The purpose of revenue rulings and procedures is to ensure that Internal Revenue Service employees correctly and uniformly apply the tax laws and help taxpayers with their voluntary tax compliance. In essence, revenue rulings and procedures explain the “whys and hows” of tax law: The “ruling” is the IRS’ position and its application of the tax law to a specific set of facts; the “procedure” provides tax return filing and other instructions.
A revenue ruling is a public administrative ruling that explains how the IRS applies a statute, tax treaty or regulation to a particular set of facts and how it reached its conclusion. For example, in Rev. Rul. 2016-3 (the 3rd ruling issued in 2016), following a recent Appeals Court decision, the IRS canceled the one-percent excise tax on certain reinsurance policy premiums issued by one foreign reinsurer to another foreign insurer/reinsurer.
Although a private ruling – which is based on the facts and circumstances of a particular case – generally affects only the case on which the ruling was based, the IRS can redact the taxpayer’s personal information and issue the guidance instead as a published ruling which may be referenced in resolving general tax disputes. The IRS warns that taxpayers should use caution when utilizing a particular revenue ruling in their application of the law unless their facts and circumstances are substantially the same as those described in the ruling. The taxpayer is advised to consider and reference other legislation, regulations, court decisions, and revenue rulings.
A revenue procedure is an official statement that provides instructions on how a ruling, regulation or law should be applied on a tax return. Revenue procedures generally echo the content of internal IRS management documents and provide that information for the public benefit. See 5 U.S.C. 552.
For example, Rev. Proc. 2016-18 (the 18th ruling issued in 2016), provides an updated list of countries requiring automatic exchanges of information regarding bank deposit interest.
Authority of Revenue Rulings and Procedures
Although they can be relied upon as precedent, revenue rulings and procedures are subordinate to statutes, regulations, treaties and court decisions. They have more weight, however, than private letter rulings. The IRS therefore cautions taxpayers that when applying a published ruling or procedure, the taxpayer should take subsequent laws, regulations, rulings, procedures and tax court decisions into consideration. Revenue rulings and procedures are regularly amplified, clarified, distinguished, modified, revoked, superseded, supplemented or suspended.
Unpublished rulings should not be relied upon by taxpayers, nor cited by IRS staff as precedent in other cases.
Notice and Publication
Taxpayer comments and suggestions on rulings that are being prepared for publication will be solicited if the IRS deems that justified. This IRS guidance involving substantive tax law is generally reported in the Internal Revenue Bulletin and Federal Register unless:
- It concerns an issue answered by a statute, treaty, regulation, ruling, opinion, or court decision that has already been published in the Bulletin;
- It is not deemed sufficiently important to warrant publication;
- It involves a determination of fact and not one of law;
- It relates to informers and informers’ awards; or
- Publication would result in the disclosure of confidential business practices and processes, secret formulas, and the like.