The NASPP Blog

In keeping with the spirit of the season, tax season that is, I’ve devoted my blog this week to IRS guidance. Contrary to public perception, the IRS is responsible for more than auditing tax returns, collecting taxes (revenue) and pursuing tax evaders. A core responsibility of the IRS division of the Treasury Department is the administration of tax laws enacted by Congress. It is this division’s role to take the specifics of these laws and translate them into rules, procedures and detailed regulations that will then provide guidance to American taxpayers, IRS personnel, tax professionals and firms.

I’ve included a description here of some of the more common forms of IRS guidance. Having familiarity with the function of these various rules and regulations can be helpful in your jobs when assessing their controlling authority to your company’s stock plans and in applying these rules or regulations to specific tax-related matters at your organization.

Common Types of IRS Authority

Revenue Ruling: An IRS position on a certain matter that can be followed as precedent by all taxpayers. In other words, revenue rulings are the conclusion of the IRS on the application of the law to a specific set of facts and are numbered so that they correspond to the year they are issued.

A number of Revenue Rulings related to equity compensation can be found in our document library. Please note that Revenue Rulings can be revoked or modified at any time, so it is always recommended to verify the current status of a Revenue Ruling before treating it as precedent.

Revenue Procedure: A formal statement by the IRS regarding specific procedures or information, and can be used as precedent by all taxpayers.

Private Letter Ruling (aka PLR): A written statement to an individual taxpayer that asserts the IRS’s position on a particular tax issue (specific to the taxpayers unique set of circumstances). PLR’s are typically made public (absent any confidential information), but may not be cited or relied on as precedent by other taxpayers.

A member recently posed a question in our Q&A Discussion Forum as to whether an 83(b) election could be corrected where the purchase/transfer date was incorrect. We checked with expert legal counsel on this topic and learned that an existing PLR suggested that an election could be amended as long as the original election was timely filed. While this PLR cannot be relied on as precedent in the circumstances described above, it can be used to give the impacted party a better sense of how the IRS will respond to a similar set of facts and circumstances.

Regulations: Issued by the IRS or Treasury Department to interpret and give directions on complying with tax laws. Taxpayers can look to proposed regulations for guidance on how the IRS is thinking on certain issues, but are not typically required to be followed until final regulations become effective (because they are frequently modified based on comments received by the IRS); final regulations are the highest level of administrative guidance and are treated as law.

Last year, the IRS issued proposed regulations for Section 423 employee stock purchase plans, clarifying certain areas of ESPP design and administration. These regulations are important and have touched many of us in this profession. Until final regulations are issued, these proposed regulations can provide direction on various areas of ESPP design and administration that have been unclear for many years.

Notices & Announcements: Both are public statements that are considered authority, and may be relied upon to the same extent as a revenue ruling or revenue procedure. A notice can be used to convey what regulations will say in situations where the regulations may not be published in the immediate future. Conversely, announcements can be used to convey what regulations will say in situations where regulations are certain to be published in the immediate future, and may be issued to provide information such as, guidance for complying with regulations or procedures.

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As always, we continue to post certain relevant IRS guidance to our website and will maintain this practice as new and important legislative authority develops. However, it is always advised that you check with your tax advisors for guidance on matters unique to your organization.

Webcast Today
Don’t forget to tune in to our webcast, “The Race to IFRS-Don’t Be Left Behind,” this afternoon.

-Robyn