Formal Tax Legislation

AAA

DEFINITION of 'Formal Tax Legislation'

The process by which a proposed tax rule or tax change may become law in the United States. Formal tax legislation follows specific steps as defined by the U.S. Constitution. Formal tax legislation, like all federal laws, requires the consent of both houses of Congress (the Senate and the House of Representatives) and presidential approval.

INVESTOPEDIA EXPLAINS 'Formal Tax Legislation'

The formal tax legislation process must follow specific steps:

1. The tax bill originates in the House of Representatives with what is referred to the Ways and Means Committee. Once committee members reach an agreement regarding the legislation, a proposed tax law is written.


2. The tax bill goes to the full House for debate, amendment and approval.


3. The tax bill is passed to the Senate where it is reviewed. The Finance Committee may rewrite the proposal before it is presented to the full Senate.

4. Following Senate approval, the tax bill is sent to a joint committee of House and Senate members who work to create a compromise version.

5. The compromise version is sent to the House and Senate for approval.

6. Once Congress passes the bill, it is sent to the president who will either sign it into law or veto the bill.

7. In the event the president vetoes the tax bill, Congress can override the veto with a two-thirds vote of each house; if successful, the tax bill becomes law without the signature of the President.

Citizens can influence tax laws through the informal tax legislation process, which includes contacting members of Congress and elected officials, attending town or county meetings, participating in lobbying efforts, circulating and signing petitions and by voting for particular candidates.

RELATED TERMS
  1. New Alternative Transportation ...

    A bipartisan proposal introduced in April, 2011 that amends the ...
  2. Legislative Overkill

    A law enacted to stop or prevent the abuse of a loophole, but ...
  3. Loophole

    A technicality that allows a person or business to avoid the ...
  4. Negative Income Tax - NIT

    A guaranteed minimum income plan advocated by economist Milton ...
  5. Net Proceeds

    The amount received by the seller after all costs and expenses ...
  6. Tax Reform Act Of 1986

    A law passed by the United States Congress to simplify the income ...
Related Articles
  1. thinkstock|istock
    Economics

    What Is Fiscal Policy?

    Learn how governments adjust taxes and spending to moderate the economy.
  2. Savings

    Saver's Tax Credit: A Retirement Savings Incentive

    Here's another reason to put money toward your retirement nest egg.
  3. Taxes

    How To Save More For Your Retirement

    The Economic Growth and Tax Relief Reconciliation Act of 2001 made it easier to prepare for the future. Will you be ready?
  4. Taxes

    Capital Gains Tax 101

    Find out how taxes are applied to your investment returns and how you can reduce your tax burden.
  5. Forex Education

    How International Tax Rates Impact Your Investments

    International investors need to be aware of the staggering correlation between tax rates and economic performance.
  6. Investigate these expat havens if you seek a developed country with low barriers for getting a permanent resident visa – sometimes even citizenship.
    Personal Finance

    5 Developed Countries That Welcome Expats

    Investigate these expat havens if you seek a developed country with low barriers for getting a permanent resident visa – sometimes even citizenship.
  7. Free enterprise is the economic term used to describe an economy with very little government ownership.
    Economics

    What's Free Enterprise?

    Free enterprise is the economic term used to describe an economy with very little government ownership or regulation. In a free enterprise system, competition and the preferences and choices ...
  8. Some countries put up very high barriers for foreigners to get citizenship
    Personal Finance

    5 Countries Where It's Hardest To Become A Citizen

    The United States is one of five countries that put up very high barriers for foreigners to get citizenship. Here's how it compares to the other four.
  9. Depending on their parents, people not born in the U.S. either inherit U.S. citizenship or need to achieve it. Here are the steps to become an American.
    Personal Finance

    How To Become A U.S. Citizen

    Depending on their parents, people not born in the U.S. either inherit U.S. citizenship or need to achieve it. Here are the steps to become an American.
  10. The Affordable Care Act is the largest change to the tax code in 20 years that could affect you when you file that 2014 tax return next year.
    Taxes

    How Might The Affordable Care Act Affect You?

    The Affordable Care Act is the largest change to the tax code in 20 years that could affect you when you file that 2014 tax return next year.

You May Also Like

Hot Definitions
  1. Commodity

    1. A basic good used in commerce that is interchangeable with other commodities of the same type. Commodities are most often ...
  2. Deferred Revenue

    Advance payments or unearned revenue, recorded on the recipient's balance sheet as a liability, until the services have been ...
  3. Multinational Corporation - MNC

    A corporation that has its facilities and other assets in at least one country other than its home country. Such companies ...
  4. SWOT Analysis

    A tool that identifies the strengths, weaknesses, opportunities and threats of an organization. Specifically, SWOT is a basic, ...
  5. Simple Interest

    A quick method of calculating the interest charge on a loan. Simple interest is determined by multiplying the interest rate ...
  6. Special Administrative Region - SAR

    Unique geographical areas with a high degree of autonomy set up by the People's Republic of China. The Special Administrative ...
Trading Center