Private letter rulings from lawyers at the Internal Revenue Service take too long to issue and are often redundant, according to the Treasury Inspector General for Tax Administration in a report made public today.
About 1,000 taxpayers a year request such letters from the IRS’s Office of the Chief Counsel. The letters interpret and apply tax law to the taxpayers’ own specific set of issues – a service for which the IRS charges between $625 and $11,500.
The problem, the IG found, is that the letters are often late. The target is a 120-day turnaround. But lawyers in the chief counsel’s office, which is headed by William Wilkins, a former partner at Wilmer Cutler Pickering Hale and Dorr, failed to meet that goal 77% of the time, the IG found. Of the 65 sample letters reviewed, 50 took between 121 and 3,548 calendar days to issue.
Since taxpayers generally need the letters before filing tax returns, the delays can be costly and problematic.
Also, between FY 2007 and FY 2009, the office issued hundreds of letters dealing with the same four Internal Revenue Code sections.
“Our review showed that Chief Counsel is not monitoring available information to consider whether published guidance should be issued on certain tax issues,” the IG found. “Each of these issues could represent a strong need for published guidance, which would be available for all taxpayers.”
IRS Deputy Chief Counsel Clarissa Potter in a letter to the IG said the office “agrees we should identify common issues in letter ruling requests, and when possible and beneficial, issue published guidance.”