Because they are not directly approved by the Secretary of the Treasury, and
deal with more restricted issues,
revenue rulings do not carry the same weight as regulations.
They are, however, legally binding to all taxpayers.
The third type of administrative pronouncements are revenue procedures,
which as the name implies, deal with internal practices and
procedures of the IRS.
Revenue procedures aim to increase taxpayer compliance, and help the IRS
administer tax law more efficiently by answering important questions,
such as where to file a tax return, or how to change a fiscal year end?
The fourth type of administrative pronouncements are letter rulings,
which are specific responses to tax-related inquiries.
They take several forms including private letter rulings,
which typically concern proposed transactions.
Technical advice memoranda, which deal with completed transactions.
And determination letters, which deal with lower level, non-controversial IRS issues.
For brevity, let's focus on private letter rulings,
which are issued by the national office of the IRS.
These rulings are labeled private because they are only provided for
a substantial fee at a taxpayer's request.
They provide specific and narrowly defined anticipatory guidance on
how the IRS will treat a transaction before it occurs.
That is a proposed transaction.
Because such rulings are based on taxpayer-specific facts,
they technically are only binding on the taxpayer making the request.
However, when an anonymized version of the letter ruling is disclosed publicly,
it can sometimes be used by other taxpayers for guidance and
the avoidance of certain accuracy-related penalties.
The IRS issues about 2,500 private letter rulings each year.