What is a '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.

BREAKING DOWN 'Private Letter Ruling - PLR'

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.

How to Request a Private Letter Ruling

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.

  1. IRS Publication 1

    A document published by the Internal Revenue Service that identifies ...
  2. Taxpayer

    A taxpayer is an individual or business entity that is obligated ...
  3. IRS Form 4868

    IRS Form 4868 is a form for taxpayers who wish to extend their ...
  4. Dependent Care Credit

    The Dependent Care Credit is a tax credit for un-reimbursed childcare ...
  5. Appeals Conference

    Appeals conference is a conference that a taxpayer can request ...
  6. IRS Publication 929: Tax Rules ...

    IRS Publication 929: Tax Rules for Children and Dependents is ...
Related Articles
  1. Taxes

    Start Over With The IRS

    If you're struggling to pay back taxes, try a fresh start with the IRS. They really can help.
  2. Taxes

    20 Tax Changes You Need To Know About

    Don't miss out on the tax changes. Here's a list that you need to know about.
  3. Financial Advisor

    IRS Allows Mortgage Deduction for Unwed Couples

    Single taxpayers who co-own one or more of their homes with another person can now each claim a deduction for the mortgage interest.
  4. Taxes

    What's IRS Form 1040 For?

    Most U.S. taxpayers will be familiar with the 1040. By the end of filling it out, you'll know how much tax you owe, or what your refund is.
  5. Taxes

    Smart Year-End Tax Moves for 2016 (Part Two)

    Here's are some crucial tax planning strategies for investments, Social Security and Medicare.
  6. Taxes

    How to Log Mileage for Taxes in 8 Easy Steps

    Using these eight steps, a taxpayer can learn how to log miles for taxes and maintain the minimum requirements outlined by the IRS to qualify for a tax deduction.
  7. Taxes

    5 Ways To Receive Your Tax Refund

    Taxpayers in the U.S. can receive their income tax refund in many different forms - checks, debit cards, savings bonds and direct deposits. Find out which one is right for you.
  8. Taxes

    Why Do So Many People Fall Behind On Their Taxes?

    Despite the threat of owing thousands of dollars to possibly the most feared organization in the U.S., millions of Americans continue to fall behind on their taxes.
  9. Financial Advisor

    Family Business Estate Tax Loophole Could Be Closed

    The Treasury department is aiming to close a loophole that would result in higher estate and gift taxes for some wealthy business owners.
  10. Financial Advisor

    What Advisors Need to Know About Rule 3210

    Here's what advisors and brokers need to know about FINRA Rule 3210.
  1. Who needs to fill out IRS Form Schedule B?

    If you have several investments, there's a good chance you'll need to fill out a IRS Form Schedule B. Read Answer >>
Trading Center