I just got back yesterday from a trip to Washington, DC for a public hearing at the IRS. It occurred to me that we tax professionals are familiar with the IRS process for developing rules, but the general public isn't. So I thought I'd provide a brief, and therefore very simplistic, overview of the process for those who might be interested.
The IRS doesn't write the actual tax laws, of course. Congress passes laws to change the Internal Revenue Code. (They also give direction to the IRS about how Congress wants the tax law enforced. If you're angry with the IRS, your anger probably would be better directed toward Congress or the President.) The Code is long and very complicated. Some people have observed that it makes War and Peace seem breezy and is harder to understand than nuclear physics.
But "tax law" is much more than the laws Congress passes and the President signs. In some cases, Congress specifically says that they are leaving it up to the IRS to make particular decisions. Even when they don't delegate specific authority like that, what Congress has passed may be unclear and the IRS has to provide taxpayers with additional explanation or details. Congress gave the IRS general authority to do that as needed, and for a lot of what Congress passes, additional explanation or details are definitely needed.
The IRS may issue formal regulations interpreting the law, which -- under the right circumstances -- courts treat as almost equivalent to the law passed by Congress. The IRS also issues various different types of published "guidance": official written interpretations of exactly what the law requires, that are generally applicable to all taxpayers. Courts may be persuaded by that type of guidance or just ignore it, depending on the court and the type of guidance. Regardless, the IRS does have some input into what the tax law means. Courts do occasionally disagree with the IRS's official written interpretations, but that is rare.
Congress requires the IRS to get input from the public before issuing certain types of official interpretations. This is commonly referred to, for federal agencies in general, as a "notice and comment" process. The "notice" part is that the IRS publishes, in the Federal Register, a draft of the rules they're prepared and are planning to implement. The notice typically requests the public to provide written comments by a certain date and may also schedule a public hearing at which the public can testify.
The input they receive -- written comments and speakers at the public hearings -- comes almost exclusively from tax professionals (lawyers, CPAs, etc.) or organizations that represent taxpayers, such as the Tax Executivies Institute. But any member of the public can provide comments and testify at the hearings. The only influence we have comes from making persuasive arguments, bringing up problems or suggestions that the IRS may not have considered. We can't lobby the IRS with fancy dinners or campaign contributions.
I've helped prepare written comments from the State Bar of Texas Section of Taxation a few times over the years, including twice this year. (One concerned a proposal requiring taxpayers to point out items on their tax returns that the IRS might want to challenge. Another concerned new IRS rules regulating persons who are paid by taxpayers to prepare their tax returns.) It's a lot of effort to prepare useful comments, and we aren't paid for it. But we see it as part of our civic responsibility to help the IRS get the rules right. Particularly if we think the draft rules will unfairly hurt taxpayers. :-)
For both of the recent comments I helped prepare, I also went to Washington, DC to testify at the public hearing. We have to notify the IRS that we want to testify, and supply an outline of what we expect to discuss, in advance. After we arrive at the IRS building, check in and go through screening, we're escorted upstairs to a small auditorium. It would probably hold 150 - 200 people, although usually many fewer are there. The mainstream press doesn't attend but there are usually representatives from a couple of specialty publications who cover tax news. IRS panelists sit at a table at the front of the auditorium, and each person testifying is called, one at a time, up to a podium to address them. We get 10 minutes to speak, and then the panelists can ask us questions if they want. It's not a lot of time, so we have to focus on just a few key points in the public hearings and rely on the written comments for a more comprehensive explanation of our suggestions. The hearing as a whole typically lasts anywhere from a half hour (if only a couple of people sign up to speak) to a few hours.
Afterward, the IRS reviews the written comments they receive as well as the presentations at the public hearing, makes appropriate changes in the draft rules, and issues final rules. The IRS releases copies of the written comments to the specialist publications who cover tax, which also publish transcripts of the public hearings. The entire interaction with "the public" is out in the open.
I've usually found that the IRS representatives genuinely want to get the rules right. They want to make sure taxpayers pay what they should. That necessarily imposes some burdens on taxpayers, but they try to minimize the burden while still making sure they get the information they need to enforce the law as Congress has instructed them to do. Sometimes our written comments and testimony at the hearings don't persuade the IRS to change the draft rules. But the IRS is interested in hearing what we have to say, and often they do make changes based on our input.