United States federal tax code
The
Internal Revenue Code of 1986
(
IRC
), is the domestic portion of federal statutory
tax law
in the United States. It is codified in statute as
Title 26
of the
United States Code
.
[1]
The IRC is organized topically into subtitles and sections, covering federal
income tax in the United States
,
payroll taxes
,
estate taxes
,
gift taxes
, and
excise taxes
; as well as procedure and administration. The Code's implementing federal agency is the
Internal Revenue Service
.
Origins of tax codes in the United States
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Prior to 1874, U.S. statutes (whether in tax law or other subjects) were not codified. That is, the acts of Congress were not organized and published in separate volumes based on the subject matter (such as taxation, bankruptcy, etc.). 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
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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
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On August 16, 1954, in connection with a general overhaul of the
Internal Revenue Service
, the IRC was greatly reorganized by the
83rd United States Congress
and expanded (by Chapter 736,
Pub. L.
Tooltip Public Law (United States)
83?591
).
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
.
The 1954 Code temporarily extended the
Revenue Act of 1951
's 5 percentage point increase in corporate tax rates through March 31, 1955, increased
depreciation
deductions by providing additional depreciation schedules, and created a 4 percent dividend tax credit for individuals.
Relationship to Title 26 of the United States Code
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The Internal Revenue Code of 1954 was enacted in the form of a separate code by act of August 16, 1954, ch. 736, 68A
Stat.
1
. The
Tax Reform Act of 1986
[2]
changed the name of the 1954 Code to the "Internal Revenue Code of 1986". In addition to being published in various volumes of the United States Statutes at Large, the Internal Revenue Code is separately published as Title 26 of the United States Code. The text of the Internal Revenue Code as published in title 26 of the U.S. Code is virtually identical to the Internal Revenue Code as published in the various volumes of the
United States Statutes at Large
.
[3]
Of the 50 enacted titles, the Internal Revenue Code is the only volume that has been published in the form of a separate code.
Progressivity of the 1954 Code
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With respect to the
federal income tax
on individuals, the 1954 Code imposed a
progressive tax
with 24 income brackets applying to tax rates ranging from 20% to 91%. For example, the following is a schedule showing the federal
marginal income tax rate
imposed on each level of
taxable income
of a single (unmarried) individual under the 1954 Code:
Income level
|
Tax rate
|
2008 PPC adjusted income
[4]
|
up to $2,000.00
|
20%
|
up to $37,500.00
|
$2,000.01?$4,000.00
|
22%
|
$37,500.01?$75,000
|
$4,000.01?$6,000.00
|
26%
|
$75,000.01?$112,500
|
$6,000.01?$8,000.00
|
30%
|
$112,500.01?$150,000
|
$8,000.01?$10,000.00
|
34%
|
$150,000.01?187,500
|
$10,000.01?$12,000.00
|
38%
|
$187,500.01?$225,000
|
$12,000.01?$14,000.00
|
43%
|
$225,000.01?$262,500
|
$14,000.01?$16,000.00
|
47%
|
$262,500.01?$300,000
|
$16,000.01?$18,000.00
|
50%
|
$300,000.01?$337,500
|
$18,000.01?$20,000.00
|
53%
|
$337,500.01?$375,000
|
$20,000.01?$22,000.00
|
56%
|
$375,000.01?$412,500
|
$22,000.01?$26,000.00
|
59%
|
$412,500.01?487,500
|
$26,000.01?$32,000.00
|
62%
|
$487,500.01?$600,000
|
$32,000.01?$38,000.00
|
65%
|
$600,000.01?$712,500
|
$38,000.01?$44,000.00
|
69%
|
$712,500.01?$825,000
|
$44,000.01?$50,000.00
|
72%
|
$825,000.01?$937,500
|
$50,000.01?$60,000.00
|
75%
|
$937,500.01?$1,125,000
|
$60,000.01?$70,000.00
|
78%
|
$1,125,000.01?$1,312,500
|
$70,000.01?$80,000.00
|
81%
|
$1,312,500.01?$1,500,000
|
$80,000.01?$90,000.00
|
84%
|
$1,500,000.01?$1,687,500
|
$90,000.01?$100,000.00
|
87%
|
$1,687,500.01?$1,875,000
|
$100,000.01?$150,000.00
|
89%
|
$1,875,000.01?$2,812,500
|
$150,000.01?$200,000.00
|
90%
|
$2,812,500.01?$3,750,000
|
$200,000.01 or more
|
91%
|
$3,750,000.01 or more
|
- Source: Internal Revenue Code of 1954,
Pub. L.
Tooltip Public Law (United States)
83?591
, 68A
Stat.
5
, enacted
August 16, 1954
(modified from text of the statute).
- Relative GDP: 37.5
Internal Revenue Code of 1986
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References to the Internal Revenue Code in the
United States Code
and other statutes of Congress subsequent to 1954 generally mean Title 26 of the Code as amended. The basic structure of Title 26 remained the same until the enactment of the comprehensive revision contained in
Tax Reform Act of 1986
, although individual provisions of the law were changed on a regular basis.
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.
Thus, 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 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.
Commonly misunderstood special definitions
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Individual and corporate income tax
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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 esection 11.
Organization
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The organization of the Internal Revenue Code, as enacted in hundreds of Public Laws passed by the U.S. Congress since 1954, is identical to the organization of the Internal Revenue Code separately published as Title 26 of the U.S. Code.
For example, section 45(b)(7)(B)(i)(I)(aa)(AA) (
26 U.S.C.
45(e)(7)(B)(i)(I)(aa)
) would be as follows:
Title 26: Internal Revenue Code
- Subtitle A: Income Taxes
- Chapter 1
: Normal Taxes and Surtaxes
- Subchapter A
: Determination of Tax Liability
- Part IV
: Credits Against Tax
- Subpart D
: Business Related Credits
- Section 45
: Electricity produced from certain renewable resources, etc.
- Subsection (b): Limitations and adjustments
- Paragraph (7): Prevailing wage requirements
- Subparagraph (B): Correction and penalty related to failure to satisfy wage requirements
- Clause (i): In general. In the case of ... such taxpayer-
- Subclause (I): makes payment to such laborer or mechanic in an amount equal to the sum of-
- Item (aa): an amount equal to the difference between-
- Subitem (AA): the amount of wages paid to such laborer or mechanic during such period, and
The Internal Revenue Code is topically organized and generally referred to by section number (sections 1 through 9834). Some topics are short (e.g., tax rates) and some quite long (e.g., pension & benefit plans).
Key IRC Topics By Section:
Sections
|
Function
|
1?15
|
Tax rates
|
21?54
|
Credits (refundable and nonrefundable)
|
55?59A
|
Alternative Minimum Tax & environmental tax
|
61?90
|
Definition of gross income (before deductions), including items specifically taxable
|
101?140
|
Specific exclusions from gross income
|
141?149
|
Private activity bonds
|
151?153
|
Personal exemptions; dependent defined
|
161?199
|
Deductions, including interest, taxes, losses, and business related items
|
211?224
|
Itemized deductions for individuals
|
241?250
|
Deductions unique to corporations
|
261?291
|
Nondeductible items, including special rules limiting or deferring deductions
|
301?386
|
Corporate transactions, including formation, distributions, reorganizations, liquidations (Subchapter C)
|
401?436
|
Pension and benefit plans: treatment of plans, employers, & beneficiaries
|
441?483
|
Accounting methods & tax years
|
501?530
|
Exempt organizations (charitable and other)
|
531?565
|
Accumulated earnings tax and personal holding companies
|
581?597
|
Banks: special rules for certain items
|
611?638
|
Natural resources provisions: depletion, etc.
|
641?692
|
Trusts & estates: definitions, income tax on same & beneficiaries
|
701?777
|
Partnerships: definitions, treatment of entities and members, special rules (Subchapter K)
|
801?848
|
Insurance companies: special rules, definitions
|
851?860
|
Regulated investment companies (mutual funds) and Real Estate Investment Trusts
|
861?865
|
Source of income (for international tax)
|
871?898
|
Tax on foreign persons/corporations; inbound international rules
|
901?908
|
Foreign tax credit
|
911?943
|
Exclusions of foreign income (mostly repealed)
|
951?965
|
Taxation of U.S. shareholders of controlled foreign corporations (Subpart F)
|
971?999
|
Other international tax provisions
|
1001?1092
|
Gains: definitions, characterization, and recognition; special rules
|
1201?1298
|
Capital gains: separate taxation and special rules
|
1301?1359
|
Interperiod adjustments; certain special rules
|
1361?1388
|
S Corporations and cooperative associations: flow-through rules
|
1391?1400T
|
Empowerment, enterprise, and other special zones
|
1401?1403
|
Self-employment tax (like social security, below)
|
1441?1465
|
Withholding of tax on nonresidents
|
1501?1564
|
Consolidated returns and affiliated groups (corporations)
|
2001?2210
|
Estate tax on transfers at death
|
2501?2704
|
Gift tax and tax on generation skipping transfers
|
3101?3241
|
Social security and railroad retirement taxes
|
3301?3322
|
Unemployment taxes
|
3401?3510
|
Income tax withholding; payment of employment taxes
|
4001?5000
|
Excise taxes on specific goods, transactions, and industries
|
5001?5891
|
Alcohol, tobacco and firearms taxes and special excise tax rules
|
6001?6167
|
Tax returns: requirements, procedural rules, payments, settlements, extensions
|
6201?6533
|
Assessment, collection, and abatement; limitations on collection & refund
|
6601?6751
|
Interest and non-criminal penalties on underpayments or failures
|
6801?7124
|
Other procedural rules
|
7201?7344
|
Crimes, other offences, forfeitures, tax evasion
|
7401?7493
|
Judicial proceedings
|
7501?8023
|
Miscellaneous rules
|
9001?9834
|
Special taxes & funds (presidential election, highway, black lung, etc.)
|
Subtitles
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- A. Income Taxes (sections 1 through 1564)
As a further example, here are the chapters of this subtitle:
- B. Estate and Gift Taxes (sections 2001 through 2801)
- 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 Election Campaigns (sections 9001 through 9042)
- I. Trust Fund Code (sections 9500 through 9602) ("Trust Fund Code of 1981")
- J. Coal Industry Health Benefits (sections 9701 through 9722)
- K. Group Health Plan Requirements (sections 9801 through 9834)
List of commonly referenced sections
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(This is not intended to be a complete list of sections.)
- Subtitle A: Income Taxes (
§ 1
?
§ 1564
)
- Chapter 1
: Normal Taxes and Surtaxes (
§ 1
?
§ 1400U3
)
- Subchapter A: Determination of Tax Liability (
§ 1
?
§ 59
)
- Part I: Tax on Individuals (
§ 1
?
§ 59B
)
- Subchapter B: Computation of Taxable Income (
§ 61
?
§ 291
)
- Part I: Definition of Gross Income, Adjusted Gross Income, Taxable Income, Etc. (
§ 61
?
§ 68
)
- Part II: Items Specifically Included in Gross Income (
§ 71
?
§ 80
)
- ...
- Section 79
: Group-term life insurance purchased for employees (
§ 79
)
- ...
- Part III: Items Specifically Excluded from Gross Income (
§ 101
?
§ 140
)
- Part VI: Itemized Deductions for Individuals and Corporations (
§ 161
?
§ 198
)
- Part VII: Additional Itemized Deductions for Individuals (
§ 211
?
§ 224
)
- Subchapter C: Corporate Distributions and Adjustments (
§ 301
?
§ 385
)
- ...
- Part III: Corporate Organizations and Reorganizations (
§ 351
?
§ 368
)
- ...
- Subpart B: Effects on Shareholders and Security Holders (
§ 354
?
§ 358
)
- ...
- Section 355
: Distribution of stock and securities of a controlled corporation (
§ 355
)
- ...
- ...
- Subchapter D: Deferred Compensation, Etc. (
§ 401
?
§ 436
)
- Part I: Pension, Profit-sharing, Stock Bonus Plas, etc. (
§ 401
?
§ 420
)
- Subpart A: General Rule (
§ 401
?
§ 409A
)
- Section 401: Qualified pension, profit-sharing, and stock bonus plans
- ...
- Section 402A ("
Roth 401(k)
"): Optional treatment of elective deferrals as Roth contributions (
§ 402A
)
- Section 403: Taxation of employee annuities
- ...
- Section 408:
Individual Retirement Accounts
(
§ 408
)
- Section 408A:
Roth IRAs
(
§ 408A
)
- ...
- Section 409A
: Inclusion in gross income of deferred compensation under nonqualified deferred compensation plans (
§ 409A
)
- ...
- Subchapter E: Accounting Periods and Methods of Accounting (
§ 441
?
§ 483
)
- ...
- Part II: Methods of Accounting (
§ 446
?
§ 475
)
- Subpart B: Taxable Year for Which Items of Gross Income Included (
§ 451
?
§ 460
)
- Subpart D: Inventories (
§ 471
?
§ 475
)
- ...
- Section 475
: Mark to market accounting method for dealers in securities (
§ 475
)
- ...
- Subchapter F: Exempt Organizations (
§ 501
?
§ 530
)
- Part I: General Rule (
§ 501
?
§ 505
)
- Section 501: Exemption from tax on corporations, certain trusts, etc. (
§ 501
)
- ...
- paragraph (c) ("
501(c)
"): List of exempt organizations (
§ 501(c)
)
- ...
- Part VI: Political Organizations (§ 527)
- ...
- Part VIII: Certain Savings Entities (
§ 529
?
§ 530
)
- ...
- Subchapter N: Tax Based on Income From Sources Within or Without the United States (
§ 861
?
§ 1000
)
- Part I: Source Rules and Other General Rules Relating To Foreign Income (
§ 861
?
§ 865
)
- Subchapter O: Gain or Loss on Disposition of Property (
§ 1000
?
§ 1111
)
- ...
- Part III: Common Nontaxable Exchanges (
§ 1031
?
§ 1045
)
- Subtitle C: Employment Taxes (
§ 3101
?
§ 3510
)
See also
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References
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- ^
Other federal tax law is contained in other titles of the
United States Code
, such as
Title 11
(relating to bankruptcy) and
Title 19
(Customs Duties).
- ^
Pub. L.
Tooltip Public Law (United States)
99?514
, 100
Stat.
2085
, enacted
October 22, 1986
, § 2(a)
- ^
An apparently insignificant discrepancy between the wording in the Statutes at Large and the wording in some editions of the U.S. Code with respect to a provision of the Internal Revenue Code (specifically, the words "any papers" in the first sentence of
§ 6104(a)(1)(A)
is described by the U.S. Court of Appeals for the District of Columbia in the case of
Tax Analysts v. Internal Revenue Serv.
, 214 F.3d 179 (D.C. Cir. 2000), in footnote 1, at
[1]
. According to the Court, some versions of the U.S. Code show the text as "any paper" while the Statutes at Large version shows the text as "any papers".
- ^
"National Income and Product Accounts Table"
. U.S. Department of Commerce, Bureau of Economic Analysis. Archived from
the original
on March 6, 2012
. Retrieved
March 9,
2018
.
External links
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]