Letter rulings are written decisions issued by the Internal Revenue Service in connection with a taxpayer’s request for clarity on a particular tax issue. Because letter rulings are private, they bind only the taxpayer who makes the request. In other words, other taxpayers cannot rely on letter rulings for their own situation. The IRS is, however, able to redact the personal information from these rulings and classifying them as revenue rulings, which make the decision binding on all taxpayers and the IRS.

A recent federal case in Kentucky dealing with letter rulings, specifically whether redacted letter rulings must be released as part of an Open Records Act request, was decided in favor of greater transparency with respect to letter rulings. At issue in the case was whether the requirements of confidentiality statues made redactions of letter rulings so extensive as to be unworkable, as well as whether the benefit of doing so justified the burden to the Department of Revenue.

Ultimately, the court determined that there is a definite benefit to taxpayers and the public in releasing redacted letter rulings, and that the benefit outweighs any burden as well as any privacy concerns individual taxpayers may have. The ruling does not require the Kentucky Department of Revenue to publish all letter rulings, but requires them to be released through an Open Records Act request.

The decision is a good one for Kentucky businesses, because the ability to obtain letter rulings allows for a more transparent tax system. For businesses, this means the ability to better understand how to approach their own tax situation, as well as understand when they may be experiencing unfair treatment with respect to taxation.