Yes, the headline sounds like it took a wrong turn through a government memo. But the tax development behind it is very real, and for cross-border companies it is more important than the awkward grammar suggests. In Notice 2025-45, the U.S. Department of the Treasury and the Internal Revenue Service said they intend to issue proposed regulations under Internal Revenue Code Sections 897(d) and 897(e), while also clarifying a key rule under Section 368(a)(1)(F). Translation: the government wants to make it easier for certain publicly traded foreign corporations to redomicile into the United States without getting tripped by outdated tax rules that behave like they still use a fax machine.
This matters because the existing framework under FIRPTA, the Foreign Investment in Real Property Tax Act, can create tax recognition and compliance headaches in deals that may not be abusive at all. Treasury and the IRS are essentially saying, “We see the problem, we think the old rules overshoot in certain public-company redomiciliations, and we want to fix that.” That is not a final regulation yet. It is a notice previewing proposed rules and inviting comments. Still, the notice is detailed enough to tell the market where policy is heading, and that makes it a big deal for tax departments, deal teams, boards, and investors trying to understand whether an inbound F reorganization can happen without unnecessary tax drama.
What the Government Actually Announced
The official notice is a mouthful: Application of Sections 897(d) and (e) to Certain Inbound Asset Reorganizations under Section 368(a)(1)(F); Stock Ownership Requirement under Section 368(a)(1)(F). Government titles are rarely built for speed. The substance, however, is fairly clear. Treasury and the IRS announced their intent to issue proposed regulations that would adjust how FIRPTA applies to certain inbound F reorganizations involving United States real property interests, or USRPIs.
The notice also previews a second fix. Treasury and the IRS want to clarify that an F reorganization should not fail merely because stock in the transferor or resulting corporation changes hands outside the plan of reorganization. That may sound like a tiny drafting point, but in the public markets it is not tiny at all. Public shareholders buy and sell shares all the time. If random market trades could sink an otherwise valid reorganization, then planning a clean redomiciliation would feel like trying to set a dinner table during a windstorm.
Why the Old Rules Created a Problem
To understand the proposed fix, you need the short version of the old pain. FIRPTA generally taxes foreign persons on gains from dispositions of U.S. real property interests. That includes not only direct real estate, but also certain stock interests tied to corporations holding a lot of U.S. real estate. The policy goal is straightforward: if foreign owners profit from U.S. real property, the United States wants a shot at the tax.
That principle makes sense. The trouble starts when the same rules are dropped onto a public-company redomiciliation that does not really smell like tax avoidance. Under the existing temporary regulations and older notices, a publicly traded foreign corporation that holds USRPIs and wants to become a publicly traded domestic corporation through an inbound F reorganization may face gain-recognition consequences and extensive shareholder declaration requirements. In a world of constantly trading public stock, that can be a compliance nightmare.
Think about the practical absurdity. A company may need declarations or information linked to a broad and shifting shareholder base, even where many of those shareholders are small public investors and the transaction itself does not meaningfully strip the United States of taxing power. Treasury and the IRS appear to have concluded that the existing rules can be too blunt for these situations. In tax policy terms, the current system can over-collect friction where it is not actually collecting better policy.
What Is a “Covered Inbound F Reorganization”?
The basic definition
The notice creates the concept of a covered inbound F reorganization. This is the category that would receive the targeted relief. In simple terms, it involves an F reorganization where the transferor is a publicly traded foreign corporation and the resulting entity is a publicly traded domestic corporation.
But not every public-company move gets a golden ticket. The foreign corporation’s principal class of stock must have been regularly traded on an established securities market during the three years before the reorganization. The resulting domestic corporation’s principal class of stock must then be regularly traded for the one-year period after the reorganization. The rule is clearly designed to target genuine public-company redomiciliations, not transactions dressed up in a tuxedo five minutes before the wedding.
The no funny-business limitation
The relief also comes with a boundary line. A transaction that would otherwise qualify is kicked out of the “covered” category if, as part of a plan or series of related transactions, the resulting domestic corporation transfers non-cash property to shareholders in connection with the F reorganization. There is a narrow de minimis exception if the fair market value of that property is less than 1% of the total asset value of the foreign transferor corporation at completion.
That limitation is not just fine print. It shows Treasury and the IRS are trying to separate plain-vanilla redomiciliations from transactions that might involve additional distributions or value shifts that raise more serious policy concerns.
The Most Important Policy Shift: Relief from FIRPTA Friction
Using the public-shareholder exception more sensibly
One of the notice’s smartest moves is that it aligns the analysis with the existing public-shareholder concept in Section 897(c)(3). Under that rule, stock in a publicly traded U.S. real property holding corporation generally is treated as a USRPI only for shareholders who held more than 5% of the relevant class of stock during the relevant period. In other words, small shareholders in widely traded stock are generally not the main FIRPTA target.
The forthcoming proposed regulations would bring that common-sense concept into covered inbound F reorganizations. If a shareholder would fall within the Section 897(c)(3) exception, the notice indicates that outcome should matter for the gain-recognition framework as well. That dramatically improves the fit between FIRPTA’s policy objective and the reality of public-company ownership.
Less paperwork for the wrong people
The current rules can require declarations tied to distributees of stock, which is manageable in a closely held setting and far less manageable when ownership changes every time someone sneezes near a trading screen. The notice would narrow that burden. For covered inbound F reorganizations, declarations would be required only with respect to distributees the foreign transferor corporation knows or has reason to know do not qualify for the Section 897(c)(3) exception. The company must make reasonable efforts, including reviewing public information, but it would not be expected to perform clairvoyance.
That is a huge practical shift. It turns a potentially massive compliance exercise into a more targeted one focused on shareholders that actually matter for FIRPTA risk.
Nonrecognition treatment gets a better fit
The notice also states that, for purposes of Section 897(e)(1), nonrecognition treatment under Section 361(a) would apply in a covered inbound F reorganization even if the stock of the resulting domestic corporation is not itself a USRPI. The foreign transferor corporation still has filing requirements, but the broader policy message is unmistakable: Treasury and the IRS do not think these transactions inherently threaten the U.S. tax base in the way the old rules assumed.
The F Reorganization Clarification May Be Just as Important
If you work in transactional tax, you know that some of the scariest problems are not always giant policy debates. Sometimes they are technical “what if this tiny thing blows up the whole structure?” problems. That is why the notice’s clarification under Section 368(a)(1)(F) matters so much.
Treasury and the IRS propose to clarify that the identity-of-stock-ownership requirement is not violated by a disposition of stock in the transferor or resulting corporation if that disposition is not part of the plan of reorganization. For public companies, that is a major dose of reality. Market trading can continue during a multi-step transaction. The sky should not fall merely because unrelated shareholders keep being shareholders in the normal, unruly way shareholders tend to be.
The notice even includes an example in which some shareholders sell stock between transaction steps, yet the F reorganization remains intact because those sales are not part of the plan. That is exactly the kind of technical clarity practitioners love: not glamorous, not flashy, but incredibly useful when someone in a deal room asks, “Are we sure random market activity is not going to wreck this?”
Why Treasury and the IRS Think This Change Is Justified
The agencies say the redomiciliation transactions described in the notice do not create a risk of inappropriate avoidance under Section 897. That is the heart of the policy rationale. Treasury and the IRS are not backing away from FIRPTA. They are saying FIRPTA should hit the right target.
That distinction matters. Good tax administration is not only about stopping abuse. It is also about avoiding unnecessary friction in legitimate transactions. When a rule designed for one fact pattern causes chaos in another, regulators either live with the mismatch or recalibrate. Notice 2025-45 is a recalibration exercise. It tries to preserve protection where there is real exposure while reducing false positives in public-company inbound reorganizations.
Seen through that lens, this is not a giveaway. It is a narrowing move. Relief is limited, definitions are tight, filing requirements remain, and the transaction loses the preferred treatment if related non-cash distributions muddy the waters. The government is not rolling out a red carpet for every cross-border restructure. It is just removing a few tax rakes from the lawn.
Who Should Care Most
Publicly traded foreign corporations considering a U.S. move
This is the obvious audience. If a foreign public company with U.S. real property exposure wants to redomicile into the United States for capital markets, governance, operational, or strategic reasons, the notice makes that path less hostile.
Tax departments and in-house legal teams
In-house teams care because the notice improves planning certainty. It gives them a clearer framework for evaluating whether a transaction can fit within a covered inbound F reorganization and what diligence steps will be expected around shareholder information and filing requirements.
Advisers and boards
Outside counsel, accounting firms, and boards of directors care because this notice changes both risk assessment and execution. Deals that once looked technically possible but operationally miserable may now look more manageable. That does not make them easy. It makes them less likely to die from paperwork and interpretive anxiety.
What Happens Next
This is still a notice, not final law. Under the IRS rulemaking process, a notice of proposed rulemaking is the formal step that contains proposed regulatory text and invites public comment before final regulations are adopted. Notice 2025-45 is a preview notice: it lays out the intended direction, describes the substantive approach, and requests comments. That is meaningful, but it is not the last chapter.
The notice says the forthcoming proposed regulations will apply to distributions, transfers, or exchanges occurring on or after August 19, 2025. It also allows taxpayers to rely on the rules in the notice before the regulations are published in the Federal Register, provided they follow the rules fully and consistently. Comments were requested by October 20, 2025. That timeline shows Treasury and the IRS wanted the market to have immediate planning guidance instead of waiting around for the full regulatory machine to finish stretching first.
Real-World Experience: What This Topic Looks Like in Practice
In real life, a development like this does not arrive as a dramatic movie moment where a tax director slams a binder on a mahogany table and yells, “Eureka, Section 897 has been tamed!” It usually arrives as a quietly forwarded email, a short internal meeting, and then a surprisingly long discussion about whether the new guidance solves the problem everyone has been dancing around for months. That is the real experience of these IRC regulation announcements: they are often understated on the surface and deeply consequential underneath.
Imagine a publicly traded foreign corporation with a meaningful U.S. footprint. The company may want to move its place of incorporation for business reasons that have nothing to do with dodging tax. Maybe it wants better alignment with its investor base. Maybe its board wants a cleaner legal structure. Maybe acquisition currency, listing strategy, or governance simplicity pushes it toward a U.S. domicile. On paper, that can sound reasonable. In practice, old FIRPTA rules may turn the tax workstream into the corporate equivalent of hiking with a piano strapped to your back.
One of the most frustrating parts has been the shareholder-data issue. Public companies do not have the tidy ownership map that private companies do. Their shareholder base moves. It shifts daily. Some holders are small, some are intermediated, some are visible only through layers of reporting. When a rule assumes you can neatly identify, contact, and document everyone who matters, the deal team starts to develop that thousand-yard stare familiar to anyone who has lived through a complicated closing checklist. The notice helps because it targets the real risk instead of pretending the public market behaves like a family-owned corporation with twelve cousins and one spreadsheet.
There is also the emotional side of transaction planning that never quite shows up in regulatory prose. Boards want confidence. In-house counsel wants a defendable path. Tax advisers want technical certainty. Bankers want speed. Everyone wants the transaction to work, but nobody wants to be the person who says, two weeks before signing, “There is a weird stock-ownership continuity issue because public trading happened between steps.” The notice’s clarification on identity of stock ownership helps precisely because it reduces the odds of that kind of avoidable panic.
Another practical experience tied to this topic is the comment process itself. When Treasury and the IRS issue a notice like this, experienced taxpayers and advisers do not just read it and nod politely. They mark it up. They test it against real structures. They ask where definitions are too narrow, where filing mechanics are still clunky, and where examples need to be added. That feedback loop is one of the healthiest parts of tax administration. It is not glamorous, but it is how rules become more usable and less theoretical.
So the lived experience around “Departments Announces Intent to Proposes IRC Regulations” is really the experience of watching tax administration try to catch up with market reality. It is lawyers, accountants, executives, and government officials all wrestling with the same question: how do you preserve the tax base without making ordinary commercial transactions ridiculously hard? Notice 2025-45 does not solve every cross-border tax problem. Nothing in international tax ever solves every problem. But it does something valuable. It admits that some older rules fit modern public-company reorganizations badly and that better calibration is possible. In tax, that kind of honesty is almost refreshing enough to deserve its own parade.
Conclusion
The headline may be clunky, but the policy move is sharp. Treasury and the IRS have signaled that they want FIRPTA to work with more precision in the context of certain public-company inbound F reorganizations. By creating a targeted framework for covered inbound F reorganizations, narrowing declaration burdens, coordinating the analysis with the 5% public-shareholder rule, and clarifying that unrelated stock trades do not wreck F reorganization status, Notice 2025-45 gives taxpayers a more realistic roadmap.
For companies weighing a U.S. redomiciliation, the message is encouraging but measured. This is not a free pass. It is a practical narrowing of rules that were producing too much friction in cases Treasury and the IRS do not view as abusive. The notice is also a reminder that tax regulation is at its best when it does not just police the system, but also understands how actual businesses operate. Miracles are rare in tax law, but fewer pointless headaches? That is close enough to celebration.