IRS Private Letter Ruling (PLR) Lawyer

Should You Submit a Private Letter Ruling Request to the IRS? Here’s What You Need to Know

The Internal Revenue Service (IRS) issues private letter rulings upon request from eligible taxpayers. If you need certainty regarding the tax consequences of a proposed transaction, requesting a PLR could be a good option. With that said, you may have other options as well, and it is important to consider all viable options before contacting the IRS Office of Chief Counsel.

**Attorney Alina Veneziano**
Tax Attorney & CPA Team Lead

**Alice Campbell**
Tax Team
Former Special Agent (IRS)

Submitting a private letter ruling (PLR) request to the Internal Revenue Service (IRS) provides an opportunity to obtain circumstance-specific guidance before moving forward with a proposed transaction. If the IRS accepts a taxpayer’s request, it will issue a written determination of the tax treatment of the proposed transaction based on the information submitted—and the taxpayer can generally rely on the IRS’s determination as long as it moves forward with the transaction as described.

Private letter ruling requests are subject to strict rules and requirements, and user fees apply. As a result, it is important to make an informed decision about both whether and when to file. If you have questions about requesting a PLR, our attorneys can explain the relevant regulations and procedures, and we can help you decide whether requesting a PLR is the best option under the circumstances at hand.

When Should You Request a Private Letter Ruling?

Companies and individual taxpayers can request private letter rulings when transactions raise novel tax issues and the IRS has not published relevant guidance. A PLR is binding on the IRS with respect to—and only with respect to—the taxpayer that requests it. As the IRS explains:

“A private letter ruling, or PLR, is a written statement issued to a taxpayer that interprets and applies tax laws to the taxpayer’s represented set of facts. A PLR is issued in response to a written request submitted by a taxpayer. A PLR may not be relied on as precedent by other taxpayers or by IRS personnel. . . . A PLR is appropriate when the issuer/taxpayer wishes to confirm with the IRS that a prospective transaction will not likely result in a tax violation.”

When companies need insight into how the IRS views the tax implications of a proposed transaction, requesting a PLR can be a viable path forward. While there are costs involved, having the IRS review a proposed transaction in advance can effectively eliminate any potential tax risks involved—provided that the IRS issues a favorable ruling. If the IRS’s written decision indicates that a proposed transaction would violate the Internal Revenue Code (IRC) or have adverse tax effects, the taxpayer can take this into account in restructuring the transaction or pursuing an alternate path as warranted.

How Do You Request a Private Letter Ruling?

There is a specific process for requesting a private letter ruling from the IRS Office of Chief Counsel, and taxpayers must strictly comply with the IRS’s submission requirements. While the procedures and user fees for submitting a PLR request are published annually in the IRS’s first revenue procedure of the year, the procedures largely remain the same from year to year. With that said, before submitting a request, taxpayers should carefully review the relevant revenue procedure to ensure that they know what is required.

When we represent corporate and individual clients who want to obtain a PLR from the IRS prior to moving forward with a specific transaction, our approach involves:

Assessing the need for a PLR in light of existing sources of binding authority
Assessing the feasibility of submitting a successful PLR
Drafting and submitting the PLR in accordance with the relevant revenue procedure
Managing communications with the IRS Office of Chief Counsel during the PLR review process
Reviewing the written determination issued and advising our client regarding next steps

As noted above, a PLR is valid only with respect to the taxpayer’s specific set of circumstances as outlined in the taxpayer’s request. A PLR is not binding for any other tax matters; and, if a taxpayer does not accurately describe a proposed transaction in a PLR request, this can effectively make the PLR non-binding even with regard to the specific transaction at issue. As a result, when requesting a PLR, it is important to invest the time and effort necessary to ensure that the transaction is accurately described for tax purposes—and this makes it important to work with experienced tax counsel as well.

What Are the Alternatives to Requesting a Private Letter Ruling?

A PLR request is a type of pre-filing review. This means that taxpayers can (and must) submit PLR requests before filing their returns or pursuing transactions for which the Office of Chief Counsel’s guidance is requested.

Importantly, while submitting a PLR request is one option for seeking pre-filing review, there are other options as well. Some examples of potential alternatives to requesting a private letter ruling include:

Requesting a determination letter
Submitting a limitation of benefit (LOB) request
Seeking a pre-filing agreement (PFA)
Seeking an advanced pricing agreement (APA)
Participating in the IRS’s compliance assurance process (CAP)

Like private letter rulings, these are all subject to strict eligibility criteria and filing requirements. Not all of these options will be available in all circumstances. If you are thinking about submitting a PLR request, our attorneys can evaluate all relevant alternatives, and we can help you make an informed and strategic decision about how best to proceed.

What if the IRS Denies a Private Letter Ruling Request?

The IRS is not required to issue a private letter ruling, even in response to a valid request. If the IRS denies a PLR request, this is not indicative of the IRS’s position on the tax treatment of the transaction in question. Depending on the circumstances, if the IRS denies a taxpayer’s request, the taxpayer may be able to pursue one of the alternatives listed above, or it may make sense to consider other options for moving forward in a way that does not involve the risk of triggering an IRS audit or investigation.

FAQs: Submitting a Private Letter Ruling Request to the IRS

How long does the private letter ruling (PLR) process take? What are the costs involved?

The IRS Office of Chief Counsel typically processes private letter ruling (PLR) requests within 6 to 12 months of submission. However, the IRS does not have a set time limit for responding to PLR requests, and the duration of the review process depends on the complexity of the tax issue(s) presented, among other factors. For many taxpayers, timing alone can be a significant factor in deciding whether to request a PLR or pursue an alternate path forward.

PLR requests are subject to “user fees” that can range from a few thousand dollars to more than $40,000. Taxpayers who engage tax counsel will need to pay professional fees as well, and attorneys’ fees for PLRs can vary significantly between law firms. If you are interested in requesting a PLR, we can provide a comprehensive overview of the costs involved before you commit to moving forward.

Can I request a private letter ruling (PLR) from the IRS to confirm compliance with federal tax laws?

Yes, the purpose of submitting a private letter ruling (PLR) request is to obtain a binding determination of the IRS’s tax position regarding a particular transaction before moving forward. With that said, the IRS does not rule on every request, and it only rules on the specific facts addressed in the requests it reviews. These are both important reasons to work closely with experienced tax counsel who can assist with submitting a request that is both: (i) eligible for review; and, (ii) clear and comprehensive regarding the details of the transaction in question.

Does the IRS publish private letter rulings (PLRs)?

Yes, the IRS publishes private letter rulings (PLRs) weekly in its online database. Crucially, however, while PLRs are public record, they are not binding with respect to any transactions other than the specific transactions and taxpayers involved. Even if another taxpayer structures an identical transaction, this taxpayer will not be able to rely on a PLR issued to another company or individual.

Do I need to engage tax counsel to request a private letter ruling (PLR) from the IRS?

Technically, no. The IRS Office of Chief Counsel will accept valid private letter ruling (PLR) requests that taxpayers submit directly. With that said, due to the complexity of the IRS’s PLR regulations, the complexity of the tax issues that necessitate PLRs, and the costs involved in submitting a request, it is well worth engaging experienced tax counsel to handle the process on your behalf.

Speak with an IRS Private Letter Ruling Lawyer at Oberheiden PC

If you have questions about requesting a private letter ruling (PLR) from the IRS Office of Chief Counsel, we invite you to get in touch. To discuss your options with a senior lawyer at Oberheiden PC in confidence, call us at 888-680-1745 or tell us how we can help online today.

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