Internal Revenue Code

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The Internal Revenue Code (or IRC; more formally, the Internal Revenue Code of 1986, as amended) is the main body of domestic statutory tax law of the United States organized topically, including laws covering the income tax (see Income tax in the United States), payroll taxes, gift taxes, estate taxes and statutory excise taxes. The Internal Revenue Code is published as Title 26 of the United States Code (USC), and is also known as the internal revenue title. Its governing authority is the Internal Revenue Service.

Genesis of tax codes in the United States

Prior to 1874, U.S. statutes (whether in tax law or other subjects) were not codified. That is, they were not set forth in one comprehensive subject matter title, but were instead contained in the various acts passed by Congress. Codifications of statutes, including tax statutes, undertaken in 1873 resulted in the Revised Statutes of the United States, approved June 22, 1874, effective for the laws in force as of December 1, 1873. Title 35 of the Revised Statutes was the internal revenue title. Another codification was undertaken in 1878.

In 1919, a committee of the U.S. House of Representatives began a project to recodify U.S. statutes which eventually resulted in a new United States Code in 1926 (including tax statutes).

Internal Revenue Code of 1939

The tax statutes were re-codified by an Act of Congress on February 10, 1939 as the "Internal Revenue Code" (later known as the "Internal Revenue Code of 1939"). The 1939 Code was published as volume 53, Part I, of the United States Statutes at Large and as title 26 of the United States Code. Subsequent permanent tax laws enacted by the United States Congress updated and amended the 1939 Code.

Internal Revenue Code of 1954/1986

On August 16, 1954, in connection with a general overhaul of the Internal Revenue Service, the IRC was greatly reorganized by Congress and expanded. Ward M. Hussey was the principal drafter of the Internal Revenue Code of 1954. The code was published in volume 68A of the United States Statutes at Large. To prevent confusion with the 1939 Code, the new version was thereafter referred to as the Internal Revenue Code of 1954 and the prior version as the Internal Revenue Code of 1939. The lettering and numbering of subtitles, sections, etc., was completely changed. For example, section 22 of the 1939 Code (defining gross income) was roughly analogous to section 61 of the 1954 Code. The 1954 Code replaced the 1939 Code as title 26 of the United States Code.

Section 2 of the Tax Reform Act of 1986 provides (in part):

(a) Redesignation of 1954 Code. - The Internal Revenue Title enacted August 16, 1954, as heretofore, hereby, or hereafter amended, may be cited as the "Internal Revenue Code of 1986".

(b) References in Laws, Etc. - Except when inappropriate, any reference in any law, Executive order, or other document -

(1) to the Internal Revenue Code of 1954 shall include a reference to the Internal Revenue Code of 1986, and

(2) to the Internal Revenue Code of 1986 shall include a reference to the provisions of law formerly known as the Internal Revenue Code of 1954.

In effect, the 1954 Code was renamed the Internal Revenue Code of 1986 by section 2 of the Tax Reform Act of 1986. The 1986 Act contained substantial amendments, but no formal re-codification. That is, the 1986 Code retained the most of the same lettering and numbering of subtitles, chapters, subchapters, parts, subparts, sections, etc. The 1986 Code, as amended from time to time (and still published as title 26 of the United States Code), retains the basic structure of the 1954 Code.

The Internal Revenue Code includes most but not all Federal tax statutes. Some tax statutes are found in other provisions of the United States Code including title 11 (related to bankruptcy) and title 28 (related to the judiciary). Further, some tax statutes are not codified at all (for example, the provisions of tax statutes that list the effective dates of Internal Revenue Code amendments).

Individual and corporate income tax

Section 1 of the Internal Revenue Code imposes the Federal income tax on the taxable income of U.S. citizens and residents, and of estates and trusts. The corporate income tax is imposed by Internal Revenue Code section 11.

Organization

Since the IRC is a part of the USC, the organization of the IRC is identical. See United States Code#Organization.

As an example, section 162(e)(2)(B)(ii) (26 U.S.C. § 162(e)(2)(B)(ii)) would be as follows:

Title 26: Internal Revenue Code

• Subtitle A: Income Taxes
  • Chapter 1: Normal Taxes and Surtaxes
    • Subchapter B: Computation of Taxable Income
      • Part VI: Itemized Deductions for Individuals and Corporations
        • Section 162: Trade or business expenses
          • Subsection (e): Denial of deduction for certain lobbying and political expenditures
            • Paragraph (2) Exception for local legislation
              • Sub-paragraph (B)
                • Clause (ii)

Subtitles

• A. Income Taxes (sections 1 through 1563)
  As a further example, here are the chapters of this subtitle:
  • Chapter 1—NORMAL TAXES AND SURTAXES (sections 1 through 1400L)[1]
  • Chapter 2—TAX ON SELF-EMPLOYMENT INCOME (sections 1401 through 1403)[2]
  • Chapter 3—WITHHOLDING OF TAX ON NONRESIDENT ALIENS AND FOREIGN CORPORATIONS (sections 1441 through 1464)[3]
  • Chapter 4—Repealed
  • Chapter 5—Repealed
  • Chapter 6—CONSOLIDATED RETURNS (sections 1501 through 1563)[4]

• B. Estate and Gift Taxes (sections 2001 through 2704)
• C. Employment Taxes (sections 3101 through 3510)
• D. Miscellaneous Excise Taxes (sections 4001 through 5000)
• E. Alcohol, Tobacco and Certain Other Excise Taxes (sections 5001 through 5891)
• F. Procedure and Administration (sections 6001 through 7874)
• G. The Joint Committee on Taxation (sections 8001 through 8023)
• H. Financing of Presidential Campaigns (sections 9001 through 9042)
• I. Trust Fund Code (sections 9500 through 9602)
• J. Coal Industry Health Benefits (sections 9701 through 9722)
• K. Group Health Plan Portability, Access, and Renewability Requirements (sections 9801 through 9833)

List of commonly-referenced sections

All of these examples are from Chapter 1 (Normal Taxes and Surtaxes) of Subtitle A (Income Taxes)

(key: §="section", §§="sections")

Title 26 - Internal Revenue Code

• Subtitle A - Income Taxes (§§ 1-1563)
  • Chapter 1 - Normal Taxes and Surtaxes (§§ 1-1400L)
    • Subchapter A - Determination of Tax Liability (§§ 1-59)
      • Part I - Tax on Individuals (§§ 1-59)
        • Section 1 - Tax imposed
        • Section 41 - Research & Experimentation Tax Credit
    • Subchapter B - Computation of Taxable Income (§§ 61-291)
      • Part I—Definition of Gross Income, Adjusted Gross Income, Taxable Income, Etc.
        • Section 61 - Gross income defined
        • Section 63 - Taxable income defined
      • Part III—Items Specifically Excluded from Gross Income
        • Section 132(a) - Fringe benefits excluded from gross income
      • Part VI - Itemized Deductions for Individuals and Corporations (§§ 161-198)
        • Section 179 - Election to expense certain depreciable business assets (26 U.S.C. § 179)
        • Section 183 - Activities Not Engaged in for Profit (26 U.S.C. § 183)
    • Subchapter C - Corporate Distributions and Adjustments (§§ 301-385)
      • Part III - Corporate Organizations and Reorganizations (§§ 351-368)
        • Subpart A - Effects on Recipients (§ 351)
          • Section 351 - Transfer to Corporation controlled by transferor (26 U.S.C. § 351)
        • Subpart B - Effects on Shareholders and Security Holders (§§ 354-358)
          • Section 355 - Corporate divisions (26 U.S.C. § 355)
        • Subpart D - Special Rule: Definitions (§§ 367-368)
          • Section 368 - Taxfree reorganizations (i.e. takeovers, mergers) (26 U.S.C. § 368)
    • Subchapter D - Deferred Compensation, Etc. (§§ 401-425)
      • Part I - Pension, Profit-sharing, Stock Bonus Plas, etc. (§§ 401-420)
        • Subpart A - General Rule (§§ 401-409)
          • Section 401 - Qualified pension, profit-sharing, and stock bonus plans
            • paragraph (a) ("401(a)") - employer-sponsored retirement plan for employees of state and local governments and certain tax-exempt entities (26 U.S.C. § 401(a))
            • paragraph (k) ("401(k)")- employer-sponsored retirement plan (26 U.S.C. § 401(k))
          • Section 402A - "Roth 401(k)" (26 U.S.C. § 402A)
          • Section 403 - Taxation of employee annuities
            • paragraph (b) ("403(b)") - employer-sponsored retirement plan at non-profit organizations (26 U.S.C. § 403(b))
          • Section 408 - Individual Retirement Accounts (26 U.S.C. § 408)
          • Section 408A - Roth IRAs (26 U.S.C. § 408A)
          • Section 409A - The Enron provisions on deferred compensation (26 U.S.C. § 409A)
    • Subchapter E - Accounting Periods and Methods of Accounting (§§ 441-483)
      • Part II - Methods of Accounting (§§ 446-475)
        • Subpart A - Methods of Accounting in General (§§ 446-448)
        • Subpart B - Taxable Year for Which Items of Gross Income Included (§§ 451-460)
          • Section 457 - retirement plan for governmental and certain non governmental employers (26 U.S.C. § 457)
        • Subpart D - Inventories
          • Section 475 - Mark to market accounting method for dealers in securities
    • Subchapter F - Exempt Organizations (§§ 501-530)
      • Part I - General Rule (§§ 501-505)
        • Section 501 - Exemption from tax on corporations, certain trusts, etc. (26 U.S.C. § 501)
          • paragraph (c) ("501(c)") - List of exempt organizations (26 U.S.C. § 501(c))
            • subparagraph (1) ("501(c)(1)") - corporations organized under Acts of Congress such as Federal Credit Unions (26 U.S.C. § 501(c)(1))
            • subparagraph (2) ("501(c)(2)") - title-holding corporations for exempt organizations (26 U.S.C. § 501(c)(2))
            • subparagraph (3) ("501(c)(3)") - charitable, non-profit, religious, and educational organizations (26 U.S.C. § 501(c)(3))
            • subparagraph (4) ("501(c)(4)") - political education organizations (26 U.S.C. § 501(c)(4))
            • subparagraph (6) ("501(c)(6)") - business leagues and chambers of commerce (26 U.S.C. § 501(c)(6))
            • subparagraph (7) ("501(c)(7)") - recreational clubs (26 U.S.C. § 501(c)(7))
      • Part VI - Political Organizations (§ 527)
        • Section 527 - political advocacy groups (26 U.S.C. § 527)
      • Part VIII - Higher Education Savings Entities (§§ 529-530)
        • Section 529 - Qualified tuition programs (26 U.S.C. § 529)
        • Section 530 - Coverdell Education Savings Accounts (26 U.S.C. § 530)
    • Subchapter O - Gain or Loss on Disposition of Property
      • Part III - Common Nontaxable Exchanges
        • Section 1031 - Exchange of property held for productive use or investment (26 U.S.C. § 1031)
        • Section 1041 - Transfers of Property Between Spouses or Incident to Divorce (26 U.S.C. § 1041)

External links

• U.S. Code Title 26, via United States Government Printing Office
• Title 26 at Cornell's Legal Information Institute
• U.S. Code Title 26 - Cross Referencing