The Internal Revenue Service defines a private letter ruling, or PLR, as a statement issued to a taxpayer that interprets and applies tax laws to the taxpayer's specific set of facts. A PLR is issued to establish with certainty the federal tax consequences of the applicant’s tax question, and the findings are binding on the IRS. The resolution of the tax question in the requested PLR may not be relied on by other taxpayers. The PLRs are generally made public after the taxpayer’s identifying information has been removed from the document.

PLRs are important to planned giving to understand innovative gift planning opportunities. Although the PLRs are not binding on other taxpayers, donors and their advisors have a better understanding of how the IRS would rule when presented with a case with the same facts. While other donors may not rely on private letter rulings, certain unique planned giving options are now more common based on the PLR outcomes, such as flexible and step gift annuities, reinsured charitable gift annuities, commuted payment gift annuities, and more.

Solicitations for testamentary gifts from IRAs are often an easy ask. The donor can name a charity (or charities) to benefit from all or just a fraction of their IRA account without revising their will (and paying their attorney’s fees). Because of the ease of the ask and the prevalence of IRA holdings by donors, fundraisers should be aware when changes to IRA regulations might sway a donor towards an IRA gift.

Earlier this year, the IRS released proposed regulations that take a new position affecting required minimum distributions (RMDs) for inherited IRAs and the considerable financial penalty (up to 50%!) for failure to take an RMD. But don’t be misled by the word “proposed,” unlike proposed Federal regulations, proposed IRS regulations immediately go into effect. The upside of the IRS’s position is that it also enhances the attractiveness of testamentary charitable gift annuities (CGAs) and charitable remainder trusts (CRTs) funded by IRAs.