IRS establishes program for rulings on significant issues

The IRS issued guidance on Tuesday (Rev. Proc. 2026-21) on the establishment of a program for rulings on significant issues to allow taxpayers to request rulings on one or more issues that:

• Are solely under the jurisdiction of the Associate Chief Counsel (Corporate);
• Are significant, meaning the issue is a germane and specific issue of law, provided that a ruling on the issue would not be a comfort ruling or the conclusion in such a ruling otherwise would not be essentially free from doubt; and
• Involve the tax consequences or characterization of a transaction (or part of a transaction) that is described in Sec. 332, 351, 355, 368, or 1036.

The IRS said that the program’s purpose is to use its resources more efficiently and to increase the availability and timeliness of letter rulings. The IRS said it is reinstating the practice of issuing these letters in response to receiving “numerous informal comments from taxpayers and practitioners regarding the time required to process letter ruling requests and the scope” of those requests.

Under the IRS’s current ruling policy, it ordinarily will not issue a letter ruling on only part of an integrated transaction. In addition, except with respect to issues under Secs. 332, 351, 355, 368, and 1036, and related operative provisions, it ordinarily will not issue comfort rulings.

Under the program, taxpayers may request, and the IRS may issue, a ruling on part of an integrated transaction described in Sec. 332, 351, 355, 368, or 1036, as well as a ruling on a particular legal issue under a Code or regulations section with respect to a transaction (or part thereof), rather than requesting or issuing a ruling that addresses all aspects of that section (or any other section) with respect to the transaction (or part thereof).

In addition, the IRS may rule on the tax consequences (such as nonrecognition and basis) resulting from integrated transactions described in Sec. 332, 351, 355, 368, or 1036 to the extent that a significant issue is presented under related Code sections that address such tax consequences.

The significant issue ruling program established by Rev. Proc. 2026-21 applies to all letter ruling requests described in it postmarked or, if not mailed, received by the IRS after May 5, 2026.

— To comment on this article or to suggest an idea for another article, contact Neil Amato at Neil.Amato@aicpa-cima.com.