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August 01, 2024
Cadwalader Tax Group chair Linda Swartz spoke with Law360’s Tax Authority about recent U.S. Treasury Department regulations centered on contentious 2011 guidance aimed at so-called Killer B transactions.
The article, “Treasury's New 'Killer B' Rules May Revive Controversies,” noted that the regulations have revived longstanding questions about how much authority rule writers have to target what they perceive as corporate tax avoidance in these maneuvers. While the regulations have highlighted “contentions that the anti-abuse rule operates beyond the statute, the procedural path to litigating a substantive challenge may still be an uphill climb.”
As Linda shared with Law360, during the mid-2000s, taxpayers felt strongly that the grant of authority under Section 367(b) did not cover the anti-Killer B regulations. Even understanding the deference the regulations would receive under Chevron, taxpayers believed they could win a case to invalidate them, she said.
However, the logistics of challenging the regulations were prohibitive. As Linda pointed out to the publication, companies would have needed to pay the tax assessed in order to access a district court, take the time necessary to prepare the case for trial, try the case, and then wait for the IRS to appeal a successful verdict and try the case again.
Even though taxpayers now have a stronger case for challenging the regulations, Linda said, doing so "would be no less procedurally daunting."
Read it here.
