Key Takeaways:
- IRS withdrew its proposed rules on corporate separations and Section 355 reporting requirements.
- Revenue Procedure 2025-30 has reinstated the prior private letter ruling framework.
- This reinstated approach aims to help simplify planning for any spinoff transactions.
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On September 29, the IRS issued new guidance on corporate separations, incorporations, and reorganizations, reversing its course on changes proposed under the prior administration.
The agency formally withdrew two sets of proposed regulations published on January 16, 2025. The first addressed nonrecognition of gain or loss in corporate separations, incorporations, and reorganizations. The second would have updated reporting requirements for Section 355 transactions. The IRS noted that public comments on both proposals were “generally critical.”
In addition, the IRS released Revenue Procedure 2025-30, which supersedes Revenue Procedure 2024-24 and revokes Notice 2024-38. The new procedure restores the framework for requesting private letter rulings on divisive reorganizations under Section 368(a)(1)(D) and stock distributions under Section 355. In effect, the IRS has reinstated the approach outlined in Revenue Procedures 2018-53 and 2017-52.
The withdrawal of the proposed regulations removes layers of complexity that would have made Section 355 transactions more burdensome. With Revenue Procedure 2025-30, the IRS has effectively reset its spinoff guidance to the position it held at the start of 2024.
How MGO Can Help You Navigate Complex IRS Transaction Rules
To navigate corporate reorganizations and spinoffs, you should be prepared to execute careful planning with a clear understanding of IRS guidance. At MGO, our tax team can assist your business in structuring transactions efficiently and identifying potential risks early in the planning process. If your organization is currently considering a separation or reorganization, our team can help you navigate current IRS procedures and support your organization in meeting compliance requirements with confidence and clarity. Contact us to learn more.