FS Credit Opportunities Corp. v. Saba Capital Master Fund
Court: U.S. Supreme Court (pet. for writ of cert.) Amicus Issue: Whether Section 47(b) of the Investment Company Act of…
July 30, 2024
Mr. Grid Glyer
Internal Revenue Service
1111 Constitution Avenue, NW
Washington, DC 20224
Re: Comments on Certain Issues Relating to Debt Reallocations in Connection with Divisive Reorganizations Reflected in Rev. Proc. 2024-24 and Notice 2024-38
Dear Mr. Glyer:
The Securities Industry and Financial Markets Association (“SIFMA”)1 welcomes the opportunity to submit comments on certain aspects of the recently issued Rev. Proc. 2024-24 (the “Rev. Proc.”) and the associated Notice 2024-38 (the “Notice”), relating to IRS standards for issuing private letter rulings under Section 3612 in connection with so-called debt-for-debt and debt-for equity exchanges, as well as leveraged distributions, in each case in connection with divisive reorganizations under Sections 368(a)(1)(D) and 355.
SIFMA’s interest in these issues arises not from the prospect of any of our members engaging in a divisive reorganization, but rather because our members regularly provide financing and other assistance to our clients in executing divisive reorganizations, particularly in connection with transactions intended to allocate debt and other liabilities of Distributing3 between Distributing and Controlled. We particularly appreciate the invitation for “Intermediaries” like our members to provide feedback to “help ensure that future [IRS] guidance is responsive to the business and market-risk considerations that inform the mechanics of intermediated exchanges and direct issuance transactions.”4
I. Executive Summary
Tax-free reallocation of liabilities has long been a central component of divisive reorganizations. As the IRS’s views of such transactions – and concerns about potential abuses of such transactions – have evolved, guidance, both formal and informal, as to the basis on which the IRS will issue private letter rulings in this area has changed over time. The Rev. Proc. and Notice represent the IRS’s latest attempt to provide such guidance, including provisions that represent a departure from prior practice. SIFMA members are significant participants in these transactions, as lenders, underwriters and intermediaries, and it is from this perspective that we offer some comments on this guidance. Specifically, the IRS must: