Federal Income Tax Law

Federal income tax law governs the taxation of a person’s or entity’s income regardless of its source. Examples are income from services, property, increases in money (e.g., capital gains) and cancellation or discharge of debt.

What comprises federal income tax law?

Internal Revenue Code: A large and complex body of law that is amended frequently.

Internal Revenue Service Regulations: The Treasury Department’s interpretation of the Internal Revenue Code. Once published and adopted, these official interpretations have lawful effect.

Revenue Rulings: The IRS’ published stated position on a particular set of facts. For judges, these rulings are persuasive authority rather than binding.

Letter Ruling: An IRS agent’s position to a taxpayer on a particular set of facts. This binds the IRS but is only persuasive authority for judges.

Case Law: The court system further shapes the structure of this body of law. The main court venues available for taxpayers to address issues are:

• Tax Court: Jurisdiction for an action in this court exists in Washington, D.C., and any appeals are to the U.S. Court of Appeals. The taxpayer may sue before paying any tax.
• Federal District Court: Jurisdiction for an action in this court exists in the taxpayer’s district and allows for jury trial. The taxpayer must pay tax first and then sue for a refund.
• Claims Court: Jurisdiction for an action in this court exists anywhere in the U.S.; any appeals are to the U.S. Court of Appeals for the Federal Circuit. The taxpayer must pay tax first and then sue for a refund.

Last update: Sept. 26, 2008