A client cites an IRS publication, a blog post, and a private letter ruling issued to another taxpayer. Your job is to know which of those will hold up in Appeals, which will not, and which carries the same weight as a federal statute.
Tax authority falls into two buckets. Primary (authoritative) sources are the law itself or official interpretations binding on the IRS and courts. Secondary (non-authoritative) sources explain or summarize but cannot themselves be cited to win a position.
The Internal Revenue Code is Title 26 of the United States Code. Congress enacts it. It is the foundation of every tax dispute. When the Code is clear, the Code wins.
Treasury Regulations are issued by the Treasury Department under authority delegated by Congress (general authority under IRC §7805 or specific authority granted in individual Code sections). Regulations live in Title 26 of the Code of Federal Regulations (26 CFR). They carry three forms.
- Proposed regulations. Published in the Federal Register for public comment. Not binding but indicate the IRS's intended position. Taxpayers may generally rely on them
- Temporary regulations. Effective immediately upon publication. Binding for up to 3 years (IRC §7805(e)). Must also be issued simultaneously as proposed
Common mistakes
- Treating IRS publications as binding law. Publications (Pub. 17, Pub. 334, Pub. 463) are non-authoritative summaries. They cannot be cited to defeat the Code or regs and are not substantial authority. Trap answer: "Pub. 17 says it, so the taxpayer wins."
- Citing another taxpayer's PLR as precedent. IRC §6110(k)(3) prohibits use or citation of a PLR as precedent. The PLR binds only the requesting taxpayer. It counts toward substantial-authority analysis but cannot be cited to a court. Trap answer: "The PLR has identical facts, so my client may rely on it as binding."
- Assuming the IRM creates taxpayer rights. The Internal Revenue Manual instructs IRS personnel but does not create enforceable rights for taxpayers. An agent's IRM violation does not by itself win the case. Trap answer: "The agent skipped an IRM step, so the assessment is void."
Bottom line
- Top of the pyramid: the US Constitution, tax treaties, and the Internal Revenue Code (Title 26 USC) all carry the force of statute.
- Treasury Regulations (Title 26 CFR) interpret the Code and bind both taxpayers and the IRS unless they exceed statutory authority.
- IRS guidance: revenue rulings, revenue procedures, and notices are authoritative but rank below regs. Private letter rulings, determination letters, and TAMs bind ONLY the requesting taxpayer.
- Case law: Tax Court, district courts, Court of Federal Claims, Courts of Appeals, and Supreme Court bind within jurisdiction. Tax Court follows the Golsen rule for circuit-binding precedent.
Exam shortcut
"Can my client rely on this PLR?" Only if it is the client's own PLR. Otherwise persuasive insight only, never precedent (IRC §6110(k)(3)). "Does the IRS publication win?" No. Publications are non-authoritative. Reasonable cause may save the penalty; the publication never beats the Code. "Tax Court ruling, which circuit?" Apply Golsen. The Tax Court follows the precedent of the circuit where the taxpayer would appeal, not its own contrary opinion.
The full lesson (about 3,319 words, 22 min read) adds 2 worked examples, all 6 common mistakes, a self-check, free in the app.
Learning objectives
- 5
Browse all free EA Part 3 lessons or jump into free EA Part 3 practice questions.