The IRS released Notice 2025-45 on Aug. 19 announcing its intent to issue proposed regulations under Section 897(d) and Section 897(e) that modify the application of the rules described in §§1.897-5T and 1.897-6T, Notice 89-85, and Notice 2006-46 regarding inbound section 368(a)(1)(F) reorganizations. These rules are aimed at reducing impediments to publicly traded foreign corporations redomiciling into the United States.
Historically, these transactions have often triggered Foreign Investment in Real Property Tax Act (“FIRPTA”) gain recognition. For example, a publicly traded foreign corporation that holds USRPIs may, for valid non-tax business reasons, desire to become a publicly traded domestic corporation in a transaction that would otherwise qualify for nonrecognition treatment but would result in the imposition of tax under section 897(d) or (e). The notice would provide relief for “covered inbound F reorganizations,” defined as transactions in which a publicly traded foreign corporation becomes a publicly traded domestic corporation. The notice provides exceptions to the gain recognition rules described in §§1.897-5T(c)(4) and 1.897-6T(a), Notice 89-85, and Notice 2006-46 in certain circumstances and outlines what those circumstances are.
The proposed regulations are expected to apply to distributions, transfers, or exchanges occurring on or after Aug. 19, 2025, but taxpayers may rely on the Notice immediately if applied in full and consistently.
For foreign public companies considering a U.S. re-domiciliation, the guidance provides a clearer pathway to nonrecognition treatment and streamlined compliance. Organizations should evaluate whether their contemplated transaction meets the definition of a “covered inbound F reorganization” and consider the potential benefits of early reliance.
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