SECTION 5. UNDER WHAT — Internal Revenue Bulletin 2003-1

CIRCUMSTANCES DOES THE NATIONAL OFFICE ISSUE LETTER RULINGS?

.05 Issues under the jurisdiction of the Associate Chief Counsel (Passthroughs and Special Industries) include those that involve income taxes of S corporations (except accounting periods and methods) and certain noncorporate taxpayers (including partnerships, common trust funds, and trusts), entity classification, estate, gift, generation-skipping transfer, and certain excise taxes, amortization, depreciation, depletion, and other engineering issues, accounting method changes for depreciation and amortization, cooperative housing corporations, farmers’ cooperatives (under § 521), the low-income housing, disabled access, and qualified electric vehicle credits, research and experimental expenditures, shipowners’ protection and indemnity associations (under § 526), and certain homeowners associations (under § 528).

.06 Issues under the jurisdiction of the Associate Chief Counsel (Procedure and Administration) include those that involve federal tax procedure and administration, disclosure and privacy law, reporting and paying taxes, assessing and collecting taxes (including interest and penalties), abating, crediting, or refunding overassessments or overpayments of tax, and filing information returns.

.07 Issues under the jurisdiction of the Division Counsel/Associate Chief Counsel (Tax Exempt and Government Entities) include those that involve income tax and other tax aspects of executive compensation and employee benefit programs (other than those within the jurisdiction of the Commissioner, Tax Exempt and Government Entities Division), employment taxes, taxes on self-employment income, tax-exempt obligations, mortgage credit certificates, Qualified Zone Academy Bonds (QZADS), and federal, state, local, and Indian tribal governments.

.01 The procedures for obtaining letter rulings, etc., that apply to federal alcohol, tobacco, and firearms taxes under subtitle E of the Code are under the jurisdiction of the Bureau of Alcohol, Tobacco and Firearms. The Homeland Security Act of 2002, Pub. L. No. 107–296, moves the Bureau of Alcohol, Tobacco and Firearms into the Department of Justice and creates a Tax and Trade Bureau to take over the Bureau of Alcohol, Tobacco and Firearms functions that are not transferred to the Department of Justice.

.02 The procedures for obtaining letter rulings, determination letters, etc., on employee plans and exempt organizations are under the jurisdiction of the Commissioner, Tax Exempt and Government Entities Division. See Rev. Proc. 2003–4, this Bulletin. See also Rev. Proc. 2003–6, this Bulletin, for the procedures for issuing determination letters on the qualified status of pension, profit-sharing, stock bonus, annuity, and employee stock ownership plans under §§ 401, 403(a), 409, and 4975(e)(7), and the status for exemption of any related trusts or custodial accounts under § 501(a).

For the user fee requirements applicable to requests for letter rulings, determination letters, etc., under the jurisdiction of the Commissioner, Tax Exempt and Government Entities Division, see Rev. Proc. 2003–8, this Bulletin.

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In income and gift tax matters .01 In income and gift tax matters, the national office generally issues a letter ruling on a proposed transaction and on a completed transaction if the letter ruling request is submitted before the return is filed for the year in which the transaction that is the subject of the request was completed.

(1) Circumstances under which a letter ruling is not ordinarily issued. The national office ordinarily does not issue a letter ruling if, at the time the letter ruling is requested, the identical issue is involved in the taxpayer’s return for an earlier period and that issue—

(a) is being examined by a field office;

(b) is being considered by an area office;

(d) has been examined by a field office or considered by an area office and the statutory period of limitations on assessment or on filing a claim for refund or credit of tax has not expired; or

(e) has been examined by a field office or considered by an area office and a closing agreement covering the issue or liability has not been entered into by a field office or by an area office.

If a return dealing with an issue for a particular year is filed while a request for a letter ruling on that issue is pending, the national office will issue the letter ruling unless it is notified by the taxpayer or otherwise learns that an examination of that issue or the identical issue on an earlier year’s return has been started by a field office. See section 8.04 of this revenue procedure. Even if an examination has begun, the national office ordinarily will issue the letter ruling if the field office agrees, by memorandum, to the issuance of the letter ruling.

(2) No letter ruling on a property conversion after return filed. The national office does not issue a letter ruling on the replacement of involuntarily converted property, whether or not the property has been replaced, if the taxpayer has already filed a return for the taxable year in which the property was converted. The field office may issue a determination letter in this case. See section 6.01 of this revenue procedure.

(3) Certain late S corporation and related elections. In lieu of requesting a letter ruling under this revenue procedure, a taxpayer may obtain relief for certain late S corporation and related elections by following the procedures in Rev. Proc. 98–55, 1998–2 C.B. 643, or Rev. Proc. 97–48, 1997–2 C.B. 521. A request made pursuant to Rev. Proc. 98–55 or Rev. Proc. 97–48 does not require payment of any user fee. See section 3.05 of Rev. Proc. 98–55, section 3 of Rev. Proc. 97–48, and section 15.03(2) of this revenue procedure.

A § 301.9100 request for extension of time for making an election or for other relief

.02 The national office will consider a request for an extension of time for making an election or other application for relief under § 301.9100–3 of the Procedure and Administration Regulations. Even if submitted after the return covering the issue presented in the § 301.9100 request has been filed and even if submitted after an examination of the return has begun or after the issues in the return are being considered by an area office or a federal court, a § 301.9100 request is a letter ruling request. Therefore, the § 301.9100 request should be submitted pursuant to this revenue procedure.

An election made pursuant to § 301.9100–2 is not a letter ruling request and does not require payment of any user fee. See § 301.9100–2(d) and section 15.03(1) of this revenue procedure. Such an election pertains to an automatic extension of time.

(1) Format of request. A § 301.9100 request (other than an election made pursuant to § 301.9100–2) must be in the general form of, and meet the general requirements for, a letter ruling request. These requirements are given in section 8 of this revenue procedure. In addition, the § 301.9100 request must include the information required by § 301. 9100–3(e).

(2) Period of limitations. The running of any applicable period of limitations is not suspended for the period during which a § 301.9100 request has been filed. See § 301.9100–

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Determinations under § 999(d) of the Internal Revenue Code

3(d)(2). If the period of limitation on assessment under § 6501(a) for the taxable year in which an election should have been made or any taxable year that would have been affected by the election had it been timely made will expire before receipt of a § 301.9100 letter ruling, the Service ordinarily will not issue a § 301.9100 ruling. See § 301.9100–3(c)(1)(ii). Therefore, the taxpayer must secure a consent under § 6501(c)(4) to extend the period of limitation on assessment. Note that the filing of a claim for refund under § 6511 does not extend the period of limitation on assessment. If § 301.9100 relief is granted, the Service may require the taxpayer to consent to an extension of the period of limitation on assessment. See § 301.9100–3(d)(2).

(3) Taxpayer must notify national office if examination of return begins while re- quest is pending. If the Service starts an examination of the taxpayer’s return for the taxable year in which an election should have been made or any taxable year that would have been affected by the election had it been timely made while a § 301.9100 request is pending, the taxpayer must notify the national office. This notification includes the name and telephone number of the examining agent. See § 301.9100–3(e)(4)(i) and section 8.04(1)(b) of this revenue procedure.

(4) National office will notify examination agents, appeals officer, or government coun- sel of a § 301.9100 request if return is being examined by a field office or is being con- sidered by an area office or a federal court. If the taxpayer’s return for the taxable year in which an election should have been made or any taxable year that would have been affected by the election had it been timely made is being examined by a field office or considered by an area office or a federal court, the national office will notify the appropriate examining agent, appeals officer, or government counsel that a § 301.9100 request has been submitted to the national office. The examining officer, appeals officer, or government counsel is not authorized to deny consideration of a § 301.9100 request. The letter ruling will be mailed to the taxpayer and a copy will be sent to the appropriate Service official in the operating division that has examination jurisdiction of the taxpayer’s tax return, appeals officer, or government counsel.

.03 Under Rev. Proc. 77–9, 1977–1 C.B. 542, the Office of Associate Chief Counsel (International) issues determinations under § 999(d) that may deny certain benefits of the foreign tax credit, deferral of earnings of foreign subsidiaries and domestic international sales corporations (DISCs), and tax exemption for foreign trade income of a foreign sales corporation or a small foreign sales corporation (FSC or small FSC) to a person, if that person, a member of a controlled group (within the meaning of § 993(a)(3)) that includes the person, or a foreign corporation of which a member of the controlled group is a United States shareholder, agrees to participate in, or cooperate with, an international boycott. Requests for determinations under Rev. Proc. 77–9 are letter ruling requests and, therefore, should be submitted to the Associate Chief Counsel (International) pursuant to this revenue procedure.

In matters involving § 367 .04 Unless the issue is covered by section 7 of this revenue procedure, the Office of Associate Chief Counsel (International) may issue a letter ruling under § 367 even if the taxpayer does not request a letter ruling as to the characterization of the transaction under the reorganization provisions of the Code. The Office of Associate Chief Counsel (International) will determine the § 367 consequences of a transaction based on the taxpayer’s characterization of the transaction but will indicate in the letter ruling that it expresses no opinion as to the characterization of the transaction under the reorganization. The Office of Associate Chief Counsel (International) may decline to issue a § 367 ruling in situations in which the taxpayer inappropriately characterizes the transaction under the reorganization provisions.

In estate tax matters .05 In general, the national office issues prospective letter rulings on transactions affecting the estate tax on the prospective estate of a living person and affecting the estate tax on the estate of a decedent before the decedent’s estate tax return is filed. The national office will not issue letter rulings for prospective estates on computations of tax, actuarial factors, and factual matters.

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In matters involving additional estate tax under § 2032A(c)

In matters involving qualified domestic trusts under § 2056A

In generation-skipping transfer tax matters

In employment and excise tax matters

If the taxpayer is requesting a letter ruling regarding a decedent’s estate tax and the estate tax return is due to be filed before the letter ruling is expected to be issued, the taxpayer should obtain an extension of time for filing the return and should notify the national office branch considering the letter ruling request that an extension has been obtained.

If the return is filed before the letter ruling is received from the national office, the taxpayer must disclose on the return that a letter ruling has been requested, attach a copy of the pending letter ruling request to the return, and notify the national office that the return has been filed. See section 8.04 of this revenue procedure. The national office will make every effort to issue the letter ruling within 3 months of the date the return was filed.

If the taxpayer requests a letter ruling after the return is filed, but before the return is examined, the taxpayer must notify the field office having jurisdiction over the return that a letter ruling has been requested, attach a copy of the pending letter ruling request, and notify the national office that a return has been filed. See section 8.04 of this revenue procedure. The national office will make every effort to issue the letter ruling within 3 months of the date the return has been filed.

If the letter ruling cannot be issued within that 3-month period, the national office will notify the field office having jurisdiction over the return, who may, by memorandum to the national office, grant an additional period for the issuance of the letter ruling.

.06 In matters involving additional estate tax under § 2032A(c), the national office issues letter rulings on proposed transactions and on completed transactions that occurred before the return is filed.

.07 In matters involving qualified domestic trusts under § 2056A, the national office issues letter rulings on proposed transactions and on completed transactions that occurred before the return is filed.

.08 In general, the national office issues letter rulings on proposed transactions that affect the generation-skipping transfer tax and on completed transactions that occurred before the return is filed. In the case of a generation-skipping trust or trust equivalent, letter rulings are issued either before or after the trust or trust equivalent has been established. The national office will issue letter rulings on the application of the effective date rules for generationskipping transfer tax (§ 1433 of the Tax Reform Act of 1986, 1986–3 (Vol. 1) C.B. 1, 648) to wills, trusts, and trust equivalents in existence on October 22, 1986, and to generationskipping transfers taking place on or before October 22, 1986.

.09 In employment and excise tax matters, the national office issues letter rulings on proposed transactions and on completed transactions either before or after the return is filed for those transactions.

Requests regarding employment status (employer/employee relationship) from federal agencies and instrumentalities should be submitted directly to the national office. Requests regarding employment status from other taxpayers must first be submitted to the appropriate Service office listed on the current Form SS–8 (Rev. January 2001). See section 6.04 of this revenue procedure. Generally, the employer is the taxpayer and requests the letter ruling. If the worker asks for the letter ruling, both the worker and the employer are considered to be the taxpayer and both are entitled to the letter ruling.

The national office usually will not issue a letter ruling if, at the time the letter ruling is requested, the identical issue is involved in the taxpayer’s return for an earlier period and that issue—

(1) is being examined by a field office;

(2) is being considered by an area office;

(3) is pending in litigation in a case involving the taxpayer or a related taxpayer;

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In administrative provisions matters

In Indian tribal government matters

(4) has been examined by a field office or considered by an area office and the statutory period of limitations on assessment or on filing a claim for refund or credit of tax has not expired; or

(5) has been examined by a field office or considered by an area office and a closing agreement covering the issue or liability has not been entered into by a field office or by an area office.

If a return involving an issue for a particular year is filed while a request for a letter ruling on that issue is pending, the national office will issue the letter ruling unless it is notified by the taxpayer or otherwise learns that an examination of that issue or an examination of the identical issue on an earlier year’s return has been started by a field office. See section 8.04 of this revenue procedure. Even if an examination has begun, the national office ordinarily will issue the letter ruling if the director agrees, by memorandum, to the issuance of the letter ruling.

.10

(1) In general. The national office issues letter rulings on matters arising under the Code and related statutes and regulations that involve—

(a) the time, place, manner, and procedures for reporting and paying taxes;

(b) the assessment and collection of taxes (including interest and penalties);

(d) the filing of information returns.

(2) Circumstances under which a letter ruling is not ordinarily issued. The national office ordinarily does not issue a letter ruling if, at the time the letter ruling is requested, the identical issue is involved in the taxpayer’s return for an earlier period and that issue—

(a) is being examined by a field office;

(b) is being considered by an area office;

(d) has been examined by a field office or considered by an area office and the statutory period of limitations on assessment or on filing a claim for refund or credit of tax has not expired; or

(e) has been examined by a field office or considered by an area office and a closing agreement covering the issue or liability has not been entered into by a field office or area office.

If a return involving an issue for a particular year is filed while a request for a letter ruling on that issue is pending, the national office will issue the letter ruling unless it is notified by the taxpayer or otherwise learns that an examination of that issue or an examination of the identical issue on an earlier year’s return has been started by a field office. See section 8.04 of this revenue procedure. But, even if an examination has begun, the national office ordinarily will issue the letter ruling if the director agrees, by memorandum, to the issuance of the letter ruling.

.11 Pursuant to Rev. Proc. 84–37, 1984–1 C.B. 513, as modified by Rev. Proc. 86–17, 1986–1 C.B. 550, and Rev. Proc. 2003–1 (this revenue procedure), the Office of Division Counsel/ Associate Chief Counsel (Tax Exempt and Government Entities) issues determinations recognizing a tribal entity as an Indian tribal government within the meaning of § 7701(a)(40) or as a political subdivision of an Indian tribal government under § 7871(d) if it determines, after consultation with the Secretary of the Interior, that the entity satisfies the statutory definition of an Indian tribal government or has been delegated governmental functions of an Indian tribal government. Requests for determinations under Rev. Proc. 84–37 are let

Sec. 5.11 2003–1 I.R.B. 13 January 6, 2003

Generally not to business associations or groups

Generally not to foreign governments

Generally not on federal tax consequences of proposed legislation

Issuance of a letter ruling before the issuance of a regulation or other published guidance

ter ruling requests, and, therefore, should be submitted to the Office of Division Counsel/ Associate Chief Counsel (Tax Exempt and Government Entities) pursuant to this revenue procedure.

(1) Definition of Indian tribal government. The term “Indian tribal government” is defined under § 7701(a)(40) to mean the governing body of any tribe, band, community, village or group of Indians, or (if applicable) Alaska Natives, that is determined by the Secretary of the Treasury, after consultation with the Secretary of the Interior, to exercise governmental functions. Section 7871(d) provides that, for purposes of § 7871, a subdivision of an Indian tribal government shall be treated as a political subdivision of a state if the Secretary of the Treasury determines, after consultation with the Secretary of the Interior, that the subdivision has been delegated the right to exercise one or more of the substantial governmental functions of the Indian tribal government.

(2) Inclusion in list of tribal governments. Rev. Proc. 2001–15, 2001–1 C.B. 465, provides a list of Indian tribal governments that are treated similarly to states for certain federal tax purposes. Rev. Proc. 84–36, 1984–1 C.B. 510, as modified by Rev. Proc. 86–17, provides a list of political subdivisions of Indian tribal governments that are treated as political subdivisions of states for certain federal tax purposes. Under Rev. Proc. 84–37, tribal governments or subdivisions recognized under § 7701(a)(40) or § 7871(d) will be included on the list of recognized tribal government entities in revised versions of Rev. Proc. 2001–15 or Rev. Proc. 84–36.

.12 The national office does not issue letter rulings to business, trade, or industrial associations or to similar groups concerning the application of the tax laws to members of the group. But groups and associations may submit suggestions of generic issues that would be appropriately addressed in revenue rulings. See Rev. Proc. 89–14, which states the objectives of, and standards for, the publication of revenue rulings and revenue procedures in the Internal Revenue Bulletin.

The national office may issue letter rulings to groups or associations on their own tax status or liability if the request meets the requirements of this revenue procedure.

.13 The national office does not issue letter rulings to foreign governments or their political subdivisions about the U.S. tax effects of their laws. The national office also does not issue letter rulings on the effect of a tax treaty on the tax laws of a treaty country for purposes of determining the tax of the treaty country. See section 13.02 of Rev. Proc. 2002– 52, 2002–31 I.R.B. 242, 252. Treaty partners can continue to address matters such as these under the provisions of the applicable tax treaty. In addition, the national office may issue letter rulings to foreign governments or their political subdivisions on their own tax status or liability under U.S. law if the request meets the requirements of this revenue procedure.

.14 The national office ordinarily does not issue letter rulings on a matter involving the federal tax consequences of any proposed federal, state, local, municipal, or foreign legislation. The Office of Division Counsel/Associate Chief Counsel (Tax Exempt and Government Entities) may issue letter rulings regarding the effect of proposed state, local, or municipal legislation upon an eligible deferred compensation plan under § 457(b) provided that the letter ruling request relating to the plan complies with the other requirements of this revenue procedure. The national office also may provide general information in response to an inquiry.

.15 Unless the issue is covered by section 7 of this revenue procedure, Rev. Proc. 2003–3, this Bulletin, or Rev. Proc. 2003–7, this Bulletin, a letter ruling may be issued before the issuance of a temporary or final regulation or other published guidance that interprets the provisions of any act under the following conditions:

(1) Answer is clear or is reasonably certain. If the letter ruling request presents an issue for which the answer seems clear by applying the statute to the facts or for which the answer seems reasonably certain but not entirely free from doubt, a letter ruling will be issued.

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(2) Answer is not reasonably certain. The Service will consider all letter ruling requests and use its best efforts to issue a letter ruling even if the answer does not seem reasonably certain where the issuance of a letter ruling is in the best interests of tax administration.

(3) Issue cannot be readily resolved before a regulation or any other published guid- ance is issued. A letter ruling will not be issued if the letter ruling request presents an issue that cannot be readily resolved before a regulation or any other published guidance is issued. When the Service has closed a regulation project or any other published guidance project that might have answered the issue or decides not to open a regulation project or any other published guidance project, the appropriate branch will consider all letter ruling requests unless the issue is covered by section 7 of this revenue procedure, Rev. Proc. 2003–3, or Rev. Proc. 2003–7.

Not on frivolous issues .16 A letter ruling will not be issued on frivolous issues. A “frivolous issue” is one without basis in fact or law, or that espouses a position which has been held by the courts to be frivolous or groundless. Examples of frivolous or groundless issues include, but are not limited to:

(1) frivolous “constitutional” claims, such as claims that the requirement to file tax returns and pay taxes constitutes an unreasonable search barred by the Fourth Amendment; violates Fifth and Fourteenth Amendment protections of due process; violates Thirteenth Amendment protections against involuntary servitude; or is unenforceable because the Sixteenth Amendment does not authorize nonapportioned direct taxes or was never ratified;

(2) claims that income taxes are voluntary, that the term “income” is not defined in the Internal Revenue Code, or that preparation and filing of income tax returns violates the Paperwork Reduction Act;

(3) claims that tax may be imposed only on coins minted under a gold or silver standard or that receipt of Federal Reserve Notes does not cause an accretion to wealth;

(4) claims that a person is not taxable on income because he or she falls within a class entitled to “reparation claims” or an extra-statutory class of individuals exempt from tax, e.g., “free-born” individuals;

(5) claims that a taxpayer can refuse to pay taxes on the basis of opposition to certain governmental expenditures;

(6) claims that taxes apply only to federal employees; only to residents of Puerto Rico, Guam, the U.S. Virgin Islands, the District of Columbia, or “federal enclaves”; or that sections 861 through 865 or any other provision of the Internal Revenue Code imposes taxes on U.S. citizens and residents only on income derived from foreign based activities;

(7) claims that wages or personal service income are not “income,” are “nontaxable receipts,” or “are a nontaxable exchange for labor;”

(8) claims that income tax withholding by an employer on wages is optional; or

(9) other claims the courts have characterized as frivolous or groundless.

No “comfort” rulings .17 Except as otherwise provided in Rev. Proc. 2003–3 ( e.g. under section 3.02(29), where the Service already is ruling on a significant issue in the same transaction), a letter ruling will not ordinarily be issued with respect to an issue that is clearly and adequately addressed by statute, regulations, decisions of a court, revenue rulings, revenue procedures, notices, or other authority published in the Internal Revenue Bulletin. However, the Service may in its discretion determine to issue a ruling on such an issue if the Service otherwise is issuing a ruling on another issue arising in the same transaction.

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