Exam 2: Tax Compliance, the IRS, and Tax Authorities

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Regulations are the Treasury Department's official interpretation of the Internal Revenue Code and have the highest authoritative weight. Regulations are issued in three different forms: proposed, temporary, and final. Final regulations are regulations that have been issued in final form, and thus, until revoked, they represent the Treasury's interpretation of the Code. Temporary regulations, as the name suggests, have a limited life (three years for regulations issued after November 20, 1988). Nonetheless, during their "life," they carry the same authoritative weight as final regulations. Finally, proposed regulations are, as the name suggests, "proposed," and thus do not carry the same authoritative weight as temporary or final regulations.
In addition to being issued in three different forms, regulations also serve three basic purposes: interpretative, procedural, and legislative. Most regulations are issued as interpretative or procedural regulations. As the names suggest, interpretative regulations represent the Treasury's interpretation of the Code. Procedural Regulations explain Treasury Department procedures as they relate to administering the Code. Legislative regulations, the rarest type, are issued when Congress specifically directs the Treasury Department to create regulations to address an issue in an area of law. In these instances, the Treasury is actually writing the law instead of interpreting the Code. Because Legislative Regulations actually represent tax law instead of an interpretation of tax law, Legislative Regulations generally have been viewed to have more authoritative weight than Interpretative and Procedural Regulations. However, in Mayo Foundation for Medical Education & Research v. U.S., 131 S.Ct. 704 (2011), the Supreme Court held (subject to specific conditions) that all Treasury regulations warrant deference.
Checking the status of regulations is a bit complicated. Most tax services alert researchers if a regulation has not been updated for certain changes in the Code. If this is the case, the researcher should evaluate whether the changes in the Code make the regulation obsolete.