Legal Definitions - General Counsel's Memorandum

A General Counsel's Memorandum is an internal legal document created by the Office of Chief Counsel for the Internal Revenue Service (IRS). It serves as a detailed legal analysis and explanation of tax law issues, primarily for internal use within the IRS.

These memorandums typically fulfill two main functions:

• They provide a comprehensive legal discussion and analysis of a specific tax law question, exploring various legal arguments and their potential implications.
• They offer a detailed explanation of the legal reasoning and official position of the IRS regarding stances taken in other formal guidance documents, such as Revenue Rulings or Technical Advice Memorandums.

Essentially, a General Counsel's Memorandum provides the legal foundation and internal justification for how the IRS interprets and applies tax law.

Examples:

• Imagine a situation where a new type of financial investment, like a novel form of cryptocurrency, gains popularity. Taxpayers and tax professionals are unsure how income from this investment should be classified for tax purposes – is it property, a security, or something else entirely? The Office of Chief Counsel might issue a General Counsel's Memorandum to thoroughly analyze existing tax statutes, relevant court decisions, and the economic characteristics of the new investment. This memorandum would then outline the IRS's reasoned legal position on how to classify and tax this new financial product.

  This example illustrates how a General Counsel's Memorandum provides a detailed legal discussion on the merits of a complex, evolving tax law issue, helping the IRS formulate its official stance.

• Suppose the IRS issues a Revenue Ruling stating that certain expenses related to home-based businesses are deductible only if specific criteria are met. While the ruling itself provides the outcome, it might not fully detail the intricate legal reasoning behind it. To provide a deeper understanding of the IRS's position, a General Counsel's Memorandum might be released. This memorandum would explain the statutory interpretations, legislative history, and judicial precedents that led the IRS to adopt those particular conditions for home office expense deductions.

  Here, the General Counsel's Memorandum clarifies and elaborates on the legal basis for a publicly issued IRS position, making the underlying rationale more transparent.

• A large multinational corporation requests a Technical Advice Memorandum (TAM) from the IRS regarding the tax treatment of a highly complex cross-border transaction involving intellectual property. After the IRS issues its specific advice in the TAM, the corporation's legal team might seek to understand the full breadth of the IRS's legal analysis. A General Counsel's Memorandum could have been prepared internally, detailing the comprehensive legal research, policy considerations, and application of international tax treaties that informed the specific guidance provided in that TAM.

  This demonstrates how a General Counsel's Memorandum provides the extensive legal groundwork and justification for specific, often intricate, tax determinations made by the IRS in response to taxpayer inquiries.