Internal Revenue Code and Treasury RegulationsThe two principal tax authorities are the Internal Revenue Code (the “Code”) and Treasury Regulations (“regulations”) promulgated pursuant to the Code. Enacted by Congress, the Code is the ultimate authority on all matters upon which it speaks. Treasury is granted authority to issue regulations that interpret the Code. Taxpayers are generally required to follow (and hence may rely upon) final regulations. Prior to being finalized, regulations may take the form of proposed or temporary regulations. While taxpayers may generally rely upon temporary regulations, proposed regulations normally may not be relied upon (although in some situations the proposed regulations may specifically permit reliance).
Revenue Rulings and Revenue ProceduresThe IRS publishes guidance under a panoply of different titles. Some may be relied upon by taxpayers; others may not. There also are technical rules regarding what constitutes substantial authority to justify a taxpayer’s position (see section 6662 and the regulations thereunder). Of the types of administrative guidance the IRS publishes, Revenue Rulings and Revenue Procedures are given the most deference.
Revenue Rulings– Revenue Rulings present the IRS’s position with respect to a particular issue, and are prepared by the Office of the IRS Chief Counsel (“Chief Counsel’s Office”). In a Revenue Ruling the IRS will apply the relevant tax laws to a particular set of facts. Revenue Rulings generally may be relied upon by taxpayers and the IRS normally will not take a position in litigation contrary to its published rulings. However, the IRS cautions that its position is based upon the particular facts, and taxpayers with factual scenarios that are not substantially the same should not rely upon the ruling.
Revenue Procedures– Unlike Revenue Rulings, which deal with substantive tax law, Revenue Procedures provide guidance to taxpayers regarding procedures to be followed in computing their tax liability. Topics covered include, inter alia, compliance with new statutory rules, procedures for adopting methods of accounting, and requirements for making certain elections under the Code. Revenue Procedures are generally binding upon the IRS as to the procedural rules set forth therein. Revenue Procedures are also prepared by the Chief Counsel’s Office.
Notices and AnnouncementsNotices and Announcements are prepared by the IRS and are used to provide expedited guidance. Notices generally provide substantive interpretations of the Code or other substantive law; more recently they have been used to provide guidance regarding tax shelters. Announcements are used to provide prompt guidance on both substantive and procedural matters, including IRS interpretations or explanations of new guidance or policies. Like Revenue Rulings and Revenue Procedures, taxpayers are generally permitted to rely upon Notices and Announcements; they are binding upon the IRS to the extent that they are factually on point.
Other Guidance Prepared by the Chief Counsel’s Office
PLRs– Private Letter Rulings, or PLRs, are written statements from attorneys in the Chief Counsel’s Office, upon request, to a taxpayer applying the tax law to a specific set of facts. Generally, PLRs are sought by taxpayers prior to undertaking a transaction with respect to which the law is somewhat unclear. PLRs may be granted only with respect to proposed transactions or completed transactions for which a return has not yet been filed. PLRs may only be relied upon by the party to whom the ruling is addressed, although they provide insight into the IRS’s position on a given fact pattern and nonetheless may also be useful to other taxpayers.
TAMs– Technical Advice Memorandums, or TAMs, are similar to PLRs but arise during the course of a proceeding before the IRS, including an audit or during review by the IRS appeals division. A TAM may be requested by IRS personnel charged with examining a taxpayer’s return, or a taxpayer may request that a particular issue be referred to the Chief Counsel’s Office for technical advice. A TAM may not be requested for a prospective or hypothetical transaction. Also like PLRs, only the taxpayer with respect to whom the advice was issued may rely upon the TAM.
CCAs– Chief Counsel Advice, or CCAs, are guidance generally provided by the Chief Counsel’s Office to IRS personnel in the national office or in the field. CCAs may provide guidance on a particular fact pattern, like TAMs and PLRs, or instead may provide guidance more broadly to a range of taxpayers or on a range of fact patterns. CCAs are not precedential and, because they are written by docketed attorneys and subject to limited review, taxpayers should approach them with caution and are not assured that the IRS will apply the result in the CCA similarly in their fact pattern. Tax practitioners are also likely to encounter a number of other less common authorities while conducting research, including Field Service Advice (“FSA”), General Counsel Memorandums (“GCMs”), Generic Legal Advice Memorandums (“GLAMs”), and Associate Memorandums (“AMs”). When considering the guidance provided by these, and other, IRS authorities, tax practitioners should give consideration to the posture of the guidance and whether they may rely upon the ruling’s guidance.
ConclusionWhile this article attempts to provide a high level overview of the some of the primary tax authorities, it by no means presents an exhaustive list of authorities nor a comprehensive discussion of those that it discusses. Tax practitioners should therefore be prepared to conduct additional research whenever they encounter new authorities. But after all, isn’t that half the fun of being a tax practitioner?For further research, the following authorities may be helpful:- Mitchell Rogovin, The Four R’s: Regulations, Rulings, Reliance, and Retroactivity: A View From Within, 43 TAXES 756 (1965).- Donald Korb, The Four R's Revisited: Regulations, Rulings, Reliance, and Retroactivity in the 21st Century: A View From Within, 46 Duq. L. Rev. 323 (2008).- Gail Levin Richmond, Federal Tax Research: Guide to Materials and Techniques (5th Edition 1990).