An interpretation of statute or administrative rules and their application to a particular set of facts or circumstances. The private letter ruling addresses unusual or complex questions pertaining to a particular taxpayer and his or her tax situation. The purpose of the letter ruling is to advise the taxpayer regarding the tax treatment he or she can expect from the IRS in the circumstances specified by the ruling. Also known as "letter ruling" or "LTR".

In other words, if a taxpayer has a tax issue with the IRS, that person, before completing a certain action (i.e. paying the required taxes), can request the IRS to rule on that tax issue. The private letter ruling is the letter the IRS sends back to the taxpayer, which explains the rulings and the rational for the decision. The PLR is specific and applicable to that tax situation and that taxpayer only. Moreover, private letter rulings of other taxpayers cannot be used as precedence by a person requesting a ruling regarding his or her own issue, and in no way binds the IRS to take a similar position when dealing with different taxpayers.