In the United States, the process of preparing a federal tax law involves various legislations and stakeholders before it becomes law. A formal tax legislation has to follow some specific steps as indicated in the U.S. Constitution. In addition, a federal tax law similar to other legal laws requires the presence of House of Representatives, the Senate and the presidential approval. Described below is the formal process of drafting a federal tax law
The tax bill is sourced from the House of Representatives in what is known as the means and ways committee. After the members of the committee come to an agreement regarding legislation sections, the proposed tax law is put into writing.
The tax bill then moves to House of Representatives for full debate, amendment, and approval.
Then tax bill then moves to the Senate for a review. At this stage, the finance committee can rewrite the draft before passing it to the full Senate members.
After the bill has been approved by the Senate, it is then presented to a joint committee that comprises of selected members from both houses whose duty is to draft a compromise version of the bill.
The compromised the bill is then taken back to both houses for approval.
After the compromised bill is approved by the two houses (congress), it is then presented to the President who either veto it or sign it into law.
In case the president vetoes the tax bill, overriding the Congress can do the veto through a two-thirds vote from each house. If the voting is successful, the bill becomes law without the consent of the president.
However, US citizens have significant influence in regards to tax laws through participating in informal tax legislation activities such communicating with the members of the Congress and other elected officials, attending meetings, signing and circulating petitions.
Types of Federal Tax Registration
There exist three types of federal tax legislations, that is, procedural, interpretive and legislative. Legislative regulations typically carry the same authority weight like the law, and they are issued after the authorization by the Internal Revenue Code (IRC) to the Internal Revenue Service (IRS) for the provision of operational rules for a particular IRC provision. The interpretive regulations help in elaborating the position of the IRS based on various sections of IRC. These legislations issued under the authority of IRS for the purpose of interpreting the IRC language but are not directly authorized by the law. Finally, the procedural legislations elaborate more on the process as opposed to interpretive issues such as the procedure of filing returns and holding an election.
The IRS describes revenue rulings as public administrative decisions in the U.S. treasury department of the federal government that implement the law to specific factual conditions. These rulings are provided by the National Office and are published to provide information and guidance to the taxpayers (citizens), IRS officials and other stakeholders. The primary objective of revenue rulings is to enhance a uniform and formal implementation of tax laws by the IRS employees to enable citizens in achieving a high voluntary compliance.
Based on presented evidence, letter rulings are given by the Revenue Office of the Chief Counsel. There are times when the evidence are drafted for the purpose of protecting the confidentiality of the taxpayers. Publication of these rulings is meant to give an interpretative guidance to the taxpayers and does not allow the revenue department any authority to issue them to any other entity than the taxpayers after a request is made. Judicial conclusions, statutory changes or other evidence can modify the effect of a letter ruling. However, five years is the validity period of a letter ruling.
Hearing of Federal Tax Cases
In the United States, discussion over appellate authority on federal tax cases has been concentrating on two major issues: the effectiveness of achieving a greater formality in federal tax decisions and the diversity in compromising tax jurisdiction through quality decisions while resolving tax cases. There are four major courts tasked with the responsibility of hearing federal tax cases and the jurisdiction of their appeals have to be taken to the thirteen federal courts for appeals.
The U.S. Tax Court
Following the taxpayers disputes over the IRS deficiency notices, the tax court hears about 80% of all the cases presented. The tax court comprises of judges that are appointed for a fifteen-year term based on their experience in federal tax law. The greatest advantage of this court to taxpayers is that deficiency payments are delayed until the final decision by the court arrives.
The U.S. District Courts
The U.S. federal state has 94 district courts with the jurisdiction of hearing federal civil and criminal cases. Due to the experience of judges in these courts such as the operation of the state laws and fact-finding through bench and jury trials, these courts are authorized to hear federal tax cases. However, before a taxpayer brings claims to this court, he or she must have paid the IRS deficiency.
The Federal Claims Court
Judges in this court are appointed for a fifteen-year term and have the jurisdiction of hearing cases in any court within the United States. The jurisdiction of this court is limited to holding trials for money arising within the US Constitution, federal contracts, executive legislations and federal statutes. Moreover, the court is mandated to hear cases from taxpayers for federal tax refunds. Similar to the district courts, federal claims court requires that the taxpayer to have first paid the IRS deficiency.
The U.S. Bankruptcy Court
Under the jurisdiction of each district courts is the bankruptcy court that is directly supervised by the district courts. The jurisdiction of the bankruptcy includes the hearing of bankruptcy code cases such as federal tax cases that are resulted by bankruptcy proceedings. However, all the appeals from the bankruptcy courts have to pass through the district court before their hearings by the circuit courts.
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