Once the problem is clearly defined, what is the next step? Although the next step is a matter of individual judgment, tax research may begin with either a keyword or index search on an online tax service, like Checkpoint, or a CD-ROM search, like OnPoint.
If the problem is not complex, the researcher may turn directly to the Internal Revenue Code and Treasury Regulations – Checkpoint has it all!
Several important observations about the use of tax services cannot be overemphasized.
If the keyword approach is used, locate the subject area of the research. This is done by taking keywords or phrases from the research question and matching them to entries in the index. Frequently, variations of these key words or phrase need to be formulated.
Locating useful entries in the index can be the most difficult part of the research project. For example, to research the tax treatment of an individual’s losses from rental property, one might look up "individual" or "losses" and find nothing helpful because the search is too broad. Only after checking for "rental losses" or reformulating the issue into that of "passive losses" and checking for this phrase will the researcher be likely to find any useful references to the text of the tax service.
The secret to successfully using the keyword approach is repetition and note taking. Repetition means continuing to look up different variations of the key words and phrases from the research question until useful references in the index are located. (RIA offers several comprehensive training courses on how to navigate effectively and get the most out of Checkpoint).
RIA’s Checkpoint contains the full text of applicable Code sections and regulations along with a synopsis of case law and various sources of administrative guidance. Editorial comments normally are presented in close proximity to the full text of the appropriate primary authorities.
Access to secondary authorities frequently can expedite the process for large research projects. However, the tax researcher cannot stop there. Editorial comments or secondary authority is only an aid in finding the primary authority. Only the primary authority meets the obligation of substantial authority.
Often a researcher is familiar with the specific Code section dealing with the issue to be researched. In those cases, the researcher may choose to go directly to the Code. Reporter tax services, such as RIA’s United States Tax Reporter, are arranged in Code number order. Analytical tax services and specialized tax books are not always arranged in Code order, but usually they contain a finding list that details where a specific Code provision is discussed in the text. This allows the researcher to go directly to the coverage of the desired Code section.
If the research being performed is in an area new to the researcher, a standardized approach to locating the applicable authorities generally is the most efficient way to proceed. This is true regardless of the kind of tax service or book used, or the research method employed (that is, a keyword or Code section approach). Even if the researcher is familiar with the tax issue, a standardized approach offers the advantage on ensuring that the researcher does not carelessly leave out an important step in locating the applicable authorities.
The following five steps are recommended for locating applicable authorities:
- The applicable editorial comments or text can be located using the keyword or Code section approach, as previously discussed.
- Note references made within the editorial comments to appropriate tax authorities. The editorial comments and text contain references to the primary tax authorities, such as Code sections and regulations.
- If a tax researcher is relatively familiar with a research area, Step 1 may well come last, rather than first. When this occurs, the researcher typically is looking to see if the editors or authors of the publication agree with the researcher’s own findings.
- If the research question deals with a future transaction, make sure the copy of the Code used includes all law changes to date.
- If the research deals with a past transaction, note any changes to the Code that are effective after the date of the transaction.
- If the section is new or confusing, look at the Congressional Committee Reports and other legislative history for guidance on the intent of specific Code sections. Each Public Law contains a separate set of committee reports.
- Even if Step 2 produces a Code provision that appears to correctly answer the research question, the appropriate regulations should still be consulted. Frequently, the regulations will contain very specific examples of how the IRS (Treasury Department) interprets the Code section in question.
- Pay particular attention to the issue date of the regulation (this is listed at the end of the regulation). Frequently, amendments to the Code have been made since the regulations were issued. In that case, the regulation must be read in light of those amendments.
- Note whether the regulations are interpretive or legislative in nature. Legislative-type regulations carry more weight in terms of their relevance to the research question. If the statute specifically authorizes the IRS, Department of the Treasury, or state tax department to issue a regulation, that is known as a Statutory Regulation and has more weight.
- RIA’s Checkpoint frequently offers brief, three- or four-sentence annotations of administrative interpretations and court decisions the editors believe are relevant to the issue being discussed. If the researcher plans to rely on one or more of these, he or she should read the full text of the case or ruling
- The age of the particular case or ruling has little bearing on whether it is relevant to the issue at hand. Court decisions and administrative interpretations may not carry as much legal weight now as they did when first issued. It is the status of these items that is important.
- If cases or administrative interpretations are to be relied on, these items should be checked in a citator to determine their current status.
- Almost every tax resource is updated at least annually and some as often as weekly, or daily. Here, a critical final step is to check for new developments (which include such items as overturned court decisions and new or modified regulations and rulings).