IRS ups fees for private letter rulings

The Internal Revenue Service is increasing many of the fees for requests for private letter rulings by 26.7 percent, starting Feb. 4.

In Revenue Procedure 2021-1, the service revised the procedures for obtaining private letter rulings from the IRS Office of Chief Counsel. The OCC said it conducted a biennial review of the user fees and decided to increase the fees based upon data on the average time for responding to a ruling request and other factors, including average attorney costs and overhead. However, the IRS said substantially discounted fees would remain available for most taxpayers whose annual adjusted gross income is below $1 million. The fees start at $275.

The IRS may decide to change the way it calculates the fees in the future, however, as there have been fewer requests for private letter rulings lately.

“The fee increase for higher income taxpayers is driven by a combination of the costing methodology utilized, a decline in the overall number of rulings issued, and an increase in the relative complexity of the rulings that are requested,” said a statement from the Office of Chief Counsel. “Cognizant of the fact that increased user fees in recent years may, in part, explain the decline in the overall number of rulings requested, the Office of Chief Counsel is considering whether there are alternative fee structures that could better match the fee charged with the complexity and work involved in issuing the ruling.”

The private letter ruling process gives taxpayers more of an up-front reassurance on how the IRS will treat a tax issue, helping some taxpayers and tax professionals who seek the letter rulings avoid some of the costly, time-consuming back-end compliance activity that would otherwise be needed. The letter ruling process also helps the IRS identify areas in the tax laws that may require further explanation or guidance.

To advance these objectives, the Office of Chief Counsel is asking for public input on how the fee structure for letter rulings might better match the specific rulings requested. Any comments should be emailed to CC.PLR.userfee.comments@irscounsel.treas.gov. Comments should be sent by March 1.