Internal Revenue Code


The Internal Revenue Code, formally the Internal Revenue Code of 1986, is the domestic portion of federal statutory tax law in the United States, published in various volumes of the United States Statutes at Large, and separately as Title 26 of the United States Code. It is organized topically, into subtitles and sections, covering income tax in the United States, payroll taxes, estate taxes, gift taxes, and excise taxes; as well as procedure and administration. Its implementing agency is the Internal Revenue Service.

Origins of tax codes in the United States

Prior to 1874, U.S. statutes were not codified. That is, the acts of Congress were not separately organized and published in separate volumes based on the subject matter. 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.

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". 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

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. 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 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

The Internal Revenue Code of 1954 was enacted in the form of a separate code by act of August 16, 1954, ch. 736,. The Tax Reform Act of 1986 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. 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

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 individual under the 1954 Code:
Income levelTax rate2008 PPC Adjusted Income
up to $2,000.0020%up to $37,500.00
$2,000.01–$4,000.0022%$37,500.01–$75,000
$4,000.01–$6,000.0026%$75,000.01–$112,500
$6,000.01–$8,000.0030%$112,500.01–$150,000
$8,000.01–$10,000.0034%$150,000.01–187,500
$10,000.01–$12,000.0038%$187,500.01–$225,000
$12,000.01–$14,000.0043%$225,000.01–$262,500
$14,000.01–$16,000.0047%$262,500.01–$300,000
$16,000.01–$18,000.0050%$300,000.01–$337,500
$18,000.01–$20,000.0053%$337,500.01–$375,000
$20,000.01–$22,000.0056%$375,000.01–$412,500
$22,000.01–$26,000.0059%$412,500.01–487,500
$26,000.01–$32,000.0062%$487,500.01–$600,000
$32,000.01–$38,000.0065%$600,000.01–$712,500
$38,000.01–$44,000.0069%$712,500.01–$825,000
$44,000.01–$50,000.0072%$825,000.01–$937,500
$50,000.01–$60,000.0075%$937,500.01–$1,125,000
$60,000.01–$70,000.0078%$1,125,000.01–$1,312,500
$70,000.01–$80,000.0081%$1,312,500.01–$1,500,000
$80,000.01–$90,000.0084%$1,500,000.01–$1,687,500
$90,000.01–$100,000.0087%$1,687,500.01–$1,875,000
$100,000.01–$150,000.0089%$1,875,000.01–$2,812,500
$150,000.01–$200,000.0090%$2,812,500.01–$3,750,000
$200,000.01 or more91%$3,750,000.01 or more

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 the Title 26 remained the same until the enactment of the comprehensive revision contained in Tax Reform Act of 1986, although of course individual provisions of the law were changed on a regular basis.
Section 2 of the Tax Reform Act of 1986 provides :
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, retains the basic structure of the 1954 Code.

Commonly misunderstood special definitions

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

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 162 would be as follows:
Title 26: Internal Revenue Code
The Internal Revenue Code is topically organized and generally referred to by section number. Some topics are short and some quite long.
Key IRC Topics By Section:
SectionsFunction
Tax rates
Credits
Alternative Minimum Tax & environmental tax
Definition of gross income, including items specifically taxable
Specific exclusions from gross income
Private activity bonds
Personal exemptions; dependent defined
Deductions, including interest, taxes, losses, and business related items
Itemized deductions for individuals
Deductions unique to corporations
Nondeductible items, including special rules limiting or deferring deductions
Corporate transactions, including formation, distributions, reorganizations, liquidations
Pension and benefit plans: treatment of plans, employers, & beneficiaries
Accounting methods & tax years
Exempt organizations
Accumulated earnings tax and personal holding companies
Banks: special rules for certain items
Natural resources provisions: depletion, etc.
Trusts & estates: definitions, income tax on same & beneficiaries
Partnerships: definitions, treatment of entities and members, special rules
Insurance companies: special rules, definitions
Regulated investment companies and Real Estate Investment Trusts
Source of income
Tax on foreign persons/corporations; inbound international rules
Foreign tax credit
Exclusions of foreign income
Taxation of U.S. shareholders of controlled foreign corporations
Other international tax provisions
Gains: definitions, characterization, and recognition; special rules
Capital gains: separate taxation and special rules
Interperiod adjustments; certain special rules
S Corporations and cooperative associations: flow-through rules
Empowerment, enterprise, and other special zones
Self-employment tax
Withholding of tax on nonresidents
Consolidated returns and affiliated groups
Estate tax on transfers at death
Gift tax and tax on generation skipping transfers
Social security and railroad retirement taxes
Unemployment taxes
Income tax withholding; payment of employment taxes
Excise taxes on specific goods, transactions, and industries
Alcohol, tobacco and firearms taxes and special excise tax rules
Tax returns: requirements, procedural rules, payments, settlements, extensions
Assessment, collection, and abatement; limitations on collection & refund
Interest and non-criminal penalties on underpayments or failures
Other procedural rules
Crimes, other offences, forfeitures, tax evasion
Judicial proceedings
Miscellaneous rules
9001–9834Special taxes & funds

Subtitles

As a further example, here are the chapters of this subtitle: