'State' in the Internal Revenue Code

Jan 1, 0001

26 U.S.C. § 7701(a)(10) — the general “State” definition for purposes of the entire Internal Revenue Code — reads:

“The term ‘State’ shall be construed to include the District of Columbia, where such construction is necessary to carry out provisions of this title.”

The provision uses “include” rather than “mean,” and it does not enumerate the fifty states. Both features have been read in alternate-tax theory as significant — most prominently in The Federal Zone and its derivative texts — to argue that “State” in the IRC describes only D.C. and federal possessions, excluding the fifty states themselves.

That reading is not a tenable construction of the text. It depends on treating “include” as restrictive. The IRC’s own construction rule, in the next subsection of the same section, says exactly the opposite.

The construction rule that decides the question

26 U.S.C. § 7701(c) — “Includes and including” — provides the operative rule for how “includes” should be read throughout the IRC:

“The terms ‘includes’ and ‘including’ when used in a definition contained in this title shall not be deemed to exclude other things otherwise within the meaning of the term defined.”

The two provisions read together produce a clean answer:

  • The word “State” carries its ordinary legal meaning — a member of the constitutional Union, one of the fifty states.
  • § 7701(a)(10) adds the District of Columbia to that ordinary meaning, where such addition is necessary to carry out the title’s provisions.
  • § 7701(c) confirms that the addition is non-exclusive: the fifty states (within the ordinary meaning) remain in scope; D.C. is added.

The result is that “State” in the IRC means the fifty states + D.C. The provision is expansive (adding D.C.), not restrictive (limiting to D.C.).

Why the alternate reading is unstable

The alternate reading — “State” excludes the fifty states — depends on three moves:

  1. Reading “include” as restrictive (limiting to enumerated items).
  2. Treating the absence of the fifty states from § 7701(a)(10)’s text as exclusion of the fifty states.
  3. Disregarding § 7701(c)’s explicit non-exclusive rule, often by appealing to a 1930s Treasury Decision (TD 3980) that allegedly read “includes” as restrictive in pre-IRC contexts.

Each move runs into a problem:

  • Even before reaching § 7701(c), the ordinary plain-English meaning of “include” in legal drafting tends toward non-exclusive. “The team includes the captain” doesn’t typically mean “the team is the captain only.”
  • The absence-as-exclusion inference would produce strange results across the IRC. Many IRC definitions use “includes” without listing every covered item — e.g., “employer” definitions, “income” definitions. The non-exclusive reading is what makes the Code coherent.
  • § 7701(c) — an enacted IRC provision tracing to the 1939, 1954, and 1986 IRC enactments — controls IRC interpretation. A pre-IRC Treasury Decision cannot override it. The hierarchy is basic: an Act of Congress beats an administrative pronouncement on statutory construction.

The relationship to § 7701(a)(9)

The general “United States” definition in § 7701(a)(9) — “the term ‘United States’ when used in a geographical sense includes only the States and the District of Columbia” — uses the same “includes” formulation, with the additional word “only.” Even with that word, the geographic meaning is “the States + D.C.,” not “D.C. and territories” to the exclusion of the states. The “only” restricts the term from extending outward (to foreign nations, unincorporated territories) rather than restricting it inward (excluding the states themselves).

This is the IRC’s internal answer to the geographic-scope question. Read together, §§ 7701(a)(9), 7701(a)(10), and 7701(c) establish:

  • “United States” geographically = the fifty states + D.C.
  • “State” = a member of the Union (ordinary meaning) + D.C. (statutory addition)
  • “Includes” = non-exclusive (the listed items expand rather than replace ordinary meaning)

The territorial-limits reading that The Federal Zone and its derivatives advance is not consistent with these provisions read straight. The reading requires inverting the construction rule — treating “includes” as restrictive against § 7701(c)’s explicit text. The Federal Zone foundation essay addresses this in full.