What it means
Tax statutes are written in general terms, and real transactions are messy. The IRS issues revenue rulings to explain its position on a particular set of facts, such as how to treat a certain type of payment or whether an arrangement qualifies for a tax benefit.
Each ruling states the facts, the legal question, the law and the conclusion. Revenue rulings are published in the Internal Revenue Bulletin, which is a weekly publication available to the public.
Because they are public, any taxpayer can read them and compare their own situation with the one described. If the facts are the same in all important respects, the taxpayer can generally rely on the ruling as showing how the IRS will treat the matter.
A revenue ruling differs from a private letter ruling. A private ruling is issued to one taxpayer in reply to a specific request, and it generally may not be relied on by anyone else.
A revenue ruling is a general statement for all taxpayers, which is why it is more widely useful. The weight of a revenue ruling should not be overstated.
It is the agency's view and binds the IRS in how its own staff must act, but it does not bind the courts, which can reach a different conclusion. If the facts differ even a little, the ruling may not apply, and the safest course is to seek advice from a qualified tax professional.
Finance teams use revenue rulings when structuring deals, setting accounting policies and answering questions from auditors. They also watch for new rulings that change an earlier position, because an old ruling can be revoked or modified.
Many other countries have similar published guidance from their own tax authorities. A practical habit is to record which rulings were relied upon and why.
If a tax authority later queries the treatment, a dated note showing the ruling number, the facts compared and the adviser's view makes the position far easier to defend.
In practice
Real-world examples.
Example
A company plans to give employees a new type of benefit and wants to know if it is taxable. Its tax manager finds a revenue ruling on a very similar benefit, confirms that the facts match and structures the benefit in line with the ruling.
Example
A property developer is considering a $15,000,000 exchange of land for other land. A revenue ruling describes how a comparable exchange is treated, and the developer's adviser uses it to explain the tax result to the board.
Example
An accountant reviewing a client's treatment of a payment finds that the IRS later published a ruling taking a different view. She advises the client to change the treatment for future years and to discuss the earlier years with the tax adviser.
Case study
Seen in the real world.
Barrowfield Services is an illustrative, fictional company that wanted to reorganise its group structure. Its tax director found a published revenue ruling covering a similar reorganisation and noted that the conclusion was favourable.
She compared the facts closely and found one difference: in the ruling, the parent kept control of the subsidiary, while Barrowfield planned to sell part of its stake. Instead of relying on the ruling, she asked an external adviser whether the difference mattered and, after discussion, redesigned the deal to keep control.
In this fictional case the revised structure matched the ruling and the company went ahead with more confidence. The illustrative lesson is that a revenue ruling is a useful guide only when the facts are truly the same, so the details of the transaction must be checked against it. The tax director now files a short comparison note with every deal that depends on published guidance.
Watch out
Common mistakes.
- Relying on a revenue ruling when the facts of your transaction differ in a material way.
- Assuming that a revenue ruling is law, when it is the agency's published view and courts may disagree.
- Using an old ruling without checking whether it has since been revoked or modified.
Questions
People also ask.
What is the difference between a revenue ruling and a private letter ruling?
A revenue ruling is public guidance for all taxpayers in similar facts, while a private letter ruling answers one taxpayer's specific request and generally cannot be relied on by others.
Where are revenue rulings published?
They appear in the Internal Revenue Bulletin, and archives are available through the IRS and commercial tax research services, so a search by topic usually finds the relevant ruling quickly.
Does a revenue ruling bind the courts?
No, courts treat it as persuasive, and they may follow it or reach a different view of the law.
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