1. S TATE B AR OF M ICHIGAN S ECTION OF T AXATION, F EDERAL I NCOME T AX C OMMITTEE : N UTS AND B OLTS OF O BTAINING A P RIVATE L ETTER R ULING J ANUARY 15, 2015 January 15, 2015

2. T ODAY ’ S P RESENTER tax credit projects, and financial products taxation. Mr. Combs also represents clients in connection with tax legislation matters, including drafting legislation and lobbying activities. In addition, he has extensive experience obtaining private letter rulings from the Internal Revenue Service and representing taxpayers in federal income tax audits. 2 James H. Combs, J.D., Partner Tax Practice Group Leader Honigman Miller Schwartz and Cohn LLP Education: University of Texas at Austin School of Law, J.D. - cum laude Williams College, B.A. - Political Economy Bar Admissions Michigan | Texas Member: ABA Tax Section State Bar of Michigan, Tax Section Mr. Combs concentrates his practice on corporate taxation, mergers and acquisitions,

3. T ODAY ’ S P RESENTATION What is a PLR? Determining whether a PLR is needed Determining whether a PLR can be obtained Contacting the IRS Drafting the PLR request Submitting the PLR request Obtaining the PLR Obtaining a supplemental PLR Questions and wrap-up 3

4. W HAT IS A PLR? A PLR is a tax ruling that a taxpayer can request from the IRS The IRS has provided the following description: A “letter ruling” is a written determination issued to a taxpayer by an Associate office in response to the taxpayer’s written inquiry, filed prior to the filing of returns or reports that are required by the tax laws, about its status for tax purposes or the tax effects of its acts or transactions. A letter ruling interprets the tax laws and applies them to the taxpayer’s specific set of facts. A letter ruling is issued when appropriate in the interest of sound tax administration. IRS also issues other types of written guidance such as determination letters, closing agreements and information letters 4 Source: Section 2.01 of Revenue Procedure 2015-1.

5. I S A PLR N ECESSARY ? Is the law unclear? Is a tax opinion insufficient based on, e.g., the potential tax liability? Is it market practice to obtain a PLR for the particular type of transaction? Is a PLR needed for desired result? IRS ruling needed for particular fact pattern Late S corporation election Inadvertent termination of S corporation status “9100” relief for late elections 5

6. I S A PLR N ECESSARY ? Current user fees are set forth in Rev Proc 2015-1 A PLR can be expensive - $28,300 after February 1, 2015 A reduced user fee applies to taxpayers with specified gross income levels and to specified types of PLRs Accounting/legal costs for the preparation Assembling required information Client resources In the case of an entity, is there an officer or other person who can help develop the necessary facts? Client attention to the PLR draft Necessary documentation Timing for the ruling and timing of the transaction 6

7. I S A PLR A VAILABLE ? Annual IRS Revenue Procedure for rulings Revenue Procedure 2015-1 is the IRS’s published guidance on the areas in which it will rule It also sets forth some general areas in which the IRS ordinarily will not rule Note: the IRS will not rule on a hypothetical transaction 7

8. I S A PLR A VAILABLE ? Annual IRS Revenue Procedure for “no-rule” areas Revenue Procedure 2015-3 is the IRS’s published guidance on the areas in which it will not rule Practice tip Practice tip : Always check the revenue procedure for changes in IRS ruling policy. In 2013, the IRS imposed “no- rule” areas under Section 355 in Rev. Proc. 2013-3. Press reports of the very significant change did not show up for several weeks after the revenue procedure was published. So, always check the new revenue procedure for the IRS’s current ruling policy Other guidance issued during the year The IRS may update the areas in which it will not rule See, e.g., Revenue Procedure 2013-32 (Section 355 rulings further restricted) 8

9. I S A PLR A VAILABLE ? It can be helpful to review recently issued PLRs Has the IRS recently released copies of PLRs involving the taxpayer’s issue? What types of representations were in the PLRs? Can the taxpayer make the same or similar representations? What types of rulings were in the PLR? Do the rulings given address the taxpayer’s specific issue? Were there specific items on which the IRS explicitly did not rule? Can give the practitioner additional insight into how the IRS has been ruling on particular issues 9

10. C ONTACTING THE IRS A recommended next step is to contact the IRS directly to determine whether the taxpayer’s issue is one on which the IRS would consider a PLR request Even if the issue is not specifically described in the no-rule Revenue Procedure, the IRS can decline to issue PLRs in the interest of sound tax administration This may include on account of resource constraints, or on other grounds warranted by the facts and circumstances of a particular case Early contact with the IRS, rather than simply submitting the PLR request, can avoid an undesired surprise if the IRS is not willing to rule on an issue, e.g., on policy grounds 10

11. C ONTACTING THE IRS Publicly available resources provide contact information for the IRS Rev Proc 2015-1 has contact numbers The Office of Chief Counsel Telephone directory lists IRS personnel and contact information by Code section Determine which office of the Associate Chief Counsel at the IRS has responsibility for the issue (e.g., Corporate or Passthroughs and Special Industries) Contact the IRS to discuss the issue This can be done without revealing the client’s name 11

12. C ONTACTING THE IRS IRS attorneys are typically available to discuss the issue Contacting the IRS provides the opportunity to learn more about the IRS’s informal, non-binding views on the subject issue One can also get the IRS’s reaction to any proposed structures and whether there are any aspects that they see as problematic It is also possible to get a sense of how long PLRs are taking to process, which may be relevant to the timing of the transaction 12

13. P RE - SUBMISSION C ONFERENCE In some cases, desired by IRS and taxpayer An in-person or telephonic meeting in which any issues that may have been flagged during the initial contacts with the IRS can be discussed in greater depth The taxpayer is identified in connection with the pre- submission conference IRS Form 2848 is needed Taxpayer’s representative may prepare a memorandum summarizing the proposed transaction and outlining why the IRS should adopt a particular position 13

14. P RE - SUBMISSION C ONFERENCE Offers the IRS and the taxpayer the opportunity to, among other things: Narrow the issues that will be addressed in the PLR, to determine whether aspects of the transaction structure should be altered, and Determine whether particular tax analysis should be included in the PLR request 14

15. D RAFTING THE PLR R EQUEST Once it has been determined that the IRS will entertain a PLR request and any pre-submission conference has taken place, the taxpayer’s representative can prepare to draft the PLR request itself. Revenue Procedure 2015-1 not only describes the situations in which the IRS ordinarily will rule, it also provides information on how the PLR request should be drafted. 15

16. D RAFTING THE PLR R EQUEST General format might look like the following: See Appendix B of Revenue Procedure 2015-1. It is possible to locate PLR request samples online. 16 I.Introduction II.Statement of Facts III.Required Representations IV.Ruling(s) Requested V.Statement of Law and Analysis VI.Procedural Matters Exhibits (including documents such as contracts relevant to the transaction)

17. D RAFTING THE PLR R EQUEST It is typical to identify in a cover letter (or the PLR request itself) IRS personnel with whom the tax practitioner has had discussions in connection with the ruling. It is often helpful to have these IRS attorneys process the PLR request because of their familiarity with the background on the issue. However, Revenue Procedure 2015-1 notes that the request itself may not be assigned to the IRS attorneys who participated in a pre-submission conference. This may be on account of workload issues or for other reasons. 17

18. T HINGS TO C HECK  The PLR request itself is complete, including all of the procedural statements. If expedited treatment is desired, comply with the requirements for requesting such treatment.  Exhibits are included where required or relevant.  A penalties of perjury statement signed by the taxpayer is included.  A deletions statement is included. A deletions copy may be prepared indicated all deletions desired, although IRS has indicated that including such a copy is not necessary.  Include the relevant user fee.  Complete the required checklist from Rev Proc 2015-1, which is included with the submission.

19. S UBMITTING THE PLR R EQUEST The PLR request may be mailed to the main submission address. On occasion, there have been IRS deadlines due to ruling moratoriums and it has been advisable, out of an abundance of caution, to have someone take the PLR request directly to the IRS address and get a stamped acknowledgement of timely receipt. 19

20. O BTAINING THE R ULING IRS will formally respond within several weeks A docket attorney will be the primary contact with the taxpayer’s representative This docket attorney will review the PLR request and contact the taxpayer’s representative to discuss the request. The discussions may include requests for additional information to complete the request, expected timing for review of the PLR request and issuance of the ruling, availability of expedited treatment, and whether a “two- part ruling” will be requested. Practice tip Practice tip : A two-part ruling, where the taxpayer’s representative completes the initial draft of the PLR, can help speed up the issuance of the ruling by freeing the IRS docket attorney from this task. 20

21. O BTAINING THE R ULING IRS may request additional information or additional tax analysis from the taxpayer’s representative Updated information and tax analysis can be discussed with the IRS, but should be submitted in writing Be mindful of applicable 21-day response deadlines in the Revenue Procedure Practice tip : Practice tip : An extension may be granted by the IRS, so if it is expected that the deadline may be difficult to meet, confirm an extension with the IRS in writing In some cases, the taxpayer may decide to withdraw the PLR request (with a forfeiture of the user fee) or the IRS may decline to rule (in which case the user fee may be refundable). 21

22. O BTAINING THE R ULING The taxpayer’s representative may have phone calls with the IRS to discuss relevant issues and may submit additional information to the IRS. For example, the transaction may have aspects that it is not clear that the IRS will rule on. If the determination is subsequently made to omit these from the transaction structure, the IRS should be contacted. Practice tip Practice tip : Confirm changes in facts discussed with the IRS in writing with the IRS to “build the file” on what has been discussed with the IRS. This can be very helpful down the road if it’s necessary to revisit the rulings. 22

23. O BTAINING THE R ULING If the IRS may not rule on the issue, a taxpayer has the opportunity for a conference of right with the IRS (and possibly additional conferences at the IRS’s discretion). Once the taxpayer’s representative and the IRS have worked through submissions of additional information and tax analysis, and discussed and resolved any tax issues presented in the PLR request, the IRS (or the taxpayer’s representative in a two-part request) will prepare the initial draft of the ruling. 23

24. O BTAINING THE R ULING IRS will generally fax the taxpayer’s representative the draft ruling This draft ruling will set forth: Factual information regarding the subject transaction Legends are used for taxpayer information that is redacted: Date 1 = January 1, 2015 Taxpayer = Acme Manufacturing State = Michigan The description of the facts will be a condensed version of the facts submitted in the PLR request 24

25. O BTAINING THE R ULING The draft ruling will also contain: Representations made by the taxpayer that are relevant to the rulings If there are issues that the IRS has under study, then additional representations may be made with respect to those issues For example, the IRS has been studying certain issues under Section 355 and may include representations related to these issues 25

26. O BTAINING THE R ULING The draft ruling will also contain: Standard (and, perhaps, other) limitations in the PLR Standard limitations include that only the taxpayer can rely on the PLR and that no rulings are given on tax matters other than those ruled on in the PLR In some cases, there are limitations relevant to the particular type of transaction For example, the IRS does not rule on certain aspects of Section 355 26

27. O BTAINING THE R ULING Draft ruling will not contain the rulings to be given The PLR request (and, possibly, a supplemental letter) will set forth the actual rulings being requested The rulings that the IRS intends to give and their wording should be discussed with the IRS docket attorney in connection with the review of the draft ruling 27

28. O BTAINING THE R ULING Taxpayer will have the opportunity to comment on the draft As with any draft, the taxpayer’s representative may have changes to request These can be as simple as requesting changes to the legended information (e.g., to correct a date or a number of shares) or more complex (e.g., working out modifications to representations to make sure that such representations are accurate) Remember: The taxpayer can rely on the PLR and will file it with the tax return for the relevant year. But! On audit, the IRS field agent can review the PLR to ensure that the facts and representations therein are accurate 28

29. O BTAINING THE R ULING Once the IRS and the taxpayer’s representative have worked out all revisions, the IRS will be in a position to issue the ruling A draft ruling, containing the actual rulings to be given, may be received once all comments are worked out with the IRS An official ruling subsequently will be mailed to the taxpayer 29

30. O BTAINING A S UPPLEMENTAL R ULING In some cases, there are factual changes that occur after the IRS has issued the initial PLR, but before (or after) the transaction occurs The taxpayer can request a “supplemental” PLR in order to reconfirm the rulings in the initial PLR in spite of the factual changes or to obtain new rulings on the changed facts 30

31. O BTAINING A S UPPLEMENTAL R ULING Procedures for obtaining a supplemental ruling are generally the same as for obtaining the initial PLR. If the taxpayer is considering applying for a supplemental PLR, it is helpful to discuss the issues with the IRS first Practice tip: Practice tip: Discussing the proposed supplemental ruling with the IRS attorneys who were involved in the initial ruling is helpful. 31