For those unfamiliar with the intricacies of tax administration, the array of IRS guidance can initially seem quite perplexing. To demystify this, here’s a brief overview of seven of the most common forms of guidance.
In its role of administering tax laws enacted by Congress, the IRS must interpret these laws and translate them into detailed regulations, rules, and procedures. The Office of Chief Counsel plays a crucial role in this process by producing various documents and publications that provide guidance to taxpayers, businesses, and charitable organizations.
Regulation
A regulation is issued by the Internal Revenue Service (IRS) and the Treasury Department to provide guidance on new legislation or to address issues related to existing sections of the Internal Revenue Code. These regulations interpret the law and offer directions for compliance. They are published in the Federal Register. Typically, regulations are first issued in proposed form through a Notice of Proposed Rulemaking (NPRM). After considering public input via written comments and possibly a public hearing, a final or temporary regulation is published as a Treasury Decision (TD) in the Federal Register.
Revenue Ruling
A revenue ruling is an official interpretation by the IRS of the Internal Revenue Code, related statutes, tax treaties, and regulations. It represents the IRS’s conclusion on how the law applies to a specific set of facts. Revenue rulings are published in the Internal Revenue Bulletin to provide information and guidance to taxpayers, IRS personnel, and tax professionals. For instance, a revenue ruling might determine that taxpayers can deduct certain automobile expenses.
Revenue Procedure
A revenue procedure is an official statement outlining a procedure that impacts the rights or duties of taxpayers or other members of the public under the Internal Revenue Code, related statutes, tax treaties, and regulations. It is intended to be a matter of public knowledge and is published in the Internal Revenue Bulletin. While a revenue ruling generally states the IRS’s position, a revenue procedure provides instructions for return filing or other actions based on that position. For example, a revenue procedure might specify how those eligible to deduct certain automobile expenses should calculate them using a specific mileage rate instead of actual operating expenses.
Private Letter Ruling
A private letter ruling (PLR) is a written statement issued by the IRS that interprets and applies tax laws to a taxpayer’s specific situation. It is designed to provide certainty about the federal tax consequences of a particular transaction before it is completed or before the taxpayer’s return is filed. A PLR is issued in response to a taxpayer’s written request and is binding on the IRS, provided the taxpayer fully and accurately describes the proposed transaction and executes it as described. However, PLRs cannot be used as precedent by other taxpayers or IRS personnel. They are generally made public after removing any information that could identify the taxpayer.
Technical Advice Memorandum
A Technical Advice Memorandum (TAM) is guidance provided by the Office of Chief Counsel at the request of an IRS director or an area director, appeals, in response to technical or procedural questions that arise during a proceeding. Requests for a TAM typically originate from an examination of a taxpayer’s return, a consideration of a taxpayer’s claim for a refund or credit, or other matters involving a specific taxpayer under the jurisdiction of the territory manager or area director, appeals. TAMs are issued only for closed transactions and offer interpretations on the proper application of tax laws, tax treaties, regulations, revenue rulings, or other precedents. The advice given represents the IRS’s final determination on the specific issue in the specific case for which the advice is issued. TAMs are generally made public after removing any information that could identify the taxpayer involved.
Notice
A notice is a public announcement that may include guidance on substantive interpretations of the Internal Revenue Code or other legal provisions. For instance, notices can be used to indicate what future regulations will entail when those regulations are not yet ready for publication.
Announcement
An announcement is a public statement that holds immediate or short-term value. For example, announcements can summarize laws or regulations without providing substantive interpretation, indicate what upcoming regulations will entail when their publication is imminent, or notify taxpayers of an approaching deadline.
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