ANEXA 74 Because the language contained in the statute generally does not provide detailed guidance about the

tax treatment of a particular transaction, interpretations - bad administrative and judicial - are necessary. Administrative interpretations include, for example, Treasury Regulations, revenue rulings, and revenue procedures. Judicial interpretations consist of court decisions. The term tax law as used by most tax advisors encompasses administrative and judicial interpretations in addition to the statute. It also includes committee reports issued by the Congressional committees involved in the legislative process. KEY POINT One of the reasons the 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.

THE LEGISLATIVE PROCESS Chapter 11 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 is approved 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 agreement. 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 twothirds of the members 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 committee6, 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 income 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 approving different rates depending on whether there was one child or two or more 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 their opinions concerning provisions that should or should not be enacted. The U.S. Government Printing Office publishes the statements made at the hearings. Most major legislation is also accompanied by committee reports. .These reports, published by the U.S. Government Printing Office as separate publications and as part of the Cumulative Bulletin, explain Congress's purpose in drafting legislation7. 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 statutory language in question. KEY POINT Committee reports can be very helpful in interpreting new legislation because these reports indicate the intent of Congress. Due to the proliferation of tax legislation, committee reports are especially important because the Treasury is often unable to draft the needed regulations in a timely manner.