When a transaction requires greater certainty or when relief is sought for a difficult tax situation, applying to the IRS for a private letter ruling (PLR) can provide interpretation and application of law and regulation with respect to that taxpayer the Service will follow, within certain conditions and limitations. Here’s how to apply for a PLR:
Confirm there is a need.
The
IRS ordinarily will not issue “comfort” letter rulings on matters
that are already squarely addressed by statute, regulation, court
decision, revenue ruling, revenue procedure or notice.
Get the most recent IRS guidance for making a ruling request.
Follow
the IRS requirements and instructions for applying for a ruling.
This information generally is contained in the first revenue
procedure the IRS publishes each year; for 2009 it was Revenue
Procedure 2009-1. A sample
letter ruling request is included in the appendix. Check for updates
and revisions published during the year.
Is there an easier way to obtain a ruling?
See
if your ruling request falls under an automatic or simplified
method. Many of these are listed in an appendix of the revenue
procedure. Sometimes such relief is adequate. For example, an LLC
received assets from a corporation. The transaction was intended to
qualify as a tax-free reorganization but failed because that
treatment is not permitted in an asset distribution to a
partnership. The initial LLC partnership return has already been
filed. Relief may be available under Revenue Procedure 2007-62
requesting permission for a late S corporation or corporation
classification election, retroactively making the transaction a
distribution between two corporations.
Confirm that the IRS has not declared your subject a “no ruling”
topic.
Review
the “no ruling” lists that the IRS issues at the beginning of each
year and any subsequent updates. For 2009, they were revenue
procedures 2009-3 for U.S.
domestic matters and 2009-7
for international issues.
Seek direct guidance from the IRS.
Before
applying for a ruling, in addition to doing research to convince the
IRS to rule favorably, you should call an IRS employee who deals in
your subject matter to discuss your proposed ruling request. Most
published rulings include a name and phone number of the person
involved with the ruling who can direct you to someone with whom to
informally discuss your proposed request. Revenue Procedure 2009-1
includes a list of phone numbers to request a presubmission
conference in person or by telephone, but this requires disclosure
of the taxpayer’s identity.
Don’t forget to pay the user fee.
The
fee list the IRS publishes near the beginning of each year is
calculated in accordance with OMB Circular No. A-25. Revenue
Procedure 2009-1 (see section 15 and appendix A) lists most fees in
the range of $625 to $11,500. Automatic and simplified methods are
generally not subject to a user fee.
Maintain contact with the IRS while your ruling is pending.
Obtaining
a complex PLR generally takes months. Keeping in touch with the
person listed in the IRS acknowledgment of receipt of your ruling
application can speed up the process.
—By Jay Starkman, CPA, (jay@starkman.com) of Jay Starkman PC in Atlanta. He is the author of the book The Sex of a Hippopotamus: A Unique History of Taxes and Accounting.
