Guidance on spin-offs and other M&A transactions

In brief

What happened? 

On January 13, 2025, the Treasury Department and the IRS released proposed regulations that would introduce significant changes and new rules regarding corporate separations under Section 355 and related provisions (spin-off transactions) and other M&A transactions, affecting and clarifying their eligibility for tax-free treatment (the Proposed Substantive Regulations). 

In connection with issuance of the Proposed Substantive Regulations, the Treasury Department and the IRS also published proposed regulations that would modify the reporting requirements applicable to spin-off transactions (the Proposed Reporting Regulations). Please see the PwC Insight covering the Proposed Reporting Regulations. 

Why is it relevant? 

The Proposed Substantive Regulations would significantly alter the rules applicable to spin-off transactions, including areas for which there is currently no official regulatory guidance. Although taxpayers would not be subject to the rules in the Proposed Substantive Regulations unless and until they are finalized, the IRS has announced that it will follow these rules for purposes of administering its private letter ruling (PLR) program. 

Action to consider

Taxpayers should consult with their advisors regarding the implications of this new guidance and may want to provide comments to the Treasury Department and IRS on areas of particular concern. Comments on the Proposed Substantive Regulations and the Proposed Reporting Regulations are each due by March 17, 2025.