On September 21, the IRS released Rev. Proc. 2017-52 which introduced an 18-month pilot program significantly expanding the scope of letter rulings available from the IRS related to the tax consequences of a distribution under Section 355. Previously, the IRS only would issue rulings on 'significant issues' under Section 355. However, after reviewing its ruling process, the IRS decided to expand its ruling program for a trial period and issue private letter rulings covering most of the tax consequences associated with a Section 355 transaction.
Rev. Proc. 2017-52 represents a significant opportunity for taxpayers because it reopens the door to letter rulings addressing the tax consequences of distributions under Section 355 (and Section 368(a)(1)(D)) and provides the specific requirements for requesting a Transactional Ruling. The revenue procedure simplifies the letter ruling process, provides more clarity to taxpayers seeking a Transactional Ruling, and hopefully shortens the review process for the IRS.
Further, while Rev. Proc. 2017-52 is only a temporary pilot program, the revenue procedure supersedes Rev. Proc. 96-30. Thus, moving forward, taxpayers should look to Rev. Proc. 2017-52 for guidance as to the information and representations required for a significant issue ruling as well as a Transactional Ruling. Finally, as noted above, the pilot program only opens the door to Transactional Rulings under Section 355 and divisive reorganizations under Section 368(a)(1)(D), and does not permit Transactional Rulings on other transactions.
Partner, M&A Tax, PwC US