IRS revokes, going forward only, part of an earlier ruling on a taxpayer's 6041 reporting duty

Plain-English summary

The IRS had earlier issued a private letter ruling (PLR 202016001) to this taxpayer that, in part, addressed whether the taxpayer had to file information returns under Code § 6041 for payments it makes to a particular payee. The IRS has since decided that portion of the old ruling was wrong and no longer reflects its position, so this letter revokes that part. Importantly, the revocation is prospective: under the IRS's own procedures for continuing transactions (Rev. Proc. 2023-1, section 11.08), the IRS limited the effect to the revocation date, so the taxpayer does not have to go back and correct information returns filed for payments made before this letter. This matters because it shows the IRS can undo an earlier favorable ruling when it changes its view, but it will usually protect the taxpayer from retroactive consequences for actions already taken in reliance on the old ruling.

Ruling snapshot

• Question: Should part of an earlier private letter ruling on the taxpayer's § 6041 information-reporting obligation be revoked, and with what retroactive effect?
• Outcome: revocation (prior ruling's § 6041 portion revoked, effective going forward only; no correction of prior returns required)
• Key authorities: IRC § 6041; Rev. Proc. 2023-1, sections 11.04 and 11.08

Full text (IRS public release)

 Internal Revenue Service                               Department of the Treasury
                                                        Washington, DC 20224

 Number: 202318001                                      Third Party Communication: None
 Release Date: 5/5/2023                                 Date of Communication: Not Applicable
 Index Number: 61.40-00, 6041.00-00
                                                        Person To Contact:
 ----------------------------                           -------------, ID No. -----------------
 ------------------------------------                   Telephone Number:
 ----------------------------------                     --------------------
 -------------------------------------------            Refer Reply To:
 --------------------------------                       CC:ITA:B04
                                                        PLR-100321-23
                                                        Date:
                                                        February 06, 2023




Legend:

Taxpayer = ---------- ---------------------------

X            = --------------------------------------

Dear -----------------:

This letter ruling revokes the portion of private letter ruling 202016001 (PLR-108847-19)
relating to Taxpayer’s information reporting obligation under § 6041 of the Internal
Revenue Code for payments it makes to X. This letter also addresses the retroactive
effect of the revocation.

The IRS has authority to revoke an erroneous letter ruling. See Rev. Proc. 2023-1,
2023-1 I.R.B. 1, section 11.04. Since issuing PLR 202016001, the IRS has determined
that the portion of PLR 202016001 relating to Taxpayer’s payments to X is not in accord
with the current views of the IRS.

Under Rev. Proc. 2023-1, section 11.08, if a letter ruling is issued covering a continuing
action or series of actions and the letter ruling is later found to be in error or no longer in
accord with the position of the IRS, the appropriate Associate Chief Counsel ordinarily
will limit the retroactive effect of the revocation or modification to a date that is not
earlier than that on which the letter ruling is revoked or modified. Consequently,
PLR-100321-23                                2


Taxpayer is not required to correct any information returns filed with respect to
payments made to X prior to the date of this revocation.

                                      Sincerely,



                                      Stephen J. Toomey
                                      Senior Counsel, Branch 4
                                      Office of Associate Chief Counsel
                                      (Income Tax & Accounting)