The flurry of Opco-Propco REIT conversions has hit a stumbling block this week when the IRS issued a Revenue Procedure announcing a “no rule” policy for a key corporate tax issue for many REIT spin offs. Basically to do a tax-free REIT spin off, the existing single corporation must be able to qualify the REIT entity as having a 5-year history as an “active trade or business”. Traditionally companies ask the IRS’s blessing that the new REIT’s assets met this very factual inquiry. However, the IRS now says it will “not ordinarily” issue those Section 355 rulings if the transaction is part of a plan to separate a REIT (or RIC) from a taxable C corporation. The “no rule” also applies to cases where the “active” business of either the historical or the spun off corporation is small (less than 5%) when compared to the value of the assets of that corporation. The latter issue is often described as whether a “mere peppercorn” of a business is sufficient for a spin off. The revenue procedure applies to all ruling requests that are postmarked or, if not mailed, received on or after September 14, 2015, and relate to distributions that occur after such date.