So You Say You Want a Private Letter Ruling?

Maybe so — but be sure you understand what you are getting.

A private letter ruling (PLR) is a written statement by the IRS to a specific taxpayer in response to a written inquiry, which generally requests guidance as to the tax effects of a specific contemplated transaction. Significantly, a PLR is only binding with regard to the requesting taxpayer and may not be cited (officially) as precedent which is in any way binding on IRS. The IRS’ instructions to its people states that PLRs “may not be used as precedents in the dispositions of other cases but may be used as a guide with other research material in formulating an area office position on an issue.” (IRM 4.10.7.2.10)

Although PLRs are technically only binding on the requesting taxpayer, they do reflect the attitude of the Service on given issues, and have been cited by the Supreme Court, and various other levels of the Federal Courts as evidence of IRS’ position on a matter.

Contrast the PLR with a technical advice memorandum, or TAM issued by IRS. These documents are issued by the IRS national office, generally at the request of the IRS Appeals Division, though taxpayers can request that the examining or appeals officer (in a tax audit situation) seek technical advice on an issue.

TAMs are not precedent that is binding on IRS, but some courts have likewise cited them as supporting a taxpayer’s position and revealing IRS’ interpretation of the law. (Buckeye Power Inc. v. U.S., 1997, Ct Fed Cl 79 AFTR 2d 97-2794)