The Internal Revenue Code is the body of federal law, found in Title 26 of the U.S. Code, that spells out how income, payroll, estate and excise taxes work in the United States. Enacted in its modern form in 1939 and enforced by the IRS, it governs nearly every dollar the federal government collects from individuals and businesses.
What the Code Actually Covers
Eleven separate subtitles make up the Internal Revenue Code, and each one handles a distinct slice of federal tax law. Subtitle A deals with income taxes, the piece most people interact with every April. Subtitle B covers estate and gift taxes, while Subtitle C addresses employment taxes withheld from paychecks. From there the code branches into miscellaneous excise taxes, alcohol and tobacco taxes, procedural and administrative rules, the Joint Committee on Taxation, financing for presidential campaigns, trust fund provisions, coal industry health benefits and group health plan requirements.
Each subtitle functions almost like its own rulebook, with definitions, exceptions and cross references that determine how much someone owes and when. Because the sections interact, a change in one area, say estate tax exemptions, can ripple into how trusts or gifts get taxed elsewhere in the code.
1919 Marked the Start of a Century-Long Rewrite
A House committee began recodifying federal statutes in 1919, and that project produced a completed compilation by 1925. Title 26 itself, organized specifically around tax law, was assembled in 1939. Since then Congress has amended it repeatedly, sometimes with minor technical fixes and sometimes with sweeping overhauls.
The most recent major rewrite came with the Tax Cuts and Jobs Act of 2017, which changed individual and corporate tax brackets, deductions and credits across the board. The IRS itself dates back even further, to 1862, and operates out of Washington, D.C. with authority to collect taxes and penalize violations of the code.
Why Two Bills Wanted to Scrap It Entirely
Not everyone in Congress has been content to amend the Internal Revenue Code piece by piece. Two bills filed in 2017 aimed to eliminate it outright. H.R. 29, the Tax Code Termination Act, called for abolishing the Internal Revenue Code of 1986 by the end of 2021, but only after Congress agreed on a replacement system by July 4, 2021.
The more detailed proposal, S.18, the Fair Tax Act of 2017, introduced on January 3, 2017, would have replaced personal and corporate income tax, employment and self employment tax, and estate and gift taxes with a national sales tax. That rate was set at 23 percent for 2019, with later adjustments built in. Purchases for business, export or investment use, used and intangible property, and state government functions would have been exempt. The bill also called for dissolving the IRS entirely, with no funding authorized past 2021.
| Proposal | Core Idea | Key Deadline | Status |
|---|---|---|---|
| H.R. 29, Tax Code Termination Act | Abolish the 1986 Internal Revenue Code | End of 2021, contingent on a new system by July 4, 2021 | Not enacted |
| S.18, Fair Tax Act of 2017 | Replace income, payroll and estate taxes with a 23 percent national sales tax | IRS defunded after 2021; sales tax ends if 16th Amendment stands 7 years | Little progress since introduction |
Under the Fair Tax Act, households would have received a monthly rebate tied to income and family size, and individual states would have taken over collecting and remitting the sales tax to Washington. The bill carried a built in expiration clause too: if the Sixteenth Amendment, which permits federal income tax, was not repealed within seven years of enactment, the whole national sales tax system would terminate.
Why a Full Overhaul Still Looks Unlikely
Neither bill has advanced meaningfully since being filed, and the passage of the TCJA may have taken some of the political pressure off. John Buhl, who previously handled media relations for the Tax Foundation, has said that the 2017 reforms could reduce appetite for a larger structural rewrite. He also points out that the TCJA was adjusted partly to counter criticism that it favored wealthier taxpayers, and a consumption tax replacement would likely face the same distributional argument. As he put it, replacing all federal taxes with a consumption tax would only sharpen those concerns rather than resolve them.