From Baker Botts:

On Friday, the Trump Administration placed a freeze on the issuance of final regulations defining MLP qualifying income and other recent guidance. This freeze is similar to freezes imposed by Presidents Reagan, Clinton, George W. Bush and Obama upon taking office. Freezes of this type are intended to give the new President and Cabinet time to review any new or pending rules.

The freeze applies broadly to executive departments and agencies. The tax regulations affected include the final MLP qualifying income regulations (discussed here), proposed regulations regarding the new partnership audit rules, and final and temporary regulations regarding dividend-equivalent payments. Those three regulation packages were released to the public late last week but had not yet been formally published in the Federal Register at the time the freeze went into effect.

It is not clear when or if the regulations subject to the freeze will be issued. For example, original issue discount regulations that were subject to the Clinton freeze in 1993 were not reissued for nearly two years, and in substantially different form. While the final MLP qualifying income regulations were a significant improvement over the proposed regulations on that topic issued in May 2015, they still reflect a more restrictive view of the scope of MLP qualifying income than prevailed in the Internal Revenue Service and the industry prior to May 2015. It is therefore possible that the Trump Administration will view them as requiring significant further review.

The freeze was imposed by a memorandum (available here) issued on January 20, 2017 by President Trump’s chief of staff, Reince Priebus, setting forth the following directives for heads of executive departments and agencies:

  1. Send no new regulations to the Office of the Federal Register (the “OFR”) without approval by a Trump administration department or agency head.
  2. Withdraw all regulations that have been sent to the OFR but have not yet been published in the Federal Register and subject them to approval by a Trump administration department or agency head.
  3. Postpone for at least 60 days the effective dates of regulations that have been published in the Federal Register but have not yet taken effect. During such delay the regulations will be subject to review and approval by a Trump administration department or agency head.

The memo excludes from the freeze any regulations subject to statutory or judicial deadlines and regulations that affect critical health, safety, financial, or national security matters. Once the new administration’s Treasury Secretary reviews the pending regulations, they may be approved, changed, or rejected.

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