Final answer:
Interpretative regulations are Treasury-issued clarifications of existing tax laws, while legislative regulations are Treasury-issued rules with the force of new law, expressly authorized by Congress to address specific issues in tax legislation.
Step-by-step explanation:
The key difference between interpretative regulations and legislative regulations lies in their origin and purpose. Interpretative regulations are issued by the Treasury Department to provide guidance on the interpretation and application of existing tax laws, thereby clarifying existing statutes without changing the law itself. On the other hand, legislative regulations are a result of Congressional authority given to the Treasury Department to create regulations that have the force of new law and can fill in details or gaps in statutes.
Interpretative regulations serve to interpret statutory language, offering a Treasury Department's perspective on how the provisions of the Internal Revenue Code should be understood and applied. They do not create new law, rather they explain how the existing laws are to be enforced or applied. Legislative regulations, in contrast, are akin to the laws themselves because they are expressly authorized by Congress to address specific issues that arise within the scope of tax legislation, effectively creating new rules that have the same binding power as the statute.
While both types of regulations are used by tax professionals and courts to determine tax obligations and compliance, interpretative regulations tend to be given less deference by courts compared to legislative regulations, as the latter are considered a direct extension of Congressional intent.