Can You Cite a Private Letter Ruling? What 'May Not Be Used or Cited as Precedent' Means for Your Memo

You can cite a private letter ruling in a research memo, but you cannot treat it as precedent and you cannot rely on it the way its recipient can. Treas. Reg. 301.6110-7(b) says a written determination "may not be used or cited as precedent." Treas. Reg. 1.6662-4(d)(3)(iii) still lists "private letter rulings and technical advice memoranda issued after October 31, 1976" among the authorities that count toward substantial authority. Both statements are true, and they answer two different questions.

The trap is reading either rule alone. A preparer who sees "may not be used or cited as precedent" throws away a ruling that could help support a position against the section 6662 or 6694 penalty. A preparer who sees "authority" writes "the IRS has ruled" in a memo for a client the ruling was never issued to. Each error shows up in a memo that someone later has to defend.

I covered the general hierarchy in the post on regulations, revenue rulings and private letter rulings. In that post I wrote that you "can't cite it as authority." For penalty purposes that shorthand needs the qualification this post supplies.

What Does "May Not Be Used or Cited as Precedent" Mean for a Private Letter Ruling?

It means a private letter ruling is not a rule that the IRS or other taxpayers can invoke against each other. The full sentence in Treas. Reg. 301.6110-7(b) reads: "A written determination may not be used or cited as precedent, but the rule set forth in this paragraph shall not apply to change the precedential status, if any, of written determinations issued with respect to taxes imposed by subtitle D of the Internal Revenue Code of 1954."

The "but" clause is narrow. It preserves whatever precedential status excise tax determinations (subtitle D) already had. It does not soften the rule for income tax rulings.

"Private letter ruling" is the working name for what the regulations call a ruling. Treas. Reg. 301.6110-2(d) defines a ruling as "a written statement issued by the National Office to a taxpayer or to the taxpayer's authorized representative ... on behalf of the taxpayer, that interprets and applies tax laws to a specific set of facts." The definition of "written determination" in 301.6110-2(a) covers rulings, determination letters and technical advice memoranda. Treas. Reg. 301.6110-7 is one of the regulations under section 6110, which deals with public inspection of written determinations, and I do not quote the statute here.

A second rule sits in the procedural regulations. Treas. Reg. 601.201(l)(1) opens with a flat sentence: "A taxpayer may not rely on an advance ruling issued to another taxpayer." The same paragraph adds that a ruling may be revoked or modified at any time, with the effect applying to all open years unless the Commissioner limits it under section 7805(b).

So there are two limits. The ruling is not precedent, and the other taxpayer cannot rely on it. Neither sentence says the ruling is worthless to you.

Why Does a Private Letter Ruling Still Count as Authority for Penalty Protection?

Because the penalty regulations ask a different question. They ask whether the weight of authority supports a position, not whether a document binds the IRS.

For the accuracy-related penalty on a substantial understatement, Treas. Reg. 1.6662-4(d)(3)(iii) says that, subject to the special written-determination rules in paragraph (d)(3)(iv), "only the following are authority," and the list includes "revenue rulings and revenue procedures," "court cases," and "private letter rulings and technical advice memoranda issued after October 31, 1976." Under paragraph (d)(2), substantial authority is "less stringent than the more likely than not standard" but "more stringent than the reasonable basis standard."

The preparer penalty uses the same substantial authority term, and the preparer regulation expressly adopts the same list for one of its standards. Treas. Reg. 1.6694-2(a)(1)(ii) imposes the section 6694(a) penalty on an undisclosed position that is not a tax shelter or reportable transaction position when "there was not substantial authority for the position." For a disclosed position the test drops to reasonable basis under (a)(1)(iii). For tax shelters and reportable transactions, the test is whether it was reasonable to believe the position would more likely than not be sustained. Treas. Reg. 1.6694-2(b)(2) says the authorities considered for that standard "are those authorities provided in § 1.6662-4(d)(3)(iii)."

Circular 230 section 10.34(a)(1) points the same way. It bars a practitioner from willfully, recklessly, or through gross incompetence signing a return containing a position that "[l]acks a reasonable basis" or "[i]s an unreasonable position as described in section 6694(a)(2)." A ruling can bear on both questions.

Two limits matter inside the list. Paragraph (d)(3)(iii) also says "a private letter ruling is not authority if revoked or if inconsistent with a subsequent proposed regulation, revenue ruling or other administrative pronouncement published in the Internal Revenue Bulletin." A notice in the bulletin can therefore take a ruling out of the list. I wrote up how to read an IRS notice for that reason.

The second limit is a special rule for the recipient. Under (d)(3)(iv)(A), there is substantial authority for a treatment "supported by the conclusion of a ruling or a determination letter ... issued to the taxpayer" or by a technical advice memorandum in which the taxpayer is named. That protection fails if there was "a misstatement or omission of a material fact," if the facts later develop materially differently, or if the ruling was later modified or revoked in the ways the paragraph lists. That is the recipient's rule. It does not extend to your client.

How Do the Two Rules Fit Together?

This is my reading, not the regulations' own words. One rule governs reliance and precedent. The other governs how much a document counts when you weigh the law.

Treas. Reg. 301.6110-7(b) and 601.201(l)(1) answer: can this ruling bind the IRS or protect a taxpayer who is not its recipient? No. Treas. Reg. 1.6662-4(d)(3) answers: when I evaluate whether the weight of authorities supporting a position is substantial against the weight of contrary authorities, what goes on the scale? Rulings issued after October 31, 1976 go on the scale, with a weight set by paragraph (d)(3)(ii).

Put plainly, a ruling issued to someone else can support your conclusion. It should not be your conclusion's only foundation, because the weight rules discount it, and it cannot give your client the protection its recipient has. The IRS is not obliged to follow it.

A ruling is never the whole analysis, because contrary authority goes on the scale too. Paragraph (d)(3)(i) says "[a]ll authorities relevant to the tax treatment of an item, including the authorities contrary to the treatment, are taken into account."

How Much Weight Does a Private Letter Ruling Get?

Less than a revenue ruling on the same issue, and less as it ages. Treas. Reg. 1.6662-4(d)(3)(ii) gives four pointers:

• "The weight of an authority from which information has been deleted, such as a private letter ruling, is diminished to the extent that the deleted information may have affected the authority's conclusions."
• "A revenue ruling is accorded greater weight than a private letter ruling addressing the same issue."
• "An older private letter ruling, technical advice memorandum, general counsel memorandum or action on decision generally must be accorded less weight than a more recent one."
• "Any document described in the preceding sentence that is more than 10 years old generally is accorded very little weight."

The same paragraph adds that persuasiveness and relevance "viewed in light of subsequent developments, should be taken into account along with the age of the document." Age is a starting weight, not a cutoff.

Redaction matters because a released ruling can have information deleted, and the deleted facts may be the ones that drove the result. Read the facts section against your client's facts line by line. The regulation says a case or revenue ruling "having some facts in common with the tax treatment at issue is not particularly relevant if the authority is materially distinguishable on its facts." I read that as applying with more force to a ruling with redactions.

How Should You Use a Private Letter Ruling in a Research Memo?

Use it as supporting evidence of how the IRS has applied the law, label it as taxpayer-specific, and never let it carry the memo alone. A working order for the memo:

1. Cite it by number and say what it is. Write "PLR 202601011, issued to an unnamed taxpayer" rather than "the IRS has held." State the date of issuance.
2. Compare facts, not conclusions. Set the ruling's facts and your client's facts side by side. Flag every material difference and any redaction that could hide one.
3. State its status. Write that it is not precedent under Treas. Reg. 301.6110-7(b) and that the client cannot rely on it under Treas. Reg. 601.201(l)(1). One sentence does it.
4. Check for revocation and later guidance. A later proposed regulation, revenue ruling or notice published in the Internal Revenue Bulletin can take the ruling off the list.
5. Look for the stronger authority first. Search for a regulation, revenue ruling or court case that reaches the same result. If one exists, cite it as the lead and move the ruling to a supporting sentence. If none exists, say so in the memo, because that gap is the finding.
6. Record the weight. State whether the ruling is recent, whether it is the only authority, and whether any contrary authority exists. That is the entry a reviewer will look for. I covered the same discipline in defending a research memo at an IRS Appeals conference and in documenting research for malpractice insurance audits.

For a court-side comparison of how binding force differs by document type, see when a Tax Court opinion becomes precedent.

One note on tools. Tax Orator searches IRS guidance, regulations and private letter rulings in its database with citations.

The Short Version

A private letter ruling is not precedent and no one but its recipient may rely on it. It still counts as authority when you weigh a position for a section 6662 or section 6694 penalty, at a weight below a revenue ruling and lower still as it ages. Cite it, label it, and put a stronger authority in front of it whenever one exists.