Tax-Free Spin-Off Transaction Rules Open Treasury to Litigation

Tax attorneys Ryan Phelps and Brandon Bloom co-authored a Bloomberg Law article about the potential impact of the recent U.S. Supreme Court decision overturning Chevron deference on tax-free spin-off transactions under Section 355 of the tax code. The article examines how the U.S. Department of the Treasury's proposed guidance in this area, as outlined in the Office of Management and Budget's spring 2024 regulatory agenda, may face increased litigation in the absence of Chevron deference. The authors explain that without this deference, the Treasury Department and Internal Revenue Service (IRS) will likely have less flexibility to address changing circumstances and developing transactional markets, and more stringent or aggressive interpretations of statutory law could lead to a lack of clarity and increased vulnerability to judicial challenges.

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Holland & Knight announced the formation of its Chevron Deference Working Team in advance of the U.S. Supreme Court's June 28, 2024, Loper decision, which overturned the Chevron deference doctrine and will lead to a period of regulatory changes and potential legal challenges for some time.