Requesting a Private Letter Ruling

By Rachel Wright, Simon Menkes, & Abraham Finberg- CPAs licensed in California of AB FinWright LLP & 420CPA, and Andrew Gradman, Esq of Andrew Gradman Tax

You may someday find yourself in a unique tax situation and want to remove any uncertainty of the tax treatment of that situation.  In that case, you can request a Private Letter Ruling (PLR) from the Internal Revenue Service.

A PLR is a written statement that interprets and applies tax law to your particular facts. As long as the taxpayer frames the question properly and provides accurate information, the ruling can be considered binding for that specific situation and taxpayer.

A private letter ruling request has no specific form; it is basically a letter explaining your particular facts. The following are required to be addressed in a PLR request:

• Statement of Facts, including
  • The names, addresses, phone numbers, and taxpayer identification numbers of all interested parties;
  • The annual accounting period and overall method of accounting;
  • A description of the taxpayer’s business operation (if applicable);
  • A complete statement of the reasons for the transaction; and
  • A detailed description of the transaction.
• Copies of any contracts, deed, agreements, or other documents that are applicable.
• An analysis of the facts surrounding your transaction.
• If applicable, a statement regarding whether the same issue is on an earlier return.
• Your conclusion, with an explanation of what your grounds are for the conclusion and any authority you relied on to support it.
• Any authority contrary to your conclusion. If none exists, that should be mentioned.
• A statement identifying pending legislation, if any.

Requesting a PLR is not free – a “user fee” is required to be submitted when making the request. The user fees start at $275 but can be in the thousands of dollars in certain situations, and they must be submitted with the request. The first Revenue Procedure issued each year outlines the rules surrounding PLR submissions and the fees.

Because of the cost involved and the complexity, assess whether the IRS is likely to rule in your favor before going this route. Consider working with an experienced tax professional or tax attorney first to determine if this is the best option for you!

About The Author

Abraham Finberg

Managing Partner

420 CPA AB FinWright

Abraham Finberg MBA, CPA, managing partner at AB FinWright, has been a leader in the cannabis sphere since 2009, counseling clients in all phases of business advisory and tax, from start-up through M&A and IPO.

About The Author

Rachel Wright

Managing Partner

420 CPA AB FinWright

Rachel Wright, MST, CPA, managing partner at AB FinWright, specializes in cannabis accounting and taxation for multi-state and multinational entities, advising clients on everything from internal controls to the bottom-line implications of mixed local, state, federal and international statutes of taxation.

For all your taxation challenges in cannabis, feel free to reach out to me or any of the other team members at 420CPA and share with us your business challenges. We have been helping cannabis companies since 2009.