The Treasury Department and the IRS on Monday released proposed regulations for corporate separations and reorganizations, as well as reporting requirements for multiyear corporate separations.
The proposed regulations offer authoritative guidance on the provisions of the tax code that address corporate mergers and acquisitions transactions, the IRS said. In connection with the proposed guidance, the IRS posted to its website a draft version of new Form 7216, Multi-Year Transaction Reporting, which the agency said will give it the necessary information with respect to corporate separations.
Treasury and the IRS said Jan. 13 that the guidance was proposed to improve the IRS’s ability to administer the rules in the tax law governing the distribution of stock and securities of a controlled corporation, as well as to ensure that corporate separations satisfy the requirements to qualify for tax-free treatment.
The proposed reporting regulations require certain filers to attach the new Form 7216 to their federal income tax return to provide data to the IRS regarding their multiyear corporation separation. Generally, filers would include the distributing corporation, the controlled corporation, and certain significant shareholders or security holders of the distributing corporation, the IRS said.
The increased reporting requirements under the proposed reporting guidance would enable the Treasury Department and the IRS to provide increased transactional flexibility through the proposed regulations. Examples of this increased transactional flexibility, according to the IRS, include addressing retentions of controlled corporation stock, monetization transactions, and several other significant issues that arise from multiyear transactions.
The IRS said it intends to follow these proposed regulations when it issues private letter rulings about certain corporate separations. The agency plans to issue an update to Revenue Procedure 2024-24 to incorporate these proposed regulations into the procedures for requesting such private letter rulings.
Treasury and the IRS are seeking feedback on both the proposed regulations and the new form. The public should use the Federal e-Rulemaking portal to submit comments on both the proposed substantive regulations (users should indicate “IRS” and “REG-112261-24”) and the proposed reporting regulations and related form (users should indicate “IRS” and “REG-116085-23”). Comments can also be mailed to: CC:PA:01:PR, Room 5203, Internal Revenue Service, P.O. Box 7604, Ben Franklin Station, Washington, DC 20044. Comments are due by March 17, 2025. Interested parties can also use the portal and the address above to provide comments regarding the draft of Form 7216.
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