What Is a Revenue Ruling?

A revenue ruling is a public decree issued by the IRS that essentially has the force of law. A revenue ruling outlines the IRS's interpretation of the tax laws and is binding on all IRS employees and public taxpayers. Revenue rulings are published in the Internal Revenue Bulletin and are issued only from the National Office of the IRS. The IRS Bulletin may abbreviate revenue rulings as Rev. Rul. when listing the specific rulings online and in the Bulletin. The purpose of the Revenue Bulletin is to inform American taxpayers of their tax responsibilities and enforce the laws surrounding taxes with fairness and equality. The revenue rulings within the Revenue Bulletin help in the mission of educating and enforcing tax regulations and rulings.

Understanding Revenue Ruling

Revenue rulings are used by taxpayers and tax professionals as reliable guidelines for their own returns or the returns of their clients. According to the IRS, revenue rulings represent the conclusions of the Service on the application of the law to the pivotal facts stated in the revenue ruling. The IRS also notes that while the rulings and procedures reported in the Bulletin don’t have the force and effect of Treasury Department Regulations, they are able to be used as precedents.

Those who ignore the stipulations outlined in a revenue ruling can be subject to additional taxation, penalty or other disciplinary action. All revenue rulings can be accessed on the IRS website and include both past revenue rulings from the last 10 years and present rulings that are currently in effect. Revenue rulings are numbered in correspondence to the year that they are issued and put into effect, so they are easy to reference and identify. For instance, the 2018-4 Internal Revenue Bulletin contains revenue rulings Notice 2018-07, which was enacted in December 2017 and Rev. Rul. 2018–04, which began in January of 2018. The revenue rulings in the IRS bulletin are highly detailed and contain information such as the individual or individuals who drafted the ruling, the arguments for and against the ruling, comments made by taxpayers and special analysis and supporting documents and information.

Example of a Revenue Ruling

Revenue rulings can cover different financial transactions and regulations. For example, the aforementioned Rev. Rul. 2018-04 described an update to taxable wage bases for the year 2018. Section 401(l)(5)(E)(i) of the ruling discussed compensation as covered under the Social Security Act.