Laws and Rules vs. Private Letter Rulings and Technical Advice Memoranda

The laws and rules governing the tax credit program include Section 42 of the Internal Revenue Code and its regulations, Internal Revenue Service (IRS) Revenue Notices, IRS Revenue Procedures, and IRS Revenue Rulings. The laws and rules are binding on everyone who's involved with a tax credit site, especially owners and managers.

Private letter rulings (PLRs) and technical advice memoranda (TAMs), though issued by the IRS, aren't law, explains tax credit expert A.J. Johnson. Instead, PLRs are binding only with respect to the taxpayer that requested the ruling—not to every taxpayer in the same situation. And TAMs, which are responses to auditor's requests for clarification, aren't binding on anyone—not even the auditor who made the request. Thus, a private ruling may not be cited or relied upon as precedent.

Potential danger. It may seem logical that when the IRS issues a tax credit ruling or statement about the law that looks official, it must be binding. But thinking this way would lead you to follow every PLR and TAM, even though they're not part of the tax credit law or rules.

Insider Source

A.J. Johnson, HCCP: President, A.J. Consulting Services, Inc.; 3521 Frances Berkeley, Williamsburg, VA 23188; www.ajjcs.net.