On September 14, 2015, the Internal Revenue Service (“IRS”) issued Notice 2015-59 (the “Notice”) and Revenue Procedure 2015-43 (the “Rev Proc”; together with the Notice, the “Spin-Off Guidance”). Under the Spin-Off Guidance, the IRS has significantly limited the circumstances under which it will issue a private letter ruling with respect to spin-off or split-off transactions that are considered “cash-rich” or that involve real estate investment trusts (“REITs”) or regulated investment companies (“RICs”).

Although the Spin-Off Guidance does not change the law that currently applies to spin-off transactions, it will nevertheless be a significant consideration for any company contemplating such a transaction. The Spin-Off Guidance not only eliminates the certainty of an IRS ruling for transactions within its ambit, but also indicates a potential heightened risk of an IRS challenge under current law, as well as the prospect of future changes to the applicable rules.