Treasury Regulations

The Treasury Department issues Treasury Regulations drafted by the IRS, which is the largest division of the Treasury Department. Search for relevant Treasury Regulations after researching relevant Code sections. Regulations provide general guidance that interpret and clarify the statutory law. Regulations are first published as Treasury Decisions (TDs).

Because regulations sometimes take several years to formulate, occasionally the Treasury Department will issue an advanced notice of proposed rulemaking. New regulations now include a preamble describing the content and purpose of the regulation. Note that while some Code sections have many Treasury Regulations, other sections have none.

The citation to a Treasury Regulation indicates the Code section at issue. It's the number in the citation after the period and before the hyphen. The initial number before the period is the part number that indicates the type of tax at issue. For example, a “1” in front of the regulation means that it is an income tax regulation. Thus, Treas. Reg. § 1.61-1 is an income tax regulation interpreting Code section 61, as shown in Exhibit 5-6. Other popular part numbers are 20 for estate taxes, 25 for gift taxes, and part 301 for procedural rules.

Exhibit 5-6 Example Treasury Regulation

Understand the three major types of Treasury Regulations: final, temporary, and proposed. Most regulations are final. Final regulations are issued only after going through the official process for notice and comment at public hearings. The regulation is then published as a Treasury Decision in the Federal Register and codified into Title 26 of the Code of Federal Regulations.

Prior to finalization, temporary regulations are issued. The citation to a temporary regulation includes a T at the end. Treat temporary regulations as law, unlike proposed regulations. Temporary regulations do not require public comment, unlike final regulations. A proposed regulation is not substantial authority. The IRS has sometimes subsequently modified or withdrawn a proposed regulation. The citation to a proposed regulation identifies itself with “Prop.” preceding the rest of the citation.

Consider the two types of Treasury Regulations: interpretive and legislative. Interpretive regulations arise under the authority of Code section 7805(a). This regulation expressly provides that the Treasury Department secretary “shall prescribe all needful rules and regulations for the enforcement of this title.” Legislative regulations arise when a Code section directs the secretary of the Treasury to create regulations to carry out the purposes of the section. A taxpayer must comply with both types of final Treasury Regulations, but some consider a legislative regulation stronger authority than an interpretive regulation.

Scan the titles of the regulations that interpret the code section at issue in order to find a relevant regulation. Tax research databases attempt to link the regulations to the related Code section. For example, RIA Checkpoint has a tab for “Regulations” on the top of the display for a Code section. If the title of the regulation appears to have potential application, look over the contents of that regulation. Then carefully read potentially relevant parts of the regulation. Some Treasury Regulations provide clarifying examples on a topic. Others may directly address topics that the relevant Code section did not mention.