Federal Register / Vol. 90, No. 10 / Thursday, January 16, 2025 / Proposed Rules 4687 

SUMMARY: This document informs the 

public that HUD has determined not to 

pursue the proposed rule published in 

the Federal Register on February 9, 

2023, entitled ‘‘Affirmatively Furthering 

Fair Housing’’. HUD will proceed to 

formally withdraw the rule from HUD’s 

upcoming Spring 2025 Unified Agenda 

of Regulatory and Deregulatory Actions. 

ADDRESSES: Department of Housing and 

Urban Development, 451 7th Street SW, 

Room 10282, Washington, DC 20410. 

DATES: The proposed rule published at 

88 FR 8516, February 9, 2023, is 

withdrawn as of January 16, 2025. 

FOR FURTHER INFORMATION CONTACT: 

Aaron Santa Anna, Associate General 

Counsel for Legislation and Regulations, 

Office of General Counsel, Department 

of Housing and Urban Development, 

451 7th Street SW, Room 10282, 

Washington, DC 20410; telephone 

number 202–402–5138 (this is not a 

tollfree number). HUD welcomes and is 

prepared to receive calls from 

individuals who are deaf or hard of 

hearing, as well as individuals with 

speech or communication disabilities. 

To learn more about how to make an 

accessible telephone call, please visit 

https://www.fcc.gov/consumers/guides/ 

telecommunications-relay-service-trs. 

SUPPLEMENTARY INFORMATION: On 

February 9, 2023 (88 FR 8516), HUD 

published a proposed rule in the 

Federal Register entitled ‘‘Affirmatively 

Furthering Fair Housing’’ that included, 

among others, provisions reestablishing 

a formal AFFH planning process and 

creating an enforcement mechanism to 

ensure program participants comply 

with the duty to affirmatively further 

fair housing. 

The Department has determined to 

withdraw the proposed rule at this time 

and to terminate this rulemaking 

proceeding. HUD does not intend for a 

final rule to be issued on this NPRM. If, 

in the future, HUD decides it is 

appropriate to issue regulations on this 

topic, HUD will do so through a new 

notice of proposed rulemaking, subject 

to the requirements of the 

Administrative Procedure Act, 5 U.S.C. 

551, et seq. and 24 CFR part 10. 

HUD’s Withdrawal of Proposed Rule 

Accordingly, HUD will proceed to 

formally withdraw the following 

proposed rule from its Spring 2025 

Unified Agenda of Regulatory and 

Deregulatory Actions: Affirmatively 

Furthering Fair Housing (88 FR 8516, 

February 9, 2023) (RIN 2529–AB05). 

HUD’s Unified Agenda of Regulatory 

and Deregulatory Actions is available on 

Reginfo.gov and can be accessed at 

https://www.reginfo.gov/public/do/ 

eAgendaMain. 

Benjamin Klubes, 

Acting General Counsel. 

[FR Doc. 2025–00981 Filed 1–15–25; 8:45 am] 

BILLING CODE 4210–67–P 

DEPARTMENT OF THE TREASURY 

Internal Revenue Service 

26 CFR Part 1 

[REG–116085–23] 

RIN 1545–BR00 

Multi-Year Reporting Requirements for 

Corporate Separations and Related 

Transactions 

AGENCY: Internal Revenue Service (IRS), 

Treasury. 

ACTION: Notice of proposed rulemaking. 

SUMMARY: This document contains 

proposed regulations that would require 

multi-year tax reporting for corporate 

separations and related transactions. 

The information to be reported under 

these proposed regulations would 

establish the taxpayer’s position that the 

corporate separation and related 

transactions qualify for nonrecognition 

treatment under subchapter C of the 

Internal Revenue Code. The proposed 

regulations would affect corporations 

and their shareholders and security 

holders. Proposed regulations regarding 

certain matters relating to corporate 

separations, incorporations, and 

reorganizations qualifying for 

nonrecognition of gain or loss are 

published elsewhere in the Proposed 

Rules section of this issue of the Federal 

Register. 

DATES: Written or electronic comments 

and requests for a public hearing must 

be received by March 17, 2025. 

ADDRESSES: Commenters are strongly 

encouraged to submit public comments 

on these proposed regulations and the 

related form and instructions 

electronically via the Federal 

eRulemaking Portal at https://

www.regulations.gov (indicate IRS and 

REG–116085–23) by following the 

online instructions for submitting 

comments. Requests for a public hearing 

must be submitted as prescribed in the 

‘‘Comments and Requests for a Public 

Hearing’’ section. Once submitted to the 

Federal eRulemaking Portal, comments 

cannot be edited or withdrawn. The 

Department of the Treasury (Treasury 

Department) and the IRS will publish 

for public availability any comments to 

the IRS’s public docket. Send paper 

submissions to CC:PA:01:PR (REG– 

116085–23), Room 5203, Internal 

Revenue Service, P.O. Box 7604, Ben 

Franklin Station, Washington, DC 

20044. 

FOR FURTHER INFORMATION CONTACT: 

Concerning the proposed regulations, 

Barrett D. Cappadonna at (202) 317– 

6975 (not a toll-free number); 

concerning submissions of comments 

and requests for a hearing, contact the 

Publications and Regulations branch at 

(202) 317–6901 (not a toll-free number) 

or by email to publichearings@irs.gov 

(preferred). 

SUPPLEMENTARY INFORMATION: 

Authority 

This document contains proposed 

regulations under section 355 of the 

Internal Revenue Code (Code) that 

would amend the Income Tax 

Regulations (26 CFR part 1) by 

substantially revising the information 

reporting requirements of § 1.355–5 

(proposed regulations). The proposed 

regulations are issued under the express 

delegation of section 7805(a) of the 

Code, which authorizes the Secretary to 

‘‘prescribe all needful rules and 

regulations for the enforcement of [the 

Code], including all rules and 

regulations as may be necessary by 

reason of any alteration of law in 

relation to internal revenue.’’ 

Background 

I. Overview of Section 355 

Section 355(a)(1) provides that, if 

certain requirements are met, a 

distribution of stock, or stock and 

securities, of one or more controlled 

corporations by a distributing 

corporation to the distributing 

corporation’s shareholders, or to the 

distributing corporation’s shareholders 

and security holders, may be received 

by the distributees without the 

distributees recognizing gain or loss or 

including any amount in income 

(section 355 transaction). Section 355(c) 

generally provides that no gain or loss 

is recognized to a distributing 

corporation upon a distribution of 

qualified property that is not in 

pursuance of a plan of reorganization 

(section 355(c) distribution). Section 

355(c)(2)(B) defines ‘‘qualified 

property’’ as any stock or securities in 

a controlled corporation. If, in addition 

to the distribution of qualified property, 

the distributing corporation distributes 

other property in the section 355 

transaction and the fair market value of 

that other property exceeds the 

distributing corporation’s adjusted basis 

in that other property, gain is 

recognized to the distributing 


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4688 Federal Register / Vol. 90, No. 10 / Thursday, January 16, 2025 / Proposed Rules 

corporation as if the property were sold 

to the distributee at its fair market value. 

See section 355(c)(2)(A). 

Taxpayers also may carry out a 

section 355 transaction as part of a 

transaction that qualifies as a 

reorganization under section 

368(a)(1)(D) or (G) of the Code and to 

which neither section 354 of the Code 

nor so much of section 356 of the Code 

as relates to section 354 applies 

(divisive reorganization). A transfer by a 

distributing corporation of part of its 

assets to a controlled corporation is a 

divisive reorganization if, immediately 

after the transfer, one or more of the 

distributing corporation’s shareholders 

(including persons who were 

shareholders immediately before the 

transfer) have control (as defined in 

section 368(c)) of the controlled 

corporation and if, pursuant to the plan 

of reorganization, stock or securities of 

the controlled corporation are 

distributed in a transaction that 

qualifies under section 355. 

Section 361(c) of the Code generally 

provides that no gain or loss is 

recognized to a distributing corporation 

upon a distribution of qualified property 

in pursuance of a plan of reorganization. 

Section 361(c)(2)(B) defines ‘‘qualified 

property’’ as (i) any stock, right to 

acquire stock, or obligation (including a 

security) of the distributing corporation, 

or (ii) any stock, right to acquire stock, 

or obligation (including a security) of a 

controlled corporation received by the 

distributing corporation as part of the 

divisive reorganization. If, in addition to 

the distribution of qualified property, 

the distributing corporation distributes 

other property as part of a divisive 

reorganization and the fair market value 

of that other property exceeds the 

distributing corporation’s adjusted basis 

in that other property, gain is 

recognized to the distributing 

corporation as if the property were sold 

to the distributee at its fair market value. 

See section 361(c)(2)(A). 

II. Current Reporting Requirements for 

Section 355 Transactions 

Section 1.355–5(a)(1) currently 

requires the distributing corporation to 

report a section 355 transaction to the 

IRS by including a statement with the 

distributing corporation’s Federal 

income tax return for the year of the 

section 355 transaction (§ 1.355–5(a) 

statement). The § 1.355–5(a) statement 

must include: (i) the name and 

employer identification number (if any) 

of the controlled corporation; (ii) the 

name and taxpayer identification 

number (if any) of every ‘‘significant 

distributee’’ (as defined in § 1.355– 

5(c)(1)); (iii) the date of the section 355 

transaction; (iv) the aggregate fair 

market value and basis, determined 

immediately before the section 355 

transaction, of the stock, securities, or 

other property (including money) 

distributed by the distributing 

corporation; and (v) the date and control 

number of any private letter ruling(s) 

issued by the IRS in connection with the 

section 355 transaction. 

If the distributing corporation is a 

controlled foreign corporation within 

the meaning of section 957 of the Code 

(CFC), each United States shareholder 

(within the meaning of section 951(b) of 

the Code) with respect to the CFC must 

include a § 1.355–5(a) statement on or 

with its return. See § 1.355–5(a)(1). If 

the distributing corporation transfers 

assets to a controlled corporation in a 

transaction described in a divisive 

reorganization, then the distributing 

corporation (or, if the distributing 

corporation is a CFC, each United States 

shareholder) also must include the 

statement required by § 1.368–3(a) on or 

with its return for the year of the section 

355 transaction. See § 1.355–5(a)(2). 

Section 1.355–5(b) currently imposes 

requirements similar to those in 

§ 1.355–5(a) upon significant 

distributees. More specifically, § 1.355– 

5(b)(1) requires every significant 

distributee to include a statement on or 

with the significant distributee’s return 

for the year in which the section 355 

transaction is received (§ 1.355–5(b) 

statement). The § 1.355–5(b) statement 

must include: (i) the names and 

employer identification numbers (if any) 

of the distributing and controlled 

corporations; (ii) the date of the section 

355 transaction; (iii) the aggregate basis, 

determined immediately before the 

section 355 transaction, of any stock or 

securities transferred by the significant 

distributee in the transaction; and (iv) 

the aggregate fair market value, 

determined immediately before the 

section 355 transaction, of the stock, 

securities, or other property (including 

money) received by the significant 

distributee in the section 355 

transaction. If a significant distributee is 

a CFC, each United States shareholder 

with respect to the CFC must include 

this statement on or with the United 

States shareholder’s return. 

Section 1.355–5(d) currently imposes 

substantiation requirements. More 

specifically, § 1.355–5(d) requires 

taxpayers to retain their permanent 

records (specifically including 

information regarding the amount, basis, 

and fair market value of all property 

distributed or exchanged in the section 

355 transaction, and relevant facts 

regarding any liabilities assumed or 

extinguished as part of the section 355 

transaction) and make those records 

available to any authorized IRS officers 

and employees. See § 1.6001–1(e). 

Explanation of Provisions 

The Treasury Department and the IRS 

are of the view that enhancing the 

reporting requirements for section 355 

transactions would improve the IRS’s 

ability to administer section 355 (and 

related provisions of the Code) to ensure 

that transactions intended to qualify 

under section 355 (and such related 

provisions) satisfy the requirements for 

nonrecognition treatment. Accordingly, 

these proposed regulations would revise 

§ 1.355–5 to require all covered filers, as 

defined in proposed § 1.355–5(b)(1), to 

file with the IRS an annual report with 

regard to each section 355 transaction 

(Form 7216, Multi-Year Reporting 

Related to Section 355 Transactions) 

that would be attached to the covered 

filer’s Federal income tax return. 

For purposes of the proposed 

regulations, the term ‘‘section 355 

transaction’’ includes both divisive 

reorganizations and section 355(c) 

distributions. The term ‘‘covered filer’’ 

would include, with regard to any 

section 355 transaction: (i) a distributing 

corporation or a person that, 

immediately before the first 

distribution, was a United States 

shareholder (within the meaning of 

section 951(b)) with respect to a 

controlled foreign corporation (within 

the meaning of section 957 of the Code, 

but determined without applying 

subparagraphs (A), (B), and (C) of 

section 318(a)(3) of the Code) that is the 

distributing corporation; (ii) a controlled 

corporation or a person that, 

immediately before the first 

distribution, was a United States 

shareholder with respect to a controlled 

foreign corporation that is the controlled 

corporation; (iii) a significant distributee 

or a person that, immediately before the 

first distribution, was a United States 

shareholder with respect to a controlled 

foreign corporation that is a significant 

distributee; or (iv) any other person 

required by the Commissioner of 

Internal Revenue (Commissioner) to file 

Form 7216 (or any successor form) in 

instructions, guidance, or publications 

published in the Internal Revenue 

Bulletin (see §§ 601.601(d)(2) and 

601.602 of this chapter). The term 

‘‘covered filer’’ also would include any 

successor (within the meaning of 

section 381(a) of the Code) to an entity 

described in the preceding sentence. 

The proposed regulations also would 

revise the definition of a ‘‘significant 

distributee’’ in current § 1.355–5(c)(1)(i) 

by raising the ownership threshold for 


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non-publicly traded stock from one 

percent to five percent. 

However, the term ‘‘covered filer’’ 

would be defined to encompass solely 

taxpayers required to file certain 

specified Federal income tax returns. 

These returns would be limited to: (i) 

Form 1040, U.S. Individual Income Tax 

Return; (ii) Form 1040–NR, U.S 

Nonresident Alien Income Tax Return; 

(iii) Form 1065, U.S. Return of 

Partnership Income; (iv) Form 1120, 

U.S. Corporation Income Tax Return; (v) 

Form 1120–F, U.S. Income Tax Return 

of a Foreign Corporation; (vi) Form 

1120–S, U.S. Income Tax Return for an 

S Corporation; and (vii) any other form 

listed in instructions, guidance, or 

publications published in the Internal 

Revenue Bulletin (see §§ 601.601(d)(2) 

and 601.602 of this chapter). 

Accordingly, a taxpayer that is not 

required to file one of these specified 

Federal income tax returns (such as an 

estate, a trust, or a regulated investment 

company (as defined in section 851(a) of 

the Code)) would not be required to file 

Form 7216. The Treasury Department 

and the IRS request comments as to 

whether taxpayers required to file 

additional types of Federal income tax 

returns should be required to file Form 

7216. 

Each covered filer would be required 

to file Form 7216 with regard to each 

section 355 transaction for the required 

reporting period. For this purpose, the 

term ‘‘required reporting period’’ would 

mean the period (i) beginning in the 

covered filer’s taxable year in which the 

first distribution occurs, and (ii) ending 

in the fifth taxable year of the covered 

filer after the taxable year in which the 

control distribution occurs. The fiveyear required reporting period would 

apply to a covered filer (or its successor) 

even in cases where the covered filer (or 

its successor) ceases to be a United 

States shareholder with respect to a 

relevant corporation and is no longer 

required to file Form 5471, Information 

Return of U.S. Persons With Respect To 

Certain Foreign Corporations, with 

respect to such corporation. 

Consistent with current § 1.355–5(d), 

the proposed regulations would require 

that, under § 1.6001–1(e), a covered filer 

must retain its permanent books and 

records and make those books and 

records available for inspection by any 

authorized IRS officers and employees. 

In addition, the proposed regulations 

would provide that, in connection with 

the section 355 transaction, the covered 

filer’s books and records, as relevant to 

the section 355 transaction, will be 

considered to be complete and accurate 

if they contain all information necessary 

to document and substantiate 

satisfaction of the requirements under 

section 355. 

The proposed regulations would 

significantly enhance the IRS’s ability to 

identify section 355 transactions that 

pose the highest risk of potential 

Federal income tax noncompliance and 

abuse. These proposed regulations also 

would help effectuate a broader effort by 

the Treasury Department and the IRS to 

close the portion of the Federal tax gap 

(that is, the difference between all 

Federal taxes that are owed and those 

that are collected) due to such potential 

noncompliance and abuse. 

Because the enhanced reporting 

requirements in these proposed 

regulations would augment the IRS’s 

ability to identify section 355 

transactions with the highest risk of 

potential noncompliance and abuse, the 

Treasury Department and the IRS are of 

the view that additional flexibility can 

be provided in the substantive rules 

applicable to section 355 transactions 

(for example, by affording taxpayers 

additional time to carry out a plan of 

distribution). Proposed regulations that 

would provide guidance regarding 

certain matters relating to corporate 

separations, incorporations, and 

reorganizations qualifying, in whole or 

in part, for nonrecognition of gain or 

loss are published elsewhere in the 

Proposed Rules section of this issue of 

the Federal Register. 

The proposed reporting requirements 

would apply to all types of section 355 

transactions with a covered filer. 

Specifically, the proposed regulations 

would apply to (i) section 355 

transactions within an affiliated group 

(as defined in section 1504(a)(1) of the 

Code, without regard to the exceptions 

in section 1504(b)) (internal section 355 

transaction), and (ii) section 355 

transactions in which stock or securities 

of a controlled corporation are 

distributed to a distributing corporation 

shareholder or security holder that is 

not a member of the distributing 

corporation’s affiliated group (external 

section 355 transaction). To reflect the 

differences between internal section 355 

transactions and external section 355 

transactions (including the different 

statutory requirements and potential for 

Federal income tax noncompliance or 

abuse), the proposed regulations would 

impose, through the annual Form 7216, 

different reporting requirements for 

each type of section 355 transaction. 

These proposed regulations are 

consistent with the recommendations 

set forth in the Treasury Inspector 

General for Tax Administration (TIGTA) 

report titled ‘‘A Strategy Is Needed to 

Assess the Compliance of Corporate 

Mergers and Acquisitions With Federal 

Tax Requirements,’’ Ref. No. 2019–30– 

050 (Sept. 5, 2019). In that report, 

TIGTA recommended that the 

Commissioner determine whether 

merger and acquisition (M&A) tax 

forms, and information provided on 

those forms, could be used as a 

compliance tool within a larger strategy 

to assess risk and ensure that corporate 

M&A transactions are compliant with 

the Code. These proposed regulations 

would enable the IRS to collect 

information on section 355 transactions 

from taxpayers engaging in those 

transactions and utilize that information 

to identify potential noncompliance 

with section 355 and other related 

provisions of the Code. 

Special Analyses 

I. Regulatory Planning and Review 

Pursuant to the Memorandum of 

Agreement, Review of Treasury 

Regulations under Executive Order 

12866 (June 9, 2023), tax regulatory 

actions issued by the IRS are not subject 

to the requirements of section 6 of 

Executive Order 12866, as amended. 

Therefore, a regulatory impact 

assessment is not required. 

II. Paperwork Reduction Act 

The Paperwork Reduction Act of 1995 

(44 U.S.C. 3501–3520) (PRA) requires 

that a Federal agency obtain the 

approval of the Office of Management 

and Budget (OMB) before collecting 

information from the public, whether 

such collection of information is 

mandatory, voluntary, or required to 

obtain or retain a benefit. A Federal 

agency may not conduct or sponsor, and 

a person is not required to respond to, 

a collection of information unless the 

collection of information displays a 

valid control number. 

The collections of information in 

these proposed regulations contain 

reporting and recordkeeping 

requirements that are necessary to 

identify potential noncompliance with 

the requirements of section 355 and 

related sections of the Code. These 

collections of information generally 

would be used by the IRS for tax 

compliance purposes and by taxpayers 

to facilitate proper reporting and 

compliance. 

The recordkeeping requirements 

within this proposed regulation are 

considered general tax records under 

§ 1.6001–1. These records are required 

for the IRS to validate that taxpayers 

have met the requirements under 

section 355 and related sections of the 

Code. For PRA purposes, general tax 

records are already approved by OMB 

under control numbers 1545–0123 for 


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4690 Federal Register / Vol. 90, No. 10 / Thursday, January 16, 2025 / Proposed Rules 

business filers and 1545–0074 for 

individual filers. 

The reporting requirements outlined 

in § 1.355–5 will be covered within the 

form and instructions for IRS Form 7216 

(or any successor form). This form will 

be approved under 1545–0123 for 

business filers and 1545–0074 for 

individual filers. The IRS will be 

submitting the form to OMB for 

approval under these OMB control 

numbers in accordance with the PRA 

procedures in 5 CFR 1320.10. 

III. Regulatory Flexibility Act 

Pursuant to the Regulatory Flexibility 

Act (5 U.S.C. chapter 6), it is hereby 

certified that these proposed regulations 

would not have a significant economic 

impact on a substantial number of small 

entities. This certification is based on 

the fact that these proposed regulations 

primarily would affect corporations that 

are publicly traded corporations, which 

tend to be larger businesses. 

Specifically, the Research, Applied 

Analytics, and Statistics Division of the 

IRS estimates that approximately 110 

small businesses with gross receipts 

under $25 million would be subject to 

collection of information in these 

regulations annually. In addition, the 

collection of information in these 

proposed regulations is an incremental, 

additional obligation on small entities to 

a currently existing collection of 

information. Moreover, the economic 

impact of these proposed regulations 

will not be significant. 

Therefore, these proposed regulations 

would not create significant additional 

obligations for, or impose any 

meaningful economic impact on, a 

substantial number of small entities. 

Accordingly, the Secretary certifies that 

the proposed regulations would not 

have a significant economic impact on 

a substantial number of small entities 

and a regulatory flexibility analysis is 

not required. 

Pursuant to section 7805(f) of the 

Code, the proposed regulations have 

been submitted to the Chief Counsel for 

the Office of Advocacy of the Small 

Business Administration for comment 

on its impact on small business. 

IV. Unfunded Mandates Reform Act 

Section 202 of the Unfunded 

Mandates Reform Act of 1995 (UMRA) 

requires that agencies assess anticipated 

costs and benefits and take certain other 

actions before issuing a final rule that 

includes any Federal mandate that may 

result in expenditures in any one year 

by a State, local, or Tribal government, 

in the aggregate, or by the private sector, 

of $100 million in 1995 dollars, updated 

annually for inflation. These proposed 

regulations do not include any Federal 

mandate that may result in expenditures 

by State, local, or Tribal governments, or 

by the private sector, in excess of that 

threshold. 

V. Executive Order 13132: Federalism 

Executive Order 13132 (Federalism) 

prohibits an agency from publishing any 

rule that has federalism implications if 

the rule either imposes substantial, 

direct compliance costs on State and 

local governments, and is not required 

by statute, or preempts State law, unless 

the agency meets the consultation and 

funding requirements of section 6 of the 

Executive order. This proposed rule 

does not have federalism implications 

and does not impose substantial direct 

compliance costs on State and local 

governments or preempt State law 

within the meaning of the Executive 

order. 

Comments and Public Hearing 

Before these proposed regulations are 

adopted as final regulations, 

consideration will be given to any 

comments that are submitted timely to 

the IRS as prescribed in the preamble 

under the ADDRESSES heading. The 

Treasury Department and the IRS 

request comments on all aspects of the 

proposed regulations. All commenters 

are strongly encouraged to submit 

comments electronically. The Treasury 

Department and the IRS will publish for 

public availability any comment 

submitted electronically or on paper to 

its public docket on https://

www.regulations.gov. 

A public hearing will be scheduled if 

requested in writing by any person who 

timely submits electronic or written 

comments. Requests for a public hearing 

also are encouraged to be made 

electronically. If a public hearing is 

scheduled, notice of the date and time 

for the public hearing will be published 

in the Federal Register. 

Drafting Information 

The principal author of these 

proposed regulations is Barrett D. 

Cappadonna of the Office of Associate 

Chief Counsel (Corporate). However, 

other personnel from the Treasury 

Department and the IRS participated in 

their development. 

List of Subjects in 26 CFR Part 1 

Income taxes, Reporting and 

recordkeeping requirements. 

Proposed Amendments to the 

Regulations 

Accordingly, the Treasury Department 

and the IRS propose to amend 26 CFR 

part 1 as follows: 

PART 1—INCOME TAXES 

■ Paragraph 1. The authority citation 

for part 1 continues to read in part as 

follows: 

Authority: 26 U.S.C. 7805 * * * 

* * * * * 

■ Par. 2. Section 1.355–5 is revised to 

read as follows: 

§ 1.355–5 Information reporting and record 

retention requirements. 

(a) Reporting of transaction 

information—(1) Annual reporting 

form—(i) In general. For each taxable 

year of the required reporting period, a 

covered filer must file annually with the 

IRS a complete and accurate Form 7216, 

Multi-Year Reporting Related to Section 

355 Transactions (or as provided in 

publications, forms, instructions, or 

other guidance), with regard to a section 

355 transaction. 

(ii) Manner of filing form. A covered 

filer must file Form 7216 (or any 

successor form)— 

(A) With the specified Federal income 

tax return of the covered filer for the 

taxable year (see section 6011 of the 

Code and § 1.6011–1); and 

(B) In the manner prescribed by the 

Commissioner in instructions, guidance, 

or publications published in the Internal 

Revenue Bulletin (see §§ 601.601(d)(2) 

and 601.602 of this chapter). 

(2) [Reserved] 

(3) [Reserved] 

(b) Definitions. The following 

definitions apply for purposes of this 

section: 

(1) Covered filer—(i) In general. The 

term covered filer means a taxpayer that 

is required to file a specified Federal 

income tax return and that is— 

(A) A distributing corporation or a 

person that, immediately before the first 

distribution, was a United States 

shareholder (within the meaning of 

section 951(b) of the Code) with respect 

to a controlled foreign corporation 

(within the meaning of section 957 of 

the Code, but determined without 

applying subparagraphs (A), (B), and (C) 

of section 318(a)(3)) that is the 

distributing corporation; 

(B) A controlled corporation or a 

person that, immediately before the first 

distribution, was a United States 

shareholder with respect to a controlled 

foreign corporation that is the controlled 

corporation; 

(C) A significant distributee or a 

person that, immediately before the first 

distribution, was a United States 

shareholder with respect to a controlled 

foreign corporation that is a significant 

distributee; or 

(D) Any other person required by the 

Commissioner to file Form 7216 (or any 


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1As a result, for example, such disallowed 

amounts generally may not be capitalized. See 

§§ 1.263(a)-1(b) and 1.263A–1(c)(2). 

successor form) in accordance with 

instructions, guidance, or publications 

published in the Internal Revenue 

Bulletin (see §§ 601.601(d)(2) and 

601.602 of this chapter). 

(ii) Successors. The term covered filer 

includes any successor (within the 

meaning of section 381(a) of the Code) 

to an entity described in paragraph 

(b)(1)(i) of this section. 

(2) Required reporting period. The 

term required reporting period means 

the period— 

(i) Beginning in the taxable year of the 

covered filer during which the first 

distribution occurs; and 

(ii) Ending in the fifth taxable year of 

the covered filer after the taxable year in 

which the control distribution occurs. 

(3) Significant distributee. The term 

significant distributee means: 

(i) A holder of stock of a distributing 

corporation that— 

(A) Receives stock of a controlled 

corporation in a section 355 transaction; 

and 

(B) Owned at least five percent (by 

vote or value) of the total outstanding 

stock of the distributing corporation 

immediately before the first 

distribution. 

(ii) A holder of securities of a 

distributing corporation that— 

(A) Receives stock or securities of a 

controlled corporation in a section 355 

transaction; and 

(B) Owned securities in the 

distributing corporation with a basis of 

at least $1,000,000 immediately before 

the first distribution. 

(4) Specified Federal income tax 

return. The term specified Federal 

income tax return means— 

(i) Form 1040, U.S. Individual Income 

Tax Return; 

(ii) Form 1040–NR, U.S. Nonresident 

Alien Income Tax Return; 

(iii) Form 1065, U.S. Return of 

Partnership Income; 

(iv) Form 1120, U.S. Corporation 

Income Tax Return; 

(v) Form 1120–F, U.S. Income Tax 

Return of a Foreign Corporation; 

(vi) Form 1120–S, U.S. Income Tax 

Return for an S Corporation; or 

(vii) Any other form listed in 

instructions, guidance, or publications 

published in the Internal Revenue 

Bulletin (see §§ 601.601(d)(2) and 

601.602 of this chapter). 

(c) Substantiation information. Under 

§ 1.6001–1(e), a covered filer must retain 

its permanent books and records and 

make those books and records available 

for inspection by any authorized IRS 

officers and employees. In connection 

with the section 355 transaction, the 

covered filer’s books and records, as 

relevant to the section 355 transaction, 

will be considered to be complete and 

accurate if they contain all information 

necessary to document and substantiate 

satisfaction of the requirements under 

section 355. 

(d) Applicability date—(1) In general. 

Except as provided in paragraph (d)(2) 

of this section, the rules of this section 

apply to taxable years ending after [date 

of publication of final regulations in the 

Federal Register] with respect to section 

355 transactions occurring after January 

16, 2025. For rules applicable to prior 

taxable years, see § 1.355–5 as in effect 

and contained in 26 CFR part 1, as 

revised April 1, 2024. 

(2) [Reserved] 

Douglas W. O’Donnell, 

Deputy Commissioner. 

[FR Doc. 2025–00312 Filed 1–13–25; 4:15 pm] 

BILLING CODE 4830–01–P 

DEPARTMENT OF THE TREASURY 

Internal Revenue Service 

26 CFR Part 1 

[REG–118988–22] 

RIN 1545–BQ87 

Certain Employee Remuneration in 

Excess of $1,000,000 Under Internal 

Revenue Code Section 162(m) 

AGENCY: Internal Revenue Service (IRS), 

Treasury. 

ACTION: Notice of proposed rulemaking. 

SUMMARY: This document sets forth 

proposed regulations under section 

162(m) of the Internal Revenue Code, 

which limits the deduction for certain 

employee remuneration in excess of 

$1,000,000 for Federal income tax 

purposes. These proposed regulations 

implement the amendments made to 

section 162(m) by the American Rescue 

Plan Act of 2021. These proposed 

regulations would affect publicly held 

corporations. 

DATES: Written or electronic comments 

and requests for a public hearing must 

be received by March 17, 2025. 

ADDRESSES: Commenters are strongly 

encouraged to submit public comments 

electronically. Submit electronic 

submissions via the Federal 

eRulemaking Portal at 

www.regulations.gov (indicate IRS and 

REG–118988–22) by following the 

online instructions for submitting 

comments. Requests for a public hearing 

must be submitted as prescribed in the 

‘‘Comments and Requests for a Public 

Hearing’’ section of this preamble. Once 

submitted to the Federal eRulemaking 

Portal, comments cannot be edited or 

withdrawn. The Department of the 

Treasury (Treasury Department) and the 

IRS will publish for public availability 

any comments submitted to the IRS’s 

public docket. Send paper submissions 

to: CC:PA:01:PR (REG–118988–22), 

Room 5203, Internal Revenue Service, 

P.O. Box 7604, Ben Franklin Station, 

Washington, DC 20044. 

FOR FURTHER INFORMATION CONTACT: 

Concerning the proposed regulations, 

Ilya Enkishev at (202) 317–5600; 

concerning submissions of comments 

and/or requests for a public hearing, 

contact the Publications and 

Regulations Section of the Office of 

Associate Chief Counsel (Procedure and 

Administration) by email at 

publichearings@irs.gov (preferred) or by 

telephone at (202) 317–6901 (not tollfree numbers). 

SUPPLEMENTARY INFORMATION: 

Authority 

These proposed regulations are issued 

under the express delegation of 

authority under section 7805 of the 

Code. Section 7805(a) directs the 

Secretary of the Treasury or her delegate 

to prescribe all needful rules and 

regulations for the enforcement of the 

Code, including all rules and 

regulations as may be necessary by 

reason of any alteration of law in 

relation to internal revenue. 

Background 

This document sets forth proposed 

amendments to the Income Tax 

Regulations (26 CFR part 1) under 

section 162(m). Section 162(m)(1) 

disallows a deduction by any publicly 

held corporation for applicable 

employee remuneration that is 

otherwise deductible with respect to 

any covered employee to the extent that 

such remuneration for the taxable year 

exceeds $1,000,000.1 Section 162(m) 

was added to the Internal Revenue Code 

(Code) by section 13211(a) of the 

Omnibus Budget Reconciliation Act of 

1993 (Pub. L. 103–66, 107 Stat. 312, 

469). Proposed regulations under 

section 162(m) were published in the 

Federal Register by the Treasury 

Department and the IRS on December 

20, 1993 (58 FR 66310) (1993 proposed 

regulations). On December 2, 1994, the 

Treasury Department and the IRS 

published in the Federal Register 

amendments to the proposed 

regulations (59 FR 61884) (1994 

proposed regulations). On December 20, 

1995, the Treasury Department and the 


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