Why I Don't Read PLRs or Chief Council Advice

Craig W. Smalley, EA
Founder/CEO
CWSEAPA PLLC
Columnist
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My wife likes to make a joke about me and she isn’t wrong. I literally bring tax magazines and read through a majority of the articles. 

This is how I relax., I admit that I am a tax nerd.  What draws me to tax is to see what I can get away with.  I use Thompson Reuters Checkpoint as my research software and like clockwork, each morning I receive their RIA email very early in the morning. 

I usually read every article in the email.  My thoughts are if I don’t need this info today, who's to say I won’t tomorrow.  However, embedded in those emails are two things that I ignore and don’t waste my time reading:  Private Letter Rulings and Chief Council Advice.

Chief Council Advice, I will skim.  Chief Council Advice is legal advice, signed by executives in the National Office of the Office of Chief Counsel and issued to Internal Revenue Service personnel who are national program executives and managers.

They are issued to assist Service personnel in administering their programs by providing authoritative legal opinions on certain matters, such as industry-wide issues. More information about this can be found here CCDM 33.1.2, Chief Counsel's Legal Advice Program.

The reason I just skim this advice is twofold.  First of all, it’s nice to see what some attorney is advising the IRS on.  In fact, I just skimmed one yesterday talking about how those in the cannabis industry can have their equipment seized.  Good luck with that. 

Secondly, this advice is just some attorney’s opinion.  Another attorney will have a contra-opinion, and you can get lost in these, which are usually a bunch of nonsense and neither the IRS nor you can use them as a precedent. 

The next nonsensical things I pay no attention to are Private Letter Rulings.  A private letter ruling, or PLR, is a written statement issued to a taxpayer that interprets and applies tax laws to the taxpayer’s represented set of facts. 

A PLR is issued in response to a written request submitted by a taxpayer.  A PLR may not be relied on as precedent by other taxpayers or by IRS personnel.

It is important to distinguish between a PLR, generally issued by Chief Counsel, and TEB’s Voluntary Closing Agreement Program. A PLR is appropriate when the issuer/taxpayer wishes to confirm with the IRS that a prospective transaction will not likely result in a tax violation.

Whereas, a closing agreement is appropriate when the issuer/taxpayer wants to conclusively resolve tax matters relating to a violation, even if there are legal arguments that can be asserted to suggest a violation did not in fact occur.

PLR’s have their place.  For instance, commonly they are used to clarify the IRS’s position on a particular issue.  It doesn’t apply to your particular issue.

If you specialize in tax, you have to interpret tax law.  Quickly, US Law is based on English common law.  Rulings are used as precedents that can be used to prove your point.  If you do any representation you use precedents a lot, especially in Appeals. 

When representing a client, you use precedents a lot, whether you realize it or not.  In Appeals, that is all you use.  The function of Appeals is to weigh the “hazards of litigation.”  Basically, will it cost the government more to go to court, or just settle the matter in Appeals.

You can’t go into an audit with a fistful of PLR’s, and Chief Council Advices.  You’ll get laughed at.  I skim both of these, just to know what the IRS is thinking, but I don’t use them to prove my case. 

The best thing you can do is read the audit technique guide, US Tax Court Cases that prove your point, Rev Procs, etc. In short, there are only so many hours in a day, don’t waste them going over these with a fine-toothed comb.

About Craig W. Smalley, EA

Craig Smalley

Craig W. Smalley, MST, EA, has been in practice since 1994. He has been admitted to practice before the IRS as an enrolled agent and has a master's in taxation. He is well-versed in US tax law and US Tax Court cases. He specializes in taxation, entity structuring and restructuring, corporations, partnerships, and individual taxation, as well as representation before the IRS regarding negotiations, audits, and appeals. In his many years of practice, he has been exposed to a variety of businesses and has an excellent knowledge of most industries. He is the CEO and co-founder of CWSEAPA PLLC and Tax Crisis Center LLC; both business have locations in Florida, Delaware, and Nevada. Craig is the current Google small business accounting advisor for the Google Small Business Community. He is a contributor to AccountingWEB and Accounting Today, and has had 12 books published on various topics in taxation. His articles have also been featured in the Chicago Tribune, New York Times, Yahoo Finance, Nasdaq, and several other newspapers, periodicals, and magazines. He has been interviewed and been a featured guest on many radio shows and podcasts. Finally, he is the co-host of Tax Avoidance is Legal, which is a nationally broadcast weekly Internet radio show.

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