IRS EXPANDS ITS NO-RULE LIST.

Rev. Proc. 90-56

SECTION 1. BACKGROUND

Section 3 of Rev. Proc. 90-3, 1990-1 C.B. 402, lists areas of the Internal Revenue Code under the jurisdiction of the Associate Chief Counsel (Technical) in which the Internal Revenue Service will not issue advance rulings or determination letters. To enable the Service to use its resources more efficiently, this revenue procedure adds several no-rule areas to the list, including most holding company formations, acquisitive mergers, and reorganizations under section 368(a)(1)(F).

SEC. 2. PROCEDURE

Rev. Proc. 90-3 is amplified by adding the following to section 3.01:

Section 351. -- Transfer to Corporation Controlled By Transferor. -- Whether section 351 of the Code applies to an exchange of stock for stock in the formation of a holding company, and whether the taxpayer is subject to the consequences of qualification under that section (such as nonrecognition and basis consequences) that are adequately addressed by a statute, regulation, decision of the Supreme Court, tax treaty, revenue ruling, revenue procedure, notice, or other authority published in the Internal Revenue Bulletin.

For purposes of this provision, if such an exchange qualifies under both section 351 and another corporate restructuring provision and the other provision is not covered by this revenue procedure, the Service will treat any request for a qualification ruling under the other provision as a request for a qualification ruling under section 351. A taxpayer or the taxpayer's representative (as the Service deems appropriate) seeking a qualification ruling for such an exchange under any such other provision must accordingly state that to the best of his/her knowledge and belief the exchange does not qualify under section 351.

The Service will not rule on the qualification of an exchange of stock under section 351, even if it is an integral part of a larger transaction that involves other issues upon which the Service will rule and it is impossible to determine the tax consequences of the larger transaction without making a determination with regard to the exchange of stock. However, in such event, the Service will rule on the tax consequences of the larger transaction, provided the taxpayer or the taxpayer's representative (as the Service deems appropriate) represents that to the best of his/her knowledge and belief the exchange will (or will not) qualify under section 351. If the Service issues a ruling on the larger transaction the ruling will state that no opinion is expressed as to whether or not the exchange qualifies under section 351.

Section 368(a)(1)(A). -- Definitions Relating to Corporate Reorganizations. -- Whether a transaction constitutes a corporate reorganization within the meaning of section 368(a)(1)(A) of the Code, including a transaction that qualifies under section 368(a)(1)(A) by reason of section 368(a)(2)(D) or section 368(a)(2)(E), and whether the taxpayer is subject to the consequences of qualification under that section (such as nonrecognition and basis consequences) that are adequately addressed by a statute, regulation, decision of the Supreme Court, tax treaty, revenue ruling, revenue procedure, notice, or other authority published in the Internal Revenue Bulletin.

For purposes of this provision, if a transaction qualifies under both section 368(a)(1)(A) and another corporate restructuring provision other than section 368(a)(1)(G), and the other provision is not covered by this revenue procedure, the Service will treat any request for a qualification ruling under the other provision as a request for a qualification ruling under section 368(a)(1)(A). A taxpayer or the taxpayer's representative (as the Service deems appropriate) seeking a qualification ruling under any such other provision must accordingly state that to the best of his/her knowledge and belief the transaction does not qualify under section 368(a)(1)(A). The Service will continue to rule on transactions that qualify under section 368(a)(1)(G), even if they also qualify under section 368(a)(1)(A).

The Service will not rule on the qualification of a reorganization under section 368(a)(1)(A), even if it is an integral part of a larger transaction that involves other issues upon which the Service will rule and it is impossible to determine the tax consequences of the larger transaction without determining the tax consequences of the reorganization. However, in such event, the Service will rule on the tax consequences of the larger transaction, provided the taxpayer or the taxpayer's representative (as the Service deems appropriate) represents that to the best of his/her knowledge and belief the reorganization will (or will not) qualify under section 368(a)(1)(A). If the Service issues a ruling on the larger transaction the ruling will state that no opinion is expressed as to whether or not the reorganization qualifies under section 368(a)(1)(A). For example, the Service will not rule on whether a transaction constitutes a corporate reorganization within the meaning of section 368(a)(1)(A), even if the larger transaction also involves the issue of whether a prior distribution of stock in a subsidiary containing assets unwanted by the acquiring corporation qualifies under section 355. See Rev. Rul. 78-251, 1978-1 C.B. 89. However, in such event, if the taxpayer or the taxpayer's representative (as the Service deems appropriate) represents that the merger qualifies under section 368(a)(1)(A), the Service will rule as to whether the prior stock distribution qualifies under section 355. Such ruling will state that no opinion is expressed as to whether or not the reorganization qualifies under section 368(a)(1)(A).

Additionally, the Service will have the discretion to rule on significant subissues that must be resolved to determine whether the transaction qualifies under section 368(a)(1)(A) (including transactions qualifying by reason of section 368(a)(2)(D) or section 368(a)(2)(E)). However, the Service will only rule on such subissues if in the view of the Service they are significant and not clearly and adequately addressed by a statute, regulation, decision of the Supreme Court, tax treaty, revenue ruling, revenue procedure, notice, or other authority published in the Internal Revenue Bulletin. To obtain a ruling on such a subissue, the taxpayer must explain the significance of the subissue, set forth the authorities most closely related to the subissue, and explain why the subissue is not resolved by these authorities. The taxpayer or the taxpayer's representative (as the Service deems appropriate) will also be required to state that to the best of his/her knowledge and belief the transaction will (or will not) qualify under section 368(a)(1)(A) if the Service rules as the taxpayer proposes on the subissue. Taxpayers may seek a presubmission conference to determine whether a subissue ruling can be obtained under this section. See sections 6.08 and 16.01, Rev. Proc. 90-1, 1990-1 C.B. 356, 373, 380. If the Service issues a ruling on a subissue the ruling will state that no opinion is expressed as to whether or not the transaction in question qualifies under section 368(a)(1)(A).

Section 368(a)(1)(B). -- Definitions Relating to Corporate Reorganizations. -- Whether the acquisition of stock in the formation of a holding company constitutes a corporate reorganization within the meaning of section 368(a)(1)(B) of the Code, and whether the taxpayer is subject to the consequences of qualification under that section (such as nonrecognition and basis consequences) that are adequately addressed by a statute, regulation, decision of the Supreme Court, tax treaty, revenue ruling, revenue procedure, notice, or other authority published in the Internal Revenue Bulletin.

For purposes of this provision, if such an acquisition of stock qualifies under both section 368(a)(1)(B) and another corporate restructuring provision, and the other provision is not covered by this revenue procedure, the Service will treat any request for a qualification ruling under the other provision as a request for a qualification ruling under section 368(a)(1)(B). A taxpayer or the taxpayer's representative (as the Service deems appropriate) seeking a qualification ruling for such an acquisition under any such other provision must accordingly state that to the best of his/her knowledge and belief the acquisition does not qualify under section 368(a)(1)(B).

The Service will not rule on the qualification of an acquisition of stock under section 368(a)(1)(B), even if it is an integral part of a larger transaction that involves other issues upon which the Service will rule and it is impossible to determine the tax consequences of the larger transaction without determining the tax consequences of the acquisition. However, in such event, the Service will rule on the tax consequences of the larger transaction, provided the taxpayer or the taxpayer's representative (as the Service deems appropriate) represents that to the best of his/her knowledge and belief the acquisition will (or will not) qualify under section 368(a)(1)(B). If the Service issues a ruling on the larger transaction the ruling will state that no opinion is expressed as to whether or not the acquisition qualifies under section 368(a)(1)(B).

Section 368(a)(1)(F). -- Definitions Relating to Corporate Reorganizations. -- Whether a transaction constitutes a reorganization within the meaning of section 368(a)(1)(F) of the Code, and whether the taxpayer is subject to the consequences of qualification under that section (such as nonrecognition and basis consequences) that are adequately addressed by a statute, regulation, decision of the Supreme Court, tax treaty, revenue ruling, revenue procedure, notice, or other authority published in the Internal Revenue Bulletin.

For purposes of this provision, if a transaction qualifies under both section 368(a)(1)(F) and another corporate restructuring provision, and the other provision is not covered by this revenue procedure, the Service will treat any request for a qualification ruling under the other provision as a request for a qualification ruling under section 368(a)(1)(F). A taxpayer or the taxpayer's representative (as the Service deems appropriate) seeking a qualification ruling under any such other provision must accordingly state that to the best of his/her knowledge and belief the transaction does not qualify under section 368(a)(1)(F).

The Service will not rule on the qualification of a reorganization under section 368(a)(1)(F), even if it is an integral part of a larger transaction that involves other issues upon which the Service will rule and it is impossible to determine the tax consequences of the larger transaction without determining the tax consequences of the reorganization. However, in such event, the Service will rule on the tax consequences of the larger transaction, provided the taxpayer or the taxpayer's representative (as the Service deems appropriate) represents that to the best of his/her knowledge and belief the reorganization will (or will not) qualify under section 368(a)(1)(F). If the Service issues a ruling on the larger transaction the ruling will state that no opinion is expressed as to whether or not the reorganization qualifies under section 368(a)(1)(F).

SEC. 3. COLLATERAL AND OTHER ISSUES

Although the Service will not rule on the consequences of qualification under the foregoing provisions if the consequences are adequately addressed by a statute, regulation, decision of the Supreme Court, tax treaty, revenue ruling, revenue procedure, notice, or other authority published in the Internal Revenue Bulletin, it will rule where the consequences of qualification are not adequately addressed by such authorities. For example, the Service will issue a section 381(c)(4) ruling in connection with a section 368(a)(1)(A) or section 368(a)(1)(F) reorganization. To obtain a ruling on a collateral issue, the taxpayer or the taxpayer's representative (as the Service deems appropriate) must state that to the best of his/her knowledge and belief the transaction qualifies under the applicable no-rule section, set forth the authorities most closely related to the collateral issue, and explain why the collateral issue is not resolved by these authorities. If the Service issues a ruling on a collateral issue the ruling will state that no opinion is expressed as to whether or not the transaction in question qualifies under the applicable no-rule provision.

The Service will also continue to rule on issues that arise in connection with a no-rule transaction but do not depend upon or affect qualification under the applicable no-rule provision.

SEC. 4. MODIFICATIONS

Six months from the publication date of this revenue procedure, the Service will assess the resource burden of issuing rulings on subissues under sections 368(a)(1)(A), 368(a)(2)(D), and 368(a)(2)(E). Based on such assessment, the Service may revise this revenue procedure, as appropriate, to eliminate the practice of issuing subissue rulings or to expand the practice to the other no- rule areas covered by this revenue procedure.

SEC. 5. EFFECTIVE DATE

This revenue procedure is effective with regard to all ruling requests postmarked more than 30 days after December 3, 1990, the date of publication of this revenue procedure in the Internal Revenue Bulletin.

SEC. 6. EFFECT ON OTHER DOCUMENTS

Rev. Proc. 90-3 is amplified.

DRAFTING INFORMATION

The principal author of this revenue procedure is Thomas J. Matragrano of the Office of Assistant Chief Counsel (Corporate). For further information regarding this revenue procedure contact Mr. Matragrano at (202) 566-2456 (not a toll-free call).