Treasury regulations are rules about how various provisions of the Internal Revenue Code should be interpreted. The Internal Revenue Code, or IRC, is the United States’ tax code, and sets out codified rules governing how taxes are to be collected and reported. The United States Internal Revenue Service (IRS) enforces the code, but the United States Treasury Department has authority to set guidelines for how the code is meant to be interpreted. Treasury regulations are those guidelines.
The United States’ tax code is dense and complex, and describes federal taxation rules in language that is not always easy to understand. A lot of the rules in the IRC can also seem somewhat ambiguous. A companion to the IRC, treasury regulations provide the official interpretation of how the IRC’s rules are supposed to be applied.
Treasury regulations are published annually in a bound document known as the Code of Federal Regulations, or CFR. The CFR includes regulations from many different government agencies, but one section is always dedicated to treasury regulations. Title 26 of the code is where regulations are found each year.
The Regulations are subject to change from year to year. They are updated and amended on a regular basis. Changes are usually posted on the Treasury Department’s website, and some are open for public comment before being finalized. All are subject to internal comments, discussions, and testimony.
Most treasury regulations are final, but some are issued on a temporary basis. Temporary treasury regulations are often issued in emergency situations when there is not sufficient time to go through the finalization process. These are usually valid for up to three years, at which time they must be finalized in order to be enforced.
All treasury regulations, even those that have been finalized, can be disputed in court. Taxpayers, government agencies, and even the IRS are usually able to challenge a treasury regulation by bringing a lawsuit. Federal courts have the authority to override a treasury regulation if it seems to have misconstrued the tax law or if it in some way presents an ambiguity or is inconsistently applied.
Treasury regulations are typically considered to be authoritative tax documents. Together with the IRC they make up the bulk of U.S. federal income tax law. There are many different federal tax regulations, but all are contained — and most are described — between the many pages of these two sources.
Because treasury regulations are built out of the Internal Revenue Code, tax planners and preparers can rely on either document when looking for advice. The IRC remains the black-letter rule, however. For a treasury regulation, the main goal is to provide guidance on how that rule should be read, understood, and applied. Regulations are official advice, but are not a substitute for the original rule.