Tax insight

Proposed regulations and ruling guidance regarding spin-offs and reorganizations withdrawn

Insight
5 minute read
October 08, 2025

What happened?

On September 29, 2025, Treasury and the IRS withdrew proposed regulations (the Proposed Regulations) that had been released in January 2025. These Proposed Regulations would have (i) introduced significant changes and new rules regarding corporate separations under Section 355 and related provisions (spin-off transactions) and reorganizations, and (ii) substantially modified the reporting requirements applicable to such transactions.

On the same day, Treasury and the IRS issued Rev. Proc. 2025-30, which reinstates the prior ruling guidance under Rev. Procs. 2017-52 and 2018-53 for taxpayers seeking a private letter ruling (PLR) related to spin-off transactions. Rev. Proc. 2025-30 also supersedes Rev. Proc. 2024-24 and revokes Notice 2024-38 (which had requested feedback on the provisions set forth in Rev. Proc. 2024-24). Rev. Proc. 2025-30 applies to all PLR requests submitted after September 25, 2025.

Why is it relevant?

The withdrawal of the Proposed Regulations addresses concerns raised by practitioners about the burden and complexity of the proposed rules, as well as potential inconsistencies with existing law. Although the Proposed Regulations were not binding on taxpayers while in proposed form, the IRS had been applying them in the context of PLR requests, which significantly increased the complexity and uncertainty of obtaining a PLR.

Additionally, Rev. Proc. 2024-24 had imposed substantial new requirements for information, representations, supporting documentation, and analysis that taxpayers needed to provide to obtain a PLR on a spin-off transaction. Rev. Proc. 2025-30, which supersedes Rev. Proc. 2024-24, reinstates the guidance and procedures for requesting a PLR for spin-off transactions that were in effect under Rev. Proc. 2017-52 (general Section 355 procedures) and Rev. Proc. 2018-53 (debt allocation in divisive reorganizations).

While the return to the prior guidance is a welcome development for taxpayers and practitioners seeking a PLR on spin-off transactions, questions remain as to whether the IRS will fully embrace all of its prior ruling positions that are not expressly covered by Rev. Proc. 2017-52 and Rev. Proc. 2018-53.

Actions to consider

Taxpayers should consult with their advisors regarding the implications of the change in ruling procedures on upcoming transactions and PLR requests.