Private Letter Ruling Law and Legal Definition

Private letter ruling is an informational statement of the Internal Revenue Service's (I.R.S.'s) interpretation of statute or administrative rules and their application to a particular set of facts or circumstances. A private letter ruling typically addresses unusual or complex questions pertaining to a particular taxpayer. The purpose of the letter ruling, usually sought by the taxpayer in advance of a contemplated transaction, is to advise the taxpayer regarding the tax treatment he can expect from the I.R.S. in the circumstances specified by the ruling. The procedure for requesting a private letter ruling is updated annually. It is always the first revenue procedure in the first Internal Revenue Bulletin of the year.

State laws, which vary by state, also may allow for private letter rulings to be issued by the state's tax authority. The procedures vary, but the underlying purpose is the same as the federal private letter ruling.