(Bloomberg BNA) Broad guidance governing tax-free spinoffs is “just not gonna happen” anytime soon, and companies contemplating them will have to keep seeking opinions on a case by case basis, a senior Internal Revenue Service official said.
“Every guidance project is a thing, it’s a significant project,” Robert Wellen, an associate chief counsel of the U.S. tax agency, said Saturday at an American Bar Association conference in Washington. “Time has to be spent not only on the merits, but also on all the administrative aspects surrounding the issues of guidance.”
Three years ago, the IRS stopped ruling on whole transactions, and began issuing them only on significant underlying issues to save time and money. Uncertainty about what the IRS is thinking has slowed down or even ended some deals, including Yahoo Inc.’s planned spinoff of its stake in Chinese e-commerce giant Alibaba Group Holding Inc., which was scrapped in February over concerns it might lead to a huge tax bill.
Since September, the IRS has been working on guidance to companies related to the business purpose of a spinoff and whether the transaction is being used as a device to distribute earnings to shareholders. These regulations may be issued in the coming months.
Wellen said he hopes this guidance will help to reduce the need for companies to request IRS input on proposed deals.
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