Private Letter Ruling (PLR)

A private letter ruling (PLR) is a written decision by the Internal Revenue Service (IRS), in response to a taxpayer’s request for guidance on unusual circumstances or complex questions about their specific tax situation. A PLR is issued by the IRS Office of Chief Counsel or the Tax Exempt and Government Entities Division, which interprets and applies the tax laws to a taxpayer’s represented set of facts. The purpose of the PLR is to advise the taxpayer regarding the tax treatment they can expect from the IRS in the circumstances specified by the ruling and explain the rationale for that decision. A PLR can also help a taxpayer confirm whether or not a potential action will result in a tax violation. A PLR is also sometimes called a letter ruling, or LTR.

A PLR is specific and applicable only to an individual taxpayer and their tax situation at the time of the request. PLRs of other taxpayers cannot be used as precedent by a person requesting a ruling regarding their own issue, and in no way binds the IRS to take a similar position when dealing with other taxpayers. The IRS can, however, redact the personal content of a private ruling and issue it as a revenue ruling, which becomes binding on all taxpayers. Even with a favorable ruling, a taxpayer has no absolute guarantee of the tax consequences, since the IRS can modify or revoke a previously issued PLR if it is later determined that the ruling was incorrect or inconsistent with the current position of the IRS.

PLRs are generally made public after all identifiable information about the taxpayer in question has been removed, and they can be accessed through the IRS FOIA Library.

Taxpayers requesting a PLR should consult the first Revenue Procedure published by the IRS at the start of each calendar year, which describes guidelines and updates for the process, and includes sample request letter templates and a checklist of over 50 questions that must be answered. Taxpayers planning to request a PLR should also consider consulting with an IRS employee or other tax expert, since the procedures are extremely technical and exact compliance is required for a successful filing.

One of the burdens of requesting a PLR is the cost, which has steadily risen in recent years. As of 2018, fees incurred by the taxpayer can reach as high as $50,000 for large group submissions. The IRS generally completes ruling requests within 60-90 days, although the process can take significantly longer if multiple branches of the IRS need to review the ruling or if there are other extenuating circumstances.