Treasury Finalizes "Killer B" Regulations With Few Adjustments

On July 17, the U.S. Treasury and IRS released final regulations targeting various inbound cross-border transactions broadly referred to as "Killer B" transactions, marking the end (for now) of a long-running regulatory fight against what the IRS has long regarded as an abuse of corporate reorganizations to repatriate cash from foreign subsidiaries without recognizing dividend income.

As previously discussed in Brass Tax, the paradigmatic "Killer B" transaction entails a foreign subsidiary of a U.S. parent repatriating cash to the parent by purchasing stock from the parent and then using that stock to acquire stock of another foreign subsidiary in a purportedly tax-free reorganization. In order to combat various permutations of this perceived abuse, the IRS and Treasury issued notices in 2006 and 2007, regulations adopted in 2011, additional notices in 2014 and 2016 and additional proposed regulations in 2023.