Q&A with the Pennsylvania Department of Revenue

Please state whether a spinoff that is tax-free under IRC § 355(b) is also tax-free for PIT purposes.

Sep 30, 2013
PA PIT law does not specifically incorporate or follow IRC § 355 like some other IRC provisions. However, PA PIT does contain provisions that exempt certain types of corporate reorganizations from tax which would otherwise normally create taxable gain. Those provisions can be found at 72 P.S. § 7303(a)(3)(iv). If the spinoff meets the statutory criteria of a reorganization, then any gain would not be taxable. A blanket statement whether all IRC § 355 spinoffs are tax-free for PA PIT purposes cannot be issued without having all the possible scenarios in which IRC Section 355 can be applied. If specific facts are provided for a taxpayer, the department would be happy to provide an opinion on those facts as they relate to that specific situation.

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These documents provide a summary of the answers provided by the Department of Revenue to the PICPA Committee on State Taxation at its annual question and answer session. These documents are classified as revenue information issued for informational purposes only for the convenience of PICPA members. Pursuant to 61 Pa. Code Section 3.4, these documents should not be relied upon for any purpose or used in tax appeals. Taxpayers requiring a binding opinion on their specific fact situation may request a written letter ruling under 61 Pa. Code Section 3.3.