Former British Prime Minister Winston Churchill once said, “Plans are of little importance, but planning is essential.” Perhaps that quote is a tad strong to apply generally to corporate reorganizations under Section 368 of the Internal Revenue Code. Plans, after all, are very important—if not essential—in the context of corporate reorganizations. However, based on a recent Private Letter Ruling, the Internal Revenue Service (“IRS”) noted that the “plan of reorganization” requirement for an “F” reorganization was not undermined by a subsequent change to the plan midstream. Effectively, in this instance, a change to the plan was “of little importance.”
Corporate Reorganizations, Generally
Generally, corporate reorganizations are defined under Section 368(a)(1)(A)-(G) and may take many different forms.[1]An “A” reorganization, for example, is defined as a plain statutory merger or consolidation. An “E” reorganization is defined as a recapitalization. These corporate reorganizations must generally meet certain requirements to potentially qualify for tax-free treatment:
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