On September 29, 2025, the IRS and Treasury Department withdrew proposed regulations (REG-112261-24) under IRC Sections 355, 357, 361 and 368 on the nonrecognition of gain or loss on corporate separations, incorporations and reorganizations. At the same time, they withdrew the accompanying proposed regulations under IRC Section 355 that would have required multi-year reporting for corporate separations and related transactions.

On the same day, the IRS also issued Revenue Procedure 2025-30, superseding the guidance in Revenue Procedure 2024-24 for requesting a private letter ruling (PLR) for IRC Section 355 transactions (IRC Section 355 PLR Requests) and revoking Notice 2024-38, which described Treasury and the IRS's concerns about the matters addressed in Revenue Procedure 2024-24 (see Tax Alert 2024-0949).

Withdrawal of proposed regulations

The proposed regulations (REG-112261-24) were published in January 2025 and primarily related to IRC Section 355 distributions and IRC Section 368(a)(1)(D) reorganizations to which IRC Section 355 applies (collectively, IRC Section 355 Transactions). According to the Preamble, they were intended to provide substantive guidance on all IRC Section 355 Transactions, not just those for which PLRs are sought, as well as acquisitive reorganizations and IRC Section 351 exchanges (see Tax Alert 2025-0408). Certain aspects of the proposed regulations would have tightened prior ruling standards or substantive law, potentially affecting companies' ability to efficiently undertake IRC Section 355 Transactions. The proposed rules would have also imposed intricate and significant documentation and reporting requirements that taxpayers would need to navigate closely to ensure nonrecognition treatment for all reorganizations.

The proposed regulations on reporting (REG-116085-23) would have required taxpayers to file a new Form 7216, Multi-Year Transaction Reporting Related to Section 355 Transactions, with the IRS for up to seven years after the first distribution occurs as part of an IRC Section 355 Transaction. The questions on Form 7216 would have been extensive and included areas outside the proposed regulations' scope.

According to the notice of withdrawal, Treasury and the IRS received several comments in response to both sets of proposed regulations that "generally were critical of the proposed guidance" and withdrew the proposed regulations in response.

Revenue Procedure with respect to IRC Section 355 PLR Requests

Revenue Procedure 2024-24, which was issued in May 2024, significantly changed the procedures for IRC Section 355 PLR Requests, modifying Revenue Procedure 2017-52 and superseding Revenue Procedure 2018-53 in its entirety. Notice 2024-38, a companion to Revenue Procedure 2024-24, indicated that Treasury and the IRS were continuing to study several matters that were related to IRC Section 355 Transactions and addressed in Revenue Procedure 2024-24.

Revenue Procedure 2025-30 reinstates the guidance originally in Revenue Procedures 2018-53 and 2017-52, and revokes Notice 2024-38.

Revenue Procedure 2025-30 applies to all IRC Section 355 PLR Requests postmarked or received by the IRS after September 29, 2025. If an IRC Section 355 PLR request is pending, the taxpayer may supplement its submission with additional material.

Implications

The prior PLR standards for IRC Section 355 Transactions reinstated by Revenue Procedure 2025-30 generally offer more transactional flexibility for taxpayers considering IRC Section 355 PLR Requests, as compared to the standards in effect under the withdrawn regulatory and administrative guidance. On its face, the revocation of the proposed regulations, Revenue Procedure 2024-24 and Notice 2024-38 suggests a return to the historic IRS ruling policy that was upended by the withdrawn guidance. However, Revenue Procedure 2025-30 does not explicitly address certain issues that were addressed in the withdrawn guidance or incorporate prior advancements in IRS ruling practice made after the issuance of Revenue Procedure 2018-53. Thus, Revenue Procedure 2025-30 does not clearly indicate the IRS's current ruling policy on these issues.

From a procedural standpoint, the reinstatement of prior PLR procedures affecting IRC Section 355 PLR Requests should streamline and simplify the process of obtaining a PLR in this situation. Specifically, Revenue Procedure 2025-30 reestablishes flexibility for taxpayers to propose modifications to standard representations and moderates the level of substantiation and analysis required for an IRC Section 355 PLR request, which was significantly increased by Revenue Procedure 2024-24.