SECTION 6. UNDER WHAT

CIRCUMSTANCES DOES THE SERVICE NOT ISSUE LETTER RULINGS OR DETERMINATION LETTERS?

Ordinarily not if issue involves an issue under examination, or consideration, or in litigation

84–37 are letter 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. 2002–64, 2002–2 C.B. 717, 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. 2002–64 or Rev. Proc. 84–36.

.12 The Associate office will issue letter rulings in all cases on the determination of a constructive sales price under § 4216(b) or § 4218(c) and in all other cases on prospective transactions if the law or regulations require a determination of the effect of a proposed transaction for tax purposes.

.13 Unless the issue is covered by section 6 of this revenue procedure, Rev. Proc. 2004–3, this Bulletin, or Rev. Proc. 2004–7, 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 may be issued.

(2) Answer is not reasonably certain. The Associate office 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. But see section 6.08 of this revenue procedure.

.01 The Service ordinarily does not issue a letter ruling or a determination letter if, at the time of the request 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 Appeals;

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

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

Sec. 6.01 2004-1 I.R.B. 13 January 5, 2004

Ordinarily not in certain areas because of factual nature of the problem

Ordinarily not on part of an integrated transaction

Ordinarily not on which of two entities is a common law employer

Generally not to business associations or groups

Generally not to foreign governments

Ordinarily not on federal tax consequences of proposed legislation

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

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 Associate 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 7.04 of this revenue procedure. In income and gift tax matters, even if an examination has begun, the Associate office ordinarily will issue the letter ruling if the field office agrees, by memorandum, to the issuance of the letter ruling.

.02 The Service ordinarily does not issue letter rulings or determination letters in certain areas because of the factual nature of the problem involved or because of other reasons. Rev. Proc. 2004–3 and Rev. Proc. 2004–7, this Bulletin, provide a list of these areas. This list is not all-inclusive because the Service may decline to issue a letter ruling or a determination letter when appropriate in the interest of sound tax administration or on other grounds whenever warranted by the facts or circumstances of a particular case.

Instead of issuing a letter ruling or determination letter, the Associate office or a director may, when it is considered appropriate and in the best interests of the Service, issue an information letter calling attention to well-established principles of tax law.

.03 The Associate office ordinarily will not issue a letter ruling on only part of an integrated transaction. If a part of a transaction falls under a no-rule area, a letter ruling on other parts of the transaction may be issued. Before preparing the letter ruling request, a taxpayer should call the branch having jurisdiction for the matters on which the taxpayer is seeking a letter ruling to discuss whether the Associate office will issue a letter ruling on part of the transaction.

.04 The Service does not ordinarily issue a letter ruling or a determination letter on which of two entities, under common law rules applicable in determining the employer-employee relationship, is the employer, when one entity is treating the worker as an employee.

.05 The Service does not issue letter rulings or determination letters 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, 1989–1 C.B. 814, which states the objectives of, and standards for, the publication of revenue rulings and revenue procedures in the Internal Revenue Bulletin.

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

.06 The Service does not issue letter rulings or determination letters to foreign governments or their political subdivisions about the U.S. tax effects of their laws. The Associate 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, 2002–2 C.B. 242 at 252. Treaty partners can continue to address matters such as these under the provisions of the applicable tax treaty. In addition, the Associate 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.

.07 The Service 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 Associate office also may provide general information in response to an inquiry.

Sec. 6.01 January 5, 2004 14 2004-1 I.R.B.

Not before issuance of a regulation or other published guidance

.08 The Service will not issue a letter ruling or a determination letter if the 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 Associate office may consider all letter ruling requests unless the issue is covered by section 6 of this revenue procedure, Rev. Proc. 2004–3, or Rev. Proc. 2004–7, this Bulletin.

Not on frivolous issues .09 The Service will not issue a letter ruling or a determination letter 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” letter rulings .10 Except as otherwise provided in Rev. Proc. 2004–3, this Bulletin, ( e.g., under section 3.01 (29), where the Associate office already is ruling on a significant issue in the same transaction), a letter ruling will not 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. The Associate office may in its discretion determine to issue a letter ruling on such an issue if the Associate office is otherwise issuing a ruling on another issue arising in the same transaction.

Not on alternative plans or hypothetical situations

Not on property conversion after return filed

.11 The Service will not issue a letter ruling or a determination letter on alternative plans of proposed transactions or on hypothetical situations.

.12 The Associate office will 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 12.01 of this revenue procedure.

Sec. 6.12 2004-1 I.R.B. 15 January 5, 2004

Circumstances under which determination letters are not issued by a director