General rules: IRS rulings & memoranda

From an NTEA member What is the difference between Private Letter Rulings, Technical Advice Memoranda and Revenue Rulings? The three types of Internal Revenue Service (IRS) rulings you have identified all provide taxpayers with information concerning the IRS position on tax matters. However, each type of rulings is issued in particular circumstances and has its own legal significance. Private Letter Rulings Private Letter Rulings are issued by the IRS National Office in response to written requests from taxpayers. Rulings may be requested for completed or prospective transactions. IRS officials all over the country will honor Private Letter Rulings, but only for the taxpayer who requested the ruling. Although a Private Letter Ruling generally indicates the IRS position as to the matters addressed, persons other than the recipient have no assurance the IRS will treat them consistently with the ruling. Thus, the fact that a competitor obtains a favorable ruling for a product similar to one that you sell does not necessarily mean you have no audit risk if you decide not to charge tax on your product. But that does not mean you should run out to obtain your own ruling. You need to consider the expense of obtaining a ruling and the fact that a ruling request invites the IRS under the tent. Also, rulings are published, and information about your products may become public. (You can request that certain information be deleted from the published ruling, but the IRS may not agree with all the deletions you request.) Always consult with your tax adviser prior to submitting a ruling request. Technical Advice Memoranda A Technical Advice Memorandum (TAM) is a written interpretation of tax law issued by the National Office upon request of a district director or chief of a local Appeals Office. TAMs typically are requested when an issue arises during the course of an audit or a request for refund/credit. TAMS are only provided for closed transactions (i.e., a TAM cannot be obtained for prospective transactions). When a taxpayer involved in an audit or seeking a refund/credit disagrees with an IRS position, he can submit a written request that the district director seek a TAM. The request must include a statement of the issues, the taxpayer’s position and supporting legal precedents. (The taxpayer gets an opportunity to submit the same information if a TAM is requested by the district director or chief of the Appeals Office without prodding by the taxpayer.) If the examining officer or appeals officer denies the taxpayer’s request, there are several layers of appeals that can be pursued. Ultimately, however, the local office can deny a request that a TAM be submitted. Like Private Letter Rulings, TAMs are binding only on the taxpayer involved in the TAM. Others who rely on a position set forth in a TAM do so at their peril. Revenue Rulings A Revenue Ruling is an official interpretation by the IRS National Office of how the Internal Revenue Code applies to a particular set of facts. Many Revenue Rulings are issued following the issuance of a Private Letter Ruling or Technical Advice Memorandum addressing the same subject. The difference is that a Revenue Ruling can be relied on by all taxpayers. It should be noted, however, that courts are not bound by Revenue Rulings if the court determines that the IRS position is contrary to law. As the foregoing indicates, taxpayers obtain much greater comfort from Revenue Rulings than from third-party Private Letter Rulings and Technical Advice Memoranda. In all instances, the extent to which your facts are similar to the facts in the ruling also should be considered when relying on a ruling. IMPORTANT NOTE: This document reflects the FET as of 4/1/1998. Transactions prior to this time may be subject to different rules because of changes in the FET Regulations, Statutory Amendments and IRS Rulings issued subsequent to the time of such earlier transactions. Similarly, transactions entered into after 4/1/1998 may be subject to different rules. It is, therefore, essential that users of the outline consult with their tax advisers before relying upon it. Also, users should recognize that IRS Letter Rulings referred to in these materials are binding only on the taxpayers to whom they were issued and only serve as an indication of the IRS's position on any issue.

General rules: IRS rulings & memoranda

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