May 17, 2024

Spin-Offs: Updated IRS Guidance on Private Letter Rulings

A recent memo from Gibson Dunn addresses updated guidelines for obtaining private letter rulings from the IRS addressing spin-offs and related debt exchanges.  Here’s the intro:

The Internal Revenue Service (the “IRS”) and the Treasury Department (“Treasury”) have released Rev. Proc. 2024-24 (the “Rev. Proc.”) providing updated guidelines for requesting private letter rulings regarding transactions intended to qualify under section 355, with significant focus on “Divisive Reorganizations” and related debt exchanges. The Rev. Proc. modifies Rev. Proc. 2017-52 and supersedes Rev. Proc. 2018-53.

The IRS and Treasury also released Notice 2024-38 (the “Notice”) requesting public comment on select issues addressed by the Rev. Proc. and outlining the IRS and Treasury’s current perspectives and concerns related to those issues.

The Rev. Proc. was highly anticipated and is of critical importance for taxpayers considering a spin-off, particularly for spin-offs that involve debt exchanges. It applies to all ruling requests postmarked or, if not mailed, received by the IRS after May 31, 2024.

The rest of the memo provides details on the new guidelines, but I’m not going to excerpt any of it here because it is written in tax lawyers’ native tongue, and my fluency in that language is very limited.

John Jenkins