Revenue Ruling

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Revenue Rulings are public administrative rulings by the Internal Revenue Service (IRS) that apply the law to particular factual situations. A revenue ruling can be relied upon by all taxpayers.

A taxpayer may, for a fee, seek advice from the IRS as to the proper tax treatment of a transaction. This is called a private letter ruling. A private letter ruling binds only the IRS and the requesting taxpayer. Thus, a private ruling may not be cited or relied upon for precedent. The IRS does have the option of redacting the text of a private ruling and issuing it as a revenue ruling, which become binding on all taxpayers and the IRS.

Revenue rulings are published both in the Internal Revenue Bulletin and in the Federal Register.The numbering system for revenue rulings corresponds to the year in which they are issued. Thus, for example, Revenue Ruling 79-24 was the twenty-forth revenue ruling issued in 1979.

Public administrative rulings are part of second tier authorities and generally do not prevail over legislative regulations, the Internal Revenue Code, Court Cases and Treaties. However, they hold higher weight than tier 3 authorities such as legislative history and private letter rulings. Revenue Rulings can be used to avoid certain IRS penalties.

Revenue rulings are different than revenue procedures. While a revenue ruling is the conclusion of the IRS on how the law is applied to a specific set of facts, a revenue procedure is an official statement of a procedure that affects the rights or duties of taxpayers under the law. Generally, a revenue ruling states the IRS position, whereas a revenue procedure provides return filing or other instructions concerning the IRS position.

For example, a revenue ruling holds that taxpayers may deduct certain automobile expenses, and a revenue procedure provides that taxpayers entitled to deduct these automobile expenses may compute them by applying certain mileage rates in lieu of determining actual operating expenses.

Revenue rulings and revenue procedures are alike in that both are issued only by the National Office and both are for the information and guidance of taxpayers