After a law is enacted, regulations may be drafted to implement the law.
For Federal tax law, the regulations are known as Treasury Regulations because the Internal Revenue Service is an agency of the Department of the Treasury. State tax regulations are drafted by the state’s tax agency that may be named a department, commission, or a division.
Regulations follow closely the language in the statute and legislative committee reports. The regulations must be consistent with legislative intent. If regulations have not been published for a particular tax law, careful reading of the committee reports provides guidance on how the regulations will be written. Often the number of a regulation includes the number of the related statue.
The process of issuing regulations may take months or many years from the time a statute is enacted until the regulations are finalized. Regulations usually contain definitions of key terms and provide more details than the statute. Proposed regulations are the draft of regulations that are published for comments by the public. After the public comments are received and approval by various regulatory agencies, the tax agency issues final regulations.
There are two major types of regulations: statutory and interpretive.
A statutory regulation is the result of a tax law enacted that expressly authorizes the tax agency to issue regulations.
A statute on depreciation may expressly authorize the tax agency to issue depreciation schedules. Even if the statute does not expressly authorize the agency to issue a specific regulation, the agency has the general authority to issue interpretive regulations related to enforcement of tax law.
The agency may decide to issue an interpretive regulation to define terminology in a statute or specify a filing procedure.
Tax agencies issue many other pronouncements to assist with the implementation of the tax law. These include:
These pronouncements contain more detail than a statute or regulation, but they do not have as much authority as a regulation or statute.
Some pronouncements are limited to specific taxpayers. The tax agency has more discretion to withdraw or modify its own administrative pronouncements.