Federal Tax Regulations - Legislative and Interpretative
The world of Federal Tax Regulations, which are promulgated by the Department of Treasury, differs slightly from the normal federal regulatory scheme.
A summary of the typical rulemaking process is available here under "Regulatory Process" from the Law Library's Administrative Law LibGuide.
In the world of federal tax regulations, many regulations are promulgated by the Treasury Department in this typical fashion. They are most often issued under "enabling" authority in the Internal Revenue Code and provide operational rules for specific IRC provisions. These are known as "legislative" regulations. According to the Internal Revenue Manual 184.108.40.206.3.2, "If the code states 'The Secretary shall provide such regulations . . .', then the regulations issued are legislative."
"Interpretative" regulations may also be issued by the Treasury Department. These regulations "are issued under the general authority of IRC section 7805(a), which allows regulations to be written when the Secretary determines they are needed to clarify a Code section" (Internal Revenue Manual 220.127.116.11.3.2).
"The courts consider the merit of both interpretative and legislative regulations. However, more weight is given to legislative regulations than to interpretative regulations" (Internal Revenue Manual 18.104.22.168.3.2).
For more information on how to determine if a regulation is legislative or interpretative, please see Internal Revenue Manual 22.214.171.124.8.
Federal Tax Regulations - Proposed, Temporary, and Final
Both legislative and interpretative regulations can be issued as proposed, temporary or final regulations.
As with any federal agency, the Treasury Department must publish proposed regulations in the Federal Register via a Notice of Proposed Rulemaking (NPRM). Proposed regulations do not have binding authority, but they can be helpful to glean the position or interpretation of the IRS regarding a code provision. The public is given an opportunity to comment on a proposed regulation and a public hearing may be held if a sufficient number of requests to speak at a hearing are received. However, it may take months or years for a proposed regulation to become a final regulation, which is binding authority.
Accordingly, the Treasury Department has a mechanisum to create temporary regulations. Temporary regulations have the same authority as final regulations, but they must expire within three years. These are utilized in situations where a new code provision or issue requires immediate guidance to taxpayers, and it would not be practicable to wait through the notice and comment period.
A temporary regulation must also be issued simultaneously as a proposed regulation. A temporary regulation will never become a final regulation, but will simply expire, whereas a similar or identical version of the temporary regulation that begins as a proposed regulation may eventually become a final regulation.
Despite their "temporary" nature, temporary regulations are published in the Federal Register, Internal Revenue Bulletin, and Cumulative Bulletin as Treasury Decisions (T.D.'s) and are included in the Code of Federal Regulations (Title 26).
A final regulation is one that began as a proposed regulation and has proceeded through the notice and comment process. These regulations are published in the CFR with indefinite full force and authority. Final regulations are published in the Federal Register, the Internal Revenue Bulletin, and the Cumulative Bulletin as Treasury Decisions (T.D.'s) before they are compiled in the CFR.