In early May, the IRS issued Rev. Proc. 2026-21, which restores “significant issue” private letter rulings for certain corporate transactions. The Rev. Proc. allows rulings on portions of transactions under Subchapter C, including tax-free spin-offs and reorganizations. This change responds to practitioner concerns about time, scope, and cost burdens associated with ruling requests on full transactions. Details below the fold.

Rev. Proc. 2026-21 arrives after a period of turbulence. For more than a decade, the IRS’s general policy under Rev. Proc. 2013-32 was to rule on significant issues only and not on an entire transaction, with some later exceptions for § 355 tax-free spin-offs. In 2024, the IRS eliminated this significant-issue ruling practice through Rev. Proc. 2024-1 and Rev. Proc. 2024-3, replacing narrower rulings with a broader “integrated transaction” approach. Then, in September 2025, the IRS reset the ruling environment for spin-offs by withdrawing some 2024 changes and restoring much of the prior procedural framework for § 355 rulings. Rev. Proc. 2026-21 essentially completes this administrative reset for other Subchapter C transactions.

What’s the upshot? First, Rev. Proc. 2026-21 may herald a golden era of ruling practice—and greater reliance on private letter rulings as informal guidance to sophisticated practitioners. Taxpayers now can pursue full-transaction rulings under the 2024 changes or significant-issue rulings under the Rev. Proc., subject to no-rule areas and IRS discretion “in the interest of sound tax administration.” Many will take advantage of these options. In turn, these private letter rulings form a public corpus of knowledge about the IRS’s views on various aspects of Subchapter C, subject to the caveats of § 6110(k)(3). After Loper Bright, these rulings may do even more work in terms of informal guidance and legal development, especially as expert practitioners divine meaning from the parameters of IRS-blessed deals.

Second, Rev. Proc. 2026-21 gives both sides additional flexibility in assembling and evaluating corporate transactions. Deals can be viewed as a series of line-drawing exercises, where each piece (or issue) must survive a binary analysis and the whole also must pass muster. The IRS’s new ruling policy allows for more nuance in how public and private experts apply their judgment to a specific set of facts and business objectives, while keeping everyone at the table as a transactional structure comes together. This type of dialogue is sound public policy as dealmaking intensifies.

Rev. Proc. 2026-21 (May 5, 2026):

Under the significant issue ruling program described in this revenue procedure, taxpayers may request, and the Service may issue, a ruling on part of an integrated transaction described in § 332, 351, 355, 368, or 1036. In addition, taxpayers may request, and the Service may issue, a ruling on a particular legal issue under a section of the Code or the Income Tax Regulations with respect to a transaction (or part thereof) rather than a ruling that addresses all aspects of that section (or any other section) with respect to the transaction (or part thereof). For example, the Service may issue a letter ruling addressing significant issues presented by the application of § 355(e), 1.368-1(d), or 1.368-2(k), even though the ruling does not address overall qualification of the transaction under § 355 or 368.

Prior TaxProf Blog coverage:

• McCormick-Unilever and the Next Wave of Reverse Morris Trust Deals (Apr. 11, 2026)
• New Reports by NYSBA Tax Section (Mar. 25, 2026) (on Report No. 1523)