SECTION 13. WHAT

EFFECT WILL A LETTER RULING HAVE?

May be relied on subject to limitations

Will not apply to another taxpayer

Will be used by the Director, EP or EO Examinations in examining the taxpayer’s return

issue on which a letter ruling is ordinarily issued and a draft of the letter ruling request or other detailed written statement of the proposed transaction, issue, and legal analysis. If the taxpayer’s representative will attend the pre-submission conference, a power of attorney form is required. A Form 2848, Power of Attorney and Declaration of Representative, must be used to provide the representative’s authorization.

Any discussion of substantive issues at a pre-submission conference is advisory only, is not binding on the Service, and cannot be relied upon as a basis for obtaining retroactive relief under the provisions of § 7805(b). See section 3.08(2) of this procedure. A letter ruling request submitted following a pre-submission conference will not necessarily be assigned to the group that held the pre-submission conference.

.08 A taxpayer may request that their conference of right be held by telephone. This request may occur, for example, when a taxpayer wants a conference of right but believes that the issue involved does not warrant incurring the expense of traveling to Washington, DC. If a taxpayer makes such a request, the group manager will decide if it is appropriate in the particular case to hold the conference of right by telephone. If the request is approved by the group manager, the taxpayer will be advised when to call the Service representatives (not a toll-free call).

.09 The procedures for requesting a conference for determination letters that are not subject to § 7428 or § 501 or § 521 are the same as described in this section, except that generally conferences will be held by telephone

.01 A taxpayer ordinarily may rely on a letter ruling received from the Service subject to the conditions and limitations described in this section.

.02 A taxpayer may not rely on a letter ruling issued to another taxpayer. See § 6110(k)(3).

.03 When determining a taxpayer’s liability, the Director, EP or EO Examinations must ascertain whether—

(1) the conclusions stated in the letter ruling are properly reflected in the return;

(2) the representations upon which the letter ruling was based reflected an accurate statement of the material facts;

(3) the transaction was carried out substantially as proposed; and

(4) there has been any change in the law that applies to the period during which the transaction or continuing series of transactions were consummated.

If, when determining the liability, the Director, EP Examinations finds that a letter ruling should be revoked or modified, unless a waiver is obtained from the Director, Employee Plans,, the findings and recommendations of the Director, EP Examinations will be forwarded to the Office of Associate Chief Counsel for consideration before further action is taken by the Director, EP Examinations. Such a referral to the Office of Associate Chief Counsel will be treated as a request for technical advice and the provisions of Rev. Proc. 2015–2, this Bulletin, relating to requests for technical advice will be followed. Otherwise, the letter ruling is to be applied by the Director, EP Examinations in determining the taxpayer’s liability. If an office having jurisdiction over a return or other matter proposes to reach a conclusion contrary to a letter ruling previously issued to the taxpayer, it should coordinate the matter with the Office of Associate Chief Counsel.

Sec. 13.03 Bulletin No. 2015–1 173 January 2, 2015

May be revoked or modified if found to be in error

Letter ruling revoked or modified based on material change in facts applied retroactively

Not otherwise generally revoked or modified retroactively

In addition, in the event of a letter ruling that is revoked or modified, the Office of Associate Chief Counsel has discretionary authority under § 7805(b) to limit the retroactive effect of a revocation or modification.

.04 Unless it was part of a closing agreement as described in section 3.03 of this revenue procedure, a letter ruling found to be in error or not in accord with the current views of the Service may be revoked or modified. If a letter ruling is revoked or modified, the revocation or modification applies to all years open under the period of limitation unless the Service uses its discretionary authority under § 7805(b) to limit the retroactive effect of the revocation or modification.

A letter ruling may be revoked or modified by—

(1) a letter giving notice of revocation or modification to the taxpayer to whom the letter ruling was issued;

(2) the enactment of legislation or ratification of a tax treaty;

(3) a decision of the United States Supreme Court;

(4) the issuance of temporary or final regulations; or

(5) the issuance of a revenue ruling, revenue procedure, notice, or other statement published in the Internal Revenue Bulletin.

Consistent with these provisions, if a letter ruling relates to a continuing action or a series of actions, it ordinarily will be applied until any one of the events described above occurs or until it is specifically withdrawn.

Publication of a notice of proposed rulemaking will not affect the application of any letter ruling issued under this revenue procedure.

Where a letter ruling is revoked or modified by a letter to the taxpayer, the letter will state whether the revocation or modification is retroactive. Where a letter ruling is revoked or modified by the issuance of final or temporary regulations or by the publication of a revenue ruling, revenue procedure, notice, or other statement in the Internal Revenue Bulletin, the document may contain a statement as to its retroactive effect on letter rulings.

. 05 The revocation or modification of a letter ruling will be applied retroactively to the taxpayer for whom the letter ruling was issued or to a taxpayer whose tax liability was directly involved in the letter ruling if—

(1) there has been a misstatement or omission of controlling facts;

(2) the facts at the time of the transaction are materially different from the controlling facts on which the letter ruling was based; or

(3) the transaction involves a continuing action or series of actions and the controlling facts change during the course of the transaction.

See section 11.05 of Rev. Proc. 2015–1.

. 06 Where the revocation or modification of a letter ruling is, for reasons other than a change in facts as described in section 13.05 of this revenue procedure, the revocation or modification will generally not be applied retroactively to the taxpayer for whom the letter ruling was issued or to a taxpayer whose tax liability was directly involved in the letter ruling provided that—

(1) there has been no change in the applicable law;

(2) the letter ruling was originally issued for a proposed transaction; and

Sec. 13.06 January 2, 2015 174 Bulletin No. 2015–1

Retroactive effect of revocation or modification applied to a particular transaction

Retroactive effect of revocation or modification applied to a continuing action or series of actions

May be retroactively revoked or modified when transaction is completed without reliance on the letter ruling

Taxpayer may request that retroactivity be limited

(3) the taxpayer directly involved in the letter ruling acted in good faith in relying on the letter ruling, and revoking or modifying the letter ruling retroactively would be to the taxpayer’s detriment. For example, the tax liability of each employee covered by a letter ruling relating to a qualified plan of an employer is directly involved in the ruling. However, the tax liability of a member of an industry is not directly involved in a letter ruling issued to another member and, therefore, the holding in a revocation or modification of a letter ruling to one member of an industry may be retroactively applied to other members of the industry. By the same reasoning, a tax practitioner may not extend to one client the non-retroactive application of a revocation or modification of a letter ruling previously issued to another client

If a letter ruling is revoked or modified by a letter with retroactive effect, the letter will, except in fraud cases, state the grounds on which the letter ruling is being revoked or modified and explain the reasons why it is being revoked or modified retroactively. See section 11.06 of Rev. Proc. 2015–1.

. 07 A letter ruling issued on a particular transaction represents a holding of the Service on that transaction only. It will not apply to a similar transaction in the same year or any other year. Except in unusual circumstances, the application of that letter ruling to the transaction will not be affected by the later issuance of regulations (either temporary or final) if conditions (1) through (3) in section 13.06 of this revenue procedure are met.

If a letter ruling on a transaction is later found to be in error or no longer in accord with the position of the Service, it will not protect a similar transaction of the taxpayer in the same year or later year.

.08 If a letter ruling is issued covering a continuing action or series of actions and the letter ruling is later found to be in error or no longer in accord with the position of the Service, the Associate Chief Counsel ordinarily will limit the retroactive effect of revocation or modification to a date that is not earlier than that on which the letter ruling is revoked or modified. See section 11.08 of Rev. Proc. 2015–1.

.09 A taxpayer is not protected against retroactive revocation or modification of a letter ruling involving a transaction completed before the issuance of the letter ruling or involving a continuing action or series of actions occurring before the issuance of the letter ruling, because the taxpayer did not enter into the transaction relying on a letter ruling. See section 11.10 of Rev. Proc. 2015–1.

.10 Under § 7805(b), the Service may prescribe any extent to which a revocation or modification of a letter ruling or determination letter will be applied without retroactive effect.

The Director, EP Examinations does not have authority under § 7805(b) to limit the revocation or modification of a letter ruling. Therefore, if the Director, EP Examinations proposes to revoke or modify a letter ruling issued by the Commissioner, Tax Exempt and Government Entities, the taxpayer may request that the Office of Associate Chief Counsel, Tax Exempt and Government Entities limit the retroactive effect of any revocation or modification of the letter ruling. See Rev. Proc. 2015–1 section 11.11, this Bulletin.

Format of request (1) Request for relief under § 7805(b) must be made in required format.

A request to limit the retroactive effect of the revocation or modification of a letter ruling issued by the Tax Exempt and Government Entities Division must be made to the Office of Associate Chief Counsel (Tax Exempt and Government Entities) and must be in the general form of, and meet the general requirements for, a letter ruling request that is submitted to the Office of Associate Chief Counsel. These requirements are given in section 7 of Rev. Proc. 2015–1. Specifically, the request must also

(a) state that it is being made under § 7805(b);

(b) state the relief sought;

Sec. 13.10 Bulletin No. 2015–1 175 January 2, 2015

(c) explain the reasons and arguments in support of the relief requested (including a discussion of section 13.05 of this revenue procedure, the three items listed in section 13.06 of this revenue procedure, and any other factors as they relate to the taxpayer’s particular situation); and

(d) include any documents bearing on the request.

A request that the Service limit the retroactive effect of a revocation or modification of a letter ruling may be made in the form of a separate request for a letter ruling when, for example, a revenue ruling has the effect of modifying or revoking a letter ruling previously issued to the taxpayer or when the Service notifies the taxpayer of a change in position that will have the effect of revoking or modifying the letter ruling.

When notice is given by the Director, EP or EO Examinations during an examination of the taxpayer’s return or by Appeals, during consideration of the taxpayer’s return before Appeals, a request to limit retroactive effect must be made in the form of a request for technical advice as explained in section 14.02 of Rev. Proc. 2015–2, this Bulletin.

When germane to a pending letter ruling request, a request to limit the retroactive effect of a revocation or modification of a letter ruling may be made as part of the request for the letter ruling, either initially or at any time before the letter ruling is issued. When a letter ruling that concerns a continuing transaction is revoked or modified by, for example, a subsequent revenue ruling, a request to limit retroactive effect must be made before the examination of the return that contains the transaction that is the subject of the letter ruling request .

Consideration of relief under § 7805(b) will be included as one of the taxpayer’s steps in exhausting administrative remedies only if the taxpayer has requested such relief in the manner described in this revenue procedure. If the taxpayer does not complete the applicable steps, the taxpayer will not have exhausted the taxpayer’s administrative remedies as required by § 7428(b)(2) and § 7476(b)(3) and will, thus, be precluded from seeking a declaratory judgment under § 7428 or § 7476. Where the taxpayer has requested § 7805(b) relief, the taxpayer’s administrative remedies will not be considered exhausted until the Service has had a reasonable time to act upon the request.

Request for conference (2) Taxpayer may request a conference on application of § 7805(b).

A taxpayer who requests the application of § 7805(b) in a separate letter ruling request has the right to a conference with the Associate office as explained in sections 10.02, 10.04, and 10.05 of Rev. Proc. 2015–1. If the request is made initially as part of a pending letter ruling request or is made before the conference of right is held on the substantive issues, the § 7805(b) issue will be discussed at the taxpayer’s one conference of right as explained in section 10.02 of Rev. Proc. 2015–1. If the request for the application of § 7805(b) relief is made as part of a pending letter ruling request after a conference has been held on the substantive issue and the Associate office determines that there is justification for having delayed the request, the taxpayer is entitled to one conference of right concerning the application of § 7805(b), with the conference limited to discussion of this issue.