In keeping with its deregulatory agenda, the Department of Treasury and the Internal Revenue Service (IRS) announced on September 29, 2025, the withdrawal of proposed regulations issued in January that addressed corporate nonrecognition transactions and related reporting rules (see prior coverage). The January proposed regulations — culminating a process that began with Rev. Proc. 2024-24 and Notice 2024-38 — would have overhauled and updated rules under sections 355, 357, 361, and 368 by tightening standards on retained stock, debt exchanges, and boot purges, while adding multi-year reporting and plan documentation requirements. The proposed regulations were also aimed to alleviate a perceived "mandatory" requirement for a private letter ruling (PLR) for section 355 transactions and refocus future PLR requests on targeted issues. The January proposed regulations, however, extended beyond section 355, affecting a broader range of corporate transactions. The government cited "critical" comments as the impetus for the withdrawal. The proposed regulations would have been effective upon finalization, so the proposed rules will not take effect.

Also issued on the same date, Rev. Proc. 2025-30 consolidates the section 355 ruling framework by revoking Notice 2024-38 and superseding Rev. Proc. 2024-24 (see prior coverage), which provided guidance for taxpayers seeking PLRs on section 355 transactions. Rev. Proc. 2025-30 reintroduces guidance from Rev. Proc. 2018-53 and several deleted representations from Rev. Proc. 2017-52, eliminating the need to cross-reference multiple sources. Rev. Proc. 2024-24 deleted the representations while the government studied issues related to retained stock, delayed distributions, debt exchanges, and solvency in connection with Notice 2024-38's request for comments. Rev. Proc. 2025-30 now reintroduces those rules into the ruling framework. Rev. Proc. 2025-30 is effective for PLR requests received after September 29, and taxpayers with pending requests submitted before that date may submit supplemental materials to align with the updated framework. 

For more information, please contact:

Layla J. Asali, lasali@milchev.com, 202-626-5866

David W. Zimmerman, dzimmerman@milchev.com, 202-626-5876

Chadwick Rowland, crowland@milchev.com, 202-626-1589

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