A new year means renewed attention to the compliance requirements required of plan sponsors. In addition to legislation and regulations affecting employers, subregulatory guidance helps clarify the law and provides direction and insight into complex rules.
What is subregulatory guidance?
Regulations or rules are written to interpret legislation and develop the guidance necessary for implementation. Subregulatory guidance is any guidance other than proposed or final regulations. An agency may release additional information to address specific aspects of published regulations. Subregulatory guidance does not have the same effect as guidance issued through the typical proposed or final rule process.
One agency producing this type of additional guidance is the Internal Revenue Service (IRS). The IRS is the largest bureau within the Treasury Department (Treasury). When the IRS releases either proposed or final rules, you’ll commonly see the information jointly released by both the Treasury and the IRS. The difference in the forms of IRS subregulatory guidance is based upon where the guidance is published or posted, which indicates whether the guidance can be used as precedents for future situations. Resources published in the Internal Review Bulletin (IRB) can be used for precedent. Those not published in the IRB cannot be used for or relied upon for precedent.
Published in the IRB
The IRS also separately uses its IRB to publish certain types of guidance outside of the official regulations of the Treasury, such as revenue rulings, revenue procedures, announcements, notices and other items of great interest. The IRS notes that “rulings and procedures reported in the IRB do not have the force and effect of Treasury regulations, but they may be used as precedents.”
Revenue Ruling
A revenue ruling is issued for the benefit of taxpayers, tax professionals or even IRS personnel. Using a specific set of facts about a situation, the IRS makes an official statement, conclusion or interpretation of the tax code and represents the IRS position on how the law is applied to the situation.
Revenue Procedure
A revenue procedure is the official IRS statement that provides procedural instructions for return filings or other instructions. For example, a revenue procedure might explain the process for calculating a deduction.
Notice
A notice provides interim guidance or interpretation of the tax code before a revenue ruling is finalized or published. In other words, the IRS is just providing a public pronouncement of the guidance prior to its official release.
Announcement
An announcement is another IRS public pronouncement used to make an official statement of an approaching deadline and has only immediate or short-term value. Announcements may summarize a regulation but do so without making any interpretation of the law.
Not Published in the IRB
In addition to those mentioned above that are officially published in the IRB, there are numerous other types of subregulatory guidance published on the IRS website. These include frequently asked questions (FAQs), private letter rulings (PLRs), technical advice memoranda (TAMs) and other general legal advice materials. These resources tend to be taxpayer-specific and address detailed scenarios based on sets of facts.
Frequently Asked Questions
FAQs are used as an alternative to official guidance, allowing the IRS to answer commonly asked questions from the public more quickly. FAQs typically cover general questions but may not reflect specific scenarios or exceptions that could apply to a specific case. Although FAQs are not considered official guidance, according to the IRS, “reasonable reliance on an FAQ (even one that is subsequently updated or modified) is relevant and will be considered in determining whether certain penalties apply.”
Private Letter Rulings
A PLR is the IRS’s written response made to a specific written request from a taxpayer (a plan sponsor, for example). Although a PLR is only binding for the requester and cannot be relied on as precedent for other situations, a PLR is generally still made public.
Technical Advice Memorandum
A TAM is written by the IRS Office of Chief Counsel in response to technical or procedural questions that develop during an IRS proceeding. While similar to a PLR, a TAM is issued after a transaction has closed to explain and interpret the application of tax laws and regulations. TAMs are not officially published but are available on the IRS website.
Three Takeaways for Plan Sponsors
- Before using and acting on IRS guidance, employers should consult with legal counsel and/ or tax advisors.
- The IRS issues many different types of guidance in the administration of the Internal Revenue Code, some that plan sponsors can use as precedent and some that can’t be used as precedent.
- It’s key for employers to understand what a particular IRS guidance is used for and where the guidance is published before relying on it to make decisions.
Additional Resources for Legislation and Regulations
- Log in to the International Foundation website to access our U.S. Legislative Tracker and Regulatory Updates webpages.
- View Understanding IRS guidance – A brief primer from the Internal Revenue Service.
- View General overview of taxpayer reliance on guidance published in the Internal Revenue Bulletin and FAQs from the Internal Revenue Service.
Developed by International Foundation Information Center staff. This does not constitute legal advice. Please consult your plan professionals for legal advice.
