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ANEXA

74

KEY POINT th e tax law is so complex is that it comes from a variety of sources. This chapter highlights the three principal sources of the tax law: statutory, judicial, and administrative.
One of the reasons

Because the language contained in the statute generally does not provide detailec guidance about the tax trearrnenr of a particular transaction, inrerpretarions-i- bod administrative and judicial-are necessary. Administrative interpretationsin~lude, fOJ example, Treasury Regulations, revenue rulings, and revenue procedures. Judicial intcrpre rations consist of court decisions. The term tax law as used by most tax advisor: encompasses administrative and judicial interpretations in addition to the stature. It alsc includes committee reports issued by the Congressional committees involved in rhe legislative process. THE LEGISLATIVE PROCESS Chapter I1 of Prentice Hall's Federal Taxation: Individuals describes the' legislative process, which is also summarized here. All tax legislation must begin in the House of Representatives. The committee responsible for initiating statutory changes dealing with taxation is the Ways and Means Committee. Once proposed legislation isapproved by the Ways and Means Committee, it goes to the floor of the House for consideration by the full membership. Legislation approved by a majority vote in the House then goes to the Senate, where it is considered by the Senate Finance Committee. The bill moves from the Finance Committee to the full Senate. Upon being approved by the Senate, the bill goes to the President for approval or veto, provided the House and Senate versions of the bill are in complete agreeIJfenL If the President signs the bill, it becomes law. If the President vetoes the bill, Congress can override the veto by a vote of at least two-thirds of the mem bers of each house. Often, the House and Senate versions are not in complete agreement. Whenever the two versions of a bill are not identical, the bill goes to a conference committee/ consisting of members of each house, and the revised bill goes back to the House and Senate for approvaL For example, in 1990 the House and Senate disagreed about the earned .incorne credit. The House approved a higher increase in the credit percentage than did the Senate. The Senate's provision provided one credit percentage for taxpayers with one qualifying child and a higher percentage for taxpayers with two or more children. The conference committee compromised by choosing a different rate from either of the two houses.and ~fJf>rnvine rJlffprpnt r~tP~ .. 0t:'p'='f!d~T"!g 0!"! '.vht:~h~r th~~t:' 'H25 one chi!d 8~ ~.1!.r8 cr !""!""!.'2~e children. The House and Senate approved the conference version. Before drafting statutory changes, both the House of Representatives and the Senate often hold hearings at which various persons testify. Often the Secretary of the Treasury or another member of the Treasury Department offers extensive testimony. Generally, persons testifying express theiropiniorrs concerning provisions that should or should not be enacted. The U.S. Government Printing Office publishes the statements made at the hearings. Most majorTegislarion is also accompanied by committee reports. These reports, published by the V.S. Government Printing Office as separate publications and as part of the Cumulative Bulletin, explain Congress's purpose in drafting legislation? Because committee reports give clues as to Congressional intent, they can be invaluable aids in interpreting the statute, especially in situations where there are no regulations concerning the srarur ory language in question.

KEY POINT Committee reports can be very ~elpful in interpreting new leqislatron because these reports indicate the intent of Congress. Due to the proliferation of taxlegislatron, committee reports are espeCially imoortanr because the Treasury is ciften unable to draft the needed regulations in a timely manner.