IRS Lifts PLR Pause

March 6, 2015
Updated March 9, 2015

The Internal Revenue Service is announcing today that the “PLR Pause” during which the IRS has ceased issuing private letter rulings concerning the “qualifying income” rules for MLPs under section 7704 of the tax code, is over as of today. Proposed regulations will be issued “soon” addressing 7704(d)(1)(E) and services related to the activities in that section. Work will begin today on the PLR requests that have been filed and new requests will be accepted. The IRS believes it has developed workable standards and welcomes comments when the regulations are issued.

NAPTP and its members are very pleased that the long wait for rulings to resume is over. We look forward to seeing and responding to the proposed regulations clarifying section 7704.

The IRS’ official statement is below:

IRS Statement on PLRs and Guidance Under 7704

We have made significant progress on our 7704 guidance project and we expect to publish proposed regulations in the near future. These proposed regulations will provide guidance on section 7704(d)(1)(E) concerning qualifying income from the exploration, development, mining and production, processing, refining, transportation, and marketing of minerals and natural resources. As has been mentioned previously by IRS and Treasury representatives, the proposed regulations will also address services provided by contractors to others in the oil and gas industry. The proposed regulations will not address other forms of qualifying income. Interested stakeholders will have an opportunity to provide comments on the proposed regulations before they are finalized and become effective. We look forward to those comments and to working with stakeholders to develop appropriate and administrable rules in this area of the law.

In the meantime, we know taxpayers have been patiently waiting for private letter rulings before proceeding with their transactions. We are pleased to report today that we are now comfortable lifting the pause in the private letter ruling process that began in 2014. During the pause, we have spent significant time studying the issues and have worked extensively with engineers in LB&I to develop workable standards to guide our ruling practice. These standards will be incorporated into the proposed regulations. P&SI is resuming the ruling process as of today, and is beginning to review the pending ruling requests, notwithstanding that we have a guidance project ongoing and that the proposed regulations, which are intended to provide greater transparency, are still being developed. We are doing so now because we recognize the importance of private letter rulings to industry participants, and we do not want to delay the availability of private letter rulings any longer where we are comfortable giving them. It may take some time to process the ruling requests as we reach out to the relevant taxpayers where additional information is needed, but we expect to work diligently to process these as promptly as we can.