IRS Makes Important Changes to Ruling Policy for Spinoffs

In the wake of Yahoo Inc.’s announcement that the Internal Revenue Service (the“IRS”) has declined to issue a private letter ruling with respect to its widely publicized spinoff of its small business unit (which included Yahoo’s remaining portfolio position in Alibaba stock), on September 14, 2015, the Department of the Treasury (“Treasury”) and the IRS announced a significant shift in IRS ruling policy with respect to certain tax-free distributions under Section 355 of the Internal Revenue Code and, potentially, in the IRS’s interpretation of the law applicable to such distributions.