Internal Revenue Code
The Internal Revenue Code (IRC) is the domestic portion of federal statutory tax law in the United States. It is a comprehensive statutory compilation of tax laws that govern the collection of taxes on individuals, corporations, estates, trusts, employment, and excise taxes. Here is a detailed look at various aspects of the IRC:
History and Evolution
- Origin: The IRC can trace its origins back to the Revenue Act of 1862, which was passed to help finance the Civil War. This act established the Office of the Commissioner of Internal Revenue.
- Codification: The IRC was first codified as Title 26 of the U.S. Code in 1939. However, the modern IRC dates back to 1954 when Congress undertook a major revision and reorganized the tax laws into the Internal Revenue Code of 1954. This was later renamed to the Internal Revenue Code of 1986 when significant tax reform occurred.
- Revisions: Over the years, the IRC has been amended through numerous tax acts passed by Congress. Notable revisions include the Tax Reform Act of 1986, which aimed at simplifying the tax code, reducing tax rates, and broadening the tax base.
Structure
The IRC is organized into subtitles, chapters, subchapters, parts, subparts, sections, and subsections. Key subtitles include:
- Subtitle A: Income Taxes
- Subtitle B: Estate and Gift Taxes
- Subtitle C: Employment Taxes and Collection of Income Tax at Source
- Subtitle D: Miscellaneous Excise Taxes
- Subtitle E: Alcohol, Tobacco, and Certain Other Excise Taxes
- Subtitle F: Procedure and Administration
Key Provisions
- Tax Rates and Brackets: The IRC specifies tax rates for different income levels, which change periodically through legislation.
- Deductions and Credits: Includes rules for various deductions (like mortgage interest, charitable contributions) and credits (like the Earned Income Tax Credit).
- Corporate Taxation: Details how corporations are taxed, including provisions for Corporate Tax Rates, dividends received deduction, and corporate AMT (Alternative Minimum Tax).
- International Taxation: Rules on how foreign income is taxed, including foreign tax credits and subpart F income.
Administration
- Internal Revenue Service (IRS): The IRS is the primary administrative body responsible for enforcing the IRC. It interprets the law, collects taxes, and provides guidance through regulations, rulings, and publications.
- Tax Court: The United States Tax Court is a federal court that has jurisdiction over certain tax disputes, offering taxpayers a venue to contest IRS determinations without first paying the tax.
Challenges and Criticisms
- Complexity: The IRC is often criticized for its complexity, which can make compliance challenging for both taxpayers and tax professionals.
- Frequent Changes: The constant amendments and temporary provisions can lead to uncertainty and planning difficulties for taxpayers.
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