Federal Tax Procedure Book Revisions on Section 6110 (9/10/17)

I posted here a new cumulative supplement, dated 9/10/17, for the Federal Tax Procedure Book.  The significant addition for this cumulative supplement is to expand the discussion of Section 6110, here.  I offer just the text (no footnotes) below.   This new material is to be inserted in the Student  Edition at end of p. 56 and in the Practitioner Edition at end of p. 85. See the supplement for the footnotes.

l. Public Access to and Precedential or Persuasive Value of Less Formal IRS Written Determinations.

The more formal IRS interpretations have historically been published so as to be easily accessible to the public.  Regulations are published in the Federal Register; Revenue Rulings and Procedures and some notices are published in the Internal Revenue Bulletins and Cumulative Bulletins. Less formal written interpretations (such as PLRs and TAMs) formerly were not published publicly.  These written determinations usually interpret the substantive law in the context of the taxpayer’s facts.  For example, a PLR or TAM will address a taxpayer’s facts and apply an interpretation of the law to the facts.  These written determinations and the interpretations are not intended to be formal IRS interpretations (such as by regulation or Revenue Ruling) and hence require lower levels of review and procedure.

Notwithstanding that these written determinations are not formal IRS interpretations, IRS personnel could access these determinations and use their interpretations to influence the IRS actions involving other taxpayers.  Furthermore, the taxpayers and practitioners involved in the process of the written determinations would often know of the interpretations (e.g., they would have copies of the TAMs and PLRs) and could use the interpretations in the future to their benefit in other matters before the IRS.

By the mid-1970s, responding to suits for access to these written determinations, courts reached different conclusions but raised concerns about a secret body of law. In this environment, in 1976, Congress enacted § 6110.  That section starts with the command that “the text of any written determination and any background file document relating to such written determination shall be open to public inspection.”  § 6110(a).  A written determination includes a “ruling, determination letter, technical advice memorandum, or Chief Counsel advice.”  § 6110(b)(1).

Pursuant to this command, the IRS routinely makes available the text of written determinations less formal that Revenue Rulings and Revenue Procedures.  The IRS must redact the portion of the written determination that discloses certain matters where nondisclosure is warranted (such as taxpayer identification (cf. § 6013), information otherwise exempt from disclosure by statute or executive order relating to national defense or foreign policy, trade secrets or financial information and certain other sensitive matter).  § 6110(c).  The text that is disclosed even as redacted will show the IRS’s informal interpretations of the law.

The IRS makes these written determinations available on its FOIA Electronic Reading Room web site.  Also, many tax publishers publish these informal written determinations as the IRS makes them available.  In a tax practice, these written determinations made public under § 6110 must be consulted in researching tax issues, particularly with respect to transactions, return reporting, and litigation.  For example, a taxpayer considering an important transaction may want to know the IRS’s position, and written determinations may be the only source available for issues presented.  That taxpayer may want to seek a PLR if these written determinations indicate that the IRS may rule favorably or may not want to seek a PLR if these written determinations indicate that the IRS may not rule favorably.


Recognizing the relatively informal genesis of such written determinations (including PLRs), Congress provided in § 6110(k)(3):

(3) Precedential status.  Unless the Secretary otherwise establishes by regulations, a written determination may not be used or cited as precedent. * * * *

The statutory prohibition is straight-forward and would seem to preclude the use of these informal written determinations by the IRS, taxpayers or courts in interpreting the tax law in a way that is contrary to the interpretation derived from traditional tools of statutory interpretation.  In a very general sense, this is true.

The nuance comes in meaning of “used or cited as precedent.”  Precedent means that the interpretation is authoritative in making a current interpretation because the interpretation was applied previously by some authority that the current interpreter should or may follow to impose an interpretation not otherwise supported by the tools of statutory interpretation.  It is a fully developed concept in relation to judicial authorities such as decided case opinions.  Prior interpretations of a higher court or the same court may be deemed controlling precedent for the court making the current interpretation of the law. Other court interpretations may be deemed persuasive authority, not exactly precedent, to the extent that the court making the current interpretation is persuaded that the prior decision reached the correct interpretation of the law.

Section 6110(k)(3) does not prohibit use other than as precedent.  Although not precedential, the interpretations tend to have some influence in the development of the law even though they are not precedential.  Particular contexts will present nuanced opportunities to use written determinations in an outcome determinative way despite 6110(k)(3)’s prohibition on use or citation as precedent.

The Supreme Court may have breathed new life into this issue in the Chevron and Skidmore lines of cases where deference may be given to administrative interpretations other than Regulations, particularly if they evidence long-standing interpretations and are otherwise persuasive.  In short, these nonprecedential written determinations may influence current interpretation because the reasoning in them is persuasive.   I will return to this issue in discussing the Supreme Court’s decisions in  Chevron and Skidmore and their progeny below (pp. ? ff.).

Finally, in a rare decision prior to § 6110(k)(3), involving facts where a PLR improperly gave a taxpayer a competitive advantage, the Court of Claims appellate division (the predecessor to the Court of Appeals for the Federal Circuit) permitted reliance in a backhanded way.  See International Business Machines Corp. v. United States, 343 F.2d 914 (Ct. Cl. 1965), cert. denied, 382 US 1028 (1966), discussed below at p. ?.  I say IBM is a rare case because taxpayers sometimes seek to bootstrap reliance on a PLR via the IBM case, but rarely succeed.