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1 1 (February 11, 2025)

handle is hein.crs/govesla0001 and id is 1 raw text is: Congressional Research Service Informing the legislative debate since 1914 0 Updated February 11, 2025 Reliance on Treasury Department and IRS Tax Guidance The Department of the Treasury (Treasury) and Internal Revenue Service (IRS) use several forms of guidance to help taxpayers understand the Internal Revenue Code (IRC) and to inform taxpayers of Treasury and the IRS's position on particular tax issues. For the most part, this tax guidance can be split into three categories: (1) Treasury regulations, (2) sub-regulatory guidance published in the Internal Revenue Bulletin (IRB), and (3) unpublished sub-regulatory guidance (i.e., sub-regulatory guidance not published in the Federal Register or the IRB). Former heads of the IRS's Office of Chief Counsel have remarked that the type of guidance issued reflects a balance between taxpayers' need for certainty and the need of Treasury and the IRS for latitude in administering tax laws. In a tax dispute, taxpayers generally may rely on Treasury regulations and sub-regulatory guidance published in the IRB (e.g., revenue rulings, revenue procedures, notices, and announcements) to support their tax position, as long as the guidance is not contrary to or inconsistent with the law and subsequent guidance does not render it moot. Taxpayers are generally unable to rely on unpublished sub-regulatory guidance (e.g., forms, instructions, and publications) in tax disputes. Given that Treasury and the IRS often issue unpublished sub-regulatory guidance in response to time- sensitive issues, taxpayers may exercise caution when the need for clarity and certainty is at its greatest, and might wait for Congress to potentially enact clarifying legislation or for courts to address the legal issue in litigation. This In Focus analyzes the ability of taxpayers to rely on valid Treasury regulations and the more common types of published sub-regulatory tax guidance. Common Types of Published Treasury and RS Tax Gu dance Treasury Regulations Treasury regulations are the most important type of tax guidance issued by Treasury and the IRS. Treasury regulations can provide guidance on newly enacted legislation and tax issues that arise with respect to preexisting laws. Taxpayers may rely on final and temporary Treasury regulations, but may not rely on proposed Treasury regulations unless they contain an express statement permitting reliance. Generally, proposed Treasury regulations are published in the Federal Register as a Notice of Proposed Rulemaking, which invites the public to review and comment on the proposed regulation. Treasury and the IRS may modify or withdraw a proposed Treasury regulation based on the comments they receive. After considering the public's comments, Treasury and the IRS may issue a final regulation and publish it in the Federal Register as a Treasury Decision. Treasury and the IRS issue temporary Treasury regulations when they conclude that the public requires immediate guidance before the publication of final Treasury regulations. Temporary Treasury regulations are also published in the Federal Register as Treasury Decisions, but expire after three years. When Treasury and the IRS issue a temporary Treasury regulation, they simultaneously issue a corresponding proposed Treasury regulation. On January 31, 2025, the President issued Executive Order 14192, which instructs the Treasury Secretary and the Director of the Office of Management and Budget (OMB) to reinstate an April 11, 2018, memorandum of agreement (MOA) that had significantly altered tax regulatory procedure. Under the reinstated MOA, certain types of tax regulations undergo the standard centralized review process in Section 6 of Executive Order 12866 conducted by the OMB's Office of Information and Regulatory Affairs. Revenue Rulings Revenue rulings are the IRS's official interpretation of tax laws, related statutes, tax treaties, and regulations as applied to a specific set of facts. They are published in the IRB. Taxpayers may rely on revenue rulings when the taxpayer's facts are substantially the same as the facts addressed in the revenue ruling. Revenue rulings foster uniformity and enable taxpayers to make informed decisions about their tax obligations. Revenue rulings do not carry the same level of authority as Treasury regulations. Revenue Procedures The IRS announces administrative practices and procedures through revenue procedures published in the IRB. A revenue procedure can provide information on filing a return or other instruction to enable a taxpayer to reach a particular result. Revenue procedures cover diverse topics, such as the adoption of accounting methods, the computation of certain expenses, the current value of inflation-adjusted items in the tax code, and how to request a waiver for electronic filing. Taxpayers may rely on revenue procedures when their facts are substantially the same as those described in the revenue procedure. Like revenue rulings, revenue procedures do not have the same level of authority as Treasury regulations. Announcements and Notices The IRS makes time-sensitive public pronouncements through announcements and notices. Announcements have immediate or short-term value. They can summarize laws and regulations without making substantive interpretations, explain forthcoming regulations, and notify taxpayers of approaching deadlines. Notices may contain substantive interpretations of the IRC or other laws. The IRS has used

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