Layla Asali commented on the Internal Revenue Service (IRS) and U.S. Department of the Treasury's (Treasury) publication of proposed regulations on outbound asset transfers that would eliminate the existing exception for foreign goodwill and going concern value. "This is a dramatic change," Asali said. "They've had [section] 367(d) on the guidance plan for some time. But the major change ... is really happening under section 367(a) because there is now this new narrow scope of what qualifies for the active trade or business exception… The signal is that the only outbound transfers that can go forward tax free are transfers where all the value is in the fixed assets. I think that is a limited universe."

According to Asali, it is almost impossible to reconcile the approach taken in the proposed regulations with the legislative history of section 367. "I'm surprised at the breadth of this new rule," Asali said, questioning the rejection of an exception for "an honest-to-goodness foreign branch," where all the activities occur in the foreign country. "I'm a little troubled by this comment that it is impractical to administer a rule that would be targeted at the exact type of transactions that Congress expressed a view on," she said.

This article was reprinted in Tax Notes and Tax Notes International on September 21, 2015.