Tax

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Overview

Tax law is the body of law that establishes how taxes are imposed and regulated by the government. A tax is defined as a tariff on economic transactions by individuals and corporations. Taxes are used to produce government revenue and support government programs and initiatives. Taxes are imposed by both the federal government and individual state governments. Tax laws are codified by the federal government in the Internal Revenue Code of 1986, which appears as Title 26 of the United States Code. Individual states have codified their tax systems within state statutes. While a variety of taxes exist, the most significant taxes within tax law include the income tax, social security tax, estate and gift taxes, property tax and sales and use taxes.

Income Tax

Personal and corporate income taxes are the primary source of revenue for the federal government. The Sixteenth Amendment of the United States Constitution authorizes Congress to tax "incomes from whatever source derived." Today, the federal income tax has been codified in Section 61 of Title 26 of the United States Code. All citizens, both individuals and corporations, including those who do not live in the United States, are subject to the federal income tax.

Calculating Income Tax

"Regular" income taxes are calculated by taking a percentage of the taxpayer's income, with higher incomes being taxed at a higher rate. This is called a "progressive" tax system. Taxpayers often deduct certain designated items and amounts from their income to reduce the total percentage of income that is taxed. Additionally, many taxpayers are eligible for various tax credits, which reduce the total amount of taxes owed. Income may also be calculated according to the "Alternative Minimum Tax" (AMT). The AMT was designed to prevent those with high incomes from using loopholes to avoid federal taxation. Income under the AMT is calculated without regard to tax preferences, and with a limited number of exemptions and deductions. This income base, which is higher than the income base calculated by "regular" income taxes, is then taxed in two fixed rates, with the taxpayer paying the higher of the two amounts. The AMT has been criticized on a number of different bases, and Congress has continued to modify its structure. Many states also tax income, with the exception of Alaska, Florida, Nevada, South Dakota, Texas, Washington and Wyoming. State income taxes are generally calculated in the same manner as federal income taxes, with certain state-specific modifications.

Social Security Tax

The Social Security tax is codified in the Federal Insurance and Contributions Act (FICA). The Social Security Tax is applied only to earned income, which is income derived from employment. Interest from investments, rents, etc. is not subject to the Social Security tax. The tax is comprised of a fixed percentage of an employee's salary paid by the employer, and an equal percentage paid by the employee. Revenue from the Social Security tax is used to support federal social security programs.

Estate and Gift Taxes

Property owned by an individual at the time of their death is taxed as an estate tax. The Federal Estate Tax can be found in Section 2001 of Title 26 of the United States Code. Because the estate tax is imposed upon the individual's entire estate at the time of death, the tax encourages individuals to disperse their property before they die. Wealth transfers made before death are subject to gift taxes under Section 2501 of Title 26. However, each taxpayer is entitled to transfer tax-free a certain amount of money or property as a gift each year.

Property Tax

Property taxes are frequently levied by local governments to generate revenue for schools, road maintenance, etc. Property taxes are applied to most real and personal property owned by taxpayers. Household items are generally exempt from property taxes, while other objects of value (including automobiles, works of art, etc.) are often subject to property tax.

Sales and Use Tax

Local governments in most states also impose fixed sales and use taxes. Thus, items purchased within the state are subject to a fixed rate of taxation. The rates of sales and use taxes vary between states and sometimes even between counties within a state.

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Featured Cases

United States v. Burrell et al
2:2011cv03079
Filed in California Eastern District Court
Type of Suit: Taxes (US Plaintiff or Defendant)
Plaintiff: United State. Defendant: Stanley K. Burrell, Stephanie D Burrell and Image, Likeness, Power LLC.
Judge: Garland E. Burrell
Cause Of Action: IRS: Tax Liability
(December 14, 2011)
Robinson v. Gucci America et al
1:2011cv03742
Filed in New York Southern District Court
Type of Suit: Employment
Plaintiff: Josephine Robinson. Defendant: Gucci America, Stan Sherwood, Matteo Mascazzini and Christy Leleck.
Judge: William H. Pauley
Cause Of Action: Job Discrimination (Employment)
(June 14, 2011)
Amazon.com LLC v. Lay
2:2010cv00664
Filed in Washington Western District Court
Type of Suit: Other Civil Rights
Plaintiff: Amazon.com LLC. Defendant: Kenneth R Lay.
Judge: Brian A Tsuchida
Cause Of Action: Declaratory Judgement
(January 27, 2011)
Procter & Gamble Company v. United States of America
1:2008cv00608
Filed in Ohio Southern District Court
Type of Suit: Taxes (US Plaintiff or Defendant)
Plaintiff: Procter & Gamble Company; Defendant: United States of America
Judge: S Arthur Spiegel
Cause Of Action: U.S. Government Defendant
(December 30, 2009)
American International Group, Inc. v. United States of America
1:2009cv01871
Filed in New York Southern District Court
Type of Suit: Taxes (US Plaintiff or Defendant)
Plaintiff: American International Group, Inc.; Defendant: United States of America
Judge: Louis L. Stanton
Cause Of Action: U.S. Government Defendant
(February 26, 2009)

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Dockets

United States Department of Justice v. Lambka
4:2012cv10576
Filed in Michigan Eastern District Court
Type of Suit: Taxes (US Plaintiff or Defendant)
Plaintiff: United States Department of Justice. Defendant: Dennis E. Lambka.
Judge: Mark A. Goldsmith
Cause Of Action: IRS: Tax Liability
(February 8, 2012)
Kelly v. United States of America
3:2012cv00240
Filed in Oregon District Court
Type of Suit: Taxes (US Plaintiff or Defendant)
Plaintiff: Patrick Kelly. Defendant: United States of America.
Judge: Michael H. Simon
Cause Of Action: Recovery of IRS Tax
(February 8, 2012)
United States of America v. David D. Patton & Associates, P.C. et al
2:2012cv10583
Filed in Michigan Eastern District Court
Type of Suit: Taxes (US Plaintiff or Defendant)
Plaintiff: United States of America. Defendant: David D. Patton & Associates, P.C. and David D. Patton.
Judge: Sean F. Cox
Cause Of Action: IRS: Tax Liability
(February 8, 2012)
Miccosukee Tribe of Indians of Florida v. United States of America
1:2012mc20523
Filed in Florida Southern District Court
Type of Suit: IRS-Third Party
Plaintiff: Miccosukee Tribe of Indians of Florida. Defendant: United States of America.
Judge: K. Michael Moore
Cause Of Action: Motion to Quash
(February 7, 2012)
United States of America v. Devish
4:2012mc94003
Filed in Massachusetts District Court
Type of Suit: Taxes (US Plaintiff or Defendant)
Petitioner: United States of America. Respondent: Vickie E. Devish.
Judge: F. Dennis Saylor
Cause Of Action: Petition to enforce IRS summons
(February 7, 2012)

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Legislation

Bill Introduced: S.2050 Small Business Tax Extenders Act of 2012
A bill to amend the Internal Revenue Code of 1986 to extend certain provisions of the Creating Small Business Jobs Act of 2010, and for other purposes.
(January 29, 2012)
Bill Introduced: H.R.3804 American Opportunity and Freedom Act of 2012
To permanently extend tax relief and repeal certain tax increases.
(January 21, 2012)
Bill Introduced: S.2033 A bill to amend the Internal Revenue Code of 1986 to end the costly ...
A bill to amend the Internal Revenue Code of 1986 to end the costly derivatives blended rate loophole, and for other purposes.
(January 21, 2012)
Bill Enacted: H.R.2055 Military Construction and Veterans Affairs, and Related Agencies ...
Making appropriations for military construction, the Department of Veterans Affairs, and related agencies for the fiscal year ending September 30, 2012, and for other purposes.
December 22, 2011: Became Public Law No: 112-74.
(December 21, 2011)
Bill Introduced: H.R.3671 Judiciary Appropriations Act, 2012
Making consolidated appropriations for the fiscal year ending September 30, 2012, and for other purposes.
(December 12, 2011)

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Regulations

Proposed Rule - Tax Return Preparer Penalties Under Section 6695; Hearing Cancellation
Internal Revenue Service
Proposed Rule
Tax Return Preparer Penalties Under Section 6695; Hearing Cancellation
,
68373 [2011-28660]
DEPARTMENT OF THE TREASURY Internal Revenue Service 26 CFR Part 1 [REG-140280-09] RIN 1545-BK16 Tax Return Preparer Penalties Under Section 6695; Hearing Cancellation AGENCY: Internal Revenue Service (IRS), Treasury. ACTION: Cancellation of notice of proposed rulemaking and notice of public hearing. SUMMARY: This document cancels a public hearing on notice of proposed rulemaking and notice of public hearing (REG-140280-09) that would modify existing regulations related to the tax return... [read document]
View Document | Download PDF
(November 3, 2011)
Proposed Rule - Tax Accounting Elections on Behalf of Foreign Corporations; Withdrawal
Internal Revenue Service
Proposed Rule
Tax Accounting Elections on Behalf of Foreign Corporations; Withdrawal
,
68370-68373 [2011-28658]
DEPARTMENT OF THE TREASURY Internal Revenue Service 26 CFR Part 1 [REG-114749-09] RIN 1545-BI63 Tax Accounting Elections on Behalf of Foreign Corporations AGENCY: Internal Revenue Service (IRS), Treasury. ACTION: Withdrawal of notice of proposed rulemaking and notice of proposed rulemaking. SUMMARY: These proposed regulations would clarify the rules for controlling domestic shareholders to adopt or change a method of accounting or taxable year on behalf of a foreign corporation. The regulations... [read document]
View Document | Download PDF
(November 3, 2011)
Proposed Rule - Income of Foreign Governments and International Organizations
Internal Revenue Service
Proposed Rule
Income of Foreign Governments and International Organizations
,
68119-68124 [2011-28531]
Proposed Rules Federal Register Federal Register / Vol. 76, No. 213 / Thursday, November 3, 2011 / Proposed Rules DEPARTMENT OF THE TREASURY Internal Revenue Service 26 CFR Parts 1 and 602 [REG-146537-06] RIN 1545-BG08 Income of Foreign Governments and International Organizations AGENCY: Internal Revenue Service (IRS), Treasury. ACTION: Notice of proposed rulemaking. SUMMARY: This document contains proposed Income Tax Regulations that provide guidance relating to the taxation of the income of... [read document]
View Document | Download PDF
(November 2, 2011)
Proposed Rule - Extending Religious and Family Member FICA and FUTA Exceptions to Disregard Entities
Internal Revenue Service
Proposed Rule
Extending Religious and Family Member FICA and FUTA Exceptions to Disregard Entities
,
67384-67385 [2011-28177]
DEPARTMENT OF THE TREASURY Internal Revenue Service 26 CFR Parts 31 and 301 [REG-136565-09] RIN 1545-BJ06 Extending Religious and Family Member FICA and FUTA Exceptions To Disregard Entities AGENCY: Internal Revenue Service (IRS), Treasury. ACTION: Notice of proposed rulemaking by cross-reference to temporary regulations. SUMMARY: In the Rules and Regulations section of this issue of the Federal Register, the IRS is issuing temporary regulations to extend the exceptions from taxes under the... [read document]
View Document | Download PDF
(October 31, 2011)
Rule - Extending Religious and Family Member FICA and FUTA Exceptions to Disregarded Entities
Internal Revenue Service
Rule
Extending Religious and Family Member FICA and FUTA Exceptions to Disregarded Entities
,
67363-67366 [2011-28176]
DEPARTMENT OF THE TREASURY Internal Revenue Service 26 CFR Parts 31 and 301 [TD 9554] RIN 1545-BJ07 Extending Religious and Family Member FICA and FUTA Exceptions to Disregarded Entities AGENCY: Internal Revenue Service (IRS), Treasury. ACTION: Final and temporary regulations. SUMMARY: This document contains final and temporary regulations amending 26 CFR parts 31 and 301. These regulations extend the exceptions from taxes under the Federal Insurance Contributions Act (``FICA'') and the Federal... [read document]
View Document | Download PDF
(October 31, 2011)

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Articles

Investments in Tax Planning, Tax Avoidance and the New Economy Business Model
2012 American Taxation Association Midyear Meeting: JATA Conference Thomas C. Omer , Connie D. Weaver and Jaron Wilde Texas A&M University - Department of Accounting , Texas A&M University and Texas A&M University (TAMU) - Department of Accounting Date Posted: February 09, 2012 Last Revised: February 10, 2012
(February 9, 2012)
Chasing Ghosts: On Writing Cultural Histories of Tax Law
UC Irvine Law Review, Forthcoming Assaf Likhovski Tel Aviv University - School of Law Date Posted: February 01, 2012 Accepted Paper Series 23 downloads Should Environmental Taxes Be Precautionary? RDCEP Working Paper No. 12-06 David A. Weisbach University of Chicago - Law School Date Posted: February 01, 2012 Working Paper Series 23 downloads Taxes, Profits, and Employment: A Structural Axiomatic Analysis Egmont Kakarot-Handtke University of Stuttgart - Institute of Economics and Law Date Posted: January 31, 2012 Working Paper Series 2 downloads The Use of Voluntary Disclosure Initiatives in the Battle Against Offshore Tax Evasion Villanova Law Review, Vol. 56, 2012, Indiana Legal Studies Research Paper No. 200 Leandra Lederman Indiana University Maurer School of Law Date Posted: January 31, 2012 Working Paper Series 61 downloads Capital or Current: The Tax Treatment of Expenditures to Preserve a Taxpayer's Title or Interest in Assets Monash University Law Review, Vol. 12, pp. 49-76, 1986 Richard Krever Monash University - Department of Business Law & Taxation Date Posted: January 30, 2012 Accepted Paper Series Conflicts About Conflicts: Implications of the Tax Court Canal Corp Decision for Disciplinary and Malpractice Actions Chapman University Law Research Paper No. 12-01 Michael B. Lang Chapman University - School of Law Date Posted: January 30, 2012 Last Revised: February 09, 2012
(February 8, 2012)
The Financial Transactions Tax versus (?) the Financial Activities Tax
NYU Law and Economics Research Paper Daniel Shaviro New York University School of Law Date Posted: January 22, 2012 Working Paper Series 85 downloads The Vehicle Miles Tax: The Unintended Consequences of Paying as You Drive Gregory A. Lush affiliation not provided to SSRN Date Posted: January 21, 2012 Working Paper Series 3 downloads Three Years or Six to Audit? Substance and Procedure in Intermountain Eric Bennett Rasmusen Indiana University Bloomington - Department of Business Economics & Public Policy Date Posted: January 21, 2012 Working Paper Series 8 downloads Increased Tax Liability Awards after Eshelman: A Call for Expanded Acceptance Beyond the Realm of Anti-Discrimination Statutes New York Law School Law Review, Vol. 57, No. 2, December 2011 Eirik J. Cheverud affiliation not provided to SSRN Date Posted: January 20, 2012 Accepted Paper Series 30 downloads Copthorne Holdings and the Future of the General Anti-Avoidance Rule Benjamin Alarie University of Toronto - Faculty of Law Date Posted: January 19, 2012 Working Paper Series 26 downloads Lessons from the Recent Resource Rent Tax Experience in Australia John Passant affiliation not provided to SSRN Date Posted: January 19, 2012 Last Revised: February 08, 2012
(February 7, 2012)
The Decennial Census
Stephen Kruger Independent Date Posted: January 16, 2012 Last Revised: February 08, 2012
(February 7, 2012)
Economic Rent and Taxation - A Lawyer's Guide
John Passant affiliation not provided to SSRN Date Posted: January 18, 2012 Working Paper Series 17 downloads Keeping Pace with the Times: Exploring the Meaning of Limited Partner for Purposes of the Internal Revenue Code Kansas Law Review, Vol. 60, p. 89, 2011 Kristin Balding Gutting Charleston School of Law Date Posted: January 18, 2012 Accepted Paper Series 88 downloads Scrivenersâ Errors, Drafting Errors, Operational Failures, Retroactive Amendments, Reformations, ERISA, and the Tax Qualification of Pension Plan Trusts, Part II Tax Management Weekly Report, Vol. 31, No. 3, p. 75, 2012 Albert Feuer Law Offices of Albert Feuer Date Posted: January 18, 2012 Last Revised: February 07, 2012
(February 6, 2012)

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