Repatriation tax avoidance

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Repatriation tax avoidance is the legal use of a tax regime within a country in order to repatriate income earned by foreign subsidiaries to a parent corporation while avoiding taxes ordinarily owed to the parent's country on the repatriation of foreign income.^[1] Prior to the passage of the Tax Cuts and Jobs Act of 2017, multinational firms based in the United States owed the U.S. government taxes on worldwide income.^[2] Companies avoided taxes on the repatriation of income earned abroad through a variety of strategies involving the use of mergers and acquisitions.^[1][2] Three main types of strategies emerged and were given names—the "Killer B", "Deadly D", and "Outbound F"—each of which took advantage of a different area of the Internal Revenue Code to conduct tax-exempt corporate reorganizations.^[1]

The application of repatriation tax avoidance strategies has drawn public scrutiny. Several large corporate acquisitions have involved significant repatriation tax avoidance strategies, including Merck & Co.'s acquisition of Schering-Plough and Johnson & Johnson's acquisition of Synthes.^[3] The use of repatriation tax avoidance strategies has been compared with the use of Double Irish arrangements to avoid taxes, though the two tax avoidance plans differ in the sorts of taxes that they allow a company to avoid. Double Irish arrangements have allowed multinational companies to avoid taxes owed to countries in which foreign subsidiaries of a U.S.-based multinational corporation are incorporated. Repatriation tax avoidance strategies, however, have allowed U.S.-domiciled companies to avoid owing taxes to the United States.