Section 367(b) Proposed Regulations on Triangular Reorganizations and Inbound Nonrecognition Transactions

Summary

This practice note discusses proposed regulations that the Treasury Department issued in October 2023 addressing perceived abuses by taxpayers in certain cross-border reorganizations and transactions. Congress enacted Code Section 367(b) in hopes of preventing taxpayers from avoiding U.S. tax on the repatriation of foreign earnings, but the choices that they made in the drafting of Section 367 have created significant amounts of confusion and complexity in the decades since its enactment. Although this principle sounds simple, the practical application of the Treasury Department's policy is extremely complex. This practice note provides a high-level overview of the new proposed regulations and their potential impact on cross-border transactions and reorganizations.