Question

Select the manner in which a state adopts the federal internal revenue code?

1) By passing a state law adopting the federal internal revenue code
2) By incorporating the federal internal revenue code into the state's own tax laws
3) By signing an agreement with the federal government to adopt the federal internal revenue code
4) By following the federal internal revenue code as a guideline without formally adopting it

Answer 1

States adopt the federal internal revenue code by passing a state law or incorporating it into state tax laws rather than signing an agreement with the federal government or just using it as a guideline without formal adoption.

Step-by-step explanation:

States can adopt elements of the federal internal revenue code into their tax systems, but the mechanism of adoption typically involves option 1 or 2. State legislatures pass state laws that either directly adopt the federal code by reference (option 1), meaning they create a law stating they adopt the federal code as it stands, or they incorporate specific provisions of the federal internal revenue code into their state tax laws (option 2). This incorporation can be selective, meaning not all federal provisions will necessarily be adopted. Option 3, signing an agreement with the federal government, is not typically how state tax codes adopt federal codes, and option 4 would not be an official adoption but rather a less formal approach to alignment that may leave significant discrepancies between state and federal tax regulations.