IRS Issues Temporary Procedures for Submitting PLR Requests

A private letter ruling (PLR) is a written response the IRS issues to an owner or taxpayer when the owner asks a question about the tax effects of its acts or transactions. For example, you may not know whether the IRS can give the owner more time to elect the site’s minimum set-aside, or whether the IRS will still consider your site residential if you offer certain nursing or medical services to residents. If you don’t do the right thing, your state housing agency may cite you for noncompliance, putting the owner’s tax credits at risk. In these cases, you can apply for a PLR for direction from the IRS on how to handle these situations.

PLRs aren’t law, but rather an interpretation and application of law and regulation that the IRS will follow, within certain conditions and limitations. The PLRs do bind the taxpayers that request them. So if the owner of your site requests a PLR, it can safely rely on the ruling.

We’ll discuss the latest modification the IRS has made to the process of requesting a PLR and go over the steps required to obtain one.

Submitting PLR Requests Electronically

On April 30, the IRS released an advance version of Revenue Procedure 2020-29, which temporarily allows for the electronic submission of requests for private letter rulings and information letters under the jurisdiction of the IRS Office of Chief Counsel. This modifies the procedures in Revenue Procedure 2020-1.

Revenue Procedure 2020-29 sets out the standards for electronic submissions—that is, submissions for requests for advice when transmitted by facsimile or compressed and encrypted email attachments. Here are the applicable points:

• Owners and their representatives are not required to submit original documents under the temporary procedure;
• Electronic signatures for submissions are allowed under the temporary procedures. The revenue procedure at www.irs.gov/pub/irs-drop/rp-20-29.pdf sets forth guidance on required image formatting for electronic signatures, and in the case of digital signatures, on the required encryption software for electronic signatures; and
• The paper submission option is still available, but you can expect processing delays with this option due to limited personnel.

Take Five Steps to Get PLR

Here are the steps involved in getting a PLR:

Step #1: Get advice from a tax credit attorney. Before moving ahead with the request for a PLR, advise the owner to consult a tax credit attorney. An attorney can determine whether it’s wise or even necessary to request a PLR. The attorney can confirm that there’s a need for a ruling. The IRS ordinarily won’t issue “comfort” letter rulings on matters that are already squarely addressed by statute, regulation, court decision, revenue ruling, revenue procedure, or notice.

And because the IRS revenue procedure that explains how to request a PLR is complex, the attorney can help the owner write the PLR request in the form the IRS requires. The current procedures are in Revenue Procedure 2020-01, which can be found in Internal Revenue Bulletin 2020-1 or at www.irs.gov/pub/irs-irbs/irb20-01.pdf. A sample letter ruling request is included in the appendix.

You may also seek advice directly from the IRS. Before applying for a ruling, in addition to doing research to convince the IRS to rule favorably, you should call an IRS employee who deals in your subject matter to discuss your proposed ruling request. Most published rulings include a name and phone number of the person involved with the ruling who can direct you to someone with whom to discuss your proposed request informally. Revenue Procedure 2020-1 includes a list of phone numbers to request a pre-submission conference in person or by telephone.

Step #2: Prepare request. The next step is to prepare a written statement that includes the information the IRS needs to consider the request. Even if an attorney prepares the actual statement, you may need to help the attorney by supplying some information. Although some PLR requests require additional information, all requests must include the following:

• A complete statement of facts and other related information;
• An analysis of material facts;
• A statement indicating whether the issue affects any tax returns the owner already filed;
• A statement indicating whether a ruling on the same or a similar matter has been issued or requested, or is pending;
• A list of authorities that support the request;
• A list of authorities that appear to run contrary to the request;
• A statement identifying any pending legislation that would affect the request;
• A statement identifying information to be deleted from the copy of the PLR the IRS will make available for public inspection;
• The owner’s signature or the signature of its authorized representative;
• A list of authorized representatives;
• A power of attorney and declaration of representative from each authorized representative;
• A statement attesting to the accuracy of the request under penalties of perjury (using language provided in the revenue procedure) [Rev. Proc. 2020-1 §7.01(15)]; and
• The number of copies of the request the owner is submitting. A taxpayer generally needs to submit only one copy of a PLR request. But if the request covers more than one issue, the IRS encourages taxpayers to submit multiple copies. Also, under certain circumstances outlined in the revenue procedure, taxpayers must submit two copies of their PLR requests [Rev. Proc. 2020-1 §7.01(16)].

Step #3: Assemble required documents and attach them to request. The IRS requires the owner to attach the following documents to the PLR request:

• Copies of all relevant documents, such as the owner’s tax credit application and the site’s extended use agreement; and
• A checklist covering all items included in the request. (You can get a blank checklist from Rev. Proc. 2020-1, Appendix C.)

Step #4: Submit request to IRS with required fee. If you’re helping with the submission, make sure the owner includes a check or money order to cover the fee for filing a PLR request. Read the fee schedule in Appendix A of Revenue Procedure 2020-1 to determine the correct fee.

Step #5: Respond to any issues IRS rep raises. In most cases, an IRS representative must contact the owner within 21 days after the IRS gets the PLR request to discuss procedural matters. Although, as noted, expect delays if you choose to mail in a private letter ruling request. According to Revenue Procedure 2020-29, electronic submission will result in faster processing than paper submission.

The representative must tell the owner whether he’ll recommend to the IRS that it issue a PLR and what the PLR should say. And the representative may ask the owner to send more information to help the IRS properly consider the request [Rev. Proc. 2020-1 §10.02].

Also, be sure to maintain contact with the IRS while your ruling is pending. Obtaining a complex PLR generally takes months. Keeping in touch with the person listed in the IRS acknowledgment of receipt of your ruling application can speed up the process.

Issues IRS Won’t Consider for Private Letter Rulings

The IRS won’t consider all issues presented in a PLR. It won’t respond to:

• Issues that arise only in hypothetical or alternative situations. The IRS may issue a PLR in response to owners’ questions “about their status for tax purposes” and the “tax effects of their acts or transactions…” [Rev. Proc. §3]. But the IRS won’t issue a PLR that would bind an owner in a situation that very well may not occur [Rev. Proc. §6.02].
• Frivolous issues. The IRS warns against requesting PLRs for frivolous issues. A “frivolous issue” is “one without basis in fact or law” or that supports “a position that courts have held groundless” [Rev. Proc. §6.10]. The revenue procedure gives examples, such as claiming that filing a tax return violates constitutional claims such as due process, involuntary servitude, or that your situation somehow constitutes an unreasonable search.
• Requests to change the law. If you or the owner disagree with part of the tax credit law, don’t try to change it by requesting a PLR. Only Congress can amend the tax credit law. The IRS is limited to applying the law to an owner’s particular situation.
• “Comfort” ruling requests. The IRS ordinarily won’t issue “comfort” letter rulings on matters that are already squarely addressed by statute, regulation, court decision, revenue ruling, revenue procedure, or notice. However, the IRS says that it may decide to issue a comfort ruling if it is otherwise issuing a letter ruling to the taxpayer on another issue arising in the same transaction.