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Part 32. Published Guidance and Other Guidance to Taxpayers

Chapter 2. Chief Counsel Publication Handbook

Section 3. Drafting Published Guidance

32.2.3  Drafting Published Guidance

32.2.3.1  (08-11-2004)
Drafting Instructions

  1. This section provides basic information concerning the components and formatting requirements of a publication and on how to research and develop a publication.

  2. Macros can assist in drafting publication items. The drafting attorney should use the eWord Macros under the CC Macros heading on the Menu toolbar in Microsoft Word to begin drafting revenue rulings, revenue procedures, notices, and announcements.

32.2.3.2  (08-11-2004)
Research

  1. When a drafting attorney begins the research process for a proposed publication item, the drafting attorney should begin by reading the relevant authorities, checking internal sources for previously addressed publication items, and doing a comprehensive electronic database search.

  2. If a proposed publication is based on a letter ruling or technical advice, the drafting attorney should read all of the authorities cited in the ruling or technical advice to become familiar with the authorities to make sure they are on point and that they stand for the propositions cited.

  3. The drafting attorney should make certain that all citations are accurate and current and check court cases in a citator to make certain that the case is still good authority.

  4. The Bulletin Index-Digest System (BIDS), which is current through 1994, is an historic source for the drafting attorney to check to make certain that the issue has not been published. The BIDS consists of digests of revenue rulings, revenue procedures, certain court opinions, notices, and other miscellaneous items giving citations to the full documents, and contains extensive finding lists and summaries arranged by subject matter. See Exhibit 32.2.3-1, Item B.

  5. The drafting attorney should also conduct a general search in an electronic database for any publications, including publications that are not in the same series, that may have modified the Service’s position on the subject matter of the proposed publication. Since publications that are not in the same series may have modified the Service’s position on the issue, the drafting attorney should not rely solely on Shepard’s Citations.

  6. Additional research. If appropriate, the drafting attorney should read treatises and articles in the area involved and consult informally with experts. The drafting attorney should conduct any other research needed in the analysis of the matter.

32.2.3.3  (08-11-2004)
General Formatting Guidelines

  1. The proposed publication is typed by using the eWord Macros in Microsoft Word. Exhibits 32.2.3-2 through 32.2.3-7 illustrate the formats for revenue rulings, revenue procedures, notices, announcements, and news releases.

  2. The left and right margins are always 1 inch, the bottom margin of the first page is not less than 11/2 inches, and the top margin is 1 inch from the top of the page.

  3. In the body of all proposed publications, the first line of each main paragraph is indented five spaces. All material in the body of a proposed publication is typed double spaced except for long quotations and certain other indented material.

  4. Although not required for publication in the IRB, the drafting attorney should include page numbering in proposed publication items. This will assist reviewers in keeping track of publications submitted for review. As there is no IRB requirement for page numbering, there is no specified format for page numbering.

  5. The formats for typical revenue rulings under the Internal Revenue Code and under tax conventions are set forth in Exhibits 32.2.3-2 and 32.2.3-3, respectively. The formats for a typical revenue procedure, notice, announcement, and news release are set forth in Exhibits 32.2.3-4 through 32.2.3-7.

  6. Manuscript of publications for the IRB must conform to the procedures set forth in this Handbook and be error free. Assigned reviewers must ensure that the hard copies and diskette forwarded for publication are exactly the same. The Bulletin Unit is authorized to return any manuscript to the drafting attorney for correction if the material does not meet the standards of acceptability for submission to the printer.

32.2.3.3.1  (08-11-2004)
CASE-MIS Number

  1. Each proposed publication is identified by its CASE-MIS number in the upper right corner of the first page (one inch from the top of the page) on the same line as the draft date.

32.2.3.3.2  (08-11-2004)
Draft Date

  1. The date of the latest changes made to the proposed publication (for example Draft Date: 9/1/03) must be typed on the first page of each proposed publication in the upper left corner on the line opposite the control number, one inch from the top of the page. This date reflects changes made to any page since the last dated draft. This draft date appears only on the first page of the proposed publication. See Exhibits 32.2.3-2 through 32.2.3-7.

32.2.3.4  (08-11-2004)
Identification System — General

  1. Revenue rulings and revenue procedures are printed within an identification system of IRB "Parts" and coding references for purposes of indexing them in the IRB. Announcements and notices are printed within an identification system of IRB "Parts" but with no coding references. News releases are not printed in the IRB. The text of a revenue ruling or revenue procedure is published at the place indicated by its primary coding, and a cross-reference is included at every point indicated by a secondary coding. The drafting attorney of the proposed publication has responsibility for assigning the correct Part Number in accordance with the outline shown in the Introduction printed in each IRB. See Exhibit 32.2.3-1. The current placement of publications and cross-references in these Parts is discussed below.

32.2.3.4.1  (08-11-2004)
Part Number

  1. Part I of the IRB includes revenue rulings, Supreme Court opinions and Treasury Decisions based on the provisions of the Internal Revenue Code of 1986.

  2. Part II of the IRB includes revenue rulings that state a Service position under a tax convention and related Treasury Decision, cross-references for revenue rulings and revenue procedures, as appropriate, and legislation and related committee reports.

  3. Part III of the IRB includes revenue procedures, notices, and other miscellaneous material.

  4. Part IV of the IRB includes notices of proposed rulemaking, disbarment and suspension lists, and announcements.

  5. The Part of the IRB in which the publication will appear is typed two lines below the CASE-MIS number beginning at the left margin for revenue rulings and revenue procedures and four lines below the control number for notices and announcements. "Part" is typed with the initial letter capitalized . The part number is designated by a roman numeral. See Exhibits 32.2.3-2 through 32.2.3-7.

32.2.3.4.2  (08-11-2004)
Coding — General

  1. The term "coding" refers to the identification of the provisions of:

    • The Internal Revenue Code and the regulations under which each revenue ruling is published

    • The tax convention and related Treasury Decision under which each revenue ruling is published

    • The Statement of Procedural Rules under which each revenue procedure is published

  2. The attorney drafting the proposed publication is responsible for selecting the correct primary and secondary coding and for preparing a Cross-Reference Sheet for each secondary coding provision. See CCDM 32.2.3.4.4.

  3. References to both the Code and the regulations, whether in the primary or the secondary coding, should include only the Code or regulation section number. (Correct: 421; 1.421-6. Incorrect: 421(a); 1.421- 6(a).)

  4. Temporary regulations may be used in coding if final regulations have not been adopted. (Example: Rev. Rul. 78-193, 1978-1 C.B. 12.)

  5. Proposed regulations are never used in coding. If neither final nor temporary regulations have been issued, or if the regulations do not reflect recent legislation that is the subject of the proposed publication, the regulations reference is omitted. (Examples: Rev. Ruls. 78-191 and 78-192, 1978-1 C.B. 8.)

32.2.3.4.2.1  (08-11-2004)
Primary Coding

  1. Preceding the text of each revenue ruling certain identification, referred to as primary coding, must be shown. This includes either the number and title of the Code and regulations (including temporary regulations) sections principally involved in the revenue ruling or the name of the tax convention principally involved and a citation to the tax convention.

  2. Preceding the text of each revenue procedure the section number and title of the Statement of Procedural Rules under which the revenue procedure is published must be shown.

32.2.3.4.2.1.1  (08-11-2004)
Revenue Rulings under the Code

  1. The word "Section" followed by the number and title of the Code section principally involved (not including a subsection identification or title) is typed at the left margin beginning two lines below the Part number. This entry is typed with the initial letter of each principal word capitalized (no period at the end of the title) and with the section number separated from the title by a period and two hyphens (without spaces). This entry is typed across the page to the right margin; if a second line is required, it is typed beginning at the left margin. See Exhibit 32.2.3-2.

  2. "26 CFR" is typed at the left margin beginning three lines below the primary Code section number followed in order by the number of the primary regulations section, colon, two spaces, and the exact title of the regulations section (period at the end of the title). In practically all cases, only the first word in the regulations title begins with a capital letter. This entry is typed across the page to the right margin; if a second line is required, it is typed beginning at the left margin. If there are no final or temporary regulations under the primary Code section, this entry is omitted. (Examples: Rev. Ruls. 78-191 and 78-192, 1978-1 C.B. 8.) See Exhibit 32.2.3-2.

32.2.3.4.2.1.2  (08-11-2004)
Revenue Rulings Under Tax Conventions

  1. The name of the tax convention is typed at the left margin beginning two lines below the designation "Part." This entry is typed with the initial letter of each principal word capitalized (no period at the end of the title). It is typed across the page to the right margin; if a second line is required, it is typed beginning at the left margin.

  2. The citation to the tax convention is typed three lines below the name of the tax convention (period at the end of the citation). See Exhibit 32.2.3-3.

32.2.3.4.2.1.3  (08-11-2004)
Revenue Procedures

  1. The Part III title, "Administrative, Procedural, and Miscellaneous " (with the initial letters of the principal words capitalized), is typed at the left margin two lines below the Part number (no period at the end of the title).

  2. "26 CFR" is typed three lines below the Part title, followed in order by the number of the Statement of Procedural Rules section involved, colon, two spaces, and the exact title of that section. In practically all cases, only the first word of the title of the section begins with a capital letter (period at the end of the title). This entry is typed across the page to the right margin; if a second line is required, it is typed beginning at the left margin. See Exhibit 32.2.3-4.

32.2.3.4.2.1.4  (08-11-2004)
Notices, Announcements, and News Releases

  1. Notices, announcements, and news releases do not contain primary or secondary coding.

32.2.3.4.2.2  (08-11-2004)
Secondary Coding

  1. When more than one section of the Code, tax convention, or Statement of Procedural Rules is significantly involved in the conclusion stated, the coding is expanded to include reference to the numbers of the additional sections that are significantly involved. This identification is referred to as secondary coding.

  2. A section of the Code, tax convention, or Statement of Procedural Rules is significantly involved if a person might reasonably research the matter under that section.

  3. Mere mention of a Code or regulations section in the body of a publication does not necessitate its inclusion in the coding.

  4. When a revenue ruling applies section 7805(b)(8) to make a holding nonretroactive, the secondary coding must include reference to section 7805 and section 301.7805-1 of the regulations. (Example: Rev. Rul. 78-94, 1978-1 C.B. 58. Also see Rev. Rul. 64-132, 1964-1 (Part I) C.B. 501, for an illustration of coding for a revenue ruling written solely to make a prior revenue ruling nonretroactive.) On the other hand, prospective application of a revenue procedure should not be coded or cross-referenced to section 7805.

  5. If more than one section of the regulations under a single section of the Code is significantly involved in the conclusion stated, the secondary coding should make reference to all of these sections. (Example: Rev. Rul. 78-37, 1978-1 C.B. 54.)

  6. A Cross-Reference Sheet must be prepared for each secondary coding reference. See CCDM 32.2.2.1.6.

32.2.3.4.2.2.1  (08-11-2004)
Revenue Rulings under the Code

  1. Citations to any cross-reference needed are shown in the secondary coding line. The secondary coding entry generally begins with an opening parenthesis followed by "Also Section(s)" followed in order by the numbers of all Code sections cross-referenced, semicolon, and the numbers of the pertinent sections of the related regulations, followed by a closing parenthesis, and ending with a period.

  2. All of the secondary coding information is typed, in parentheses, beginning at the left margin on the first line below the line beginning " 26 CFR." If "26 CFR" is not typed in the primary coding entry because there are no regulations under the primary Code section, the cross-reference citation is typed three lines below the primary Code section number with "26 CFR" typed ahead of the cross-reference regulations section designation.

  3. The secondary coding entry is typed across the page to the right margin; if a second line is required, it is typed beginning at the left margin.

32.2.3.4.2.2.2  (08-11-2004)
Revenue Rulings under Tax Conventions

  1. Citations to cross-references needed under any provision of the Code (or the Statement of Procedural Rules) are shown in the secondary coding line. The secondary coding entry generally begins with an opening parenthesis followed by "Also Part I, Section(s)" , followed by the numbers of all Code sections cross-referenced, semicolon, and the numbers of the pertinent sections of the related regulations, followed by a closing parenthesis, and ending with a period.

  2. All of the secondary coding information is typed, in parentheses, beginning at the left margin on the first line below the citation to the tax convention.

  3. The secondary coding entry is typed across the page to the right margin; if a second line is required, it is typed beginning at the left margin.

32.2.3.4.2.2.3  (08-11-2004)
Revenue Procedures

  1. Citations to cross-references needed under any other provision of the Statement of Procedural Rules are shown in a separate secondary coding line that begins with "Also Section," is enclosed in parentheses, and is typed at the left margin on the first line below the line that begins "26 CFR." Citations to cross-references needed under any provision of the Code are shown on a separate secondary coding line, which begins with an opening parenthesis followed by "Also Part I, Section(s), " followed by the numbers of all Code sections cross-referenced, semi-colon, and the numbers of the pertinent sections of the related regulations, followed by a closing parenthesis, ending with a period.

  2. This secondary coding line is also enclosed in parentheses and is typed at the left margin on the first line below any secondary coding to the Statement of Procedural Rules or, if there is none, on the first line below the line that begins "26 CFR."

  3. The secondary coding entry is typed across the page to the right margin; if a second line is required, it is typed beginning at the left margin.

32.2.3.4.3  (08-11-2004)
Publication Number and Headings

  1. A blank space of 10 lines following the primary and secondary coding is left in the revenue ruling or revenue procedure to allow the Bulletin Unit to insert the highlight. No space is needed for a notice, announcement, or news release.

  2. The abbreviation "Rev. Rul." or " Rev. Proc." is typed following the blank space and starting at the left margin. The words "notice" , "announcement, " and "news release" are not abbreviated and are prepared pursuant to Exhibits 32.2.3-5, 32.2.3-6, and 32.2.3-7, respectively.

  3. Headings identifying the various parts of a revenue ruling or revenue procedure are typed in all upper case letters. The first heading is typed three lines below "Rev. Rul." or "Rev. Proc. " For revenue rulings, the headings are typed flush with the left margin and are not followed by a period. For revenue procedures, the headings are assigned section numbers and are typed flush with the margin. The word "SECTION" is typed using all capital letters. Headings are not always needed in notices and announcements, and typically, are not used in news releases. If headings are used, follow the guidelines provided for revenue rulings or revenue procedures above.

32.2.3.4.4  (08-11-2004)
Cross References

  1. A Cross-Reference Sheet is prepared for each secondary coding reference for insertion in the proper place in the IRB.

  2. The Cross-Reference Sheets carry secondary coding and use as their primary coding those sections of the Code and regulations (or tax conventions and related Treasury Decisions or Statement of Procedural Rules) shown in the secondary coding of the revenue ruling or revenue procedure.

  3. The Cross-Reference Sheet does not state a holding. It is usually cast in the form of a question. This statement ends with appropriate final punctuation and is followed by the words, "See Rev. Rul.___ page__." or " See Rev. Proc._, page ___."

  4. When the project is being forwarded for publication, a separate Cross-Reference Sheet is prepared for each cross-referenced section of the Code, or of a tax convention, or of the Statement of Procedural Rules, in accordance with the format illustrated in Exhibit 32.2.3-8.

32.2.3.5  (08-11-2004)
Components of Revenue Rulings, Revenue Procedures, Notices, Announcements, and News Releases

  1. The body of a revenue ruling or revenue procedure generally is organized into certain components. Headings are usually used for each component of these publications.

32.2.3.5.1  (08-11-2004)
Revenue Rulings

  1. Revenue rulings are current authority and should be written in the present tense. For example: "Rev. Rul. 2002-50, 2002-32 I.R.B. 292, holds ... ." They speak from the perspective of the Service. Thus, revenue rulings should not contain language such as "The IRS today announced " —this language speaks from the perspective of a newspaper.

32.2.3.5.1.1  (08-11-2004)
Components of Revenue Rulings

  1. Most revenue rulings interpret the law with respect to a particular set of facts. They should be written so that the principles covered are clearly understood. Revenue rulings that interpret tax conventions are unique to the office of the Associate Chief Counsel (International). Most of the components of each type of revenue ruling are the same.

  2. The body of a revenue ruling may include some or all of the following components: issue, facts, law, analysis, holding, effect on other revenue rulings (or documents), prospective application, and drafting information. See Exhibit 32.2.3-2 for the format of a proposed revenue ruling under the Internal Revenue Code and Exhibit 32.2.3-3 for the format of a proposed revenue ruling under a Tax Convention.

32.2.3.5.1.2  (08-11-2004)
Headings

  1. Headings are used to identify the following components, as needed. They are presented in uppercase letters and are typically in the following order:

    • ISSUE(S)

    • FACTS

    • LAW

    • ANALYSIS

    • HOLDING(S)

    • EFFECT ON OTHER REVENUE RULINGS (or DOCUMENTS)

    • PROSPECTIVE APPLICATION

    • DRAFTING INFORMATION

  2. Two headings may be combined when appropriate. (Examples: ISSUE AND FACTS; LAW AND ANALYSIS).

  3. If a particular revenue ruling does not lend itself to this format, the headings may be omitted altogether. For an example see Rev. Rul. 2001-1, 2001-1 C.B. 726.

32.2.3.5.1.2.1  (08-11-2004)
Issue

  1. The issue is the question to be answered by the revenue ruling. The issue should be drafted with the holding of the revenue ruling clearly in mind because the holding must be directly responsive to, and ordinarily must parallel the language of, the issue. The issue should be stated in ordinary question format.

    Example 1: Is the Irish wealth tax deductible under section 164 ... ?

    Example 2: Does a leasehold interest qualify under section 1033(f) ... ?

    Example 3: If the income of X corporation is diverted to Y corporation, is that income ... ?

  2. If more than one issue is discussed in a revenue ruling, the issues should be numbered for easy reference. See Exhibit 32.2.3-2.

32.2.3.5.1.2.2  (08-11-2004)
Facts

  1. Clearly state the specific facts on which the holding is based. Include all facts that are relevant to a proper understanding of the holding. Do not introduce a fact for the first time in another section of the revenue ruling.

  2. Eliminate extraneous facts because their presence in a revenue ruling may cloud the message of the holding.

  3. Present two or more factual situations in the same revenue ruling as "Situation 1. ... ." and "Situation 2. ... ." or in some similar manner. See Exhibit 32.2.3-2.

  4. Tailor the facts, particularly the dates, to fit the period to which a particular statutory provision applies.

  5. Words of limitation in the fact statement may help narrow the focus of a reader of the revenue ruling to the precise issue being addressed. For example, a sentence such as "Apart from the lack of a private foundation, the plan satisfies the guidelines of Rev. Proc. 76-47, 1976-2 C.B. 670," helps the reader understand what is and is not being decided in the revenue ruling. Similarly, a sentence could be included after relevant facts are described such as, "Except for the question at issue, the transaction meets the requirements of section xxx of the Code."

  6. Alter facts taken from actual cases to conceal the identity of the taxpayer, and other confidential personal or business information, such as the names and addresses of persons involved in the transaction described, including secret processes. For example, dollar amounts should be reduced proportionately or changed to x dollars. The omission of confidential information and identifying details is necessary to prevent unwarranted invasion of personal privacy and to comply with the statutory provisions, such as section 7213 and 18 U.S.C. section 1905, dealing with disclosure of trade secrets and other confidential information obtained from members of the public and return information under sections 6103 and 6110(c).

32.2.3.5.1.2.3  (08-11-2004)
Law

  1. The LAW section includes discussions of relevant provisions of the Internal Revenue Code, regulations, court opinions, and other authorities, including other publication items.

32.2.3.5.1.2.3.1  (08-11-2004)
Code and Regulations

  1. The most directly applicable provisions of the Internal Revenue Code and regulations are paraphrased. If, however, the holding rests upon specific language in the Internal Revenue Code or regulations, that language may be quoted. When quoting or paraphrasing a section of the Internal Revenue Code or regulations, it is sufficient to say that the section "provides " rather than that it "provides, in part, ... ," unless the material presented would be misleading without an affirmative statement that only part of the Internal Revenue Code or regulations was quoted or paraphrased.

32.2.3.5.1.2.3.2  (08-11-2004)
Court Opinions

  1. A relevant court opinion that bears directly upon an issue addressed in the revenue ruling may be used in the LAW or LAW AND ANALYSIS section with some indication of what the opinion means. When specific language of a court opinion is quoted or paraphrased, it is correct to say that the court "stated."

  2. A court opinion that is adverse to the Service position will not be cited as authority in revenue rulings if the Service has decided not to follow that case, either by a published nonacquiescence (in Tax Court cases) or by an unpublished Action on Decision (in other federal court cases). Opinions of the Supreme Court of the United States, however, are always followed. Generally, it is not advisable to cite an adverse opinion in which the Commissioner has acquiesced in result only. An adverse opinion may, however, be cited in order to distinguish it from the facts stated in or the law applicable to the present revenue ruling, or when a revenue ruling is being used to announce that the Service will follow an adverse opinion in a particular case. An opinion that supports the Service’s position in a matter may nevertheless be unacceptable for use in a revenue ruling if it would adversely affect another Service position.

  3. An unreported opinion of any court, including a memorandum opinion of the Tax Court or the Board of Tax Appeals, is cited only if better authority is not available. When an unreported opinion is used in a revenue ruling, it is not cited to an unofficial private commercial reporter.

32.2.3.5.1.2.3.3  (08-11-2004)
Other Authorities

  1. Other publication items that bear directly upon the issue may be used in the LAW or LAW AND ANALYSIS section with some indication of what they mean. When the holding of an existing ruling is referred to in a new revenue ruling, it is correct to refer to that holding in the present tense because it is current authority. THUS: "Rev. Rul. 92-69, 1992-2 C.B. 51, holds ... ."

  2. Relevant federal tax statutes other than the Internal Revenue Code may be cited, paraphrased, or quoted, as appropriate.

  3. Congressional material should be used with care. Committee reports may be cited, paraphrased, or quoted. A Joint Committee General Explanation of a revenue act (commonly referred to as the "Bluebook" ), however, should not be cited as authority. These explanations reflect only the views of the staff of the Joint Committee as to the intent of Congress and are not part of the legislative history of the act. Extracts from congressional debate or hearings generally are used only if better authority is not available and only if the speaker had significant official authority, such as chairperson of a committee.

  4. Treatises (such as Fletcher on Corporations or Scott on Trusts) may be cited on a selective basis only when better authority is not available.

  5. Articles in professional journals and legal encyclopedias, editorial comments in commercial tax services, and similar items should not be cited.

32.2.3.5.1.2.4  (08-11-2004)
Analysis

  1. The analysis is the explanation of how the cited authorities apply to the issue(s) and facts presented in order to reach the conclusion(s) of the revenue ruling. Because a revenue ruling serves as research material for taxpayers and Service personnel, it should contain sufficient analysis to permit some degree of analogy in similar factual situations. Only in rare situations may the position of the Service be stated without analysis or explanation.

  2. When more than one issue or situation is presented, the analysis of each may be presented separately, if desired, under headings such as "Analysis-Issue (1)" or "Analysis-Situation 1. "

32.2.3.5.1.2.5  (08-11-2004)
Holding

  1. The holding must be directly responsive to, and ordinarily must parallel the language of, the issue. It should be stated clearly and definitively. Normally, it is stated without introductory words, such as " Accordingly."

  2. The holding should not be drafted with reference to the particular taxpayer identified in the facts. For example, the holding should not state, "Under the facts of this ruling, X may deduct advertising expenditures as an ordinary and necessary business expense under section 162."

  3. If more than one issue or more than one factual situation is discussed in the revenue ruling, the holdings should be clearly labeled to show which issue relates to which holding.

32.2.3.5.1.2.6  (08-11-2004)
Effect on Other Revenue Rulings (or Documents)

  1. If another revenue ruling (or another document) is affected (that is, amplified, clarified, distinguished, modified, obsoleted, revoked, superseded, supplemented, or suspended, as those terms are described in CCDM 32.2.2.8.1) by the new revenue ruling, that fact must be stated. The extent of the change should be described precisely; it is not sufficient to state that a prior revenue ruling is modified "to the extent that it is inconsistent herewith."

  2. Generally, it is helpful to discuss the effect on another publication and the extent of the change in the ANALYSIS or LAW AND ANALYSIS section of the new revenue ruling. Nevertheless, the EFFECT ON OTHER REVENUE RULINGS (or DOCUMENTS) heading must be retained and be followed by a statement that "Rev. Rul. xx-xxx is how affected." This statement in the EFFECT ON OTHER REVENUE RULINGS (or DOCUMENTS) section is necessary both to ensure clarity and to aid in updating finding lists and citators.

  3. When significant changes are made by a new revenue ruling to a prior revenue ruling, it is usually desirable to incorporate into the new revenue ruling the remaining current provisions of the previous revenue ruling so that the previous ruling may be modified and superseded.

  4. A new revenue ruling may affect a prior publication in more than one way. For example, the new revenue ruling may amplify and supersede, clarify and supersede, or modify and supersede the prior publication. In these cases, all relevant terms are used in the EFFECT ON OTHER REVENUE RULINGS (or DOCUMENTS) section. (Illustration: "Rev. Rul. xx–xxx is amplified and superseded." )

32.2.3.5.1.2.7  (08-11-2004)
Prospective Application

  1. Revenue rulings apply retroactively unless they include a specific statement indicating, under the authority of section 7805(b)(8), the extent to which they are to be applied without retroactive effect (that is, prospectively). If a position taken in a revenue ruling is to be applied only prospectively it must be stated clearly and section 7805(b)(8) cited as the authority. See Exhibit 32.2.3-9 for a sample statement.

  2. Section 7805(b)(8) provides the Secretary with the authority to prescribe the extent to which any ruling is to be applied prospectively only. This authority has been redelegated to the Deputy Associate Chief Counsel level. The exercise of this authority requires an affirmative action. Approval by an Associate or Deputy Associate Chief Counsel of a revenue ruling containing a clear statement that a position taken in the ruling is to be applied only prospectively is sufficient.

  3. Revocation or modification of a previous revenue ruling is usually made nonretroactive to the extent that the new revenue ruling has adverse tax consequences to taxpayers.

  4. When a revenue ruling applies only prospectively pursuant to section 7805(b)(8), the secondary coding must include reference to section 7805(b)(8) and section 301.7805–1 of the Regulations on Procedure and Administration .

  5. If a proposed revenue ruling is to be applied only prospectively, the Background Information Note (BIN), using the caption Prospective Application Considerations (see CCDM 32.2.4.2.1.8), should state and discuss the reasons for and against the prospective application. The BIN should also include background information necessary to an understanding of the section 7805(b)(8) considerations as well as supporting facts and reasons for the application of section 7805(b)(8). If desired, the information may be summarized and organized under the following headings:

    • Reasons for applying section 7805(b)(8)

    • Reasons for rejecting the application of section 7805(b)(8)

    • Recommendation of whether section 7805(b)(8)’s nonretroactivity rule should apply


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