Bret Wells (Houston; Google Scholar), Reform of Section 367(a) and Section 367(b) for a Post-TCJA Era, 22 Hous. Bus. & Tax L.J. __ (2022):

Section 367 grants regulatory authority for the Treasury Department to divine whether and to what extent the normal Subchapter C rules should be modified in order to prevent tax avoidance when nonrecognition transactions involve a foreign corporation. But even though these policy goals are left for the Treasury Department to divine, it is still incumbent upon the Treasury Department to divine these goals in light of the design parameters that Congress has set forth in existing law. The Treasury Department has been diligent in its usage of Section 367(a) and Section 367(b) to protect the U.S. tax base from inappropriate tax avoidance transactions. Throughout that effort, the Treasury Department has rightly recognized that the normal Subchapter C rules might not adequately address tax avoidance concerns when nonrecognition transactions involve foreign corporations. So, when those nonrecognition provisions of Subchapter C intersect with a foreign corporation, Section 367 provides broad authority to the Treasury to turn off the nonrecognition provisions when appropriate.

The voluminous regulations under Section 367, in provisions of numbing complexity, severely limit nonrecognition of gain in international corporate transactions to protect the U.S. tax base according to an elusive goal of ferreting out possible tax avoidance restructurings involving a foreign corporation. The regulations work by imposing conditions—known colloquially as “toll charges”—on international reorganizations whenever those reorganizations pose the risk of tax avoidance. Sometimes, the condition is partial or complete immediate recognition of gain; in other cases, it is the preservation of certain tax attributes.