Revenue Ruling

What Is a Revenue Ruling?

A revenue ruling is a public decree issued by the Internal Revenue Service (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 by 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.

Key Takeaways

  • A revenue ruling is a public decree issued by the IRS that essentially has the force of law that outlines the IRS's interpretation of the tax laws.
  • Revenue rulings are published in the Internal Revenue Bulletin and are issued by the National Office of the IRS.
  • 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.
  • Revenue rulings are used by taxpayers and tax professionals as reliable guidelines for their own returns or the returns of their clients.
  • Revenue rulings and procedures in the Bulletins don’t have the force and effect of Treasury Department Regulations but 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.

Understanding a 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 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 2022-2 Internal Revenue Bulletin contains revenue rulings on Section 401 - Qualified Pension, Profit-Sharing, and Stock Bonus Plans. The revenue rulings in the IRS bulletin are highly detailed and contain information such as the individual or individuals who drafted the ruling and detailed explanations regarding the ruling.

Real World Example

The revenue ruling mentioned above, Rev. Rul. 2022-2, provides tables that cover the compensation under § 401(l)(5)(E) of the Internal Revenue Code and the Income Tax Regulations for 2022. Section 401(l)(5)(E) sets out to define what covered compensation is with respect to an employee, defines the taxable wage base, and more. The covered compensation tables show the calendar year of both, the corresponding calendar year of Social Security retirement age, and the dollar value of the covered compensation.

Are Revenue Rulings Binding Authority?

In regard to litigation, revenue rulings are not binding in court. They do not have a force of law nor the authoritative weight of regulations. They are typically used for persuasive authority. There are exceptions to the above depending on the specific situation.

What Is IRS Revenue Ruling 70-604?

IRS revenue ruling 70-604 permits homeowners associations to avoid paying taxes on excess membership income. Taxation can be avoided by returning the excess to members or carrying the excess forward to the next tax year.

Are Revenue Rulings Judicial?

Revenue rulings are not judicial but rather an interpretation by the IRS of the tax code. It is a conclusion reached by the IRS on how the law should be applied to a specific set of facts. It also covers related statutes, tax treaties, and regulations.

Article Sources
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  1. U.S. Government Publishing Office. "26 CFR Ch. I (4–1–12 Edition)," Page 112.

  2. U.S. Government Publishing Office. "26 CFR Ch. I (4–1–12 Edition)," Page 113.

  3. Internal Revenue Service. "Revenue Rulings."

  4. Internal Revenue Service. "Section 401. -- Qualified Pension, Profit-Sharing, and Stock Bonus Plans. Rev. Rul. 2022-2."

  5. Drexel University Thomas R. Kline School of Law. "Tax Law Legal Research: Precedential Rulings & Guidance."

  6. Internal Revenue Service. "Understanding IRS Guidance - A Brief Primer."

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