Internal Revenue Code
Short title	Internal Revenue Code
Legislature	United States Congress
Citation	26, 1 et seq.
Enacted by	73rd United States Congress
Date enacted	1939 (first codification)
Date amended	Continuously, most recently by the Tax Cuts and Jobs Act of 2017
Administered by	Internal Revenue Service
Related legislation	Revenue Act of 1913, Internal Revenue Code of 1954, Tax Reform Act of 1986

United States Internal Revenue Code. It is the comprehensive federal statutory tax law of the United States, compiled as Title 26 of the United States Code. The code is administered and enforced by the Internal Revenue Service, a bureau of the Department of the Treasury. Its provisions govern all federal taxation, including income tax, estate tax, gift tax, and excise taxes, forming the legal foundation for the federal government's revenue.

History and development

The origins of modern federal tax law trace to the Revenue Act of 1913, enacted following the ratification of the Sixteenth Amendment to the United States Constitution. Prior to this, federal revenue relied heavily on tariffs and excise taxes. The first official codification was enacted by the 73rd United States Congress in 1939, organized by the Joint Committee on Internal Revenue Taxation. A major reorganization, the Internal Revenue Code of 1954, was passed by the 83rd United States Congress, introducing significant structural changes. This was subsequently replaced by the Internal Revenue Code of 1986, enacted through the landmark Tax Reform Act of 1986 under President Ronald Reagan, which dramatically lowered rates and broadened the tax base.

Structure and organization

The code is arranged in a hierarchical structure of subtitles, chapters, subchapters, parts, and sections. Major subtitles include Subtitle A for Income Taxes, Subtitle B for Estate and Gift Taxes, and Subtitle C for Employment Taxes. Key chapters cover topics like Normal Tax and Surtax, and the Alternative Minimum Tax. The foundational Internal Revenue Code Section 1 imposes the tax on taxable income, while other pivotal sections include Internal Revenue Code Section 61 defining gross income and Internal Revenue Code Section 162 governing trade or business expense deductions.

Major provisions and tax law

Core provisions establish the framework for calculating federal income tax liability, starting with gross income and proceeding through adjusted gross income to taxable income. The code details rules for capital gains and capital losses, depreciation under the Modified Accelerated Cost Recovery System, and various tax credits like the Earned Income Tax Credit and Child Tax Credit. It governs specialized entities including S corporations, partnerships, and REITs. International provisions, such as those for Controlled Foreign Corporations and the Global Intangible Low-Taxed Income regime, address cross-border taxation.

Administration and enforcement

The Internal Revenue Service, under the direction of the Commissioner of Internal Revenue, is the primary administrative agency. The Department of the Treasury, through the Office of Tax Policy, also plays a key role in interpretation. The Tax Court of the United States is a specialized forum for resolving disputes prior to payment, while the United States District Courts and the United States Court of Federal Claims hear refund suits. Enforcement tools include tax liens, levies, and criminal prosecution for tax evasion, with guidance provided in official publications like the Internal Revenue Bulletin.

Legislative process and amendments

All changes originate as bills from the House Committee on Ways and Means or the Senate Committee on Finance. Major amendments are often enacted through large-scale acts, such as the Economic Recovery Tax Act of 1981, the Tax Reform Act of 1986, the American Taxpayer Relief Act of 2012, and the Tax Cuts and Jobs Act of 2017. Technical corrections are frequently made via subsequent acts, and the Joint Committee on Taxation provides nonpartisan analysis. Revenue bills must originate in the House of Representatives, as stipulated by the U.S. Constitution.

Impact and criticism

The code profoundly influences the U.S. economy, individual behavior, and corporate decision-making through its incentives and penalties. It is frequently criticized for its extreme complexity, leading to high tax compliance costs for individuals and businesses, as noted by groups like the Tax Foundation. Debates persist over the equity of its progressive tax structure, the efficiency of its numerous tax expenditures and loopholes, and the economic effects of provisions like the deduction for state and local taxes. Ongoing reform efforts aim to balance simplicity, fairness, and revenue generation.

Category:United States federal taxation legislation Category:1939 in American law