Corporations navigating complex reorganizations (such as section 368(a) reorganizations), divisive transactions (such as section 355 transactions, which the IRS has shown an increasing willingness to provide rulings on in recent years after a fairly long no-ruling period), and qualifications for specialized exceptions or treatments should strongly consider pursuing PLRs under these promising new procedures that expedite a historically slow process that previously took 6-12 months down to a 12-week timeframe (though an even shorter period can be requested if the taxpayer can demonstrate a business need).
At the beginning of every year, the IRS issues an updated revenue procedure (e.g., Rev. Proc. 2023-1) outlining the process for seeking PLRs and other forms of IRS advice. Under these standard procedures, the IRS processes requests for PLRs in chronological order, allowing expedited handling only in rare and exceptional cases.
In January 2022, the IRS issued Rev. Proc. 2022-10, which launched an 18-month pilot fast-track program focused on processing corporate PLR requests within 12 weeks. This initiative reflected a responsiveness to taxpayer concerns and a willingness to provide sound analysis on shortened timelines where taxpayers face time-sensitive business decisions.
Success of the pilot
It is not surprising that the pilot received positive feedback from taxpayers and tax professionals. As a testament to its effectiveness, the IRS formalized and permanently extended the fast-track approach introduced in Rev. Proc. 2022-10 by issuing Rev. Proc. 2023-26. This revenue procedure applies to PLR requests postmarked or received after 26 July 2023.
Rev. Proc. 2023-26 is nearly identical to Rev. Proc. 2022-10 but expands on the initial pilot program in several key ways:
- No "business need" requirement in most cases. Similar to the procedure in Rev. Proc. 2022-10, taxpayers requesting fast-track processing must include a statement of their reason(s) for the fast-track request. Under Rev. Proc. 2022-10, it was not clear whether a business need was required to be shown. However, Rev. Proc. 2023-26 clarifies that taxpayers do not need to demonstrate a business need for fast-track processing unless they are requesting that a ruling be issued in less than 12 weeks (i.e., more quickly than the fast-track program provides for).
- No fast-track for closing agreements. Fast-track processing will not be granted for PLR requests that include a closing agreement on an issue under the jurisdiction of the Associate Chief Counsel (Corporate) or another Associate office. If a closing agreement arises during fast-track processing, the fast-track process will be terminated, but expedited handling can still be requested. A closing agreement may be entered into with a PLR or in lieu of a PLR and is a final agreement between the IRS and a taxpayer on a specific issue or liability unless fraud, malfeasance, or misrepresentation of a material fact can be shown. A PLR, on the other hand, may be revoked or modified for a number of reasons once issued.
By shifting from a pilot program to an established procedure, the IRS aims to institutionalize faster ruling turnaround times and encourage taxpayers to proactively seek clarity on the tax treatment of complex transactions. This evolution represents a positive step towards timely, amicable, and constructive tax guidance from the IRS.
The general instructions and procedures for requesting PLRs are outlined in Section 7 of Rev. Proc. 2023-1. These general instructions apply to a PLR that is submitted under the fast-track program, subject to the modifications in Rev. Proc. 2023-26 (as discussed below).
A request for fast-track processing can generally only be made for a PLR that is solely or primarily under the jurisdiction of the Associate Chief Counsel (Corporate). If the PLR is primarily under the jurisdiction of the Associate Chief Counsel (Corporate) but also includes a ruling request on an issue under the jurisdiction of another Associate office, fast-track processing will only be granted if the other Associate office with jurisdiction over the particular issue agrees to process the request in accordance with Rev. Proc. 2023-26. Note that fast-track processing is not available for a Treas. Reg. § 301.9100 requests for an extension of time for making an election or for other applications for relief under Treas. Reg. § § 301.9100-1 through 301.9100-3 (though expedited handling under Rev. Proc. 2023-1 can be requested).
The 12-week period to issue a PLR begins on the date the PLR request is assigned to and received by the branch representative and reviewer processing the PLR request or, if it involves issues under the jurisdiction of another Associate office, the 12-week period begins on the first date on which all Associate offices have provided their agreement to fast-track processing. Within seven business days of the assignment of the PLR request to a branch representative or reviewer, the IRS will notify the taxpayer whether the request for fast-track processing has been granted, denied, or is still pending. In contrast, under the current Rev. Proc. 2023-1, the IRS is not obligated to respond within a certain period of time.
The taxpayer seeking a fast-tracked PLR must request a pre-submission conference, during which the substantive issues and the request for fast-track processing will be addressed. The PLR request submitted by the taxpayer must include the taxpayer's reasons for requesting fast-track processing (as noted above, this does not require a showing of a business need), the taxpayer's agreement to provide additional information requested by the branch representative or reviewer within seven business days (shortened from the general 21 business day period under Rev. Proc. 2023-1), and provide a draft PLR in a form that includes a legend of defined terms, a description of relevant facts, representations, requested rulings, and administrative matters.
The permanence of the fast-track process marks a substantial shift in IRS policy towards a more structured, transparent, and efficient process for handling certain PLR requests. The emphasis on time frames, clear eligibility criteria, and specific procedural requirements reflects a commitment to enhancing the predictability and responsiveness of the PLR process.