On May 5, 2026, the IRS issued Rev. Proc. 2026-21, reviving a practice that allows taxpayers to request private letter rulings (PLRs) on discrete, significant tax issues arising in complex corporate transactions, without requiring a ruling on the transaction as a whole.[1] The renewed “significant issue” ruling program provides taxpayers with welcome opportunities to obtain targeted certainty on key technical issues that may drive the overall tax treatment of a transaction. At the same time, this more focused approach requires taxpayers to take responsibility for the tax consequences of the broader transaction and carefully evaluate the tradeoffs associated with a narrower ruling request.

In this alert, we highlight the types of rulings the IRS may issue, critical taxpayer requirements, and practical considerations for determining when significant issue rulings may be most valuable.

What Types of Rulings May the IRS Issue?

Under Rev. Proc. 2026-21, the IRS may rule on issues that fall solely within the jurisdiction of the Associate Chief Counsel (Corporate). In general, these PLRs may address:

• A discrete legal question arising in a complex corporate transaction that must be resolved to determine the transaction’s tax treatment
• A particular component of a larger transaction (rather than the entire transaction)
• Certain tax consequences of an integrated transaction (e.g., nonrecognition treatment or tax basis) if tied to the significant issue

This means taxpayers may seek IRS guidance on specific issues within common corporate transactions, for example:

• Whether the active trade or business requirement is met with respect to a transaction otherwise qualifying as a section 355 spin-off
• Whether a corporate spin-off transaction followed by an acquisition (e.g., a Reverse Morris Trust transaction) is taxable under section 355(e)
• Whether a transaction satisfies key reorganization requirements, such as the continuity of business enterprise requirement under Treas. Reg. §1.368-1(d)

For many transactions, this change in the PLR program may expand the practical availability of IRS rulings by allowing taxpayers to isolate and resolve a deal-critical issue without submitting the full transaction for a ruling. Seeking a significant issue ruling may be particularly valuable when the overall transaction structure is well understood and a single tax issue creates disproportionate risk.

Critical Taxpayer Requirements

In requesting a significant issue PLR, taxpayers must clearly identify an issue that is critical to the tax outcome of the transaction. Importantly, taxpayers must make certain formal representations to the IRS, including:

• That the overall transaction otherwise satisfies the requirements of the relevant tax rules (for example, that a reorganization or spin-off would qualify as tax-free aside from the issue being addressed)
• The relevant tax consequences of the integrated transaction if the IRS issues the requested ruling
• Any assumptions regarding issues on which the IRS will not rule

Taxpayers are not limited in the number of significant issues they present for a single transaction.

Other Practical Considerations

In addition to the formal requirements, several practical aspects of the program are important in determining whether to proceed with a significant issue ruling request. For example, the IRS’s no-rule policy on enumerated issues remains fully in effect, meaning that certain issues will not be addressed in a ruling. Where such issues are relevant, taxpayers must identify them and provide their assumptions on the tax treatment.

In addition, the IRS retains broad discretion in administering the program and may:

• Decline to issue a ruling
• Request additional information
• Address issues beyond those specifically presented, including reaching adverse conclusions

Further, significant issue rulings will explicitly state that the IRS is not expressing an opinion on the overall transaction or on issues not specifically addressed.

A&M Tax Says

Rev. Proc. 2026-21 introduces a valuable tool for taxpayers seeking targeted certainty in complex corporate transactions. The significant issue ruling program is most effective where a single, well-defined issue drives the tax risk and the broader transaction is otherwise well understood. At the same time, taxpayers must be prepared to take responsibility for determining the tax treatment of the overall transaction, make specific representations and disclosures, and accept the possibility of broader IRS scrutiny. As a result, the decision to pursue a significant issue ruling should be made deliberately, with careful consideration of both the strategic benefits and the associated constraints.

If you are considering a significant issue ruling for a corporate transaction, A&M Tax advisors are available to help you evaluate whether this program is appropriate for a particular transaction, frame the issue for submission, and navigate the IRS ruling process.

[1] In 2013, the IRS adopted a “significant issue” ruling approach for certain corporate transactions (Rev. Proc. 2013-32), under which it generally ruled only on discrete issues rather than the overall transaction. In 2024, the IRS discontinued that approach (Rev. Proc. 2024-3), eliminating significant issue rulings for those transactions.