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What is a Revenue Ruling?

Charity Delich
Charity Delich

A revenue ruling is a type of administrative decision issued by the Internal Revenue Service (IRS) in the United States. Typically, revenue rulings are designed to assist taxpayers and tax professionals with determining how to treat certain transactions or taxable events for tax purposes. Once an IRS revenue ruling is made, it can be relied on as precedent by taxpayers and tax professionals.

In 1953, the IRS first began issuing revenue rulings. A year later, they adopted a numbering system that matches up with the year in which the opinion was handed down. For instance, Revenue Ruling 99-2 would be the second revenue opinion given in 1999. Revenue decisions are typically issued by the National Office, and they are primarily published in the Internal Revenue Bulletin.

Woman with hand on her hip
Woman with hand on her hip

Revenue rulings are usually handed down in order to clarify a vague tax statute, treaty, or regulation. These decisions generally represent the IRS's stance on how the tax laws apply in a certain tax scenario, and IRS agents and officials are typically obligated to follow them. If a taxpayer or tax professional fails to adhere to the conditions outlined in a revenue ruling, he or she may be required to pay additional taxes. In some circumstances, the IRS may fine or hand down a disciplinary action if somebody ignores a revenue ruling.

Taxpayers can seek alternate forms of guidance from the IRS through private letter rulings. These rulings are similar to revenue rulings in that they advise a taxpayer about tax treatment in a particular scenario. Unlike a revenue ruling, however, a private letter ruling is only binding on the requesting taxpayer and the IRS, and other taxpayers cannot use it as precedent when filing tax returns. Sometimes the IRS elects to publish private letter rulings as public revenue rulings, making them binding precedent. Typically, a taxpayer must pay a fee in order to receive a private letter ruling.

The IRS may also put out a revenue procedure, which is an official statement published in the Internal Revenue Bulletin. Like revenue rulings, revenue procedures are intended to clarify tax statutes, treaties, and regulations. Unlike rulings, however, revenue procedures primarily address the procedural and administrative policies and practices of the IRS, such as return filing instructions. For instance, a revenue ruling may declare that a self-employed taxpayer can deduct expenses for a work car. The revenue procedure would outline procedural aspects, such as the taxpayer being able to compute the expenses by using a certain mileage rate when making the deduction.

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