Revenue procedure (often abbreviated Rev. Proc.) is a type of official pronouncement issued by the United States Internal Revenue Service (IRS). A revenue procedure is an official statement of a procedure that affects the rights or duties of taxpayers or other members of the public under the Internal Revenue Code, related statutes, treaties and regulations, and that is published in the Internal Revenue Bulletin (IRB). [1] [2]
Revenue procedures generally do not create new substantive tax law. Instead, they prescribe how taxpayers should proceed in order to obtain a particular tax result, claim a benefit, rely on a safe harbor, or obtain administrative relief under the IRS’s interpretation of existing statutes and regulations. [2]
The IRS describes a revenue procedure as an “official statement of a procedure” that either affects taxpayer rights or duties under the Internal Revenue Code and related authorities or is otherwise appropriate for publication as a matter of public knowledge. [1] Revenue procedures are part of the IRS’s body of precedential guidance and, unlike informal web pages or publications, are published in the Internal Revenue Bulletin. [3]
In practice, revenue procedures are used to:
Revenue procedures sit below statutes and Treasury regulations in the commonly described hierarchy of U.S. federal tax authority but above purely informal materials. A simplified ordering is:
The IRS has stated that the IRB is the “authoritative instrument” for announcing official rulings and procedures and for publishing Treasury decisions and other items of general interest. [6] [7] Guidance that is not published in the IRB, such as ordinary FAQs, generally does not have precedential value. [3]
Courts and practitioners sometimes refer to this hierarchy when assessing whether a taxpayer may reasonably rely on a particular piece of guidance or when reconciling conflicts among authorities (for example, between an older revenue procedure and a later regulation).
Revenue procedures are first published in the weekly Internal Revenue Bulletin, which the IRS describes as the official vehicle for substantive rulings and procedures of the Service. [6] [7] The IRB is available electronically on the IRS website and is later compiled into annual “cumulative” volumes.
Each IRB contains a numerically organized “finding list” of revenue rulings, revenue procedures, Treasury decisions, notices and other items for that year. [8] Law library guides and research manuals commonly treat IRB items, including revenue procedures, as primary sources of federal tax law for research purposes. [9]
Revenue procedures are numbered in the format “Rev. Proc. YYYY-NN”, where “YYYY” is the calendar year of issuance and “NN” is a sequential number assigned during that year. A complete citation typically includes both the revenue procedure number and the IRB citation, for example:
Items in the IRB are cited using the volume-issue-page convention “YYYY-II I.R.B. PPP”. [10]
Revenue procedures are often discussed alongside revenue rulings. Both are published in the IRB and are considered precedential, but they serve different roles. [2] [11]
The IRS’s own primer explains that “a revenue ruling generally states an IRS position”, whereas “a revenue procedure provides return filing or other instructions concerning an IRS position”. [2] In audits and administrative practice, revenue rulings are commonly cited for substantive analysis, while revenue procedures are used as procedural roadmaps or checklists.
Revenue procedures also interact with private letter rulings (PLRs) and technical advice memoranda (TAMs). PLRs and TAMs are taxpayer-specific determinations that apply the law to a particular taxpayer’s facts and are binding only with respect to that taxpayer. [2] Revenue procedures frequently prescribe how to request these rulings, including required information, representations and user fees, and they are updated periodically to reflect changes in IRS organizational structure or fees. [12]
Other forms of IRS guidance include notices, announcements, frequently asked questions (FAQs) and general publications. These may provide useful explanations or transitional relief but do not ordinarily carry the same precedential status as revenue rulings and revenue procedures published in the IRB. [3] [5] Where an apparent conflict exists, the Code, regulations and IRB-published guidance control.
Revenue procedures are issued in many areas of federal taxation. Common subject-matter categories include:
Because they are detailed and often highly technical, revenue procedures are widely used by tax professionals as practical guidance for structuring transactions and preparing returns in ways that align with published IRS expectations. [11]
Revenue Procedure 2000-37 established a safe harbor for certain “reverse” and improvement like-kind exchanges under § 1031. It allows a taxpayer to use an exchange accommodation titleholder (EAT) to “park” property temporarily while still qualifying for non-recognition treatment, provided strict timing and documentation requirements are met. [13]
Commentary emphasizes that the procedure provides a safe harbor for specified parking arrangements, but does not prohibit other structures that fall outside the safe harbor from qualifying under general § 1031 principles. [14]
Revenue Procedure 2002-22 provides advance ruling guidelines for determining when an undivided fractional interest in rental real property, commonly structured as a tenancy in common (TIC), will be treated as a direct interest in real estate rather than as an interest in a business entity for federal income tax purposes. [15]
The procedure lists a series of conditions regarding co-ownership arrangements, such as limits on the number of co-owners, restrictions on centralized management, allocation of income and expenses, limitations on financing, and rules about transferability and decision-making rights. Contemporary commentary notes that these standards quickly became a de facto benchmark for structuring TIC arrangements intended to be eligible as replacement property in § 1031 exchanges. [16]
Revenue Procedure 2008-16 provides a safe harbor for when a dwelling unit used partly as a residence will nevertheless be treated as held for productive use in a trade or business or for investment for purposes of § 1031. Under the safe harbor, a vacation or second home can qualify if ownership and use tests are satisfied over a two-year period, including minimum periods of rental at fair market value and limits on personal use by the owners. [17] [18]
Revenue Procedure 2020-44 addresses the global transition away from the LIBOR and other interbank offered rates (IBORs). It provides that, under specified conditions, modifications to contracts to incorporate certain recommended fallback language or to replace an IBOR with a qualified alternative reference rate will not be treated as taxable exchanges or terminations for U.S. federal income tax purposes and will not cause the termination or “legging out” of certain integrated or hedging transactions. [19] [20]
Subsequent Treasury regulations on IBOR transition incorporate and build on this framework, treating modifications described in section 4.02 of Rev. Proc. 2020-44 as “covered modifications” that generally do not result in realization events. [21]
Recent revenue procedures continue to address a wide variety of administrative topics, such as indexing adjustments under the Affordable Care Act shared responsibility provisions, procedures for adequate disclosure to reduce accuracy-related penalties, and consolidated guidance on user fees and ruling practices. [22] [23]
Tax advisers routinely consult revenue procedures when planning transactions, preparing returns, or seeking rulings from the IRS. Because the Service’s policy is to publish in the IRB all substantive rulings and procedures necessary to promote a uniform application of the tax laws, [7] [3] revenue procedures play an important role in:
Practitioner-oriented explanations aimed at investors and business taxpayers commonly describe revenue procedures as practical “playbooks” or checklists that translate the IRS’s substantive positions into detailed operational requirements and safe-harbor structures. [24]