Internal Revenue Service Announces Changes to Ruling Policy for Spinoffs
Earlier this week, the Internal Revenue Service (the “IRS”) and Treasury Department announced the IRS will generally stop issuing private rulings blessing tax-free treatment for certain spinoffs, including those involving large amounts of investment assets or small active businesses and those creating a real estate investment trust. Although the announcement does not change the substantive tax rules, and such transactions may still proceed on the basis of an opinion from a company’s legal advisers, the shift in ruling policy may lead some companies to reevaluate their spinoff plans (including accelerating the completion of a spinoff before further guidance is issued).