Internal Revenue Bulletin 2024-35 (PDF rendition): IRS Revenue Rulings

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Bulletin No. 2024–35
August 26, 2024
HIGHLIGHTS
OF THIS ISSUE
These synopses are intended only as aids to the reader in
identifying the subject matter covered. They may not be
relied upon as authoritative interpretations.
ESTATE TAX
Rev. Rul. 2024-16, page 534.
Special Use Value: Farms: Interest Rates. The 2024 interest
rates to be used in computing the special use value of farm
real property for which an election is made under section
2032A of the Code are listed for estate of decedents.
EXEMPT ORGANIZATIONS
Announcement 2024-32, page 535.
Revocation of IRC 501(c)(3) Organizations for failure to meet
the code section requirements. Contributions made to the
organizations by individual donors are no longer deductible
under IRC 170(b)(1)(A).
INCOME TAX
REG-105128-23, page 536.
Section 1503(d) and the regulations thereunder determine
the deductibility of certain losses of a domestic corporation.
The proposed regulations provide rules that would refine cer-
tain computations and would also address the application of
section 1503(d) to certain foreign taxes that are intended to
ensure that multinational enterprises pay a minimum level of
tax. The proposed regulations also contain rules regarding
certain disregarded payments of domestic corporations that
give rise to losses for foreign tax purposes.
Finding Lists begin on page ii.

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Provide America’s taxpayers top-quality service by helping
them understand and meet their tax responsibilities and
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Introduction
The Internal Revenue Bulletin is the authoritative instrument
of the Commissioner of Internal Revenue for announcing offi-
cial rulings and procedures of the Internal Revenue Service
and for publishing Treasury Decisions, Executive Orders, Tax
Conventions, legislation, court decisions, and other items of
general interest. It is published weekly.
It is the policy of the Service to publish in the Bulletin all sub-
stantive rulings necessary to promote a uniform application
of the tax laws, including all rulings that supersede, revoke,
modify, or amend any of those previously published in the
Bulletin. All published rulings apply retroactively unless other-
wise indicated. Procedures relating solely to matters of inter-
nal management are not published; however, statements of
internal practices and procedures that affect the rights and
duties of taxpayers are published.
Revenue rulings represent the conclusions of the Service
on the application of the law to the pivotal facts stated in
the revenue ruling. In those based on positions taken in rul-
ings to taxpayers or technical advice to Service field offices,
identifying details and information of a confidential nature are
deleted to prevent unwarranted invasions of privacy and to
comply with statutory requirements.
Rulings and procedures reported in the Bulletin do not have the
force and effect of Treasury Department Regulations, but they
may be used as precedents. Unpublished rulings will not be
relied on, used, or cited as precedents by Service personnel in
the disposition of other cases. In applying published rulings and
procedures, the effect of subsequent legislation, regulations,
court decisions, rulings, and procedures must be considered,
and Service personnel and others concerned are cautioned
against reaching the same conclusions in other cases unless
the facts and circumstances are substantially the same.
The Bulletin is divided into four parts as follows:
Part I.—1986 Code.
This part includes rulings and decisions based on provisions
of the Internal Revenue Code of 1986.
Part II.—Treaties and Tax Legislation.
This part is divided into two subparts as follows: Subpart A,
Tax Conventions and Other Related Items, and Subpart B,
Legislation and Related Committee Reports.
Part III.—Administrative, Procedural, and Miscellaneous.
To the extent practicable, pertinent cross references to these
subjects are contained in the other Parts and Subparts. Also
included in this part are Bank Secrecy Act Administrative
Rulings. Bank Secrecy Act Administrative Rulings are issued
by the Department of the Treasury’s Office of the Assistant
Secretary (Enforcement).
Part IV.—Items of General Interest.
This part includes notices of proposed rulemakings, disbar-
ment and suspension lists, and announcements.
The last Bulletin for each month includes a cumulative index
for the matters published during the preceding months. These
monthly indexes are cumulated on a semiannual basis, and are
published in the last Bulletin of each semiannual period.
The contents of this publication are not copyrighted and may be reprinted freely. A citation of the Internal Revenue Bulletin as the source would be appropriate.
August 26, 2024 Bulletin No. 2024–35

Part I
Section 2032A.—Valuation
of Certain Farm, Etc.,
Real Property
26 CFR 20.2032A-4: Method of valuing farm real
property.
Rev. Rul. 2024-16
This revenue ruling contains a list of
the average annual effective interest rates
on new loans under the Farm Credit Sys-
tem. This revenue ruling also contains a
list of the states within each Farm Credit
System Bank Territory.
Under § 2032A(e)(7)(A)(ii) of the
Internal Revenue Code, rates on new
Farm Credit System Bank loans are
used in computing the special use
value of real property used as a farm
for which an election is made under
§ 2032A. The rates in Table 1 of this
revenue ruling may be used by estates
that value farmland under § 2032A as
of a date in 2024.
Average annual effective interest
rates, calculated in accordance with
§ 2032A(e)(7)(A) and § 20.2032A-4(e)
of the Estate Tax Regulations, to be used
under § 2032A(e)(7)(A)(ii), are set forth
in the accompanying Table of Interest
Rates (Table 1). The states within each
Farm Credit System Bank Territory are
set forth in the accompanying Table of
Farm Credit System Bank Territories
(Table 2).
Rev. Rul. 81-170, 1981-1 C.B. 454,
contains an illustrative computation of
an average annual effective interest rate.
The rates applicable for valuation in 2023
are in Rev. Rul. 2023-15, 2023-34 I.R.B.
559. For rate information for years prior
to 2023, see Rev. Rul. 2022-16, 2022-35
I.R.B. 171, and other revenue rulings that
are referenced therein.
DRAFTING INFORMATION
The principal author of this revenue
ruling is Lane Damazo of the Office of the
Associate Chief Counsel (Passthroughs
and Special Industries). For further infor-
mation regarding this revenue ruling, con-
tact Lane Damazo at (202) 317-4628 (not
a toll-free call).
REV. RUL. 2024-16 TABLE 1
TABLE OF INTEREST RATES
(Year of Valuation 2024)
Farm Credit System Bank Servicing State in
Which Property is Located Rate
AgFirst, FCB ................................. 5.78
AgriBank, FCB ............................... 5.27
CoBank, ACB ................................ 5.30
Texas, FCB .................................. 5.70
REV. RUL. 2024-16 TABLE 2
TABLE OF FARM CREDIT SYSTEM BANK TERRITORIES
Farm Credit System Bank Location of Property
AgFirst, FCB .................................... Delaware, District of Columbia, Florida, Georgia,
Maryland, North Carolina, Pennsylvania, South Carolina,
Virginia, West Virginia.
AgriBank, FCB ................................ Arkansas, Illinois, Indiana, Iowa, Kentucky, Michigan,
Minnesota, Missouri, Nebraska, North Dakota, Ohio,
South Dakota, Tennessee, Wisconsin, Wyoming.
CoBank, ACB ..................................
Alaska,
Arizona, California, Colorado, Connecticut,
Hawaii, Idaho, Kansas, Maine, Massachusetts, Montana,
New Hampshire, New Jersey, New Mexico, New York,
Nevada, Oklahoma, Oregon, Rhode Island, Utah, Vermont,
Washington.
Texas, FCB .......................................
Alabama, Louisiana, Mississippi,
Texas.
August 26, 2024 534 Bulletin No. 2024–35

Part IV
Announcement 2024-32
Deletions From Cumulative
List of Organizations,
Contributions to Which are
Deductible Under Section
170 of the Code
Table of Contents
The Internal Revenue Service has revoked
its determination that the organizations
listed below qualify as organizations
described in sections 501(c)(3) and 170(c)
(2) of the Internal Revenue Code of 1986.
Generally, the IRS will not disallow
deductions for contributions made to a
listed organization on or before the date
of announcement in the Internal Revenue
Bulletin that an organization no longer
qualifies. However, the IRS is not pre-
cluded from disallowing a deduction for
any contributions made after an organiza-
tion ceases to qualify under section 170(c)
(2) if the organization has not timely filed
a suit for declaratory judgment under sec-
tion 7428 and if the contributor (1) had
knowledge of the revocation of the ruling
or determination letter, (2) was aware that
such revocation was imminent, or (3) was
in part responsible for or was aware of the
activities or omissions of the organization
that brought about this revocation.
If on the other hand a suit for declaratory
judgment has been timely filed, contri-
butions from individuals and organiza-
tions described in section 170(c)(2) that
are otherwise allowable will continue
to be deductible. Protection under sec-
tion 7428(c) would begin on August 26,
2024, and would end on the date the court
first determines the organization is not
described in section 170(c)(2) as more
particularly set for in section 7428(c)(1).
For individual contributors, the maximum
deduction protected is $1,000, with a hus-
band and wife treated as one contributor.
This benefit is not extended to any indi-
vidual, in whole or in part, for the acts or
omissions of the organization that were
the basis for revocation.
Name Of OrganizationEffective Date of RevocationLocation
Covenant of Blessing International Church Inc. 1/1/2019Indianapolis, IN
Willits-Robinson Preservation Foundation7/1/2016Highland Park, IL
Lil Bit of Love Rescue1/1/2018Maricopa, AZ
National Christian Information Center Inc 1/01/2019Valley Center, CA
Bulletin No. 2024–35 535 August 26, 2024

August 26, 2024 536 Bulletin No. 2024–35
Notice of Proposed
Rulemaking
REG-105128-23
Rules Regarding Dual
Consolidated Losses and
the Treatment of Certain
Disregarded Payments
AGENCY: Internal Revenue Service
(IRS), Treasury.
ACTION: Notice of proposed rulemak-
ing.
SUMMARY: This document contains
proposed regulations that address certain
issues arising under the dual consolidated
loss rules, including the effect of inter-
company transactions and items arising
from stock ownership in calculating a
dual consolidated loss. The proposed reg-
ulations also address the application of the
dual consolidated loss rules to certain for-
eign taxes that are intended to ensure that
multinational enterprises pay a minimum
level of tax, including exceptions to the
application of the dual consolidated loss
rules with respect to such foreign taxes.
Finally, the proposed regulations include
rules regarding certain disregarded pay-
ments that give rise to losses for foreign
tax purposes.
DATES: Written or electronic comments
and requests for a public hearing must be
received by October 7, 2024.
ADDRESSES: Commenters are strongly
encouraged to submit public comments
electronically via the Federal eRulemak-
ing Portal at https://www.regulations
(indicate IRS and REG-105128-23) by
following the online instructions for sub-
mitting comments. Requests for a public
hearing must be submitted as prescribed
in the “Comments and Requests for a
Public Hearing” section. Once submitted
to the Federal eRulemaking Portal, com-
ments cannot be edited or withdrawn. The
Department of the Treasury (Treasury
Department) and the IRS will publish for
public availability any comments submit-
ted to the IRS’s public docket. Send paper
submissions to: CC:PA:01:PR (REG-
105128-23), Room 5203, Internal Reve-
nue Service, P.O. Box 7604, Ben Franklin
Station, Washington, DC 20044.
FOR FURTHER INFORMATION
CONTACT: Concerning the proposed
regulations generally, Andrew L. Wig-
more at (202) 317-5443; concerning the
proposed regulations regarding intercom-
pany transactions, Julie Wang at (202)
317-6975; concerning submissions of
comments or requests for a public hear-
ing, Publications and Regulations Section
at (202) 317-6901 (not toll-free numbers)
or by email at publichearings@irs.gov
(preferred).
SUPPLEMENTARY INFORMATION:
Background
I. The Dual Consolidated Loss Rules
A. In general
Section 1503(d) was enacted in
response to concerns that taxpayers were
isolating expenses in dual resident cor-
porations to enable two profitable com-
panies, subject to tax in two different
jurisdictions, to use the dual resident cor-
poration’s losses. See S. Rep. No. 99-313,
99th Cong., 2nd Sess., at 419-421 (1986).
Section 1503(d) and the regulations there-
under are intended to prevent this result
and to neutralize other types of “dou-
ble-deduction outcomes,” that is, where
the same economic loss could be used to
offset or reduce both income subject to
U.S. tax (but not a foreign jurisdiction’s
tax) and income subject to the foreign
jurisdiction’s tax (but not U.S. tax). See
id. and TD 9315 (72 FR 12902).
Section 1503(d)(1) generally provides
that a dual consolidated loss of a domes-
tic corporation cannot reduce the taxable
income of a domestic affiliate (a “domes-
tic use”). See also §§1.1503(d)-2 and
1.1503(d)-4(b). Except as provided in regu-
lations under section 1503(d)(2)(B), section
1503(d)(2)(A) defines a dual consolidated
loss as any net operating loss of a domestic
corporation which is subject to an income
tax of a foreign country without regard to
whether such income is from sources in or
outside of such foreign country, or is subject
to such a tax on a residence basis. Section
1503(d)(3) provides regulatory authority to
treat any loss of a separate unit of a domes-
tic corporation as a dual consolidated loss.
1

Accordingly, §1.1503(d)-1(b)(5) defines
a dual consolidated loss as a net operating
loss of a dual resident corporation or the net
loss of a domestic corporation attributable
to a separate unit.
A dual resident corporation is gener-
ally defined as a domestic corporation
that is subject to an income tax of a for-
eign country on its worldwide income or
on a residence basis. See §1.1503(d)-1(b)
(2)(i). A separate unit is generally defined
as either a foreign branch (defined in
§1.1503(d)-1(b)) or an interest in a hybrid
entity
2
that is carried on or owned, as appli-
cable, directly or indirectly, by a domestic
corporation (a “domestic owner” of the
separate unit). See §1.1503(d)-1(b)(4)(i).
An affiliated dual resident corporation and
an affiliated domestic owner are defined as
a dual resident corporation and a domestic
owner, respectively, that is a member of
a consolidated group. See §1.1503(d)-1(b)
(10).
Pursuant to section 1503(d)(2)(B), the
dual consolidated loss regulations pro-
vide certain exceptions to the general
prohibition against the domestic use of a
dual consolidated loss. For example, the
domestic use limitation does not apply
if, pursuant to a “domestic use election,”
the taxpayer certifies that there has not
been and will not be a “foreign use” of
the dual consolidated loss during a cer-
tification period.
3
See §1.1503(d)-6(d).
1
Although the term “separate unit” is not defined in the statute, the legislative history to section 1503(d)(3) provides one example: a foreign branch the losses of which are, under foreign
law, able to offset income of an affiliated foreign corporation. See H.R. Rep. No. 100-795, 100th Cong., 2d Sess., at 292-93 (1988).
2
Hybrid entity means an entity that is not taxable as an association for U.S. tax purposes but is subject to an income tax of a foreign country as a corporation (or otherwise at the entity level)
either on its worldwide income or on a residence basis. §1.1503(d)-1(b)(3).
3
Section 1.1503(d)-6(b) (involving certain elective agreements between the United States and a foreign country) and §1.1503(d)-6(c) (if it can be demonstrated that there is no possibility of
a foreign use) also provide exceptions to the prohibition on domestic use.

Bulletin No. 2024–35 537 August 26, 2024
If a foreign use or other triggering event
occurs during the certification period, the
dual consolidated loss must be recaptured,
and an interest charge is imposed on the
recaptured amount. See §1.1503(d)-6(e)
(1). In general, a foreign use occurs when
any portion of the dual consolidated loss
is made available under the income tax
laws of a foreign country to offset or
reduce, directly or indirectly, the income
of a foreign corporation or the direct or
indirect owner of a hybrid entity that is
not a separate unit. See §1.1503(d)-3(a)
(1). Other triggering events include cer-
tain transfers of the interests in or assets
of a separate unit, as well as the failure to
satisfy various certification requirements.
See §1.1503(d)-6(e).
B. Computing income or dual
consolidated loss
In general, the income or dual consol-
idated loss of a dual resident corporation
for a taxable year is computed based on
the dual resident corporation’s items of
income, gain, deduction, and loss for
the taxable year. See §1.1503(d)-5(b)(1).
Similarly, the income or dual consoli-
dated loss of a separate unit is generally
computed as if the separate unit were a
domestic corporation and based solely on
the items of income, gain, deduction, and
loss of the domestic owner of the separate
unit that are attributable to the separate
unit. See §1.1503(d)-5(c)(1). If the dual
resident corporation or domestic owner is
a member of a consolidated group, then
the computations are made in accordance
with rules under section 1502 regarding
the computation of consolidated taxable
income. See §1.1503(d)-5(b)(1) and (c)
(1).
The income or dual consolidated loss
of a dual resident corporation or separate
unit does not, however, include items
attributable to an interest in a “transparent
entity.” See §1.1503(d)-5(b)(2)(iii), (c)(1)
(i) and (iii). A transparent entity is an entity
that (i) is not taxable as an association for
U.S. tax purposes, (ii) is not subject to
income tax in a foreign country as a cor-
poration either on its worldwide income
or on a residence basis, and (iii) is not a
pass-through entity under the laws of the
foreign country under which the relevant
separate unit or dual resident corporation
is subject to tax. See §1.1503(d)-1(b)(16)
(i). A domestic limited liability company
that, for U.S. tax purposes, is either disre-
garded as an entity separate from its owner
or classified as a partnership is an example
of a business entity that may be a trans-
parent entity if the foreign jurisdiction
does not view it as a pass-through entity.
Because it is unlikely that items attribut-
able to an interest in a transparent entity
are taken into account by the jurisdiction
in which the dual resident corporation or
separate unit is subject to tax, such items
should not affect the calculation or use of
a dual consolidated loss. See TD 9315 (72
FR 12902, 12904-05).
For purposes of attributing items to a
separate unit, only items of the domes-
tic owner of the separate unit that are
regarded for U.S. tax purposes are taken
into account. See §1.1503(d)-5(c)(1)(ii).
Thus, items related to disregarded trans-
actions – irrespective of whether such
items are regarded and taken into account
for foreign tax or accounting purposes –
are not taken into account for purposes
of determining the amount of income or
dual consolidated loss of the separate unit.
See id.; see also §§1.1503(d)-7(c)(6)(iii),
1.1503(d)-7(c)(23), and 1.1503(d)-7(c)
(24) for examples illustrating this treat-
ment for various types of disregarded pay-
ments.
In the case of a foreign branch sepa-
rate unit (as defined in §1.1503(d)-1(b)
(4)(i)(A)), items of the domestic owner
generally are attributable to the separate
unit based on rules under section 864
and §1.882-5 (by treating the domestic
owner as a foreign corporation and the
foreign branch separate unit as a trade or
business within the United States). See
§1.1503(d)-5(c)(2).
In the case of a hybrid entity separate
unit (as defined in §1.1503(d)-1(b)(4)(i)
(B)), items of a domestic owner gener-
ally are attributable to the separate unit
to the extent they are reflected on the
books and records of the hybrid entity.
See §1.1503(d)-5(c)(3)(i). These items
reflected on the books and records must,
however, be adjusted to conform to U.S.
tax principles. Id.
Pursuant to a special rule, any amount
included in income of a domestic owner
arising from the ownership of stock in a
foreign corporation through a separate
unit (for example, a subpart F inclusion)
is attributable to the separate unit if an
actual dividend from such foreign cor-
poration would have been so attributed.
See §1.1503(d)-5(c)(4)(iv); see also
§1.1503(d)-7(c)(24) for an example illus-
trating the application of §1.1503(d)-5(c)
(4)(iv).
In general, these rules are intended
to attribute items existing for U.S. tax
purposes to a separate unit to the extent
that it is likely that the relevant foreign
country would take into account the item
(assuming the item is recognized) for tax
purposes, with such approach serving as
a proxy for determining whether a dou-
ble-deduction outcome could result. See
TD 9315 (72 FR 12902, 12908).
C. Made available standard and all or
nothing principle
A foreign use may occur if any portion
of a dual consolidated loss is made avail-
able to offset income, even if there are no
items of income to actually offset in that
taxable year. See §1.1503(d)-3(b). This
“made available” standard was adopted
because of the administrative complexity
that would result from having a foreign
use occur only when the dual consolidated
loss actually offsets income. See REG-
102144-04 (70 FR 29868, 29872-73).
For example, if a portion of a dual con-
solidated loss is made available to be used
by another person, and that person already
has a loss before accounting for the dual
consolidated loss, then a portion of the
dual consolidated loss could become
part of a loss carryover, which could be
available to be carried forward or carried
back to offset income in different taxable
years. Departing from the made available
standard would require that the portion of
the loss carryforward or carryback that
was taken into account in computing the
dual consolidated loss be identified and
tracked, which would require detailed
ordering rules for determining when such
losses were used and an understanding of
the timing and base differences between
the United States and the foreign jurisdic-
tion. See id.
In general, any amount of the dual
consolidated loss being put to a foreign
use would cause the entire amount of
the dual consolidated loss to be recap-

August 26, 2024 538 Bulletin No. 2024–35
tured and reported as income. See
§1.1503(d)-6(e)(1). This “all or nothing”
principle was adopted because, like the
made available standard, departing from
it would have led to significant admin-
istrative complexity and the need for
detailed ordering rules. See TD 9315 (72
FR 12902, 12910-11). For example, to
depart from this standard and determine
the amount of recapture on actual foreign
use, taxpayers and the IRS would need
to undertake a complex analysis of for-
eign law and distinguish a permanent (or
base) difference from a timing difference,
to ensure that the portion of the dual con-
solidated loss that is not recaptured will
not be available for a foreign use at some
point in the future. See id.
D. Mirror legislation rule
A foreign use of a dual consolidated
loss may also be deemed to occur pursu-
ant to the “mirror legislation” rule if the
foreign income tax laws would deny any
opportunity for the foreign use of the dual
consolidated loss in the year in which
the dual consolidated loss is incurred
(assuming the foreign country recognized
the loss in the same year), provided that
the foreign use of the loss is denied under
such laws for any of the following rea-
sons: (i) the dual resident corporation or
separate unit that incurred the loss is sub-
ject to income taxation by another coun-
try (for example, the United States) on
its worldwide income or on a residence
basis; (ii) the loss may be available to off-
set income (other than income of the dual
resident corporation or separate unit)
under the laws of another country (for
example, the United States); or (iii) the
deductibility of any portion of a deduc-
tion or loss taken into account in comput-
ing the dual consolidated loss depends on
whether such amount is deductible under
the laws of another country (for example,
the United States). See §1.1503(d)-3(e).
Thus, in order for the rule to apply,
two requirements must be satisfied: the
income tax laws of the foreign country
must deny any opportunity for a foreign
use, and the reason for such denial must
be described in one of the three enumer-
ated paragraphs in §1.1503(d)-3(e)(1). In
other words, being described in one of
the three enumerated paragraphs alone
does not cause a foreign law to be treated
as mirror legislation (if, for example, the
dual consolidated loss could nevertheless
be put to a foreign use).
The mirror legislation rule is intended
to prevent foreign jurisdictions from
enacting legislation that gives taxpayers
no choice but to use a dual consolidated
loss to offset an affiliate’s income in the
United States. See REG-102144-04 (70
FR 29868, 29873-74). A lack of choice is
contrary to the approach in the dual con-
solidated loss rules providing taxpayers
the option of putting a dual consolidated
loss to either a domestic use or a foreign
use (but not both). See id.
E. Foreign income tax
Section 1503(d)(2)(A) defines a dual
consolidated loss as any net operating
loss of a domestic corporation which
is subject to an income tax of a foreign
country on its income without regard to
whether such income is from sources in
or outside of such foreign country, or is
subject to such a tax on a residence basis.
The exception to the definition of a dual
consolidated loss under section 1503(d)
(2)(B) similarly references “foreign
income tax law.” The legislative history
to section 1503(d) references foreign
taxes on income without further discus-
sion of the characteristics of a foreign
income tax. See, for example, S. Rep. No.
99-313, 99th Cong., 2nd Sess., at 419-
421 (1986). Similarly, the regulations
only reference a foreign income tax when
setting forth many dual consolidated loss
rules. See, for example, §§1.1503(d)-(1)
(b)(2) (dual resident corporation defini-
tion), 1.1503(d)-(1)(b)(3) (hybrid entity
definition), 1.1503(d)-(1)(b)(16) (trans-
parent entity definition) and 1.1503(d)-
(3)(a)(1) (foreign use definition). Thus,
the dual consolidated loss rules neither
define the term “income tax” nor describe
the characteristics that distinguish an
income tax from another type of tax.
II. The Intercompany Transaction
Regulations and the Matching Rule
The regulations under §1.1502-13 (the
“intercompany transaction regulations”)
provide rules for taking into account
items of income, gain, deduction, and
loss of consolidated group members from
intercompany transactions (as defined in
§1.1502-13(b)(1)(i)). Their purpose is to
provide rules to clearly reflect the taxable
income (and tax liability) of the group
as a whole by preventing intercompany
transactions from creating, accelerating,
avoiding, or deferring consolidated tax-
able income (or consolidated tax liability).
This is accomplished by treating the sell-
ing member (“S”) and the buying mem-
ber (“B”) as separate entities for some
purposes, but as divisions of a single cor-
poration for other purposes. S’s income,
gain, deduction, or loss arising from an
intercompany transaction is an intercom-
pany item, and B’s income, gain, deduc-
tion, or loss arising from an intercompany
transaction, or from property acquired in
an intercompany transaction, is the cor-
responding item. The amount and loca-
tion of S’s intercompany items and B’s
corresponding items are determined on
a separate entity basis (“separate entity
treatment”). The timing, character, source,
and other attributes of the intercompany
items and corresponding items, although
initially determined on a separate entity
basis, generally are redetermined under
the intercompany transaction regula-
tions to produce the effect of transactions
between divisions of a single corporation
(“single entity treatment”).
One of the principal rules within the
intercompany transaction regulations that
implements single entity treatment is the
matching rule of §1.1502-13(c). Section
1.1502-13(c)(1) requires the attributes
of the intercompany and corresponding
items to be redetermined to the extent nec-
essary to achieve the same overall effect
as if the members were divisions of a sin-
gle corporation.
Under the matching rule, although
treated as divisions of a single corpora-
tion, S and B are treated as engaging in
their actual transaction and owning any
actual property involved in the transaction
(rather than treating the transaction as not
occurring). Accordingly, under §1.1502-
13(c), the existence of the intercompany
transaction and the intercompany items
generally is not disregarded. Although
treated in the same manner as divisions of
a single corporation, S and B are treated
as having any special status that they have
under the Code or regulations.

Bulletin No. 2024–35 539 August 26, 2024
Section 1.1502-13(c)(4) provides rules
for allocating and redetermining attributes
under the matching rule. To the extent that
B’s corresponding item matches S’s inter-
company item in amount, the attributes
of B’s corresponding item generally will
control S’s offsetting intercompany item.
The symmetry that is ordinarily required
under the matching rule by conforming
the source, character, and other attributes
of one member’s items to the other mem-
ber’s items is expressly overridden when
either S or B has a “special status.” Sec-
tion 1.1502-13(c)(5) provides that, when
the attributes otherwise determined under
§1.1502-13(c)(1)(i) for a member’s item
are permitted or not permitted under the
Code or regulations because of a mem-
ber’s special status, the attributes required
by the Code or regulations apply to that
member’s items, but not to the items of
another member. The special status rule
lists examples of members with special
status, including banks, life insurance
companies, and a member carrying for-
ward a loss subject to limitation under the
separate return limitation year (“SRLY”)
rules.
III. Sections 301.7701-1 Through
301.7701-3 – Classification of Business
Entities
Sections 301.7701-1 through
301.7701-3 classify a business entity with
two or more members as either a corpora-
tion or a partnership, and a business entity
with a single owner as either a corpora-
tion or disregarded as an entity separate
from its owner (“disregarded entity”).
Certain business entities with a single
owner are classified as disregarded enti-
ties by default or through an election. See
§301.7701-3(a) through (c).
IV. Pillar Two
A. GloBE Model Rules
On December 20, 2021, the OECD/
G20 Inclusive Framework on BEPS pub-
lished model rules (the “GloBE Model
Rules”
4
) to assist in the implementation of
a reform to the international tax system.
See OECD/G20, Tax Challenges Arising
from the Digitalisation of the Economy
Global Anti-Base Erosion Model Rules
(Pillar Two). The GloBE Model Rules
create a coordinated system of minimum
taxation intended to ensure that certain
large Multinational Enterprise Groups
(“MNE Groups”) pay a minimum level
of tax based on the income, adjusted for
certain items, arising in each of the juris-
dictions where they operate.
5
Under the GloBE Model Rules, an
in-scope MNE Group must compute the
GloBE Income or Loss of each of its
Constituent Entities.
6
The computation of
GloBE Income or Loss generally begins
with the net income or loss of a Constitu-
ent Entity determined using the account-
ing standard used in preparing the Consol-
idated Financial Statements and without
any consolidation adjustments that would
eliminate income or expense attributable
to intra-group transactions. To reflect
GloBE policy outcomes, this amount is
then adjusted for specific items to deter-
mine the Constituent Entity’s GloBE
Income or Loss.
7
The MNE Group must then calculate
its Effective Tax Rate (“ETR”) for each
jurisdiction in which it operates. The
ETR of a jurisdiction equals (i) the sum
of Adjusted Covered Taxes of each Con-
stituent Entity located in the jurisdiction,
divided by (ii) the Net GloBE Income of
the jurisdiction for the Fiscal Year. The
Net GloBE Income of the jurisdiction is
determined by aggregating the GloBE
Income or Loss of all Constituent Enti-
ties of the MNE Group located in the
same jurisdiction.
8
This “jurisdictional
blending” is mandatory and is intended to
avoid distortions arising from tax consol-
idation and similar regimes and shifting
income and taxes between Constituent
Entities located in the same jurisdiction.
See OECD (2024), Tax Challenges Aris-
ing from the Digitalisation of the Econ-
omy – Consolidated Commentary to the
Global Anti-Base Erosion Model Rules
(2023); Inclusive Framework on BEPS,
OECD Base Erosion and Profit Shifting
Project, April 2024, OECD Publishing,
Paris (“GloBE Model Rules Consolidated
Commentary”), Article 5.1.1, Paragraph
4. If the ETR in that jurisdiction would be
below the 15% Minimum Rate, a top-up
tax may be imposed and collected under
a Qualified Domestic Minimum Top-up
Tax (“QDMTT”), an IIR (the income
inclusion rule), or a UTPR (commonly
referred to as the undertaxed profits rule)
to the extent necessary to ensure that the
MNE Group’s Excess Profits in the juris-
diction is taxed at the Minimum Rate.
Certain countries have enacted, and oth-
ers have proposed, legislation to imple-
ment taxes based on the GloBE Model
Rules for fiscal years beginning as early
as December 31, 2023.
9

On December 20, 2022, the OECD/
G20 Inclusive Framework on BEPS pub-
lished the Safe Harbours and Penalty
Relief document, which includes guide-
lines on aspects of the design and opera-
tion of a Transitional CbCR Safe Harbour
to the GloBE Model Rules. See OECD
(2022), Safe Harbours and Penalty Relief:
Global Anti-Base Erosion Rules (Pillar
Two), December 2022, OECD/G20 Inclu-
4
As the context requires, references to the GloBE Model Rules include references to a foreign jurisdiction’s legislation implementing the GloBE Model Rules.
5
Capitalized terms used in this part IV of the Background section and parts I.D of the Explanation of Provisions section of this preamble, but not defined herein, have the meanings ascribed
to such terms under the GloBE Model Rules.
6
Constituent Entities include legal persons (other than a natural person), arrangements that prepare separate financial accounts (such as a partnership or trust), or a Permanent Establish-
ment.
7
In addition to adjustments to reflect common differences between the applicable financial accounting standard and the local income tax rules, the computation of a Low-Tax Entity’s GloBE
Income or Loss excludes any expense attributable to an Intragroup Financing Arrangement that can reasonably be anticipated to increase the expenses of the Low-Tax Entity without resulting
in a commensurate increase in the taxable income of the High-Tax Counterparty.
8
However, a Stateless Constituent Entity (such as a Reverse Hybrid Entity) is treated as a single Constituent Entity located in a separate and unspecified jurisdiction; the GloBE Income or
Loss of a Reverse Hybrid Entity is not aggregated with that of any other Constituent Entity.
9
The UTPR will generally be effective for Fiscal Years beginning on or after December 31, 2024. Under the European Union (EU) Directive requiring the adoption of the GloBE Model Rules,
EU Member States will apply the UTPR for years beginning on or after December 31, 2023, but only in limited circumstances. See Council Directive 2022/2523, art. 50, 2022 OJ (L 328) 1, 55.

August 26, 2024 540 Bulletin No. 2024–35
sive Framework on BEPS, OECD, Paris.
10

The Transitional CbCR Safe Harbour is
designed to ameliorate the compliance
burden of undertaking full GloBE calcu-
lations during the Transition Period
11
by
limiting the circumstances in which an
MNE will be required to perform such
calculations to a smaller number of high-
er-risk jurisdictions. An MNE Group uses
its Qualified CbC Report and financial
accounting data to determine if its oper-
ations in a jurisdiction qualify for the
Transitional CbCR Safe Harbour and, if
such operations qualify, the jurisdiction is
effectively excluded from the scope of the
GloBE Model Rules. Specifically, under
the Transitional CbCR Safe Harbour, the
Jurisdictional Top-up Tax in a jurisdiction
for a Fiscal Year beginning on or before
December 31, 2026
12
is deemed to be zero
if (i) the MNE Group reports Total Reve-
nue of less than EUR 10 million and Profit
(Loss) before Income Tax of less than EUR
1 million in the jurisdiction on its Quali-
fied CbC Report for the Fiscal Year, (ii) the
MNE Group has a Simplified ETR that is
equal to or greater than the Transition Rate
in the jurisdiction for the Fiscal Year, or
(iii) the MNE Group’s Profit (Loss) before
Income Tax in such jurisdiction is equal to
or less than the Substance-based Income
Exclusion amount, for Constituent Enti-
ties resident in that jurisdiction under the
Qualified CbC Report, as calculated under
the GloBE Model Rules. Expenses and
losses are relevant in determining whether
each of these three tests is satisfied.
B. Notice 2023-80
On December 11, 2023, the Treasury
Department and the IRS released Notice
2023-80, which, among other things,
described the interaction of the dual con-
solidated loss rules with the GloBE Model
Rules. The notice explains that in certain
cases, the aggregation of GloBE Income
or Loss of Constituent Entities in the same
jurisdiction in calculating the ETR can be
viewed as giving rise to double-deduction
outcomes that the dual consolidated loss
rules were intended to address. Moreover,
the notice recognizes that these concerns
could exist with respect to a dual con-
solidated loss incurred in a taxable year
ending before the effective date of for-
eign legislation implementing the GloBE
Model Rules, for example, due to certain
timing differences. The notice also recog-
nizes that certain features of the GloBE
Model Rules may differ from traditional
foreign income tax systems. For example,
the GloBE Model Rules do not include
a mechanism that would permit taxpay-
ers to forgo the aggregation of GloBE
Income and GloBE Losses, and in some
cases where the ETR in the jurisdiction
is or would otherwise be at or above the
Minimum Rate, a loss may not reduce the
amount of a Jurisdictional Top-up Tax.
The notice announces limited guidance
that would be proposed for certain “leg-
acy DCLs,” which in general are dual con-
solidated losses that a taxpayer incurred
before the effective date of the GloBE
Model Rules.
13
Under that guidance, a for-
eign use does not occur with respect to a
legacy DCL solely because all or a portion
of the deductions or losses that comprise
the legacy DCL are taken into account
under the GloBE Model Rules, subject to
an anti-abuse rule. Where a taxpayer uses
a fiscal year for tax purposes that ends
after 2023, the foreign use exception is
conditioned on the relevant MNE Group
using the same fiscal year when applying
the GloBE Model Rules. This condition
ensures that the legacy DCL rule applies
only to the extent of book-tax timing
differences, and not due to a mismatch
between the U.S. taxable year and fiscal
year used under the GloBE Model Rules.
Finally, the notice states that the Trea-
sury Department and the IRS are studying
the interaction of the dual consolidated
loss rules and the GloBE Model Rules
and the notice requests comments on
the interaction of the dual consolidated
loss rules with the GloBE Model Rules,
including Article 3.2.7 (relating to Intra-
group Financing Arrangements), which
is intended to prevent certain avoidance
transactions involving arbitrage. The
notice also states that the Treasury Depart-
ment and the IRS are studying the interac-
tion of the GloBE Model Rules with the
anti-hybrid rules under sections 245A(e)
and 267A.
C. Administrative Guidance addressing
Hybrid Arbitrage Arrangements
On December 15, 2023, the OECD/
G20 Inclusive Framework on BEPS pub-
lished additional Administrative Guidance
on the GloBE Model Rules (“December
2023 Administrative Guidance”). See
OECD (2023), Tax Challenges Arising
from the Digitalisation of the Economy
– Administrative Guidance on the Global
Anti-Base Erosion Model Rules (Pillar
Two), December 2023, OECD/G20 Inclu-
sive Framework on BEPS, OECD, Paris.
14

Among other issues, the December 2023
Administrative Guidance addresses the
treatment under the Transitional CbCR
Safe Harbour of Hybrid Arbitrage
Arrangements entered into after Decem-
ber 15, 2022.
The December 2023 Administrative
Guidance involving Hybrid Arbitrage
Arrangements is intended, in part, to
address avoidance transactions that are
designed to exploit differences between
tax and financial accounting treatment
to allow a Tested Jurisdiction to qualify
for the Transitional CbCR Safe Harbour,
which would be contrary to the pur-
10
https://www.oecd.org/tax/beps/safe-harbours-and-penalty-relief-global-anti-base-erosion-rules-pillar-two.pdf. The Safe Harbours have since been incorporated into the GloBE Model
Rules Consolidated Commentary.
11
The Transition Period covers all of the Fiscal Years beginning on or before December 31, 2026, but not including a Fiscal Year that ends after June 30, 2028.
12
Other than a Fiscal Year that ends after June 30, 2028. The Safe Harbour takes a “once out, always out” approach under which, if an MNE Group does not apply the Safe Harbour with
respect to a jurisdiction in a Fiscal Year in which it is subject to the GloBE Rules, the MNE Group cannot qualify for the Safe Harbour for that jurisdiction in a subsequent year, except where
the MNE Group did not have any Constituent Entities located in the jurisdiction in the previous Fiscal Year.
13
The notice defines legacy DCLs as dual consolidated losses incurred in (i) taxable years ending on or before December 31, 2023, or (ii) provided the taxpayer’s taxable year begins and
ends on the same dates as the Fiscal Year of the MNE Group that could take into account as an expense any portion of a deduction or loss comprising such a DCL, taxable years beginning
before January 1, 2024, and ending after December 31, 2023.
14
https://www.oecd.org/tax/beps/administrative-guidance-global-anti-base-erosion-rules-pillar-two-december-2023.pdf. The December 2023 Administrative Guidance has since been incor-
porated into the GloBE Model Rules Consolidated Commentary.

Bulletin No. 2024–35 541 August 26, 2024
poses of the GloBE Model Rules. One
of the Hybrid Arbitrage Arrangements
addressed under the guidance is a “dupli-
cate loss arrangement.” A duplicate loss
arrangement includes an arrangement
that results in an expense or loss being
included in the financial statement of a
Constituent Entity to the extent that the
arrangement also gives rise to a dupli-
cate amount that is deductible for pur-
poses of determining the taxable income
of another Constituent Entity in another
jurisdiction. An arrangement will not be
a duplicate loss arrangement, however,
to the extent that the amount of the rel-
evant expense is offset against revenue
or income that is included in both (i) the
financial statements of the Constituent
Entity including the expense or loss in
its financial statements; and (ii) the tax-
able income of the Constituent Entity
claiming the deduction for the relevant
expense or loss. Under this guidance, a
Tested Jurisdiction’s Transitional CbCR
Safe Harbour calculation is adjusted by
excluding any expense or loss arising as
a result of a duplicate loss arrangement
from the Tested Jurisdiction’s profit
before tax.
The December 2023 Administrative
Guidance states that further guidance will
be provided to address Hybrid Arbitrage
Arrangements, including those addressed
in the December 2023 Administrative
Guidance, that may otherwise affect the
application of the GloBE Model Rules
outside the context of the Transitional
CbCR Safe Harbour.
Explanation of Provisions
I. Dual Consolidated Loss Rules
A. Interaction with the intercompany
transaction regulations
As discussed in part I.B of the Back-
ground section of this preamble, the dual
consolidated loss regulations provide
that, in the case of an affiliated dual res-
ident corporation or an affiliated domes-
tic owner acting through a separate unit
(a “section 1503(d) member”), the com-
putation of income or dual consolidated
loss takes into account rules under sec-
tion 1502 regarding the computation of
consolidated taxable income. No specific
guidance is provided as to the interaction
of rules under section 1502 and those
under section 1503(d).
Comments with respect to proposed
regulations addressing certain hybrid
arrangements that were published in the
Federal Register on December 28, 2018
(REG-104352-18, 83 FR 67612) (the
“2018 proposed regulations”), addressed
the interaction of the matching rule under
§1.1502-13(c) with the computation of
income or dual consolidated loss. The pre-
amble to final regulations published in the
Federal Register on April 8, 2020 (TD
9896, 85 FR 19830), stated that the Trea-
sury Department and the IRS were study-
ing this issue.
The comments recommended that the
Treasury Department and the IRS clarify
that the matching rule does not apply to
cause regarded items to be redetermined
(and thus effectively disregarded) for
purposes of the dual consolidated loss
rules. The comments stated that such an
approach promotes the policies of the
dual consolidated loss rules and leads to
more accurate computations. In addition,
a comment asserted that such an approach
is consistent with how taxpayers generally
apply the rules, and that for these taxpay-
ers a contrary approach could have a sig-
nificant and unanticipated effect on exist-
ing structures.
However, one of the comments cau-
tioned that, if the dual consolidated loss
rules were to apply differently with respect
to an item arising from an intercompany
transaction and an item arising from a
disregarded transaction, then the dispar-
ity could produce inappropriate policy
outcomes. For example, a taxpayer might
structure its internal transactions so that
(i) payments by separate units are made
pursuant to disregarded transactions, such
that the payments would not increase
or create a dual consolidated loss, and
(ii) payments to separate units are made
pursuant to intercompany transactions,
such that the payments would reduce
or eliminate a dual consolidated loss.
The comment described additional rules
– including a rule that would require a
consolidated group to treat intercompany
transactions and disregarded payments
consistently for purposes of the dual con-
solidated loss rules – that might minimize
tax planning opportunities arising from
any such disparity. These proposed regu-
lations address the concern raised in this
comment with the disregarded payment
loss rules, as discussed in part II of this
Explanation of Provisions.
Another comment raised the possibility
that taxpayers may have differing views
regarding the interaction of the matching
rule with the dual consolidated loss rules
under current law. As a result, taxpayers
currently may be adopting different treat-
ments of the section 1503(d) member’s
intercompany (or corresponding) items.
Accordingly, the comment recommended
clarifying how these rules interact.
The dual consolidated loss rules are
intended to take into account an item of
a dual resident corporation, or attribute
an item of a domestic owner to a sep-
arate unit, to the extent that the item is
likely taken into account for foreign tax
purposes. Because it is unlikely that a
foreign jurisdiction would disregard an
intercompany transaction (or, more gen-
erally, transactions between separate legal
entities), it is consistent with the policies
of the dual consolidated loss rules to take
into account items arising from an inter-
company transaction on a separate entity
basis, to the extent of the application of
section 1503(d). In addition, the failure to
take items arising from an intercompany
transaction into account in an appropriate
manner for the section 1503(d) rules could
lead to distortive results – both an under-
and over-inclusive application of the dual
consolidated loss rules – and could create
inappropriate planning opportunities.
Accordingly, and consistent with the
approach recommended by the com-
ments, the proposed regulations would
amend §1.1502-13 to clarify the treat-
ment of items that are subject to the sec-
tion 1503(d) rules and the intercompany
transaction regulations. Specifically, the
proposed regulations clarify that a sec-
tion 1503(d) member has special status
under §1.1502-13(c)(5) for purposes of
applying the dual consolidated loss rules.
This approach is consistent with treating a
member with losses from separate return
limitation years as having special status
under §1.1502-13(c)(5) for purposes of
determining the member’s SRLY limita-
tion. See §1.1502-13(c)(7)(ii)(J)(4).
As a result, if a section 1503(d) mem-
ber’s intercompany (or correspond-

August 26, 2024 542 Bulletin No. 2024–35
ing) loss otherwise would be taken into
account in the current year, and if the dual
consolidated loss rules apply to limit the
use of that loss (causing the loss to not be
currently deductible), the intercompany
transaction regulations would not redeter-
mine that loss as not being subject to the
limitation under section 1503(d). There-
fore, a section 1503(d) member’s inter-
company (or corresponding) loss could
be limited (and therefore not currently
deductible) under the dual consolidated
loss rules, even though such an outcome is
inconsistent with single entity treatment.
In conjunction with the special status
rule for the section 1503(d) member, the
proposed regulations also clarify the treat-
ment of the section 1503(d) member’s
counterparty in an intercompany trans-
action. Proposed §1.1502-13(j)(10)(iv)
applies §1.1502-13(c) (the matching rule),
or principles of the matching rule as rel-
evant in §1.1502-13(d) (the acceleration
rule), to the counterparty member as if the
section 1503(d) member were not subject
to the dual consolidated loss rules. This
approach is consistent with the special sta-
tus rule in §1.1502-13(c)(5), which pro-
vides that, even though the Code or reg-
ulations require certain treatment of the
special status member’s items by reason
of its special status, that treatment does
not affect the attributes of the counterparty
member’s items under the matching rule.
For example, assume that, in the cur-
rent year, S (the counterparty member) has
interest income, and B (a section 1503(d)
member) has an interest deduction on an
intercompany loan. Even if B’s interest
deduction were limited under the domes-
tic use limitation under §1.1503(d)-4(b)
and therefore not currently deductible,
S nevertheless would take its interest
income into account in the current year
under proposed §1.1502-13(j)(10)(iv).
In other words, this rule clarifies that the
intercompany transaction regulations
would not redetermine the attributes of S’s
interest income to match the treatment of
B’s interest deduction in situations where
B’s deduction is limited due to B’s special
status as a section 1503(d) member. The
Treasury Department and the IRS are of
the view that redetermining S’s interest
income as not currently includible in these
situations effectively would give the con-
solidated group the benefit of B’s deduc-
tion and would not achieve the appropriate
result under dual consolidated loss policy.
These proposed regulations also clarify
the order of operation between §1.1502-
13 and the dual consolidated loss rules.
The dual consolidated loss rules apply
to an item only to the extent that the
item is otherwise taken into account in
income or loss. Consistent with this gen-
eral rule, the proposed regulations clar-
ify that (i) the intercompany transaction
regulations apply first to determine when
an intercompany (or corresponding) item
is taken into account, and (ii) such item
is then included in the dual consolidated
loss computations. Thus, for example, in
a year in which an intercompany deduc-
tion of S (a section 1503(d) member) is
deferred under the intercompany transac-
tion regulations, the deduction would not
be included in computing S’s income or
dual consolidated loss for that year under
section 1503(d). Moreover, when S’s
deduction is taken into account under the
matching rule in a later year, that deduc-
tion would be included in S’s dual con-
solidated loss computations for that year.
See proposed §1.1502-13(j)(15)(xi) for an
example illustrating the application of the
matching rule.
B. Computing income or dual
consolidated loss
1. Items Arising from Ownership of
Stock
As discussed in part I.B of the Back-
ground section of this preamble, an item
of income, gain, deduction, or loss is gen-
erally taken into account for purposes of
computing income or dual consolidated
loss to the extent it is likely that the rel-
evant foreign country would take into
account the item (assuming the item is
recognized) for tax purposes. In many
cases, gain from the sale or exchange of
stock of a corporation, or a dividend from
a corporation, is unlikely to be included
in income in the foreign country due to,
for example, a participation exemption or
indirect foreign tax credits. In addition, an
inclusion with respect to stock of a foreign
corporation (such as under section 951(a)
(1)(A) or 951A(a)) is unlikely to be taken
into account (and therefore is unlikely
to be included in income) in the foreign
country; moreover, the difference result-
ing from these inclusions is likely to be
permanent because the related earnings of
the foreign corporation are unlikely to be
included in income in the foreign country
when distributed.
Further, the Treasury Department and
the IRS are aware that taxpayers may be
affirmatively structuring into these rules to
produce inappropriate double-deduction
outcomes. For example, in order to elim-
inate a dual consolidated loss otherwise
attributable to an interest in a disregarded
entity, a domestic corporation could trans-
fer the stock of a controlled foreign cor-
poration (as defined in section 957(a))
that gives rise to inclusions under section
951A(a) to that disregarded entity, even
though the foreign country in which the
disregarded entity is subject to tax does
not tax income of, or distributions from,
the controlled foreign corporation.
In light of the prevalence of participa-
tion exemptions (or similar regimes that
exempt income with respect to stock),
coupled with taxpayers structuring into
the rules to reduce or eliminate dual con-
solidated losses, the Treasury Department
and the IRS are of the view that the rules
should be revised. The proposed regu-
lations therefore generally provide that
items arising from the ownership of stock
– such as gain recognized on the sale or
exchange of stock, dividends (including
by reason of section 1248), inclusions
under section 951(a) (including by rea-
son of section 245A(e)(2) or 964(e)(4))
or 951A(a), as well as deductions with
respect thereto (including under section
245A(a) or 250(a)(1)(B)) – are not taken
into account for purposes of computing
income or a dual consolidated loss. See
proposed §1.1503(d)-5(b)(2)(iv)(A) and
(c)(4)(iv)(A). These rules are not limited
to items arising from the ownership of
stock of a foreign corporation because,
for example, a dividend from a domestic
corporation may be eligible for a partic-
ipation exemption under the laws of the
foreign country.
However, these rules do not apply
with respect to a dividend (or other inclu-
sion) arising from a separate unit or dual
resident corporation’s ownership of port-
folio stock of a corporation (domestic or
foreign), which generally is defined as
stock representing less than ten percent

Bulletin No. 2024–35 543 August 26, 2024
of the value of the corporation. See pro-
posed §1.1503(d)-5(b)(2)(iv)(B) and (c)
(4)(iv)(B) and (C). In these cases, the
items are likely to be included (or the
related earnings are likely to be subse-
quently included when distributed) in
income in the foreign country in which
the separate unit or dual resident corpo-
ration is subject to tax. The proposed reg-
ulations are intended to ensure that these
items, as offset or reduced by any deduc-
tions with respect to the items for U.S.
tax purposes, are taken into account for
purposes of computing income or a dual
consolidated loss.
The Treasury Department and the
IRS are of the view that this approach is
simpler and more administrable than an
alternative approach that would consider
the extent to which an item is, or will be,
actually taken into account under the tax
law of the foreign country in which the
separate unit or dual resident corporation
is subject to tax and not offset or reduced
by an exemption, exclusion, deduction,
credit, or other similar relief particular to
the item. Further, in most cases a more
precise approach would not lead to sig-
nificantly different results given the like-
lihood that items of income arising from
the ownership of stock will be offset or
reduced under the tax laws of the foreign
country.
The Treasury Department and the IRS
recognize that certain amounts included
in the income of a domestic owner arising
from the ownership of stock in a foreign
corporation (in the case of a separate unit,
regardless of whether the stock of the for-
eign corporation is held through the sep-
arate unit) may reflect amounts that have
been subject to tax, to some extent, by both
the foreign jurisdiction and the United
States. For example, where a domestic
owner of a separate unit that is taxed as
a resident in a particular foreign jurisdic-
tion holds stock of a controlled foreign
corporation that is also taxed as a resident
in the same foreign jurisdiction, the con-
trolled foreign corporation’s income may
be taxed, to some extent, under the income
tax laws of the foreign jurisdiction and by
the United States through inclusions under
section 951(a) or 951A(a); this could
occur regardless of whether the inclusion
itself is taken into account by the same
foreign jurisdiction. To the extent such
amounts are taxed in the same manner and
to the same extent as if they were earned
directly by the domestic owner, they could
be viewed as representing dual inclusion
income (that is, items that are included in
income in both the United States and the
foreign country and not offset or reduced
by certain amounts particular to the item)
that could be taken into account when
determining the dual consolidated loss
attributable to the separate unit.
The proposed regulations do not pro-
vide a rule that would permit taxpayers
to identify and take into account such
amounts as dual inclusion income. Doing
so would require complicated rules, and
raise related administrability concerns,
to isolate the amount of dual inclusion
income with respect to a particular foreign
jurisdiction (for example, where a con-
trolled foreign corporation owns one or
more disregarded entities that are subject
to tax in different foreign jurisdictions).
Such an approach would also need to take
into account rate disparities (for example,
as a result of the deduction allowed under
section 250(a)(1)(B) with respect to inclu-
sions under section 951A) and other dif-
ferences that may result between income
earned directly by a domestic owner and
earned indirectly through a controlled for-
eign corporation.
2. Adjustments to Conform to U.S. Tax
Principles
As discussed in part I.B of the Back-
ground section of this preamble, regarded
items of a domestic owner generally are
attributable to a hybrid entity separate unit
to the extent they are reflected on the books
and records of the hybrid entity. These
items reflected on the books and records
must, however, be adjusted to conform
to U.S. tax principles. Such adjustments
would include, for example, adjustments
to reflect differences in the calculation of
depreciation for accounting and tax pur-
poses, and adjustments to eliminate items
reflected on the books and records that are
not deductible for tax purposes (such as a
penalty or fine). See §1.1503(d)-7(c)(25)
for an example illustrating adjustments to
conform to U.S. tax principles.
The Treasury Department and the IRS
are aware that certain taxpayers may be
taking the position that items that are not
reflected on the books and records of a
hybrid entity may nevertheless be attrib-
utable to the hybrid entity separate unit.
Specifically, taxpayers may assert that the
adjustments to the books and records nec-
essary to conform to U.S. tax principles
can include an item that has not been (and
will not be) reflected on the books and
records of the hybrid entity. For exam-
ple, if a hybrid entity provides services
to its domestic owner and receives a pay-
ment as compensation for those services
that is generally disregarded for U.S. tax
purposes, a taxpayer may take the posi-
tion that a portion of the domestic own-
er’s regarded income can be reallocated
to the books and records of the hybrid
entity (and, thus, taken into account by
the hybrid entity separate unit) under, for
example, the principles of section 482 or
section 864(c).
This position is incorrect under
the current regulations and misinter-
prets the required adjustments under
§1.1503(d)-5(c)(3)(i). Such adjust-
ments account for discrepancies between
accounting treatment and U.S. tax treat-
ment; they are not permitted to give
effect to disregarded payments that
§1.1503(d)-5(c)(1)(ii) explicitly excludes
from the calculation of income or dual
consolidated loss. See §1.1503(d)-7(c)
(23) for an example illustrating the appli-
cation of §1.1503(d)-5(c). Further, this
position is contrary to the policy under-
lying §1.1503(d)-5(c)(3), which is to take
into account only items that are regarded
for U.S. tax purposes and also are (or have
been or will be) reflected on the books and
records of the hybrid entity. Nevertheless,
for the avoidance of doubt, the proposed
regulations clarify that the adjustments
necessary to conform to U.S. tax principles
do not permit the attribution to a hybrid
entity separate unit, or an interest in a
transparent entity, of any item that has not
been and will not be reflected on the books
and records of the hybrid entity or transpar-
ent entity. See proposed §1.1503(d)-5(c)
(3)(i); see also proposed §1.1503(d)-7(c)
(23)(iii) for an example illustrating the
application of §1.1503(d)-5(c); but see
§§1.1503(d)-5(c)(4)(iii), 1.1503(d)-5(c)
(4)(v) and 1.1503(d)-5(c)(4)(vi) (special
attribution rules that do not require that an
item be reflected on the books and records
to be taken into account).

August 26, 2024 544 Bulletin No. 2024–35
C. Anti-avoidance rule
As discussed in sections I.A (interac-
tion with the matching rule), I.B.1 (items
arising from ownership of stock), I.B.2
(adjustments to conform to U.S. tax prin-
ciples), and II.A. (disregarded payment
losses) of this Explanation of Provisions,
the Treasury Department and the IRS con-
tinue to learn of transactions or structures
that attempt to obtain a double-deduction
outcome while avoiding the application of
the dual consolidated loss rules. In addi-
tion, the Treasury Department and the IRS
are aware of other avoidance transactions
that may facilitate a double-deduction out-
come by manipulating the computation of
income or a dual consolidated loss with
items that are not included in income,
or do not give rise to tax, in the foreign
country. For example, income-producing
assets located within the United States
could be transferred to, or otherwise be
acquired by, a separate unit that is a tax
resident in a jurisdiction that, pursuant to a
participation exemption or similar regime
(including a regime that grants a foreign
tax credit for foreign taxes paid on foreign
income), would exempt or otherwise not
tax the income derived from those assets.
Because such assets are located in the
United States, however, taxpayers could
assert that they would not give rise to a
foreign branch separate unit and, assuming
they are not held by a transparent entity,
take the position that income derived from
those assets would reduce or eliminate a
dual consolidated loss (despite not being
subject to tax in the foreign jurisdiction).
Even if these particular transactions
were also addressed by new rules in these
proposed regulations, other avoidance
transactions could continue to be devel-
oped. Accordingly, and rather than con-
tinuing to address these transactions on a
case-by-case basis, the proposed regula-
tions include an anti-avoidance rule that,
in general, is intended to address addi-
tional transactions, or interpretations, that
may attempt to avoid the purposes of the
dual consolidated loss rules. See proposed
§1.1503(d)-1(f); see also §1.1503(d)-7(c)
(43) for an example illustrating the appli-
cation of the anti-avoidance rule to a trans-
fer of assets located in the United States to
a separate unit. This anti-avoidance rule
also applies with respect to transactions
that attempt to avoid the purposes of the
disregarded payment loss rules because,
as discussed in part II of this Explanation
of Provisions, such rules are also intended
to address transactions that raise policy
concerns similar to those arising under the
dual consolidated loss rules. See proposed
§1.1503(d)-1(f).
D. GloBE Model Rules
1. General Applicability of Dual
Consolidated Loss Rules
As discussed in part IV.B of the Back-
ground section of this preamble, Notice
2023-80 requested comments on the inter-
action of the dual consolidated loss rules
with the GloBE Model Rules. In response,
comments requested that the dual con-
solidated loss rules be made inapplicable
with respect to a foreign tax based on the
GloBE Model Rules. In support of these
recommendations, comments asserted that
the QDMTT, IIR, and UTPR have unique
characteristics that are not present in the
income taxes that were in existence when
section 1503(d) was enacted. According
to some comments, these taxes are not
based on the traditional concept of tax res-
idency and thus do not present the possi-
bility for the mismatches in tax residency
that the dual consolidated loss rules were
intended to address. Comments further
noted that the QDMTT, IIR, and UTPR
are minimum taxes based on an MNE
Group’s financial accounting income and,
in contrast to typical tax consolidation
or group relief regimes, the aggregation
of revenue or expense under the GloBE
Model Rules is not elective. Finally, com-
ments asserted that the IIR differs from a
typical foreign income tax because it is
not a tax on an entity’s income (including
income imputed from a subsidiary) arising
in the foreign jurisdiction where the entity
is a tax resident. According to these com-
ments, a foreign use cannot occur under
the current dual consolidated loss rules as
a result of a loss being taken into account
under an IIR if the entity incurring the loss
is not a tax resident in the foreign juris-
diction imposing the IIR – that is, these
comments assert a foreign use can only
occur if a dual consolidated loss is made
available under the laws of the foreign
jurisdiction in which the loss arises.
As indicated in Notice 2023-80, the
Treasury Department and the IRS are of
the view that the aggregation of items of
revenue and expense of Constituent Enti-
ties in the same jurisdiction in calculat-
ing the ETR can result in double-deduc-
tion outcomes that the dual consolidated
loss rules were intended to address. First,
despite the differences between the GloBE
Model Rules and more traditional foreign
income tax systems, the GloBE Model
Rules can also present a typical example
of tax residency arbitrage that the dual
consolidated loss rules were intended
to address. For example, assume USP, a
domestic corporation, owns all the inter-
ests in DEx, an entity organized under the
laws of Country X that is disregarded as
an entity separate from its owner. DEx, in
turn, owns all the stock in CFCx, a for-
eign corporation organized under the laws
of Country X. DEx incurs a $100x loss
and CFCx generates $100x of income. If
Country X does not impose an income tax
on Country X entities, then the $100x loss
incurred by DEx would not be a dual con-
solidated loss with respect to USP’s inter-
ests in DEx. See §1.1503(d)-1(b)(5)(ii),
(b)(3), and (b)(4)(i). This is appropriate as
the loss could not be used to offset CFCx’s
income and give rise to a double-deduc-
tion outcome because there is no Country
X income tax that could be reduced as a
result of the offset. If, however, Country X
enacted a QDMTT that is an income tax,
and absent the application of the dual con-
solidated loss rules, the $100x loss of DEx
could then be available to reduce U.S. tax
imposed on USP’s income as well as the
Country X QDMTT imposed on CFCx’s
income. The Treasury Department and
the IRS are of the view that as a matter
of the policy underlying the dual consoli-
dated loss rules there is no meaningful dis-
tinction between using DEx’s $100x loss
to offset the Country X QDMTT versus
using the loss to instead offset a more tra-
ditional income tax imposed by Country
X; both cases give rise to a double-deduc-
tion outcome. Further, a double-deduction
outcome could also occur if the loss were
to offset income under another country’s
IIR, rather than under a QDMTT.
Moreover, the features of the IIR or
QDMTT noted by comments – such as
using financial accounting income as a
starting point for purposes of determin-

Bulletin No. 2024–35 545 August 26, 2024
ing GloBE Income or Loss, or being a
minimum tax – do not preclude an IIR
or QDMTT from being the type of tax
to which the dual consolidated loss rules
were intended to apply. Indeed, these
types of features are included in the U.S.
income tax. See, for example, sections 55,
56A, and 59 (corporate alternative mini-
mum tax). The sharing of the loss through
the mechanics of calculating Net GloBE
Income similarly is an insufficient basis
to distinguish the IIR or QDMTT from a
more traditional foreign income tax where
the loss is shared pursuant to a consol-
idation election or similar loss-sharing
regime.
As an alternative to a foreign use excep-
tion, some comments recommended an
anti-abuse rule that provides that a foreign
use can only occur as a result of aggre-
gation under the GloBE Model Rules if
the losses were created for a tax-avoid-
ance purpose. These proposed regula-
tions do not provide such an anti-abuse
rule because there is no indication in the
statutory language or legislative history
that the application of the dual consoli-
dated loss rules should be limited to losses
incurred for a tax-avoidance purpose.
15

Many deductions that can be structured to
give rise to a double-deduction outcome
are incurred for non-tax business reasons,
such as interest expense incurred on exter-
nal debt that is issued to acquire property
or fund business operations.
Accordingly, the proposed regulations
provide that an income tax may include a
tax that is intended to ensure a minimum
level of taxation on income or computes
income or loss by reference to financial
accounting net income or loss. See pro-
posed §1.1503(d)-1(b)(6)(ii). Therefore,
an IIR or QDMTT may be an income tax
for purposes of the dual consolidated loss
rules and a foreign use may occur under
such tax by reason of a loss being used in
the calculation of Net GloBE Income or to
qualify for a Transitional CbCR Safe Har-
bour. See proposed §1.1503(d)-7(c)(3)(ii)
for an example illustrating the application
of the dual consolidated loss rules with
respect to a QDMTT. These proposed reg-
ulations do not, however, provide specific
guidance regarding the UTPR. The Trea-
sury Department and the IRS continue to
analyze issues related to the UTPR.
2. Effect on Certain Entities and Foreign
Business Operations
As discussed in parts I.A, I.B, and I.E
of the Background section of this pre-
amble, the definitions of hybrid entity,
hybrid entity separate unit, and dual res-
ident corporation are each based, in part,
on whether the relevant entity is subject to
an income tax of a foreign country on its
worldwide income or on a residence basis.
The definition of a foreign branch separate
unit, on the other hand, is based on the
level of activities required to constitute a
foreign branch under §1.367(a)-6T(g)(1)
(subject to an exception where business
operations do not constitute a permanent
establishment under an applicable income
tax convention). Among other require-
ments, an entity is a transparent entity
only if it is not subject to an income tax of
a foreign country on its worldwide income
or on a residence basis.
As discussed in part IV.A of the Back-
ground section of this preamble, a top-up
tax may be collected by a jurisdiction
with respect to the Net GloBE Income of
a Constituent Entity under a QDMTT or
an IIR. The top-up tax under an IIR with
respect to the Net GloBE Income of an
entity located in one jurisdiction may be
collected by a different jurisdiction from
another Constituent Entity in the MNE
Group. As mentioned in part I.D.1 of this
Explanation of Provisions, comments
have asserted that the IIR is not based on
the traditional concept of tax residency
and, if a loss does not arise in the foreign
jurisdiction that assesses the tax, the dual
consolidated loss rules do not apply.
The Treasury Department and the IRS
are of the view, that where a loss reduces
or eliminates the amount of Net GloBE
Income in a jurisdiction, the results under
the dual consolidated loss rules should
be the same regardless of the jurisdic-
tion collecting tax with respect to the
amount of Jurisdictional Top-up Tax. For
example, assume a domestic corporation
(“DC”) owns a foreign disregarded entity
(“FDEx”), a tax resident in Country X that
imposes a QDMTT that is an income tax.
Further assume that FDEx owns all the
stock of a foreign corporation organized
under the laws of Country X (“CFCx”)
and that is also a tax resident in Country
X. FDEx should be treated as subject to
the QDMTT, and as a hybrid entity as a
result of being subject to the QDMTT, to
prevent the double-deduction outcome
discussed in part I.D.1 of this Explanation
of Provisions.
Alternatively, assume that DC owns
another disregarded entity (“FDEy”), that
is a tax resident in Country Y, a jurisdic-
tion that imposes an IIR that is income
tax, and FDEy owns FDEx, which owns
CFCx, and that Country X does not impose
a QDMTT. In this case, a loss of FDEx
can reduce the GloBE Income of CFCx
for purposes of the Country Y IIR and, as
was the case with a Country X QDMTT
(that is also calculated in part by reference
to FDEx’s income), a double-deduction
outcome may result. The treatment of an
interest in FDEx as a separate unit should
not be affected if, instead of the QDMTT
being collected from FDEx with respect to
its GloBE Income, an IIR is collected on
FDEy, the owner of FDEx, with respect to
the GloBE Income of FDEx. Moreover,
a loss of FDEx cannot offset income of a
Country Y Constituent Entity for purposes
of the Country Y IIR and, therefore, the
FDEx separate unit should not be part of
a combined separate unit that includes
FDEy, which would otherwise distort the
calculation of income or loss attributable
to the combined Country Y separate unit.
In other words, specifically identifying
these separate units is necessary to apply
the separate unit combination rule, includ-
ing for purposes of describing the location
of separate units arising from a QDMTT
or an IIR.
Accordingly, the proposed regulations
generally provide that if the income or
loss of a foreign entity that is not taxed
as an association for Federal income tax
purposes is taken into account in deter-
mining the amount of tax under an IIR,
then a domestic corporation’s directly or
15
In contrast, the anti-avoidance rule under proposed §1.1503(d)-1(f) is intended to backstop the dual consolidated loss rules, which apply to losses without regard to whether incurred for
a tax-avoidance purpose.

August 26, 2024 546 Bulletin No. 2024–35
indirectly held interest in such an entity
is a hybrid entity separate unit. See pro-
posed §1.1503(d)-1(b)(4)(i)(B)(2). Fur-
ther, such a hybrid entity separate unit
would form part of a combined separate
unit based on where the relevant entity is
located for purposes of the IIR. See pro-
posed §1.1503(d)-1(b)(4)(ii)(A) and (b)
(4)(ii)(B)(2). Thus, in both variations of
the example in the preceding paragraph,
the interest in FDEx would, by reason of
the relevant foreign income tax, be treated
as a separate unit in Country X, which is
the country in which FDEx is located for
purposes of the QDMTT and IIR. Further,
because a double-deduction outcome may
also result from a place of business con-
ducted by a domestic corporation outside
the United States that is treated as a Per-
manent Establishment with respect to a
QDMTT or an IIR, the proposed regula-
tions would treat such a place of business
as a foreign branch separate unit. See pro-
posed §1.1503(d)-1(b)(4)(i)(A)(2).
These new definitions of hybrid entity
separate unit and foreign branch sepa-
rate unit do not apply to an interest in an
entity, or place of business, respectively,
that would otherwise qualify as a separate
unit under the definitions included in the
current regulations. This is because a loss
attributable to a separate unit as defined
under the current regulations is already
a dual consolidated loss and, thus, addi-
tional rules are not necessary to prevent
a double-deduction outcome from occur-
ring as a result of the use of losses attribut-
able to such separate units for purposes of
a QDMTT or IIR. For example, if a hybrid
entity’s loss is also taken into account in
determining the amount of tax under an
IIR, a foreign use may result if a dual
consolidated loss attributable to an inter-
est in the entity is made available to offset
income either for purposes of the foreign
income tax to which the entity is subject
or for purposes of the IIR.
Under the proposed regulations, being
subject to an IIR would not cause an inter-
est in a Tax Transparent Entity to be a
hybrid entity separate unit. See proposed
§1.1503(d)-1(b)(4)(i)(B)(2). Although
a calculation of GloBE Income or Loss
is required for a Tax Transparent Entity,
for purposes of an IIR, all of the entity’s
Financial Accounting Net Income or Loss
is allocated to its owners (or to a perma-
nent establishment of the entity) and, thus,
it is unlikely that a loss attributable to an
interest in such an entity could give rise
to a double-deduction outcome. This treat-
ment is also consistent with the treatment,
and policy rationale, under the existing
dual consolidated loss rules that an inter-
est in a partnership that is not a hybrid
entity is not a separate unit.
The Treasury Department and the IRS
are of the view that the treatment of a for-
eign entity or a place of business outside
the United States as a Stateless Constitu-
ent Entity should not preclude treating a
domestic corporation’s interest in such
an entity or the place of business as an
individual separate unit. Even though
the GloBE Income or Loss of a Stateless
Constituent Entity is not combined with
the GloBE Income or Loss of any other
Constituent Entity, treating an interest in
such an entity or a place of business as an
individual separate unit is appropriate to
prevent double-deduction outcomes that
may nevertheless arise (for example, if
the foreign entity were to generate a loss
during the first half of the taxable year and
then elect to be treated as a foreign corpo-
ration for U.S. tax purposes).
The income or loss of a domestic entity
may also be taken into account in deter-
mining the amount of tax imposed under
an IIR (for example, if a domestic corpo-
ration were wholly owned by a foreign
corporation organized under the laws of
a jurisdiction that imposed an IIR). How-
ever, the Treasury Department and the IRS
are of the view that the IIR alone should
not cause a domestic entity to be treated
as a dual resident corporation or a hybrid
entity. The dual consolidated loss rules
are intended to prevent double-deduc-
tion outcomes that can arise from struc-
tures involving the possibility of a form
of arbitrage, such as from an entity or
place of business being subject to tax in
more than one country, or from the entity
or place of business having different tax
classifications under U.S. and foreign tax
law. Absent this type of arbitrage, the dual
consolidated loss rules would not apply
to limit the deductibility of a domestic
entity’s loss due to that entity’s income
or loss being reflected in the amount
of tax imposed under an IIR (or a simi-
lar shareholder-level tax). Moreover, if a
loss of a domestic entity were viewed as
giving rise to a second deduction because
it is taken into account to determine the
amount of tax imposed under an IIR, the
loss is likely only available to offset dual
inclusion income (and therefore would not
give rise to a double-deduction outcome)
since the income of any domestic affiliate
that could be offset by the loss for domes-
tic tax purposes should also be taken into
account in determining the amount of
tax imposed under the IIR. Accordingly,
under the proposed regulations a domes-
tic entity is not treated as a dual resident
corporation or a hybrid entity solely as a
result of the domestic entity’s income or
loss being taken into account in determin-
ing the amount of an IIR. See proposed
§1.1503(d)-7(c)(3)(iii) for an example
illustrating the treatment of domestic
entities under an IIR. Applying the dual
consolidated loss rules only when there is
an element of hybridity (or mismatch) is
consistent with the scope of both the cur-
rent dual consolidated loss regulations and
the OECD reports addressing hybrid and
branch mismatch arrangements.
16
3. Application to Transitional CbCR Safe
Harbour
Comments requested guidance pro-
viding that, even if the dual consolidated
loss rules apply with respect to the GloBE
Model Rules, a foreign use should not
occur solely because a dual consolidated
loss is taken into account for purposes of
the Transitional CbCR Safe Harbour. The
comments noted that, unlike the QDMTT,
IIR, and UTPR, the Transitional CbCR
Safe Harbour is not a collection mecha-
nism and thus does not operate to impose
a tax liability. Instead, according to some
comments, the Transitional CbCR Safe
Harbour can be viewed as a “gating”
mechanism to determine if a taxpayer
16
See, for example, OECD/G20, Neutralising the Effects of Hybrid Mismatch Arrangements, Action 2: 2015 Final Report (October 2015) (“Hybrid Mismatch Report”), Part I recommenda-
tions, paragraph 13 (“While cross-border mismatches arise in other contexts (such as the payment of deductible interest to a tax exempt entity), the only types of mismatches targeted by this
report are those that rely on a hybrid element to produce such outcomes.”).

Bulletin No. 2024–35 547 August 26, 2024
is subject to tax, similar to a determina-
tion of whether activity rises to the level
of a permanent establishment under an
applicable tax treaty. Further, comments
claimed that the calculation of income and
expenses under the Transitional CbCR
Safe Harbour is substantially different
from such calculations under the gen-
eral GloBE Model Rules and generally
accepted accounting principles.
Because the Transitional CbCR Safe
Harbour is intended to serve as a simpli-
fied proxy for determining whether the
Tested Jurisdiction is likely to have an
ETR that is at or above the minimum rate,
the Treasury Department and the IRS are
of the view that a foreign use exception
for the Transitional CbCR Safe Harbour
is not appropriate where, in the absence
of the Transitional CbCR Safe Harbour,
a dual consolidated loss could be made
available to reduce the amount of income
subject to a Top-up Tax. In other words,
the use of a loss or expense to qualify for
the Transitional CbCR Safe Harbour, and
thereby avoid tax that may otherwise be
imposed under the GloBE Model Rules
absent the application of the Transitional
CbCR Safe Harbour, has the same dou-
ble-deduction outcome effect as if the loss
or expense were made available to directly
reduce the tax. As a result, a foreign use
may occur with respect to the application
of the Transitional CbCR Safe Harbour.
See proposed §1.1503(d)-7(c)(3)(ii) for
an example illustrating that duplicate loss
arrangement rules may prevent such a for-
eign use.
Finally, one comment requested guid-
ance that jurisdictional blending in a
Tested Jurisdiction under the GloBE
Model Rules does not constitute a foreign
use of a dual consolidated loss if the Tran-
sitional CbCR Safe Harbour is satisfied
in that Tested Jurisdiction after the appli-
cation of the duplicate loss arrangement
rules. This concern could arise because
satisfying the Transitional CbCR Safe
Harbour in a Tested Jurisdiction techni-
cally does not preclude the application of
the GloBE Model Rules (and, thus, tech-
nically would not preclude a foreign use
that could occur under the “made avail-
able” standard), but rather only deems the
Jurisdictional Top-up Tax in the Tested
Jurisdiction to be zero. Consistent with
the guidance requested in this comment,
the proposed regulations provide a lim-
ited foreign use exception under which
there is deemed to be no foreign use with
respect to the GloBE Model Rules where
the Transitional CbCR Safe Harbour is
satisfied and no foreign use occurs with
respect to the Transitional CbCR Safe
Harbour due to the application of the
duplicate loss arrangement rules. See pro-
posed §1.1503(d)-3(c)(9). For the avoid-
ance of doubt, however, this foreign use
exception does not preclude a foreign
use from occurring if the duplicate loss
arrangement rules do not apply and a dual
consolidated loss is taken into account
in determining whether the Transitional
CbCR Safe Harbour is satisfied.
4. Mirror Legislation
As discussed in part IV.C. of the Back-
ground section of this preamble, the
December 2023 Administrative Guidance
contains rules that disallow expenses for
purposes of qualifying for the Transitional
CbCR Safe Harbour if there is a dupli-
cate loss arrangement. An arrangement
qualifies as a duplicate loss arrangement,
in relevant part, if an expense or loss in
the financial statements of a Constitu-
ent Entity also gives rise to a duplicate
amount that is deductible in determining
the taxable income of another Constitu-
ent Entity in another jurisdiction. Com-
ments requested guidance as to whether
the duplicate loss arrangement rules in the
December 2023 Administrative Guidance
constitute mirror legislation (within the
meaning of §1.1503(d)-3(e)(1)).
As discussed in part I.D of the Back-
ground section of this preamble, the tax-
payer’s ability to choose the jurisdiction
in which a dual consolidated loss is used
is a long-standing feature of the dual con-
solidated loss rules. The mirror legisla-
tion rule was issued to address situations
where foreign legislation undermines
the taxpayer’s ability to choose by deny-
ing any opportunity for a foreign use of
a particular dual consolidated loss and
thereby compelling the taxpayer to make
a domestic use election. However, not all
forms of foreign law that deny the foreign
use of deductions composing a dual con-
solidated loss are mirror legislation. See
§1.1503(d)-7(c)(18)(iii) for an example
illustrating that a foreign law similar to the
dual consolidated loss rules is not mirror
legislation because it permits the loss to
be used in that jurisdiction if the loss is not
used in another jurisdiction.
The Treasury Department and the IRS
are of the view that a taxpayer’s ability
to choose whether to put a dual consoli-
dated loss to a domestic use or a foreign
use can be preserved even if the foreign
law does not explicitly provide an elec-
tion to use the loss (like the dual consol-
idated loss rules) and instead only denies
a loss to avoid a double-deduction out-
come. The duplicate loss arrangement
rules in the December 2023 Administra-
tive Guidance preserve such a choice and
thus do not constitute mirror legislation
because a dual consolidated loss could be
put to a foreign use for purposes of the
Transitional CbCR Safe Harbour. That is,
if no domestic use election is made with
respect to a dual consolidated loss, then
the loss is subject to the domestic use
limitation, and the duplicate loss arrange-
ment rules should not apply because the
loss would not be deductible for pur-
poses of determining the taxable income
of another Constituent Entity in another
jurisdiction. If, on the other hand, a
domestic use election is made for a dual
consolidated loss, then the loss would be
put to a domestic use and the duplicate
loss arrangement rules should prevent
the expense or loss from being taken into
account for purposes of the Transitional
CbCR Safe Harbour (that is, they should
prevent a foreign use). Thus, through its
ability to make or forgo a domestic use
election, a taxpayer retains the choice to
put a dual consolidated loss to a domes-
tic use or a foreign use (but not both).
For the same reason, the double-deduc-
tion rules included in the OECD report
addressing hybrid and branch mismatch
arrangements,
17
which similarly deny the
foreign use of a dual consolidated loss
to the extent it is deductible in another
jurisdiction, do not constitute mirror
17
See the Hybrid Mismatch Report; OECD/G20, Neutralising the Effects of Branch Mismatch Arrangements, Action 2: Inclusive Framework on BEPS (July 2017).

August 26, 2024 548 Bulletin No. 2024–35
legislation.
18
Accordingly, the proposed
regulations clarify that foreign law that
preserves a taxpayer’s choice to put a
dual consolidated loss to a domestic use
or a foreign use (but not both) does not
constitute mirror legislation, even if there
are specific instances where the foreign
law denies the foreign use of a deduc-
tion or expense to the extent necessary
to prevent a double-deduction outcome.
See proposed §1.1503(d)-7(c)(18)(iv) for
an example illustrating a foreign law that
provides such a choice.
5. Transition Rules
As discussed in part IV.B of the Back-
ground section of this preamble, Notice
2023-80 announced that future regula-
tions would be promulgated concerning
legacy DCLs (that is, certain dual consol-
idated losses incurred before any legisla-
tion enacting the GloBE Model Rules is
effective).
Several comments requested that the
foreign use exception described in Notice
2023-80 be extended to include dual con-
solidated losses incurred in taxable years
beginning after December 31, 2023 (for
example, for taxable years ending on or
before December 31, 2024, or taxable
years beginning in the year that final regu-
lations concerning the applicability of the
dual consolidated loss rules with respect
to the QDMTT and IIR are issued). Com-
ments asserted that the extension of the
foreign use exception is warranted to pro-
vide certainty and to take into account fur-
ther developments from the OECD, such
as the possible future application of the
duplicate loss arrangement rules outside
the context of the Transitional CbCR Safe
Harbour.
The Treasury Department and the IRS
are of the view that it is appropriate to
extend, for a limited period, relief from
the application of the dual consolidated
loss rules with respect to the GloBE
Model Rules. This would provide tax-
payers more certainty, allow for further
consideration of these proposed regu-
lations and comments that may be sub-
mitted, and allow for consideration of
any future developments at the OECD.
Extending the relief only for a limited
period is intended to minimize the dou-
ble-deduction outcomes that may result.
Accordingly, and subject to an anti-
abuse rule, these proposed regulations
provide that the dual consolidated loss
rules apply without taking into account
QDMTTs or Top-up Taxes with respect
to losses incurred in taxable years begin-
ning before August 6, 2024. See proposed
§1.1503(d)-8(b)(12).
In addition to not being limited to leg-
acy DCLs, this transition relief differs
from the relief provided in Notice 2023-
80 in that it applies beyond foreign use,
applying with respect to all the dual con-
solidated loss rules (including foreign
use). This broader relief is intended, in
part, to relieve the administrative burden
of having to file a domestic use election
and annual certifications for dual consoli-
dated losses that would otherwise qualify
for the foreign use exception described
in Notice 2023-80 (or for the additional
relief provided under the proposed regu-
lations). Further, this would prevent a loss
from being subject to recapture as a result
of a triggering event other than a foreign
use, such as the failure to file an annual
certification.
6. Interaction with Anti-hybrid Rules
As noted in part IV.B of the Back-
ground section of this preamble, the Trea-
sury Department and the IRS are studying
the interaction of the GloBE Model Rules
with the rules under sections 245A(e)
and 267A and request comments in this
regard. For example, the Treasury Depart-
ment and the IRS are considering whether
a foreign country’s traditional income tax
and a Top-up Tax with respect to the oper-
ations in the foreign country should be
viewed as part of the same “tax laws” of
the country for purposes of section 267A.
E. Applicability dates
Proposed §1.1502-13(j)(10), relating
to the interaction of the dual consolidated
loss rules with the intercompany trans-
action regulations, is proposed to apply
to taxable years for which the original
Federal income tax return is due (without
extensions) after the date that final regu-
lations are published in the Federal Reg-
ister. See proposed §1.1502-13(l)(11).
However, taxpayers may apply proposed
§1.1502-13(j)(10), once published in the
Federal Register as final regulations, to
an earlier taxable year that remains open,
provided that the taxpayer and all mem-
bers of its consolidated group apply the
regulations consistently in that taxable
year and each subsequent taxable year.
See id.
The parenthetical in proposed
§1.1503(d)-1(c)(1)(ii), clarifying that a
specified foreign tax resident that is a dis-
regarded entity can be related to a domes-
tic consenting corporation for purposes
of §1.1503(d)-1(c)(1)(ii), is proposed to
apply to determinations relating to taxable
years ending on or after August 6, 2024.
See proposed §1.1503(d)-8(b)(6).
Proposed §1.1503(d)-5(b)(2)(iv) and
(c)(4)(iv), relating to the attribution of
items arising from ownership of stock, are
proposed to apply to taxable years ending
on or after August 6, 2024. See proposed
§1.1503(d)-8(b)(9).
The fourth and fifth sentences of pro-
posed §1.1503(d)-5(c)(3)(i), relating to
the adjustments to conform to U.S. tax
principles, are proposed to apply to tax-
able years ending on or after August 6,
2024. See proposed §1.1503(d)-8(b)(10).
As noted in part I.B.2 of this Explanation
of Provisions, the proposed addition of
these two sentences is intended merely
to clarify the existing regulation for the
avoidance of any doubt. The IRS may
18
See, for example, New Zealand’s Tax Information Bulletin, Vol. 31 No. 3 April 2019 at p. 50, which discusses New Zealand’s deduction disallowance rules that are based on the double-de-
duction rules in the Hybrid Mismatch Report. In discussing the interaction of the New Zealand rules with the dual consolidated loss rules, the Bulletin provides:

Expenditure incurred by a US taxpayer, or a New Zealand hybrid entity which is deductible by a US owner, will not be subject to [New Zealand’s deduction disallowance rules] so long
as the US taxpayer is subject to the [dual consolidated loss] rules and has not made a domestic use election. If the US taxpayer has made a domestic use election, then [the New Zealand
deduction disallowance rules] will apply to deny a deduction for the expenditure. That is because the domestic use election is an election that the [dual consolidated loss] rules do not
apply to the US taxpayer in respect of the relevant expenditure.

Bulletin No. 2024–35 549 August 26, 2024
challenge contrary positions for taxable
years ending before August 6, 2024 under
the rules applicable to such taxable years.
Proposed §1.1503(d)-8(b)(12), relating
to the application of the dual consolidated
loss rules without regard to QDMTTs
or Top-up Taxes, applies with respect to
losses incurred in taxable years beginning
before August 6, 2024.
Proposed §1.1503(d)-3(c)(9), relating
to the foreign use exception for qualifica-
tion for the Transitional CbCR Safe Har-
bour, is proposed to apply to taxable years
beginning on or after August 6, 2024. See
proposed §1.1503(d)-8(b)(13).
Proposed §§1.1503(d)-1(b)(4)(i)
(A)(2), 1.1503(d)-1(b)(4)(i)(B)(2), and
1.1503(d)-1(b)(4)(ii)(B)(2), relating to
separate units arising as a result of a
QDMTT or IIR, apply to taxable years
beginning on or after August 6, 2024. See
proposed §1.1503(d)-8(b)(14).
Proposed §1.1503(d)-1(f), relating to an
anti-avoidance rule, is proposed to apply
to taxable years ending on or after August
6, 2024. See proposed §1.1503(d)-8(b)
(15).
Proposed §1.1503(d)-1(b)(6)(ii), relat-
ing to minimum taxes and taxes based on
financial accounting principles, is pro-
posed to apply to taxable years ending
on or after August 6, 2024. See proposed
§1.1503(d)-8(b)(16).
A taxpayer may rely on these proposed
regulations for any taxable year ending
on or after August 6, 2024 and begin-
ning on or before the date that regulations
finalizing these proposed regulations are
published in the Federal Register, pro-
vided that the taxpayer and all members
of its consolidated group apply the pro-
posed regulations in their entirety and in
a consistent manner for all taxable years
beginning with the first taxable year of
reliance until the applicability date of
those final regulations. In addition, a tax-
payer may rely on the foreign use excep-
tion described in Notice 2023-80 for any
taxable year ending on or after December
11, 2023 and before August 6, 2024, pro-
vided that the taxpayer and all members
of its consolidated group apply those rules
in their entirety and in a consistent man-
ner for all taxable years beginning with
the first taxable year of reliance until the
applicability date of the final regulations
on this topic.
II. Rules Regarding Disregarded Payment
Losses
A. Overview
The preamble to the 2018 proposed
regulations describes structures involving
payments from foreign disregarded enti-
ties to their domestic corporate owners
that are regarded for foreign tax purposes
but disregarded for U.S. tax purposes. For
foreign tax purposes, the payments give
rise to a deduction or loss that, for exam-
ple, can be surrendered (or otherwise used,
such as through a consolidation regime)
to offset non-dual inclusion income. The
preamble notes that these structures are
not addressed under the current section
1503(d) regulations but give rise to sig-
nificant policy concerns that are similar
to those arising under sections 245A(e),
267A, and 1503(d). In addition, the pre-
amble states that the Treasury Department
and the IRS are studying these transac-
tions and request comments.
In response to this request, a comment
agreed that these structures can produce
a deduction/no-inclusion (“D/NI”) out-
come. In a similar context, the comment
asserted that arriving at the correct result
would generally require, for U.S. tax pur-
poses, disaggregating a disregarded pay-
ment into a regarded item of deduction
and a regarded item of income, and tak-
ing such items into account for purposes
of the dual consolidated loss rules to the
extent reflected on the books and records
of the entity. However, the comment did
not recommend this approach due to com-
plexity, noting, for example, that it would
require tracking of transactions between a
foreign disregarded entity and its domes-
tic corporate owner, as well as determin-
ing the character and source of items that
would not otherwise exist for U.S. tax pur-
poses. To mitigate certain D/NI outcomes,
the comment recommended an alternative
approach, which would track disregarded
items only so as to offset regarded items,
and thus not so as to create items of income
and deduction. The comment conceded,
however, that this approach would not
address the paradigm structure involving
only disregarded deductions that give rise
to D/NI outcomes and therefore would not
address the policy concerns. The comment
queried whether it might be better for the
dual consolidated loss rules not to apply,
with the expectation that the foreign juris-
diction could, in some cases, eliminate D/
NI outcomes by denying the foreign tax
deduction.
The Treasury Department and the IRS
are of the view that treating items other-
wise disregarded for U.S. tax purposes
as regarded could give rise to consider-
able complexity, and that the alternative
approach recommended by the comment
would not address the paradigm struc-
ture, and therefore would not sufficiently
address the policy concerns underlying
these structures. Accordingly, neither of
these approaches is adopted. However,
the Treasury Department and the IRS
are not of the view that these structures
should be addressed only to the extent of
applicable foreign tax rules addressing D/
NI outcomes; in the absence of a foreign
tax rule denying a foreign tax deduction,
these structures would continue to give
rise to the significant policy concerns
noted above. In addition, the OECD/G20
recommends defensive rules that require
income inclusions to neutralize D/NI
outcomes. See, for example, Hybrid Mis-
match Report Recommendations 1.1(b)
and 3.1(b).
Accordingly, the proposed regula-
tions address these structures through
the entity classification rules under sec-
tion 7701 and the dual consolidated loss
rules under section 1503(d), in a man-
ner that is consistent with the “domestic
consenting corporation” approach under
§§301.7701-3(c)(3) and 1.1503(d)-1(c)
addressing domestic reverse hybrids.
Under this approach, when certain eli-
gible entities (“specified eligible enti-
ties”) are treated as disregarded entities
for U.S. tax purposes, a domestic corpo-
ration that acquires, or on the effective
date of the election directly or indirectly
owns, interests in such a specified eligi-
ble entity consents to be subject to the
rules of proposed §1.1503(d)-1(d). See
proposed §301.7701-3(c)(4)(i).
Pursuant to these rules (the “disre-
garded payment loss” rules), and as further
discussed in part II.B. of this Explanation
of Provisions, the domestic corporation
agrees that it will monitor a net loss of
the entity under a foreign tax law that is
composed of certain payments that are
disregarded for U.S. tax purposes and,

August 26, 2024 550 Bulletin No. 2024–35
if a D/NI outcome occurs as to the loss,
include in gross income an amount equal
to the loss. See proposed §1.1503(d)-1(d)
(1). The Treasury Department and the IRS
are of the view that the domestic corpo-
ration’s inclusion of the amount in gross
income generally neutralizes the D/NI
outcome, and places the parties in approx-
imately the same position in which they
would have been had the specified eligible
entity not been permitted to be classified
as a disregarded entity. In addition, the
Treasury Department and the IRS are of
the view that this approach is more admin-
istrable than alternative approaches, such
as disaggregating each disregarded pay-
ment into a regarded item of deduction
and income, or, upon a D/NI outcome as
to the loss, terminating the specified eli-
gible entity’s classification retroactive to
the taxable year in which the loss was
incurred. These alternative approaches
would have the same effect of giving rise
to an item of income to the domestic cor-
poration because the payment would be
regarded.
The proposed regulations also include
a deemed consent rule pursuant to which,
beginning on the date that is twelve
months after the date that the disre-
garded payment loss rules are applica-
ble, a domestic corporation that directly
or indirectly owns interests in a speci-
fied eligible entity is deemed to consent
to be subject to the rules, to the extent
it has not otherwise so consented. See
proposed §301.7701-3(c)(4)(iii) and (vi).
This default rule is intended to reflect the
result that taxpayers would be expected
to favor (for example, to avoid the var-
ious income inclusion rules that would
typically apply upon the conversion of
a hybrid entity to a foreign corporation).
However, the deemed consent can be
avoided if the specified eligible entity
elects to be treated as an association.
19
See
proposed §301.7701-3(c)(4)(iv). Further,
the twelve-month delay for deemed con-
sent provides an opportunity to restruc-
ture existing arrangements to avoid the
application of the disregarded payment
loss rules without changing the classifi-
cation of a specified eligible entity.
B. Consequences of consent
1. In General
When a domestic corporation con-
sents to be subject to the disregarded
payment loss rules, the domestic corpo-
ration agrees that if the specified eligible
entity (described below) incurs a disre-
garded payment loss during a certifica-
tion period (discussed in section II.B.3
of this Explanation of Provisions) and
a triggering event occurs with respect
to that loss, then the domestic corpora-
tion will include in gross income the
DPL inclusion amount. See proposed
§1.1503(d)-1(d)(1)(i). These rules also
apply to a disregarded payment loss of a
foreign branch of the domestic corpora-
tion because disregarded payments from
the domestic corporation to the specified
eligible entity may, under the branch’s
tax law, be attributable to, and deductible
by, the branch and thus could produce a
D/NI outcome (for example, if the branch
surrendered the loss to a foreign corpora-
tion). See id.
In general, a specified eligible entity
is an entity that, when classified as a
disregarded entity, could pay or receive
amounts that could give rise to a D/NI
outcome by reason of being disregarded
for U.S. tax purposes but deductible for
foreign tax purposes. Thus, a specified
eligible entity includes an eligible entity
(regardless of whether domestic or for-
eign) that is a foreign tax resident (which,
in the case of a domestic eligible entity,
may occur, for example, if the entity
is managed and controlled in a foreign
country), because amounts paid by such
an entity may be disregarded for U.S. tax
purposes but deductible for foreign tax
purposes. See proposed §301.7701-3(c)
(4)(i).
2. Disregarded Payment Loss
Computation
A disregarded payment loss with
respect to a specified eligible entity or a
foreign branch (in either case, a “disre-
garded payment entity,” and the domestic
corporation that consents to be subject to
the disregarded payment loss rules, the
“specified domestic owner” of the disre-
garded payment entity) is computed for
each foreign taxable year of the entity.
See proposed §1.1503(d)-1(d)(6)(ii).
The disregarded payment loss generally
measures the entity’s net loss, if any, for
foreign tax purposes that is composed of
certain payments that are disregarded for
U.S. tax purposes as transactions between
the disregarded payment entity and its
tax owner (for example, a payment by
the disregarded payment entity to the
specified domestic owner or to another
disregarded payment entity of the spec-
ified domestic owner). See id. That is, it
generally measures the entity’s net loss
that, but for the disregarded payment loss
rules, could produce a D/NI outcome. For
example, if for a foreign taxable year a
disregarded payment entity’s only items
are a $100x interest deduction and $70x
of royalty income, and if each item were
disregarded for U.S. tax purposes as a
payment between a disregarded entity
and its tax owner (but taken into account
under foreign law), then the entity would
have a $30x disregarded payment loss for
the taxable year.
In general, the items of deduction
taken into account for purposes of com-
puting a disregarded payment loss include
any item that is deductible under the rel-
evant foreign tax law, is disregarded for
U.S. tax purposes and, if regarded for
U.S. tax purposes, would be interest, a
structured payment, or a royalty within
the meaning of §1.267A-5(a)(12), (b)(5)
(ii), or (a)(16), respectively. See proposed
§1.1503(d)-1(d)(6)(ii)(C). Similar rules
apply for determining items of income that
offset the items of income for purposes of
determining a disregarded payment loss.
See proposed §1.1503(d)-1(d)(6)(ii)(D).
The Treasury Department and the IRS are
of the view that defining a duplicated pay-
ment loss in this manner tailors the appli-
cation of the rules to arrangements that
are likely structured to produce a D/NI
outcome. Moreover, this approach is con-
sistent with the scope of section 267A. In
addition, only items generated or incurred
19
The deemed consent rule could also be avoided by restructuring such that the rule would not apply, for example, by contributing the interests in the specified eligible entity to a foreign
corporation or by converting the entity into a partnership.

Bulletin No. 2024–35 551 August 26, 2024
during a period in which an interest in the
disregarded payment entity is a separate
unit are taken into account. See proposed
§1.1503(d)-1(d)(6)(ii). In other words,
items generally are taken into account
only to the extent they would be subject
to the dual consolidated loss rules but for
the items being disregarded for U.S. tax
purposes. Thus, for example, if a domestic
corporation becomes a dual resident cor-
poration as a result of changing its place
of management, disregarded payments
made to or from a domestic disregarded
entity held by the domestic corporation
are not taken into account in computing
a disregarded payment loss to the extent
such payments gave rise to a deduction
under the relevant foreign law before the
domestic corporation was a dual resident
corporation subject to the dual consoli-
dated loss rules.
The rules for computing a disregarded
payment loss therefore differ in certain
respects from comparable rules applicable
for purposes of computing a dual consoli-
dated loss. For example, the latter rules do
not take into account the deductibility of
an item under a foreign tax law and are not
limited to interest, structured payments, or
royalties. See §1.1503(d)-5(b) through (d).
3. Triggering Events
In general, the specified domestic
owner must include in gross income the
DPL inclusion amount with respect to a
disregarded payment loss if either of two
triggering events occurs with respect to
the loss during a certification period (the
“DPL certification period”). See proposed
§1.1503(d)-1(d)(2)(i). The DPL certifica-
tion period includes the foreign taxable
year in which the disregarded payment
loss is incurred, any prior foreign taxable
year, and the subsequent 60-month period.
See proposed §1.1503(d)-1(d)(6)(iii); but
see proposed 1.1503(d)-1(d)(7)(iii) (ter-
minating the certification period upon a
sale of the disregarded payment entity).
This proposed definition is consistent with
the certification period under the dual
consolidated loss rules, which is revised
to include at least the 60-month period
following the year in which the dual con-
solidated loss is incurred, as well as all
taxable years (unlike the disregarded pay-
ment loss rules, as determined under U.S.
tax law) before the taxable year in which
a dual consolidated loss is incurred. See
proposed §1.1503(d)-1(b)(20).
The two triggering events are based on
certain principles of the dual consolidated
loss rules. See proposed §1.1503(d)-1(d)
(3). The first triggering event addresses
likely D/NI outcomes – that is, a foreign
use of the disregarded payment loss (deter-
mined by taking into account the excep-
tions described in §1.1503(d)-3(c)).
20

See proposed §1.1503(d)-1(d)(3)(i).
However, for purposes of determining
whether a foreign use occurs (and unlike
the approach under the dual consolidated
loss rules), only persons that are related
to the specified domestic owner are taken
into account. See id. This limitation is
intended to minimize triggering events
resulting from transactions that are not tax
motivated, such as a foreign use resulting
from the sale of a disregarded payment
entity to an unrelated person, yet still deter
arrangements structured to produce D/NI
outcomes that typically involve related
parties. Thus, for example, a foreign use
triggering event occurs if, under a foreign
tax law, a deduction taken into account in
computing the disregarded payment loss
is made available (including by reason of
a foreign consolidation regime or similar
regime, or a sale, merger, or similar trans-
action) to offset an item of income that, for
U.S. tax purposes, is an item of a foreign
corporation, but only if that foreign corpo-
ration is related to the specified domestic
owner of the disregarded payment entity.
The second triggering event is a failure
by the specified domestic owner to com-
ply with certification requirements. See
proposed §1.1503(d)-1(d)(3)(ii). In gen-
eral, the specified domestic owner must,
for the foreign taxable year in which a
disregarded payment loss is incurred, and
for each subsequent taxable year within
the DPL certification period, file a state-
ment providing information about the
disregarded payment loss of such entity
and certifying that a foreign use of the dis-
regarded payment loss has not occurred.
See proposed §1.1503(d)-1(d)(4). Relief is
available for a failure to properly comply
with the certification requirements. See
proposed §1.1503(d)-1(e).
For simplicity purposes, the proposed
regulations include fewer triggering events
than the dual consolidated loss rules. For
example, the disregarded payment loss
triggering events do not include specific
triggering events related to the transfer
of assets of, or interests in, a disregarded
payment entity. Nevertheless, the scope of
the disregarded payment loss triggering
events is, in general, consistent with that
of the dual consolidated loss triggering
events because a foreign use triggering
event typically occurs, or will occur, in
connection with other dual consolidated
loss triggering events that are not rebutted.
For example, the transfer of all the inter-
ests in a disregarded entity by its domestic
owner to a related and wholly owned for-
eign corporation would constitute a trig-
gering event described in §1.1503(d)-6(e)
(1)(v) (transfer of 50 percent or more of an
interest in a separate unit). However, such
a transfer would also typically give rise to
a foreign use triggering event described
in §1.1503(d)-6(e)(1)(i) because a portion
of a deduction or loss taken into account
in computing the dual consolidated loss
would generally carry over under for-
eign law following the transfer and thus
be made available to offset or reduce an
item that is recognized as income or gain
under foreign law and that is, or would
be, considered under U.S. tax principles
to be an item of a foreign corporation.
See §1.1503(d)-3(a)(1). Many of these
non-foreign use dual consolidated loss
triggering events are intended to heighten
awareness that certain transactions or
events are likely to give rise to a foreign
use, which results in a double-deduction
outcome, and therefore serve to increase
compliance with the rules. Because D/
NI outcomes from disregarded payment
losses involve only related parties and
typically are highly-structured, however,
20
Because an expense resulting from an Intragroup Financing Arrangement is generally excluded from the calculation of a Low-Tax Entity’s GloBE Income or loss if there is no commensurate
increase in the taxable income of the High-Tax Counterparty, a disregarded payment loss (that is, a payment that generally does not increase U.S. taxable income) should generally not be
put to a foreign use as a result of jurisdictional blending under the GloBE Model Rules.

August 26, 2024 552 Bulletin No. 2024–35
the Treasury Department and the IRS are
of the view that the foreign use and certi-
fication triggering events are sufficient for
purposes of the disregarded payment loss
rules.
4. DPL Inclusion Amount
In general, the DPL inclusion amount
is, with respect to a disregarded payment
loss as to which a triggering event occurs
during the DPL certification period, the
amount of the disregarded payment loss.
See proposed §1.1503(d)-1(d)(2)(i). For
U.S. tax purposes, the DPL inclusion
amount is treated as ordinary income and
characterized in the same manner as if the
amount were interest or royalty income
paid by a foreign corporation. See pro-
posed §1.1503(d)-1(d)(2)(ii).
In certain cases, the DPL inclusion
amount is reduced by the positive balance,
if any, of the “DPL cumulative register”
with respect to the disregarded payment
entity. See proposed §1.1503(d)-1(d)(5)
(i). The DPL cumulative register is sim-
ilar to the cumulative register for dual
consolidated loss purposes, and gener-
ally reflects each disregarded payment
loss or amount of “disregarded payment
income” of a disregarded payment entity.
See §1.1503(d)-1(d)(5)(ii). Disregarded
payment income is computed in a manner
similar to that of computing a disregarded
payment loss, and measures a disregarded
payment entity’s net income, if any, for a
foreign taxable year that is composed of
certain disregarded payments attributable
to interest, structured payments, or roy-
alties. See proposed §1.1503(d)-1(d)(6)
(ii). Taking into account whether there is
sufficient cumulative register to absorb a
disregarded payment loss is intended to
ensure that the DPL inclusion amount rep-
resents only the portion of the disregarded
payment loss that is available to be put to
a foreign use under the foreign tax law.
For example, if a disregarded payment
entity incurs a $100x disregarded pay-
ment loss in year 1 and has $80x of dis-
regarded payment income in year 2, only
$20x of the disregarded payment loss is
likely available under the foreign tax law
to be put to a foreign use. As such, if a
triggering event occurs at the end of year
2, then the specified domestic owner must
include in gross income $20x (rather than
the entire $100x of the disregarded pay-
ment loss).
5. Disregarded Payment Entity
Combination Rule
Similar to the dual consolidated loss
rules, the proposed regulations include
a rule pursuant to which disregarded
payment entities for which the relevant
foreign tax law is the same (“individual
disregarded payment entities”) are gen-
erally combined and treated as a single
disregarded payment entity (“combined
disregarded payment entity”) for purposes
of the disregarded payment loss rules. See
proposed §1.1503(d)-1(d)(7)(i); see also
§1.1503(d)-1(b)(4)(ii) (combined separate
unit rule for dual consolidated loss pur-
poses). Accordingly, for a foreign taxable
year, only a single amount of disregarded
payment income or a single disregarded
payment loss exists with respect to the
combined disregarded payment entity.
This amount is computed by first deter-
mining the disregarded payment income
or loss with respect to each of the individ-
ual disregarded payment entities and then
aggregating such amounts.
This combination rule is intended to
prevent the application of the disregarded
payment loss rules to cases in which,
taking into account the overall effect of
disregarded payments under a foreign
tax law, there is not an opportunity for a
disregarded payment loss of an individual
disregarded payment entity to produce a
D/NI outcome. For example, assume USP,
a domestic corporation, wholly owns
DE1X, which wholly owns DE2X, and
each of DE1X and DE2X is a disregarded
payment entity tax resident in Country X.
Further assume that, computed on a sep-
arate basis during a foreign taxable year,
DE1X has a $100x disregarded payment
loss (consisting solely of a $100x payment
by DE1X to DE2X), and DE2X has $100x
of disregarded payment income (consist-
ing solely of the $100x payment received
by DE2X from DE1X). Absent the combi-
nation rule, the specified domestic owner
of DE1X would be required to monitor
DE1X’s disregarded payment loss and
annually certify that no foreign use has
occurred with respect to the loss. How-
ever, taking into account the overall effect
of the payment under Country X law, there
is likely to be no net loss attributable to
the payment and, as a result, there likely is
not an opportunity for the payment to give
rise to a D/NI outcome. The combination
rule thus limits the application of the dis-
regarded payment loss rules to cases in
which it is likely that disregarded pay-
ments could give rise to a D/NI outcome.
6. Application to Dual Resident
Corporations
The proposed regulations include spe-
cial rules pursuant to which the disregarded
payment loss rules also apply to dual res-
ident corporations, because a disregarded
payment by a dual resident corporation to
its disregarded entity could also give rise
to a D/NI outcome (for example, if the dual
resident corporation surrenders the loss to
a foreign corporation). Thus, pursuant to
the consent rules described in part II.A of
this Explanation of Provisions, a dual res-
ident corporation that directly or indirectly
owns interests in an eligible entity that is
classified as a disregarded entity agrees, for
purposes of the disregarded payment loss
rules, to be treated as a disregarded pay-
ment entity and as a specified owner of such
disregarded payment entity. See proposed
§§1.1503(d)-1(d)(1)(ii) and 301.7701-3(c)
(4)(ii).
C. Interaction with dual consolidated loss
rules
Although the disregarded payment loss
rules address similar policy concerns as,
and rely on certain aspects of, the existing
dual consolidated loss rules, the Treasury
Department and the IRS are of the view
that integrating the two regimes would
result in considerable complexity and
administrative burden. For example, inte-
grating the regimes could require rules
pursuant to which a disregarded payment
entity’s deduction under a foreign tax law
for a disregarded payment is considered to
in part offset the entity’s items of regarded
income (which would have the effect of
increasing a dual consolidated loss, rel-
ative to not taking into account the pay-
ment for purposes of the dual consolidated
loss rules) and to in part offset the enti-
ty’s items of income that are disregarded
for U.S. tax purposes (which would have
the effect of decreasing a disregarded

Bulletin No. 2024–35 553 August 26, 2024
payment loss, relative to only taking into
account the payment for purposes of the
disregarded payment loss rules).
The disregarded payment loss rules
therefore operate independently of the
dual consolidated loss rules. Thus, for
example, only items that are regarded for
U.S. tax purposes are taken into account
in computing a dual consolidated loss (or
cumulative register), and only items that
are disregarded for U.S. tax purposes are
taken into account in computing a disre-
garded payment loss (or DPL cumulative
register). In addition, a disregarded pay-
ment entity may have both a dual con-
solidated loss and a disregarded payment
loss for the same taxable year, and both
of these items could be triggered by a sin-
gle event (such as a foreign use pursuant
to a foreign loss surrender regime); in
contrast, a foreign use could be avoided
both for a dual consolidated loss and dis-
regarded payment loss of the same disre-
garded payment entity if, for example, an
election is required to enable a foreign use
and no such election is made.
As discussed in part I.B of the Back-
ground section of this preamble, the
dual consolidated loss rules do not take
into account disregarded transactions
(that typically are regarded for foreign
tax purposes) for purposes of attributing
items to a separate unit or an interest in
a transparent entity. This approach, which
minimizes the need for additional com-
plex rules, can result in both the over- and
under-application of the dual consolidated
loss rules as compared to more precise
rules that would take into account such
items to the extent necessary to neutral-
ize double-deduction outcomes. Thus,
the decision to ignore disregarded trans-
actions in the dual consolidated loss rules
for this purpose reflects a balance of pol-
icy and administrability. In other contexts,
various policy objectives have required
giving effect to certain disregarded trans-
actions. See, for example, §1.904-4(f)(2)
(vi) (attributing gross income to a foreign
branch) and §1.951A-2(c)(7)(ii)(B)(2)
(determining gross income for purposes
of applying the high-tax exception). The
Treasury Department and the IRS are of
the view that, in light of the policies under-
lying the enactment of sections 245A(e),
267A, and 1503(d), the disregarded pay-
ment loss rules are another case where it
is necessary to take into account disre-
garded transactions; the absence of such
rules would otherwise permit taxpayers to
continue to implement structures involv-
ing such payments to obtain D/NI out-
comes. The Treasury Department and the
IRS will continue to study the treatment of
disregarded items for purposes of the dual
consolidated loss rules, including whether
it may be appropriate to take into account
items of disregarded income, gain, deduc-
tion or loss in other cases.
D. Applicability date
The proposed rules relating to consent
to be subject to the disregarded payment
loss rules are proposed to apply to entity
classification elections filed on or after
August 6, 2024 (regardless of whether
the election is effective before August
6, 2024). See proposed §301.7701-3(c)
(4)(vi)(A). The proposed rule relating to
deemed consent is proposed to apply on
or after August 6, 2025. See proposed
§301.7701-3(c)(4)(vi)(B). The proposed
rules relating to disregarded payment
losses are proposed to apply to taxable
years ending on or after August 6, 2024.
See proposed §1.1503(d)-8(b)(11).
Conforming Amendments to Other
Regulations
The Treasury Department and the IRS
intend to make conforming amendments
to the regulations under section 1503(d),
including with respect to examples, upon
finalization of the proposed regulations.
Special Analyses
I. Regulatory Planning and Review
Pursuant to the Memorandum of
Agreement, Review of Treasury Regula-
tions under Executive Order 12866 (June
9, 2023), tax regulatory actions issued by
the IRS are not subject to the requirements
of section 6 of Executive Order 12866, as
amended. Therefore, a regulatory impact
assessment is not required.
II. Paperwork Reduction Act
The Paperwork Reduction Act of 1995
(44 U.S.C. 3501-3520) (“PRA”) requires
that a Federal agency obtain the approval
of the OMB before collecting information
from the public, whether such collection
of information is mandatory, voluntary,
or required to obtain or retain a benefit.
Section 1.1503(d)-1(d)(4) of these pro-
posed regulations requires the collection
of information.
As discussed in part II.B of this Expla-
nation of Provisions, the proposed regu-
lations require certain taxpayers to cer-
tify that no foreign use has occurred with
respect to a disregarded payment loss. The
IRS will use this information to determine
the extent to which these taxpayers need
to recognize income under the proposed
regulations.
The reporting burden associated with
this collection of information will be
reflected in the PRA submissions associ-
ated with Form 1120 (OMB control num-
ber 1545-0123). The Treasury Department
and the IRS do not have readily available
data to determine the number of taxpayers
affected by this collection of information
because no reporting module currently
identifies these types of disregarded pay-
ments. The Treasury Department and the
IRS request comments on all aspects of
information collection burdens related to
the proposed regulations, including ways
for the IRS to minimize the paperwork
burden.
III. Regulatory Flexibility Act
When an agency issues a rulemaking
proposal, the Regulatory Flexibility Act
(5 U.S.C. chapter 6) (“RFA”) requires the
agency to prepare and make available for
public comment an initial regulatory flexi-
bility analysis that will describe the impact
of the proposed rule on small entities. See
5 U.S.C. 603(a). Section 605 of the RFA
provides an exception to this requirement
if the agency certifies that the proposed
rulemaking will not have a significant
economic impact on a substantial number
of small entities. A small entity is defined
as a small business, small nonprofit orga-
nization, or small governmental jurisdic-
tion. See 5 U.S.C. 601(3) through (6).
The Treasury Department and the IRS
do not expect that the proposed dual con-
solidated loss regulations described in
parts I.A, I.B, and I.C of the Explanation
of Provisions will have a significant eco-

August 26, 2024 554 Bulletin No. 2024–35
nomic impact on a substantial number of
small entities because those regulations
refine computations under the current
dual consolidated loss regulations with-
out changing the economic impact of the
current regulations. Further, the Treasury
Department and the IRS do not expect
the proposed dual consolidated loss reg-
ulations described in parts I.D.1 through
I.D.6 of the Explanation of Provisions
will have a significant economic impact
on a substantial number of small entities
because they provide exceptions and other
rules that limit the application of the cur-
rent dual consolidated loss regulations.
However, because there is a possibility
of significant economic impact on a sub-
stantial number of small entities, an initial
regulatory flexibility analysis for the reg-
ulation is provided below. The Treasury
Department and the IRS request com-
ments from the public on the number of
small entities that may be impacted and
whether that impact will be economically
significant.
A. Reasons why action is being
considered
The proposed dual consolidated loss
regulations described in parts I.A through
I.D of the Explanation of Provisions
address potential uncertainty, and refine or
adjust certain computations, under current
law. In addition, the proposed dual con-
solidated loss regulations provide limited
exceptions to the application of the dual
consolidated loss rules where not incon-
sistent with the general policy underlying
those rules. As a result, this portion of the
proposed regulations increases the preci-
sion of the dual consolidated loss regula-
tions and reduces inappropriate planning
opportunities.
As explained in part II.A of the Expla-
nation of Provisions, the proposed disre-
garded payment loss regulations address
certain hybrid payments that can give rise
to deduction/no-inclusion outcomes.
B. Objectives of, and legal basis for, the
proposed regulations
The proposed regulations described in
parts I.A, I.B, I.C, I.D.1, I.D.2, and I.D.4
of the Explanation of Provisions address
potential uncertainty, and refine or adjust
certain computations, under the current
dual consolidated loss regulations. The
proposed dual consolidated loss regula-
tions described in parts I.D.3 and I.D.5
of the Explanation of Provisions limit the
application of the current dual consolidated
loss regulations. The proposed disregarded
payment loss regulations described in part
II of the Explanation of Provisions require
an income inclusion for U.S. tax purposes
to eliminate the deduction/no-inclusion
outcome that would otherwise arise from
certain hybrid payments. The legal basis
for these regulations is contained in sec-
tions 1502, 1503(d), 7701, and 7805.
C. Small entities to which these
regulations will apply
Because an estimate of the number of
small businesses affected is not currently
feasible, this initial regulatory flexibility
analysis assumes that a substantial num-
ber of small businesses will be affected.
The Treasury Department and the IRS do
not expect that these proposed regulations
will affect a substantial number of small
nonprofit organizations or small govern-
mental jurisdictions.
D. Projected reporting, recordkeeping,
and other compliance requirements
The proposed dual consolidated loss
regulations do not impose additional
reporting or recordkeeping obligations.
The proposed disregarded payment loss
regulations impose a certification require-
ment that is filed with a domestic corpora-
tion’s tax return.
E. Duplicate, overlapping, or relevant
Federal rules
These proposed regulations would
replace portions of the dual consolidated
loss regulations. The Treasury Department
and the IRS are not aware of any Federal
rules that duplicate, overlap, or conflict
with these proposed regulations.
F. Alternatives considered
The Treasury Department and the IRS
did not consider any significant alternative
to the proposed dual consolidated loss regu-
lations. The proposed regulations described
in parts I.A, I.B, I.C, I.D.1, I.D.2, and I.D.4
of the Explanation of Provisions simply
address potential uncertainty, or refine or
adjust certain computations, under current
law. The proposed regulations described in
parts I.D.3 and I.D.5 of the Explanation of
Provisions limit the application of the dual
consolidated loss regulations. As a result,
the proposed dual consolidated loss regula-
tions do not impose an additional economic
burden and, consequently, the regulations
represent the approach with the least eco-
nomic impact.
As discussed in part II.A of the Expla-
nation of Provisions, the proposed disre-
garded payment loss regulations address
policy concerns that are similar to the con-
cerns underlying the enactment of sections
245A(e), 267A, and 1503(d). Sections
245A, 267A, and 1503(d) apply uniformly
to large and small business entities, and
the Treasury Department and the IRS are
of the view that the proposed disregarded
payment loss regulations should generally
apply without regard to the size of the
corporation – a small business exception
would undermine the anti-hybridity poli-
cies underlying these regulations. Accord-
ingly, there is no viable alternative to the
proposed regulations for small entities.
Pursuant to section 7805(f) of the
Code, the proposed regulations have been
submitted to the Chief Counsel for Advo-
cacy of the Small Business Administra-
tion for comment on their impact on small
businesses. The Treasury Department and
the IRS also request comments from the
public on the analysis in part III of the
Special Analyses.
IV. Unfunded Mandates Reform Act
Section 202 of the Unfunded Man-
dates Reform Act of 1995 (“UMRA”)
requires that agencies assess anticipated
costs and benefits and take certain other
actions before issuing a final rule that
includes any Federal mandate that may
result in expenditures in any one year by
a State, local, or Tribal government, in
the aggregate, or by the private sector,
of $100 million in 1995 dollars, updated
annually for inflation. The proposed rules
do not include any Federal mandate that
may result in expenditures by State, local,
or Tribal governments, or by the private
sector in excess of that threshold.

Bulletin No. 2024–35 555 August 26, 2024
V. Executive Order 13132: Federalism
Executive Order 13132 (Federalism)
prohibits an agency from publishing any
rule that has federalism implications if
the rule either imposes substantial, direct
compliance costs on State and local gov-
ernments, and is not required by statute,
or preempts State law, unless the agency
meets the consultation and funding
requirements of section 6 of Executive
Order 13132. The proposed rules do not
have federalism implications and do not
impose substantial direct compliance
costs on State and local governments or
preempt State law within the meaning of
Executive Order 13132.
Incorporation by Reference
Sections 1.1503(d)-1(b)(4)(i)(A)(2), (b)
(4)(i)(B)(2), (b)(4)(ii)(B)(2), and (b)(21),
and §§1.1503(d)-3(c)(9), 1.1503(d)-7(b)
(16) and (c)(3), and 1.1503(d)-8(b)(12)
of these proposed regulations use ter-
minology based on their definitions
under the GloBE Model Rules and
the GloBE Model Rules Consolidated
Commentary. The Office of the Federal
Register has regulations concerning
incorporation by reference. 1 CFR part
51. These regulations require that agen-
cies must discuss in the preamble to a
rule or proposed rule the way in which
materials that the agency incorporates
by reference are reasonably available to
interested persons, and how interested
parties can obtain the materials. 1 CFR
51.5(b).
The GloBE Model Rules and Adminis-
trative Guidance addressing Hybrid Arbi-
trage Arrangements are discussed in Part
IV of the Background section of this pre-
amble. The GloBE Model Rules and the
GloBE Model Rules Consolidated Com-
mentary were issued by the OECD on
December 20, 2021, and April 25, 2024,
respectively, and are available at www.
oecd.org/tax/beps/tax-challenges-aris-
ing-from-the-digitalisation-of-the-econ-
omy-global-anti-base-erosion-model-
rules-pillar-two.htm. The Administrative
Guidance was issued on December 15,
2023, and is available at www.oecd.org/
tax/beps/administrative-guidance-glob-
al-anti-base-erosion-rules-pillar-two-
june-2024.pdf.
Comments and Requests for Public
Hearing
Before these proposed amendments to
the final regulations are adopted as final
regulations, consideration will be given
to comments that are submitted timely
to the IRS as prescribed in this pream-
ble under the ADDRESSES heading.
In addition to the comments specifically
requested in the Explanation of Pro-
visions, the Treasury Department and
the IRS request comments on all other
aspects of the proposed regulations. Any
comments submitted will be made avail-
able at https://www.regulations.gov or
upon request.
A public hearing will be scheduled if
requested in writing by any person who
timely submits electronic or written com-
ments. Requests for a public hearing are
also encouraged to be made electroni-
cally. If a public hearing is scheduled,
notice of the date and time for the public
hearing will be published in the Federal
Register.
Drafting Information
The principal authors of these regu-
lations are Andrew L. Wigmore of the
Office of Associate Chief Counsel (Inter-
national) and Julie Wang of the Office
of Associate Chief Counsel (Corporate).
However, other personnel from the Trea-
sury Department and the IRS participated
in their development.
Statement of Availability of IRS
Documents
IRS Revenue Procedures, Revenue
Rulings, Notices, and other guidance
cited in this document are published in the
Internal Revenue Bulletin or Cumulative
Bulletin and are available from the Super-
intendent of Documents, U.S. Govern-
ment Publishing Office, Washington, DC
20402, or by visiting the IRS website at
https://www.irs.gov.
List of Subjects
26 CFR Part 1
Income taxes, reporting and record-
keeping requirements.
26 CFR Part 301
Employment taxes, Estate taxes,
Excise taxes, Gift taxes, Income taxes,
Penalties, Reporting and recordkeeping
requirements.
Proposed Amendments to the
Regulations
Accordingly, the Treasury Department
and the IRS propose to amend 26 CFR
parts 1 and 301 as follows:
PART 1―INCOME TAXES
Paragraph 1. The authority citation
for part 1 is amended by removing the
entry for section 1.1503(d) and adding
entries for sections 1.1503(d)-1 through
1.1503(d)-8 in numerical order to read as
follows:
Authority: 26 U.S.C. 7805 * * *
* * * * *
Sections 1.1503(d)-1 through 8 also
issued under 26 U.S.C. 953(d), 26 U.S.C.
1502, 26 U.S.C. 1503(d), 26 U.S.C.
1503(d)(2)(B), 26 U.S.C. 1503(d)(3), and
26 U.S.C. 1503(d)(4).
* * * * *
Par. 2. Section 1.1502-13, as proposed
to be amended at 88 FR 52057 (August 7,
2023) and at 88 FR 78134 (November 14,
2023), is further amended by:
1. In paragraph (a)(6)(ii) in the table
revising the entry “(G) Miscellaneous
operating rules”.
2. In paragraph (c)(5), adding the lan-
guage “See paragraph (j)(10) of this sec-
tion for rules regarding the special status
of a section 1503(d) member.” after the
last sentence.
3. Redesignating paragraph (j)(10) as
paragraph (j)(15).
4. Adding new paragraph (j)(10).
5. Adding and reserving paragraphs (j)
(11) through (14).
6. Adding paragraphs (j)(15)(x) and
(xi), and (l)(11).
The additions and revision read as fol-
lows:
§1.1502-13 Intercompany transactions.
(a) * * *
(6) * * *
(ii) * * *

August 26, 2024 556 Bulletin No. 2024–35
RuleGeneral locationParagraphExample
* * * * * * *
(G) Miscellaneous
operating rules.
§1.1502-13(j)(15) (i)Example 1. Intercompany sale followed by section 351
transfer to member.
(ii)Example 2. Intercompany sale of member stock followed by
recapitalization.
(iii)Example 3. Back-to-back intercompany transactions—
matching.
(iv)Example 4. Back-to-back intercompany transactions—accel-
eration.
(v)Example 5. Successor group.
(vi)Example 6. Liquidation—80% distributee.
(vii)Example 7. Liquidation—no 80% distributee.
(viii)Example 8. Loan by section 987 QBU.
(ix)Example 9. Sale of property by section 987 QBU.
(x)Example 10. Interest on intercompany obligation.
(xi)Example 11. Loss of a section 1503(d) member.
* * * * *
(j) * * *
(10) Dual consolidated loss rules―(i)
Scope. The rules of this paragraph (j)(10)
apply to an intercompany transaction if
either party to the transaction is a section
1503(d) member. A section 1503(d) mem-
ber is a member that is—
(A) An affiliated dual resident corpora-
tion (as defined in §1.1503(d)-1(b)(10));
or
(B) An affiliated domestic owner (as
defined in §1.1503(d)-1(b)(10)) acting
through a separate unit (as defined in
§1.1503(d)-1(b)(4)) that is not regarded
as separate from the domestic owner for
Federal income tax purposes.
(ii) Ordering rule for the section
1503(d) member. In determining when
the section 1503(d) member’s intercom-
pany (or corresponding) item is taken into
account, the dual consolidated loss rules
under section 1503(d) and the regulations
thereunder (the dual consolidated loss
rules) do not apply to the relevant item
until that item would otherwise be taken
into account under paragraph (c) or (d) of
this section.
(iii) Status as a section 1503(d) mem-
ber. A section 1503(d) member has spe-
cial status under paragraph (c)(5) of this
section with respect to its intercompany
(or corresponding) items for purposes of
applying the dual consolidated loss rules
to those items. Therefore, for purposes of
applying the dual consolidated loss rules,
paragraph (c)(1)(i) of this section does not
apply to redetermine the attributes of the
section 1503(d) member’s intercompany
(or corresponding) items.
(iv) Application of the matching rule to
the counterparty member. The special sta-
tus of a section 1503(d) member does not
affect the application of the matching rule
in paragraph (c) of this section (or under
paragraph (d) of this section, to the extent
the matching rule principles are appli-
cable) to the counterparty member in an
intercompany transaction. For example,
assume S sells depreciable property to B
(a section 1503(d) member) at a gain, and
the property is also subject to depreciation
in the hands of B. For purposes of taking
into account S’s items, the matching rule
applies as if B were not a section 1503(d)
member. Therefore, even if B’s annual
depreciation deduction on the acquired
property is limited under the dual consol-
idated loss rules and not currently deduct-
ible, S nevertheless takes into account a
portion of its intercompany gain pursu-
ant to the matching rule every year as if
B were entitled to deduct the additional
depreciation resulting from the intercom-
pany sale.
* * * * *
(15) * * *
(x) Example 10. Interest on intercompany obli-
gation—(A) Facts. S lends money to B, an affili-
ated dual resident corporation (a section 1503(d)
member), with $10 of interest due annually for
Year 1 through Year 5. For the years at issue, B
has a dual consolidated loss (within the meaning
of §1.1503(d)-1(b)(5)(i)) with respect to which it
makes a domestic use election (within the meaning
of §1.1503(d)-6(d)).
(B) Analysis—(1) Interest expense deduction of
the section 1503(d) member. For each year at issue,
B has $10 of interest expense deduction. Under para-
graph (j)(10)(ii) of this section, the matching rule
in paragraph (c) of this section applies first (before
the dual consolidated loss rules) to determine if B’s
deduction is taken into account. Pursuant to para-
graph (c)(2)(i) of this section, B would take its $10 of
interest deduction into account annually. Therefore,
the amount of B’s dual consolidated loss in each year
reflects the $10 of interest expense.
(2) Interest income of the counterparty member.
For each year at issue, S has $10 of interest income.
Although B has a dual consolidated loss for each
year at issue, B makes a domestic use election and
deducts the $10 of interest expense annually. Under
the matching rule in paragraph (c) of this section,
for each year, S takes into account its $10 of interest
income to match B’s $10 of interest deduction.
(C) Treatment for counterparty member when
deduction is deferred. The facts are the same as in
paragraph (j)(15)(x)(A) of this section, except that
for the years at issue, B’s interest expense deduction
would be limited under the domestic use limitation
rule of §1.1503(d)-4(b) (and no exception under
§1.1503(d)-6 applies) and is not currently deduct-
ible. Under paragraph (j)(10)(iv) of this section, the
matching rule applies to S (the counterparty mem-
ber) as if B did not have section 1503(d) member
status. Therefore, for the purpose of determining S’s
income inclusion, B is treated as deducting $10 of
interest expense per year. Thus, S’s interest income
is not redetermined to be deferred, even though B’s
interest expense deduction is deferred under the dual
consolidated loss rules.
(D) Treatment for counterparty member when a
dual consolidated loss is recaptured. The facts are

Bulletin No. 2024–35 557 August 26, 2024
the same as in paragraph (j)(15)(x)(A) of this section,
with B making a domestic use election (within the
meaning of §1.1503(d)-6(d)) in Year 1 and deduct-
ing $10 of interest expense in Year 1. Then in Year
2, B is required under §1.1503(d)-6(e) to recapture
and report as ordinary income $10 (plus applicable
interest) with respect to the $10 of interest expense
incurred in Year 1. Because the matching rule applies
to S (the counterparty member) as if B did not have
its section 1503(d) member status, the recapture of
B’s Year 1 dual consolidated loss will not affect the
treatment of S’s intercompany interest income. See
paragraph (j)(10)(iv) of this section.
(E) Intercompany obligation involving an affil-
iated domestic owner. The facts are the same as in
paragraph (j)(15)(x)(A) of this section, except that
B is an affiliated domestic owner with respect to a
directly owned foreign branch separate unit, S lends
money to this separate unit of B, and the $10 of inter-
est expense, when it is taken into account under the
section 1503(d) rules, would be attributable to B’s
foreign branch separate unit for the years at issue.
The analysis and treatment of S’s intercompany item
and B’s corresponding item (attributable to the sep-
arate unit) are the same as in paragraphs (j)(15)(x)
(B), (C), and (D) of this section. However, if B does
not act through its separate unit in entering the inter-
company loan with S, the rules of paragraph (j)(10)
of this section do not apply. See paragraph (j)(10)(i)
of this section.
(xi) Example 11. Loss of a section 1503(d) mem-
ber—(A) Facts. S is an affiliated dual resident corpo-
ration (a section 1503(d) member). S owns inventory
with a basis of $100. In Year 1, S sells the inventory
to B for $60. In Year 3, B sells the inventory to X for
$110. For the years at issue, S’s $40 of loss is subject
to the domestic use limitation rule of §1.1503(d)-4(b)
(and no exception under §1.1503(d)-6 applies) and
would not be currently deductible.
(B) Analysis—(1) Year 1 and Year 2: timing. S
recognizes $40 of loss on the intercompany inventory
sale to B. Pursuant to the ordering rule in paragraph
(j)(10)(ii) of this section, in each year, the matching
rule in paragraph (c) of this section applies first to
determine whether S’s loss is taken into account. In
Year 1 and Year 2, because the $40 of loss is deferred
under the matching rule, no amount of loss from the
sale is subject to the dual consolidated loss rules in
those years.
(2) Year 3: timing and attributes. In Year 3, B
sells the inventory to X for $110, for a $50 gain.
Consequently, under the matching rule (disregard-
ing the application of section 1503(d)), S’s $40 of
loss would be taken into account in that year. Since
S’s item would otherwise be taken into account,
the section 1503(d) rules are applicable to the $40
loss in Year 3, and the loss would be subject to the
domestic use limitation under §1.1503(d)-4(b) and
would not be currently deductible. The application
of §1.1503(d)-4(b) to limit S’s loss is not subject to
redetermination under paragraph (c)(1)(i) of this sec-
tion, because S has special status. See paragraph (j)
(10)(iii) of this section. Moreover, B’s gain is taken
into account in Year 3, without regard to S’s status as
a section 1503(d) member. See paragraph (j)(10)(iv)
of this section.
(C) Intercompany transaction involving a sepa-
rate unit of an affiliated domestic owner. The facts
are the same as in paragraph (j)(15)(xi)(A) of this
section, except that S is an affiliated domestic owner
with respect to a directly owned foreign branch sep-
arate unit, and S acts through the foreign branch sep-
arate unit in selling the inventory to B such that the
loss on the inventory, when it is taken into account
under the section 1503(d) rules, would be attribut-
able to S’s foreign branch separate unit. The analysis
and treatment of S’s intercompany item (attributable
to the foreign branch separate unit) and B’s corre-
sponding item are the same as in paragraphs (j)(15)
(xi)(B)(1) and (2) of this section.
* * * * *
(l) * * *
(11) Applicability date. Paragraph (j)
(10) of this section applies to taxable years
for which the original Federal income tax
return is due (without extensions) after
[DATE OF PUBLICATION OF THE
FINAL REGULATIONS IN THE FED-
ERAL REGISTER]. However, taxpayers
may choose to apply these provisions to
an earlier taxable year, if the period for the
assessment of tax for that taxable year has
not expired, provided the taxpayer and all
members of its consolidated group apply
these provisions consistently for that tax-
able year and each subsequent taxable
year.
* * * * *
Par. 3. Section 1.1503(d)-1 is amended
by:
1. Revising the section heading.
2. Revising the third sentence in para-
graph (a) and adding three new sentences
at the end.
3. Revising paragraphs (b)(4)(i) and
(ii), and (b)(6).
4. In the second sentence of paragraph
(b)(16)(i), removing the language “An
entity” and adding the language “Other
than an entity described in paragraph (b)
(4)(i)(B)(2) of this section, an entity” in
its place.
5. In paragraph (b)(20),
a. Adding the language “(not less than
60 months)” after “time”; and
b. Adding the language “, as well as
any prior taxable years” after “incurred”
at the end of the sentence.
6. Adding paragraph (b)(21).
7. In paragraph (c)(1)(ii), adding the
language “(including, in the case of a
specified foreign tax resident that under
§§301.7701-1 through 301.7701-3 of this
chapter is disregarded as an entity sepa-
rate from its owner for U.S. tax purposes,
by reason of its tax owner bearing)” after
the language “bears.”
8. Redesignating paragraph (d) as para-
graph (e).
9. Adding paragraphs (d) and (f).
The revisions and additions read as fol-
lows:
§1.1503(d)-1 Definitions, special rules,
and filings.
(a) * * * Paragraph (c) of this section
provides rules for a domestic consenting
corporation. Paragraph (d) of this section
provides rules for disregarded payment
losses. Paragraph (e) of this section pro-
vides relief for certain compliance failures
due to reasonable cause and a signature
requirement for filings. Paragraph (f) of
this section provides an anti-avoidance
rule.
(b) * * *
(4) * * *
(i) In general. The term separate unit
means either a foreign branch separate
unit or a hybrid entity separate unit.
(A) Foreign branch separate unit. The
term foreign branch separate unit means
either of the following that is carried on,
directly or indirectly, by a domestic cor-
poration (including a dual resident corpo-
ration):
(1) Except to the extent provided in
paragraph (b)(4)(iii) of this section, a busi-
ness operation outside the United States
that, if carried on by a U.S. person, would
constitute a foreign branch as defined in
§1.367(a)-6T(g)(1).
(2) A place of business (including a
deemed place of business) outside the
United States that is a Permanent Estab-
lishment with respect to a QDMTT or an
IIR, provided that the Permanent Estab-
lishment is not otherwise described in
paragraph (b)(4)(i)(A)(1) of this section.
(B) Hybrid entity separate unit. The
term hybrid entity separate unit means
either of the following that is owned,
directly or indirectly, by a domestic cor-
poration (including a dual resident corpo-
ration):
(1) An interest in a hybrid entity; and
(2) An interest in a foreign entity
(other than a Tax Transparent Entity with
respect to an IIR) that is not taxed as an
association for Federal tax purposes and
the net income or loss of which is taken
into account in determining the amount of
tax under an IIR, provided that the inter-

August 26, 2024 558 Bulletin No. 2024–35
est is not otherwise described in para-
graph (b)(4)(i)(B)(1) of this section. See
§1.1503(d)-7(c)(3)(iii) for an example
illustrating the application of this rule.
(ii) Separate unit combination rule―
(A) In general. Except as otherwise pro-
vided in paragraph (b)(4)(ii)(B) of this
section, if a domestic owner, or two or
more domestic owners that are members
of the same consolidated group, have two
or more separate units (individual sepa-
rate units), then all such individual sepa-
rate units that are located (in the case of
a foreign branch separate unit or a hybrid
entity separate unit described in paragraph
(b)(4)(i)(B)(2) of this section) or subject
to an income tax either on their worldwide
income or on a residence basis (in the case
of a hybrid entity an interest in which is
a hybrid entity separate unit described in
paragraph (b)(4)(i)(B)(1) of this section)
in the same foreign country are treated
as one separate unit (combined separate
unit). See §1.1503(d)-7(c)(1) for an exam-
ple illustrating the application of this para-
graph (b)(4)(ii)(A). Except as specifically
provided in this section or §§1.1503(d)-2
through 1.1503(d)-8, any individual sepa-
rate unit composing a combined separate
unit loses its character as an individual
separate unit.
(B) Special rules―(1) Certain dual
resident corporations. Separate units of a
foreign insurance company that is a dual
resident corporation under paragraph (b)
(2)(ii) of this section are not combined
with separate units of any other domestic
corporation.
(2) Location of separate units arising
from a QDMTT or an IIR. For purposes
of paragraph (b)(4)(ii)(A) of this section,
a separate unit described in paragraph
(b)(4)(i)(A)(2) or (b)(4)(i)(B)(2) of this
section is located in the country in which
it is located for purposes of the relevant
QDMTT or IIR. If such place of business
or entity is not located in a specific juris-
diction (for example, because the entity is
a stateless entity for purposes of an IIR),
the individual separate unit is not com-
bined with any other separate units. See
§1.1503(d)-7(c)(3)(iii) for an example
illustrating the application of this para-
graph (b)(4)(ii)(B)(2).
* * * * *
(6) Tax determination―(i) Subject to
tax. For purposes of determining whether
a domestic corporation or another entity is
subject to an income tax of a foreign coun-
try on its income, the fact that it has no
actual income tax liability to the foreign
country for a particular taxable year shall
not be taken into account.
(ii) Minimum taxes and taxes com-
puted by reference to financial account-
ing principles. For purposes of section
1503(d) and the regulations in this part
issued under section 1503(d), the determi-
nation of whether a tax is an income tax
is made without regard to whether the tax
is intended to ensure a minimum level of
taxation on income or computes income
or loss by reference to financial account-
ing net income or loss.
* * * * *
(21) Pillar Two terminology. Qual-
ified Domestic Minimum Top-up Tax
(QDMTT), Income Inclusion Rule (IIR),
and any other capitalized terms that are
used in connection with or are otherwise
relevant to a minimum tax based on a
QDMTT or IIR have the same meaning
ascribed to such terms under the material
listed in paragraphs (b)(21)(i) through (iii)
of this section. These materials are incor-
porated by reference into §§1.1503(d)-1
through 1.1503(d)-8 with the approval
of the Director of the Federal Register
under 5 U.S.C. 552(a) and 1 CFR part 51.
This material is available for inspection at
the IRS and at the National Archives and
Records Administration (NARA). Contact
the IRS at: IRS FOIA Request, Headquar-
ters Disclosure Office, CL:GLD:D, 1111
Constitution Avenue NW, Washington,
DC 20224; phone: +1 312 292 3297;
website: https://foiapublicaccessportal.
for.irs.gov/app/Home.aspx. For informa-
tion on the availability of this material at
NARA, email: fr.inspection@nara.gov, or
go to: www.archives.gov/federal-register/
cfr/ibr-locations. This material may be
obtained from the Organisation for Eco-
nomic Co-operation and Development
(OECD) at: 2, rue André Pascal, 75016
Paris; phone: +33 1 45 24 82 00; website:
www.oecd.org/tax/beps/tax-challenges-
arising-from-the-digitalisation-of-the-
economy-global-anti-base-erosion-mod-
el-rules-pillar-two.htm.
(i) OECD (2021), Tax Challenges Aris-
ing from the Digitalisation of the Economy
– Global Anti-Base Erosion Model Rules
(Pillar Two): Inclusive Framework on
BEPS, OECD, Paris, December 20, 2021.
(Available at www.oecd.org/tax/beps/
tax-challenges-arising-from-the-digital-
isation-of-the-economy-global-anti-base-
erosion-model-rules-pillar-two.htm.)
(ii) OECD (2024), Tax Challenges
Arising from the Digitalisation of the
Economy – Consolidated Commentary
to the Global Anti-Base Erosion Model
Rules (2023): Inclusive Framework on
BEPS, OECD/G20 Base Erosion and
Profit Shifting Project, OECD Publishing,
Paris, April 23, 2024. (Available at https://
doi.org/10.1787/b849f926-en.)
(iii) OECD (2024), Tax Challenges
Arising from the Digitalisation of the
Economy – Administrative Guidance on
the Global Anti-Base Erosion Model Rules
(Pillar Two), June 2024, OECD/G20
Inclusive Framework on BEPS, OECD,
Paris, December 15, 2023. (Available at
www.oecd.org/tax/beps/administrative-
guidance-global-anti-base-erosion-rules-
pillar-two-june-2024.pdf.)
* * * * *
(d) Disregarded payment loss rules―
(1) Consequences of consent―(i) In gen-
eral. As provided in §301.7701-3(c)(4)
(i) of this chapter, a domestic corporation
that directly or indirectly owns interests
in a specified eligible entity (as defined
in §301.7701-3(c)(4)(i) of this chapter)
classified as a disregarded entity consents
to be subject to the disregarded payment
loss rules of this paragraph (d). Pursuant
to such consent, the domestic corpora-
tion agrees that if the specified eligible
entity or a foreign branch of the domestic
corporation (the specified eligible entity
or such a foreign branch, a disregarded
payment entity, and the domestic corpo-
ration, a specified domestic owner) incurs
a disregarded payment loss (other than a
disregarded payment loss described in
paragraph (d)(7)(iii) of this section) and
a triggering event occurs with respect to
the disregarded payment loss during the
DPL certification period, then, for the tax-
able year of the specified domestic owner
during which the triggering event occurs,
the specified domestic owner includes in
gross income the DPL inclusion amount.
See §1.1503(d)-7(c)(42) for an example
illustrating the application of the disre-
garded payment loss rules.
(ii) Special rule regarding dual resident
corporations. As provided in §301.7701-

Bulletin No. 2024–35 559 August 26, 2024
3(c)(4)(ii) of this chapter, a dual resident
corporation that directly or indirectly
owns an interest in an eligible entity clas-
sified as a disregarded entity consents to
be subject to the disregarded payment loss
rules of this paragraph (d). Pursuant to
such consent, the dual resident corpora-
tion agrees, for purposes of this paragraph
(d), to be treated as a disregarded payment
entity and as a specified domestic owner
of such disregarded payment entity. In
such a case, if the dual resident corpora-
tion has disregarded payment income or
a disregarded payment loss for a foreign
taxable year, then with respect to a dis-
regarded payment loss, it generally must
comply with the certification requirements
of paragraph (d)(4) of this section and,
upon a triggering event, include in gross
income an amount equal to the DPL inclu-
sion amount.
(2) DPL inclusion amount―(i) In gen-
eral. A DPL inclusion amount means,
with respect to a disregarded payment
loss as to which a triggering event occurs
during the DPL certification period, an
amount equal to the disregarded payment
loss (or, if applicable, the reduced amount,
as described in paragraph (d)(5)(i) of this
section).
(ii) Character and source. A DPL
inclusion amount is, for U.S. tax purposes,
treated as ordinary income, and character-
ized, including for purposes of sections
904(d) and 907, in the same manner as if
the amount were interest or royalty income
paid by a foreign corporation (taking into
account, for example, section 904(d)(3) if
such foreign corporation would be a con-
trolled foreign corporation). For these pur-
poses, the DPL inclusion amount is con-
sidered comprised of interest or royalty
income based on the proportion of interest
or royalty deductions taken into account,
respectively, in computing the disregarded
payment loss relative to all the deductions
taken into account in computing the disre-
garded payment loss.
(iii) Translation into U.S. dollars. A
DPL inclusion amount is translated into
U.S. dollars (if necessary) using the yearly
average exchange rate (within the mean-
ing of §1.987-1(c)(2)) for the taxable year
of the specified domestic owner during
which the triggering event occurs.
(3) Triggering events. An event
described in paragraph (d)(3)(i) or (ii)
of this section is a triggering event with
respect to a disregarded payment loss of a
disregarded payment entity.
(i) Foreign use. A foreign use of the
disregarded payment loss. For this pur-
pose, a foreign use is determined under
the principles of §1.1503(d)-3 (including
the exceptions in §1.1503(d)-3(c)), by
treating the disregarded payment loss as a
dual consolidated loss, treating the disre-
garded payment entity as a separate unit
(or, in the case of a disregarded payment
entity that is a dual resident corporation,
by treating the disregarded payment entity
as a dual resident corporation), and, in
§1.1503(d)-3(a)(1)(i) and (ii), only tak-
ing into account a person that is related
to the specified domestic owner of the
disregarded payment entity. Thus, for
example, a foreign use of a disregarded
payment loss occurs if, under a relevant
foreign tax law, any portion of a deduction
taken into account in computing the dis-
regarded payment loss is made available
(including by reason of a foreign consoli-
dation regime or similar regime, or a sale,
merger, or similar transaction) to offset an
item of income that, for U.S. tax purposes,
is an item of a foreign corporation, but
only if such foreign corporation is related
to the specified domestic owner of the dis-
regarded payment entity.
(ii) Failure to comply with certification
requirements. A failure by the specified
domestic owner of the disregarded pay-
ment entity to comply with the certifica-
tion requirements of paragraph (d)(4) of
this section.
(4) Certification requirements. Except
as otherwise provided in publications,
forms, instructions, or other guidance, a
specified domestic owner of a disregarded
payment entity must satisfy the certifica-
tion requirements of this paragraph (d)(4)
with respect to a disregarded payment loss
of the disregarded payment entity, other
than a disregarded payment loss described
in paragraph (d)(7)(iii) of this section. To
satisfy the certification requirements, the
specified domestic owner must meet the
requirements in paragraphs (d)(4)(i) and
(ii) of this section.
(i) For its taxable year that includes
the date on which the foreign taxable year
in which the disregarded payment loss
is incurred ends, the specified domestic
owner must attach with its timely filed
tax return a certification labeled “Initial
Disregarded Payment Loss Certification,”
which must contain—
(A) The information set forth in
§1.1503(d)-6(c)(2)(ii) (determined by
substituting the phrase “disregarded pay-
ment entity” for the phrase “separate
unit”);
(B) A statement of the amount of the
disregarded payment loss; and
(C) A statement that a foreign use of the
disregarded payment loss has not occurred
during the DPL certification period.
(ii) During the DPL certification period,
for each of its subsequent taxable years
that includes a date on which a foreign
taxable year ends, the specified domestic
owner must attach with its timely filed
tax return a certification labeled “Annual
Disregarded Payment Loss Certification”
and satisfying the requirements of this
paragraph (d)(4)(ii). Certifications with
respect to multiple disregarded payment
losses may be combined in a single certifi-
cation, but each disregarded payment loss
must be separately identified. To satisfy
the requirements of this paragraph (d)(4)
(ii), the certification must —
(A) Identify the disregarded payment
loss to which it pertains by setting forth
the foreign taxable year in which the dis-
regarded payment loss was incurred and
the amount of such loss;
(B) State that there has been no foreign
use of the disregarded payment loss; and
(C) Warrant that arrangements have
been made to ensure that there will be no
foreign use of the disregarded payment
loss and that the specified domestic owner
will be informed of any such foreign use.
(5) Reduction of DPL inclusion amount
in certain cases. With respect to a disre-
garded payment loss as to which a trigger-
ing event occurs during the DPL certifica-
tion period, the following rules apply:
(i) The reduced amount means the
excess (if any) of the disregarded payment
loss over the positive balance (if any) of
the DPL cumulative register with respect
to the disregarded payment entity, com-
puted as of the end of the foreign taxable
year during which the triggering event
occurs but not taking into account the
disregarded payment loss. If during a tax-
able year of a specified domestic owner a
triggering event occurs as to multiple dis-
regarded payment losses of a disregarded

August 26, 2024 560 Bulletin No. 2024–35
payment entity of the specified domestic
owner (each such loss, a triggered loss),
then, when computing the DPL cumula-
tive register for purposes of determining
the reduced amount with respect to a trig-
gered loss incurred in an earlier foreign
taxable year, a triggered loss incurred in a
later foreign taxable year is not taken into
account.
(ii) The term DPL cumulative register
means, with respect to the disregarded
payment entity, an account the balance of
which is computed at the end of each for-
eign taxable year of the entity, and which
(except as provided in paragraph (d)(5)(i)
of this section) is increased by disregarded
payment income of the entity for the tax-
able year or decreased by a disregarded
payment loss of the entity for the foreign
taxable year. The account balance may be
positive or negative.
(iii) The reduced amount must be
demonstrated to the satisfaction of the
Commissioner. To so demonstrate, the
specified domestic owner of the disre-
garded payment entity must attach a state-
ment labeled “Reduction of Disregarded
Payment Loss Amount” to the income
tax return for the taxable year in which
the triggering event occurs and provide
any other information as requested by the
Commissioner. The statement must show
the disregarded payment income or dis-
regarded payment loss of the disregarded
payment entity for each foreign taxable
year up to and including the foreign tax-
able year during which the triggering
event occurs.
(6) Definitions. The following defini-
tions apply for purposes of this paragraph
(d).
(i) The term disregarded payment entity
has the meaning set forth in paragraph (d)
(1)(i) of this section, and includes a dual
resident corporation treated as a disre-
garded payment entity pursuant to para-
graph (d)(1)(ii) of this section.
(ii) The terms disregarded payment
income and disregarded payment loss
have the meanings set forth in this
paragraph (d)(6)(ii). For purposes of
computing the disregarded payment
income or disregarded payment loss of
a disregarded payment entity, an item is
taken into account only if it gives rise
to income or a deduction under the rel-
evant foreign tax law during a period
in which an interest in the disregarded
payment entity is a separate unit (or the
disregarded payment entity is a dual res-
ident corporation); for purposes of allo-
cating an item to a period, the principles
of §1.1502-76(b) apply. Items taken into
account in computing disregarded pay-
ment income or disregarded payment
loss are calculated in the currency used
to determine tax under the relevant for-
eign tax law.
(A) Disregarded payment income. Dis-
regarded payment income means, with
respect to a disregarded payment entity
and a foreign taxable year of the entity,
the excess (if any) of the sum of the items
described in paragraph (d)(6)(ii)(D) of
this section over the sum of the items
described in paragraph (d)(6)(ii)(C) of this
section.
(B) Disregarded payment loss. Dis-
regarded payment loss means, with
respect to a disregarded payment entity
and a foreign taxable year of the entity,
the excess (if any) of the sum of the
items described in paragraph (d)(6)(ii)
(C) of this section over the sum of the
items described in paragraph (d)(6)(ii)
(D) of this section.
(C) Items of deduction. With respect
to a disregarded payment entity and
a foreign taxable year of the entity, an
item is described in this paragraph (d)
(6)(ii)(C) to the extent that it satisfies
the requirements set forth in paragraphs
(d)(6)(ii)(C)(1) through (3) of this sec-
tion. In addition, an item is described in
this paragraph (d)(6)(ii)(C) if, under the
relevant foreign tax law, it is a deduc-
tion with respect to equity (including
deemed equity) allowed to the entity
in such taxable year (for example, a
notional interest deduction) or a deduc-
tion for an imputed interest payment
with respect to a debt instrument (such
as a deduction for an imputed interest
payment with respect to an interest-free
loan).
(1) Under the relevant foreign tax law,
the entity is allowed a deduction in such
taxable year for the item.
(2) The payment, accrual, or other
transaction giving rise to the item is
disregarded for U.S. tax purposes as a
transaction between a disregarded entity
and its tax owner (for example, a pay-
ment by a disregarded entity to its tax
owner or to another disregarded entity
held by its tax owner, or a payment from
a dual resident corporation to its disre-
garded entity).
(3) If the payment, accrual, or other
transaction were regarded for U.S. tax
purposes, it would be interest, a structured
payment, or a royalty within the meaning
of §1.267A-5(a)(12), (b)(5)(ii), or (a)(16),
respectively.
(D) Items of income. With respect to
a disregarded payment entity and a for-
eign taxable year of the entity, an item is
described in this paragraph (d)(6)(ii)(D) to
the extent that it satisfies the requirements
set forth in paragraphs (d)(6)(ii)(D)(1)
through (3) of this section.
(1) Under the relevant foreign tax law,
the entity includes the item in income in
such taxable year.
(2) The payment, accrual, or other
transaction giving rise to the item is dis-
regarded for U.S. tax purposes as a trans-
action between a disregarded entity and
its tax owner (for example, because it is
a payment to a disregarded entity from
the disregarded entity’s tax owner or from
another disregarded entity held by its tax
owner, or a payment to a dual resident cor-
poration from its disregarded entity).
(3) If the payment, accrual, or other
transaction were regarded for U.S. tax
purposes, it would be interest, a structured
payment, or a royalty with the meaning of
§1.267A-5(a)(12), (b)(5)(ii), or (a)(16),
respectively.
(iii) The term DPL certification period
includes, with respect to a disregarded
payment loss, the foreign taxable year in
which the disregarded payment loss is
incurred, any prior foreign taxable years,
and, except as provided in paragraph
(d)(7)(iv) of this section, the 60-month
period following the foreign taxable year
in which the disregarded payment loss is
incurred.
(iv) The term foreign branch means a
branch (within the meaning of §1.267A-
5(a)(2)) that gives rise to a taxable pres-
ence under the tax law of the foreign
country where the branch is located.
(v) The term foreign taxable year
means, with respect to a disregarded pay-
ment entity, the entity’s taxable year for
purposes of a relevant foreign tax law.
(vi) The term related has the meaning
provided in this paragraph (d)(6)(vi). A

Bulletin No. 2024–35 561 August 26, 2024
person is related to a specified domestic
owner if the person is a related person
within the meaning of section 954(d)
(3) and the regulations thereunder, deter-
mined by treating the specified domestic
owner as the “controlled foreign corpora-
tion” referred to in that section.
(vii) The term relevant foreign tax law
means, with respect to a disregarded pay-
ment entity, any tax law of a foreign coun-
try of which the entity is a tax resident
(within the meaning of §1.267A-5(a)(23)
(i)) or, in the case of a disregarded pay-
ment entity that is a foreign branch, the
tax law of the foreign country where the
branch is located.
(viii) The term specified domestic owner
has the meaning provided in paragraph (d)
(1)(i) of this section, and includes a dual
resident corporation treated as a specified
domestic owner pursuant to paragraph (d)
(1)(ii) of this section and any successor
to the corporation described in either of
those paragraphs.
(7) Special rules―(i) Disregarded
payment entity combination rule. For
purposes of this paragraph (d), disre-
garded payment entities for which the
relevant foreign tax law is the same
(for example, because the entities are
tax residents of the same foreign coun-
try) are combined and treated as a com-
bined disregarded payment entity under
the principles of paragraph (b)(4)(ii) of
this section, provided that the entities
have the same foreign taxable year and
are owned either by the same specified
domestic owner or by specified domes-
tic owners that are members of the
same consolidated group. However, this
paragraph (d)(7)(i) does not apply with
respect to a dual resident corporation
treated as a disregarded payment entity
pursuant to paragraph (d)(1)(ii) of this
section. In determining the disregarded
payment income or disregarded payment
loss of a combined disregarded payment
entity, the principles of §1.1503(d)-5(c)
(4)(ii) apply. Thus, for example, if mul-
tiple individual disregarded payment
entities are treated as a combined disre-
garded payment entity pursuant to this
paragraph (d)(7)(i), then the combined
disregarded payment entity has either a
single amount of disregarded payment
income or a single amount of disre-
garded payment loss.
(ii) Partial ownership of disregarded
payment entity. If a specified domestic
owner of a disregarded payment entity
indirectly owns less than all the interests
in the entity (for example, if the speci-
fied domestic owner and another person
are partners in a partnership that owns
all the interests in the entity), then the
rules of this paragraph (d) are applied on
a proportionate basis as to the specified
domestic owner, based on the percentage
of interests (by value) of the disregarded
payment entity that the specified domes-
tic owner directly or indirectly owns. In
such a case, as to the specified domes-
tic owner, only a proportionate share of
the disregarded payment entity’s items
of deduction or income are taken into
account in computing disregarded pay-
ment income or disregarded payment loss
of the entity. In addition, with respect
to the disregarded payment loss as so
computed, the specified domestic owner
generally must comply with the certi-
fication requirements of paragraph (d)
(4) of this section and, upon a triggering
event, directly include in gross income
an amount equal to the DPL inclusion
amount.
(iii) Termination of DPL certification
period. With respect to a disregarded
payment loss of a disregarded payment
entity, the DPL certification period does
not include any date after the end of the
specified domestic owner’s taxable year
during which the specified domestic
owner, or a person related to the specified
domestic owner, no longer holds directly
or indirectly any of the interests in, or, in
the case of a disregarded payment entity
that is a foreign branch, substantially all of
the assets of the foreign branch. In such a
case, the specified domestic owner ceases
to be subject to the rules of paragraph (d)
(1) of this section with respect to the dis-
regarded payment loss; thus, for example,
beyond the end of such taxable year the
specified domestic owner is not subject to
the certification requirements of paragraph
(d)(4)(ii) of this section with respect to the
loss, and will not be required to include
in gross income the DPL inclusion amount
with respect to such loss.
(iv) Common parent as agent for
specified domestic owner. If a specified
domestic owner is a member, but not the
common parent, of a consolidated group,
then the common parent is the agent of the
specified domestic owner under §1.1502-
77(a)(1). Thus, for example, the common
parent must attach to its tax return any cer-
tification or statement required or permit-
ted to be filed pursuant to this paragraph
(d), and references in this paragraph (d)
to a timely-filed tax return of the specified
domestic owner include a timely-filed tax
return of the consolidated group.
(v) Coordination with foreign hybrid
mismatch rules. Whether a disregarded
payment entity is allowed a deduction
under a relevant foreign tax law is deter-
mined with regard to hybrid mismatch
rules, if any, under the relevant foreign
tax law. Thus, for example, if a relevant
foreign tax law denies a deduction for
an item to prevent a deduction/no-inclu-
sion outcome (that is, a payment that is
deductible for the payer jurisdiction and
is not included in the ordinary income
of the payee), the item is not taken into
account for purposes of computing the
amount of disregarded payment income
or disregarded payment loss. For this
purpose, the term hybrid mismatch rules
has the meaning provided in §1.267A-
5(a)(10).
(vi) DPL inclusion amount not taken
into account for dual consolidated loss
purposes. A DPL inclusion amount
included in the gross income of a dual res-
ident corporation or a domestic owner of
a separate unit is not taken into account
for purposes of determining the income or
dual consolidated loss of the dual resident
corporation, or the income or dual con-
solidated loss attributable to the separate
unit, under §1.1503(d)-5(b) or (c).
* * * * *
(f) Anti-avoidance rule. If a transaction,
series of transactions, plan, or arrange-
ment is engaged in with a view to avoid
the purposes of section 1503(d) and the
regulations in this part issued under sec-
tion 1503(d), then appropriate adjustments
will be made. A transaction, series of trans-
actions, plan, or arrangement (including
an arrangement to reflect, or not reflect,
items on books and records) engaged in
with a view to avoid the purposes of sec-
tion 1503(d) and the regulations issued in
this part under section 1503(d) includes
one engaged in with a view to reduce or
eliminate a dual consolidated loss or a dis-
regarded payment loss while putting an

August 26, 2024 562 Bulletin No. 2024–35
item of deduction or loss that composes
(or would compose) the dual consolidated
loss or disregarded payment loss to a for-
eign use (determined under §1.1503(d)-3
or the principles thereof). Such appro-
priate adjustments may include adjust-
ments to disregard the transaction, series
of transactions, plan, or arrangement, or
adjustments to modify the items that are
taken into account for purposes of deter-
mining the income or dual consolidated
loss of or attributable to a dual resident
corporation or a separate unit, or for pur-
poses of determining income or loss of
an interest in a transparent entity under
§1.1503(d)-5. See §1.1503(d)-7(c)(43) for
an example illustrating the application of
this paragraph (f).
* * * * *
Par. 4. Section 1.1503(d)-3 is amended
by:
1. In paragraph (c)(1), removing the
language “Paragraphs (c)(2) through (9)”
and adding the language “Paragraphs (c)
(2) through (10)” in its place.
2. Redesignating paragraph (c)(9) as
paragraph (c)(10) and adding a new para-
graph (c)(9).
The addition reads as follows:
§1.1503(d)-3 Foreign use.
* * * * *
(c) * * *
(9) Qualification for Transitional
CbCR Safe Harbour. This paragraph (c)
(9) applies with respect to a dual consol-
idated loss incurred in a taxable year in a
Tested Jurisdiction where the Transitional
CbCR Safe Harbour is satisfied (such that
the Jurisdictional Top-up Tax in that juris-
diction is deemed to be zero for that tax-
able year), and no foreign use occurs with
respect to the Transitional CbCR Safe
Harbour due to the application of rules
addressing Duplicate Loss Arrangements.
In such a case, no foreign use is consid-
ered to occur with respect to that dual con-
solidated loss solely because any portion
of the deductions or losses that compose
the dual consolidated loss is taken into
account in determining the Net GloBE
Income in that jurisdiction for that taxable
year. See §1.1503(d)-7(c)(3)(ii)(C) for an
example illustrating the application of this
paragraph (c)(9).
* * * * *
Par. 5. Section 1.1503(d)-5 is amended
by:
1. In paragraph (b)(1):
a. Adding the language “(including
the special rules under §1.1502-13(j)(10)
concerning the treatment of intercompany
(or corresponding) items (as defined in
§1.1502-13(b)(2) and (3))” in the second
sentence after the language “1502.”
b. Adding a sentence after the second
sentence.
2. Removing the language “the fol-
lowing shall not be taken into account—”
from the introductory text of paragraph
(b)(2) and adding the language “any item
described in paragraphs (b)(2)(i) through
(iv) is not taken into account.” in its place.
3. Revising paragraphs (b)(2)(i)
through (iii).
4. Adding paragraph (b)(2)(iv).
5. In paragraph (c)(1)(i):
a. Adding the language “(including
the special rules under §1.1502-13(j)(10)
concerning the treatment of intercompany
(or corresponding) items (as defined in
§1.1502-13(b)(2) and (3)) attributable to a
separate unit” in the second sentence after
the language “1502.”
b. Adding a sentence after the second
sentence.
6. Adding two sentences after the third
sentence of paragraph (c)(3)(i).
7. Revising paragraph (c)(4)(iv).
The revisions and additions read as fol-
lows:
§1.1503(d)-5 Attribution of items and
basis adjustments.
* * * * *
(b) * * *
(1) * * * For examples illustrating the
interaction of the intercompany trans-
action rules in §1.1502-13 with the dual
consolidated loss rules, see §1.1502-13(j)
(15)(x) and (xi). * * *
(2) * * *
(i) Net capital loss. An item described
in this paragraph (b)(2)(i) is any net cap-
ital loss of the dual resident corporation.
(ii) Carryover or carryback loss. An
item described in this paragraph (b)(2)(ii)
is any carryover or carryback loss.
(iii) Item attributable to a separate unit
or transparent entity. An item described
in this paragraph (b)(2)(iii) is any item
of income, gain, deduction, or loss that is
attributable to a separate unit or an interest
in a transparent entity of the dual resident
corporation.
(iv) Items arising from ownership of
stock―(A) In general. Except as provided
in paragraph (b)(2)(iv)(B) of this section,
an item described in this paragraph (b)(2)
(iv)(A) is an amount that the dual resident
corporation takes into account in its gross
income as a result of ownership of stock
in a corporation (including as a result of
a sale or other disposition), as well as any
deduction or loss with respect to such
amount. Thus, for example (and except
as provided in paragraph (b)(2)(iv)(B)
of this section), an item described in this
paragraph (b)(2)(iv)(A) includes gain rec-
ognized on the sale or exchange of stock, a
dividend (including an amount under sec-
tion 78), a deduction allowed under sec-
tion 245A(a) with respect to a dividend,
an amount included in gross income under
section 951 or 951A, foreign currency
gain or loss under section 986(c), and a
deduction allowed under section 250(a)
(1)(B) with respect to an inclusion under
section 951A.
(B) Exception for portfolio stock. Para-
graph (b)(2)(iv)(A) of this section does not
apply to a dividend received by the dual
resident corporation from a corporation,
any other amount that the dual resident
corporation includes in its gross income
as a result of ownership of stock in a cor-
poration, or any deduction with respect to
either such amount, if the dual resident
corporation owns less than ten percent
of the sum of the value of all classes of
stock of the corporation. For purposes of
the preceding sentence, the percentage of
stock owned by the dual resident corpora-
tion is determined as of the beginning of
the taxable year of the dual resident cor-
poration in which it receives the dividend,
includes in gross income another amount
as a result of ownership of stock, or claims
a deduction with respect to the dividend or
inclusion in gross income, and by apply-
ing the rules of section 318(a) (except
that in applying section 318(a)(2)(C), the
phrase “ten percent” is used instead of the
phrase “50 percent”).
(c) * * *
(1) * * *
(i) * * * For examples illustrating the
interaction of the intercompany trans-
action rules in §1.1502-13 with the dual

Bulletin No. 2024–35 563 August 26, 2024
consolidated loss rules, see §1.1502-13(j)
(15)(x) and (xi). * * *
* * * * *
(3) * * *
(i) * * * For this purpose, an adjust-
ment to conform to U.S. tax principles
does not include the attribution to a
hybrid entity separate unit or an interest
in a transparent entity of any items that
have not and will not be reflected on the
books and records of the hybrid entity or
transparent entity; for example, items that
are reflected on the books and records of
the domestic owner cannot be attributed
to a hybrid entity separate unit or an
interest in a transparent entity as a result
of disregarded payments made between
the domestic owner and the hybrid entity
or transparent entity. See §1.1503(d)-5(c)
(1)(ii) (providing that items reflected
on the books and records of the hybrid
entity or transparent entity are eliminated
if they are otherwise disregarded for U.S.
tax purposes). See also §1.1503(d)-7(c)
(6) and (c)(23) through (25) for examples
illustrating the application of this para-
graph (c)(3)(i).* * *
(4) * * *
(iv) Items arising from ownership of
stock―(A) In general. Except as provided
in paragraph (c)(4)(iv)(B) of this section,
for purposes of determining the items of
income, gain, deduction, and loss of a
domestic owner that are attributable to a
separate unit or an interest in a transpar-
ent entity, any amount that the domestic
owner includes in gross income as a result
of ownership of stock in a corporation
(including as a result of a sale or other
disposition), as well as any deduction or
loss with respect to such an amount, is not
taken into account. Thus, for example (and
except as provided in paragraph (c)(4)(iv)
(B) of this section), gain recognized by a
domestic owner on the sale or exchange
of stock is not attributable to a separate
unit of the domestic owner; in addition,
neither a dividend received by a domes-
tic owner (including an amount under
section 78), nor any deduction allowed
under section 245A(a) with respect to a
dividend, is attributable to a separate unit
of the domestic owner; further, neither
an amount included in gross income by
a domestic owner under section 951 or
951A, foreign currency gain or loss under
section 986(c), nor any deduction under
section 250(a)(1)(B) with respect to an
inclusion under section 951A, is attrib-
utable to a separate unit of the domestic
owner. See §1.1503(d)-7(c)(24) for an
example illustrating the application of this
paragraph (c)(4)(iv)(A).
(B) Exception for portfolio stock.
Paragraph (c)(4)(iv)(A) of this section
does not apply to a dividend received by
a domestic owner from a corporation,
any other amount that is included in gross
income by the domestic owner as a result
of ownership of stock in a corporation,
or any deduction with respect to either
such amount, if the domestic owner owns
less than ten percent of the sum of the
value of all classes of stock of the cor-
poration. For purposes of the preceding
sentence, the percentage of stock owned
by the domestic owner is determined as
of the beginning of the taxable year of the
domestic owner in which it receives the
dividend or includes in gross income the
other amount, and by applying the rules
of section 318(a) (except that in apply-
ing section 318(a)(2)(C), the phrase “ten
percent” is used instead of the phrase “50
percent”).
(C) Additional rules for portfolio stock.
For purposes of determining the items
of income, gain, deduction, and loss of a
domestic owner that are attributable to a
separate unit or an interest in a transparent
entity—
(1) The amount of a dividend described
in paragraph (c)(4)(iv)(B) of this section
that is taken into account is equal to the
amount of the dividend less the amount
of any deduction with respect to the div-
idend; and
(2) Any other amount described in
paragraph (c)(4)(iv)(B) of this section is
taken into account if an actual dividend
from the corporation described in para-
graph (c)(4)(iv)(B) of this section would
be attributable to the separate unit or inter-
est in the transparent entity.
* * * * *
§1.1503(d)-6 [Amended]
Par. 6. Section 1.1503(d)-6 is amended
by:
1. In paragraph (d)(2):
a. Removing the language “there is a
triggering event in the year the dual con-
solidated loss is incurred” in the para-
graph heading and adding the language “a
triggering event has occurred” in its place;
and
b. Adding the language “or before”
immediately before the language “such
taxable year” in the first sentence.
Par. 7. Section 1.1503(d)-7 is amended
by:
1. Adding paragraph (b)(16).
2. Revising and republishing paragraph
(c)(3).
3. Adding a sentence after the first sen-
tence in paragraph (c)(6)(iii)(B).
4. In paragraph (c)(18)(iii):
a. Removing the language “the Coun-
try X mirror legislation” from the first sen-
tence and adding the language “instead of
Country X mirror legislation, Country X
law” in its place.
b. Removing the language “mirror leg-
islation” from the third sentence and add-
ing the language “law” in its place.
c. Removing the language Ҥ1.1503(d)-
(4)(e)” from the last sentence and adding
the language “§1.1503(d)-(3)(e)” in its
place.
5. Adding paragraph (c)(18)(iv).
6. Adding a sentence after the third sen-
tence in paragraph (c)(23)(ii).
7. Adding paragraph (c)(23)(iii).
8. Adding the language “not” before
the language “attributable” in the para-
graph (c)(24) heading.
9. In paragraph (c)(24)(i):
a. Removing the language “(or related
section 78 gross-up)” from the fourth sen-
tence.
b. Revising the fifth sentence.
c. Removing the last sentence.
10. In paragraph (c)(24)(ii), revising
the first sentence and removing the sec-
ond, fifth, and sixth sentences.
11. In paragraph (c)(25)(ii)(B), adding
a sentence after the fifth sentence.
12. In paragraph (c)(26)(i), removing
the language from the sixth sentence “all
of the interests” and adding the language
“90 percent of the interests” in its place.
13. Adding paragraphs (c)(42) and
(43).
The revisions and additions read as fol-
lows:
§1.1503(d)-7 Examples.
* * * * *
(b) * * *

August 26, 2024 564 Bulletin No. 2024–35
(16) No country imposes a tax col-
lected under either a Qualified Domestic
Minimum Top-up Tax, IIR, or UTPR.
(c) * * *
(3) Domestic use limitation and certain top-up
taxes―(i) Example 3. Domestic use limitation—for-
eign branch separate unit owned through a part-
nership―(A) Facts. P and S organize a partnership,
PRSX, under the laws of Country X. PRSX is treated
as a partnership for both U.S. and Country X tax pur-
poses. PRSX owns FBX. PRSX earns U.S. source
income that is unconnected with its FBX branch
operations, and such income is not subject to tax by
Country X. In addition, such U.S. source income is
not attributable to FBX under §1.1503(d)-5.
(B) Result. Under §1.1503(d)-1(b)(4)(i)(A), P’s
and S’s shares of FBX owned indirectly through their
interests in PRSX are individual foreign branch sep-
arate units. Pursuant to §1.1503(b)-1(b)(4)(ii), these
individual separate units are combined and treated
as a single separate unit of the consolidated group
of which P is the parent. Unless an exception under
§1.1503(d)-6 applies, any dual consolidated loss
attributable to FBX cannot offset income of P or S
(other than income attributable to FBX, subject to
the application of §1.1503(d)-4(c)), including their
distributive share of the U.S. source income earned
through their interests in PRSX, nor can it offset
income of any other domestic affiliates.
(ii) Example 3A. QDMTT―(A) Facts. P owns
DE1X. DE1X owns FSX. Effective January 1, 2025,
Country X imposes a Qualified Domestic Minimum
Top-up Tax (Country X QDMTT). The Country X
QDMTT is a foreign income tax for purposes of sec-
tion 1503(d) and the regulations thereunder. Other
than the Country X QDMTT, Country X does not
impose an income tax on Country X entities. For the
taxable year and Fiscal Year ending December 31,
2025, DE1X incurs a $100x deduction for interest
expense. The $100x of interest expense is reflected
on the books and records of DE1X and is taken into
account to determine the amount of income or loss
for purposes of the Country X QDMTT. If the $100x
expense were deducted by P in determining U.S. tax-
able income, the loan and $100x of interest expense
thereon would be a Duplicate Loss Arrangement
under the Transitional CbCR Safe Harbour for the
Country X QDMTT (Safe Harbour) and, as a result
of Country X’s rules for Duplicate Loss Arrange-
ments (Country X DLA rules), the $100x of interest
expense would be excluded from Country X’s Profit
(Loss) before Income Tax (PBT) for purposes of
the Safe Harbour calculation. If the $100x of inter-
est expense were taken into account in determining
whether the Safe Harbour is satisfied (that is, if it
were not excluded from PBT by the Country X DLA
rules), the Safe Harbour would be satisfied; if it were
not so taken into account, the Safe Harbour would
not be satisfied. Because the Country X DLA rules
apply only for purposes of the Safe Harbour, in all
cases the $100x of interest expense would be taken
into account in determining Net GloBE Income
under the Country X QDMTT for the 2025 Fiscal
Year.
(B) Result―(1) General application to QDMTT.
Because DE1X is not taxable as an association
for U.S. tax purposes and is subject to a foreign
income tax (that is, the Country X QDMTT), DE1X
is a hybrid entity, P’s interest in DE1X is a hybrid
entity separate unit, and the $100x interest expense
deduction gives rise to a $100x dual consoli-
dated loss attributable to P’s interest in DE1X. See
§1.1503(d)-1(b)(3), (b)(4)(i)(B)(1) and (b)(5)(ii).
Unless an exception applies, the $100x dual consol-
idated loss is subject to the domestic use limitation
under §1.1503(d)-4(b). The result would be the same
if, in addition to the Country X QDMTT, Country X
imposed another income tax on Country X entities
and, under the laws of that income tax, the loss of
DE1X is not available to offset or reduce items of
income or gain of FSX without an election, and no
such election is made.
(2) Ability to make a domestic use election. P can-
not make a domestic use election with respect to the
$100x dual consolidated loss if there is a foreign use
of the dual consolidated loss in the year in which it
was incurred (or in any prior year). §1.1503(d)-6(d)
(2). Thus, to determine whether a domestic use elec-
tion can be made it must first be determined whether
the dual consolidated loss has been or will be put to a
foreign use under the Country X QDMTT, including
whether it would be put to a foreign use if a domestic
use election were made. If a domestic use election
were made, such that the dual consolidated loss could
be deducted by P in determining its taxable income
for U.S. tax purposes, then the Country X DLA rules
would apply and prevent the $100x expense from
being taken into account for purposes of the Safe
Harbour. As a result, the $100x loss would not be
put to a foreign use under the Safe Harbour, and the
Safe Harbour would not be satisfied. Accordingly, it
must also be determined whether the dual consoli-
dated loss would be put to a foreign use under a full
application of the Country X QDMTT rules. Since
the Country X DLA rules only apply for purposes
of the Safe Harbour, the $100x expense would be
taken into account in determining the Country X Net
GloBE Income under a full application of the Coun-
try X QDMTT rules and, because the $100x interest
expense would thus be made available to offset or
reduce items of income or gain of FSX, the $100x
dual consolidated loss would be put to a foreign use
and a domestic use election cannot be made.
(C) Alternative facts. The facts are the same as
in paragraph (c)(3)(ii)(A) of this section, except
that even though the DLA Rules would exclude the
$100x of interest expense from Country X’s PBT if
a domestic use election were made, the Safe Har-
bour is nevertheless satisfied and, as a result, the
Jurisdictional Top-up Tax under a full application of
the Country X QDMTT rules is deemed to be zero.
The result is the same as set forth in paragraph (c)(3)
(ii)(B) of this section, except that because the Safe
Harbour for Country X is satisfied (and no foreign
use occurs pursuant to the application of the Safe
Harbour due to the Country X DLA rules), no for-
eign use is considered to occur with respect to the
$100x dual consolidated loss solely as a result of
it being taken into account in determining the Net
GloBE Income in Country X. See §1.1503(d)-3(c)
(9). Accordingly, P can make a domestic use election
for the $100x dual consolidated loss attributable to
its interest in DE1X.
(iii) Example 3B. IIR―(A) Facts. P owns DE3Y.
DE3Y owns DE1X, S, USLLC, FLLC, and a 90 per-
cent interest in PRS. For U.S. tax purposes: S is a
domestic corporation; USLLC is a domestic entity
that is disregarded as an entity separate from its
owner; FLLC is a foreign entity that is disregarded
as an entity separate from its owner; and PRS is a
domestic partnership. FLLC is not subject to an
income tax in a foreign country. Country X does
not impose an income tax on Country X entities.
Effective January 1, 2025, Country Y imposes an IIR
(Country Y IIR). The Country Y IIR is an income
tax for purposes of section 1503(d) and the regu-
lations thereunder. For purposes of the Country Y
IIR: DE1X is not a Flow-through Entity or a Tax
Transparent Entity and is located in Country X; each
of USLLC and FLLC is a Flow-through Entity, a
Reverse Hybrid Entity and a Stateless Constituent
Entity; and PRS is a Flow-through Entity and a Tax
Transparent Entity.
(B) Analysis―(1) DE1X and FLLC. Neither
DE1X nor FLLC is subject to a foreign income tax
on their worldwide income or on a residence basis,
and thus neither DE1X nor FLLC is a hybrid entity
(within the meaning of §1.1503(d)-1(b)(3)). How-
ever, the income or loss of each of DE1X and FLLC
is taken into account in determining the amount of
tax under the Country Y IIR and each of DE1X and
FLLC is a foreign entity other than a Tax Transparent
Entity for purposes of the Country Y IIR. As such,
P’s indirect interest in each of DE1X and FLLC is
a hybrid entity separate unit (within the meaning
of §1.1503(d)-1(b)(4)(i)(B)(2)). Because DE1X is
located in Country X for purposes of the Country Y
IIR, the DE1X separate unit would form part of a
combined separate unit including any other individ-
ual Country X separate units. See §1.1503(d)-1(b)(4)
(ii)(A) and (b)(4)(ii)(B)(2). Because FLLC is a State-
less Constituent Entity and thus not located in a spe-
cific jurisdiction for purposes of the Country Y IIR,
the FLLC separate unit cannot be combined with any
individual separate unit. See §1.1503(d)-1(b)(4)(ii)
(B)(2).
(2) S and USLLC. Neither S nor USLLC is subject
to a foreign income tax on their worldwide income or
on a residence basis, even though the income or loss
of S and USLLC is taken into account in determin-
ing the amount of tax under the Country Y IIR. As a
result, S is not a dual resident corporation (within the
meaning of §1.1503(d)-1(b)(2)) and USLLC is not a
hybrid entity (within the meaning of §1.1503(d)-1(b)
(3)). Further, because USLLC is a domestic entity,
P’s interest in USLLC is not a hybrid entity separate
unit within the meaning of §1.1503(d)-1(b)(4)(i)(B)
(2). Finally, USLLC is a transparent entity (within
the meaning of §1.1503(d)-1(b)(16)) with respect to
the DE3Y separate unit because it is not taxable as
an association for Federal tax purposes, is not subject
to an income tax in a foreign country, and is not a
pass-through entity under the laws of Country Y (the
applicable foreign country).
(3) PRS. PRS is a Tax Transparent Entity for pur-
poses of the Country Y IIR because it is fiscally trans-
parent in the United States and is not tax resident in
any foreign jurisdiction. PRS is not a hybrid entity
(within the meaning of §1.1503(d)-1(b)(3)), and P’s
indirect interest in PRS is not a hybrid entity separate
unit within the meaning of §1.1503(d)-1(b)(4)(i)(B)
(1)) because PRS is not subject to a foreign tax on
its worldwide income or on a residence basis. Fur-
ther, P’s indirect interest in PRS is not a hybrid entity

Bulletin No. 2024–35 565 August 26, 2024
separate unit within the meaning of §1.1503(d)-1(b)
(4)(i)(B)(2), even though the income or loss of PRS
is taken into account in determining the amount of
tax under the Country Y IIR, because PRS is not a
foreign entity. PRS is also not a transparent entity
(within the meaning of §1.1503(d)-1(b)(16)) with
respect to the DE3Y separate unit because, as a Tax
Transparent Entity, it is a pass-through entity under
the laws of Country Y (the applicable foreign coun-
try). The result would be the same if, instead of PRS
being a domestic entity, PRS were a foreign entity
(P’s indirect interest in PRS would not be a separate
unit in this case because PRS is a Tax Transparent
Entity).
* * * * *
(6) * * *
(iii) * * *
(B) * * * But see §1.1503(d)-1(d), which takes
into account certain payments that are otherwise
disregarded for purposes of section 1503(d) and the
regulations thereunder. * * *
* * * * *
(18) * * *
(iv) Alternative facts. The facts are the same as
in paragraph (c)(18)(i) of this section, except that
instead of Country X mirror legislation, Country X
law denies the ability to use the loss to offset income
of Country X affiliates if the loss is deductible in
another jurisdiction to offset income that is not dual
inclusion income (for example, if a domestic use
election were made with respect to FBX’s dual con-
solidated loss and the loss became deductible by P);
Country X law does not, however, deny the use of
the loss of a Country X branch or permanent estab-
lishment to offset income of Country X affiliates if
under the law of the other jurisdiction the loss can
only offset income of the Country X branch or per-
manent establishment (for example, if a domestic
use election is not made with respect to FBX’s dual
consolidated loss and the domestic use limitation
applied). Accordingly, Country X law does not deny
any opportunity for the foreign use of the dual con-
solidated loss and, therefore, is not mirror legislation
(within the meaning of §1.1503(d)-3(e)(1)).
* * * * *
(23) * * *
(ii) * * * But see §1.1503(d)-1(d), which takes
into account certain payments that are otherwise
disregarded for purposes of section 1503(d) and the
regulations thereunder. * * *
(iii) Alternative facts. The facts are the same as
in paragraph (c)(23)(i) of this section, except that P
borrows from DE1X (instead of from a third party)
and P on-lends the proceeds to a third party (instead
of to DE1X). In addition, in year 1, P earns interest
income attributable to the third-party loan. Also in
year 1, DE1X earns $40x of interest income on its
loan to P (which is generally disregarded for U.S.
tax purposes) and DE1X incurs an unrelated $30x
deduction for salary expense (which is regarded).
The loan from DE1X to P, the disregarded interest
income, and the regarded salary expense are reflected
on the books and records of DE1X. The third-party
loan and related interest income have not and will
not be reflected on the books and records of DE1X
because they are reflected on the books and records
of P. Because the interest income on P’s third-party
loan is not reflected on the books and records of
DE1X, no portion of such income is attributable to
P’s interest in DE1X pursuant to §1.1503(d)-5(c)(3)
for purposes of calculating the year 1 income or dual
consolidated loss attributable to such interest. Adjust-
ments of DE1X’s books and records to conform to
U.S. tax principles do not result in the attribution of
any portion of the third-party interest income, or any
other item reflected on the books and records of P, to
P’s interest in DE1X because such item has not and
will not be reflected on DE1X’s books and records.
See §1.1503(d)-5(c)(3)(i). Further, even though the
disregarded interest income is reflected on the books
and records of DE1X, it is not taken into account
for purposes of calculating income or a dual con-
solidated loss. See §1.1503(d)-5(c)(1)(ii). But see
§1.1503(d)-1(d), which takes into account certain
payments that are otherwise disregarded for pur-
poses of section 1503(d) and the regulations there-
under. The $30x deduction for the salary expense is
reflected on DE1X’s books and records and, thus,
there is a $30x dual consolidated loss attributable to
P’s interest in DE1X in year 1.
(24) * * *
(i) * * * In year 1, FSX distributes $50x to DE3Y,
the entire amount of which is a dividend for U.S. tax
purposes and is included in gross income by P. * * *
(ii) Pursuant to §1.1503(d)-5(c)(4)(iv)(A), nei-
ther the $50x dividend nor any deduction or loss
with respect to the dividend (for example, a deduc-
tion allowed to P under section 245A(a)) is taken
into account for purposes of determining the items
of income, gain, deduction, and loss of P that are
attributable to P’s interest in DE3Y; thus, regardless
of whether the dividend is reflected on the books
and records of DE3Y, no portion of the dividend or
any deduction or loss with respect to the dividend is
attributable to P’s interest in DE3Y. * * *
(25) * * *
(ii) * * *
(B) * * * But see §1.1503(d)-1(d), which takes
into account certain payments that are otherwise
disregarded for purposes of section 1503(d) and the
regulations thereunder. * * *
* * * * *
(42) Example 42. Disregarded payment loss –
inclusion in gross income of DPL inclusion amount
upon occurrence of triggering event―(i) Facts. P
owns DE1X, and DE1X owns FSX. P owned all the
interests in DE1X on the effective date of DE1X’s
election to be disregarded as an entity separate from
its owner. In year 1, DE1X pays $100x to P pursu-
ant to a note. For U.S. tax purposes, the payment
is disregarded as a transaction between DE1X and
P, but if the payment were regarded it would be
interest within the meaning of §1.267A-5(a)(12).
Under Country X tax law, the $100x is interest for
which DE1X is allowed a deduction in year 1. In
year 1, pursuant to a Country X group relief regime,
DE1X’s $100x deduction is made available to offset
income of FSX.
(ii) Result. Because P owned interests in DE1X,
a specified eligible entity (as defined in §301.7701-
3(c)(4)(i) of this chapter), on the effective date of
DE1X’s election to be a disregarded entity, P con-
sented to be subject to the disregarded payment
loss rules of §1.1503(d)-1(d). See §301.7701-3(c)
(4)(i) of this chapter. In addition, DE1X, a disre-
garded payment entity, incurs a $100x disregarded
payment loss with respect to its Country X taxable
year for year 1. See §1.1503(d)-1(d)(1)(i) and (d)
(6)(ii)(B). DE1X’s $100x deduction being made
available to offset income of FSX pursuant to the
Country X group relief regime constitutes a foreign
use of, and thus a triggering event with respect to,
the disregarded payment loss during the DPL cer-
tification period. See §1.1503(d)-1(d)(3)(i) and (d)
(6)(iii). As a result, in year 1, P must include in
gross income $100x, the DPL inclusion amount
with respect to the disregarded payment loss. See
§1.1503(d)-1(d)(1)(i) and (d)(2)(i). The $100x DPL
inclusion amount is treated for U.S. tax purposes as
ordinary interest income, the source and character
of which is determined as if P received the interest
payment from a wholly owned foreign corporation.
See §1.1503(d)-1(d)(2)(ii). The result would be the
same if the payment were not treated as interest (or
a structured payment or a royalty) for U.S. tax pur-
poses, if it were regarded, and the transaction, series
of transactions, plan, or arrangement that gave rise to
the payment was engaged in with a view to avoid the
purposes of the disregarded payment loss rules under
§1.1503(d)-1(d). See §1.1503(d)-1(f).
(43) Example 43. Income from U.S. business
operations to avoid the purposes of the dual consol-
idated loss rules—(i) Facts. P owns DE1X. DE1X
owns FSX. P conducts business operations in the
United States that are expected to generate items
of income or gain (U.S. business operations). With
a view to avoid the purposes of section 1503(d) by
eliminating what would otherwise be a dual consol-
idated loss, P transfers the U.S. business operations
to DE1X. But for P’s items of income or gain from
the U.S. business operations (held indirectly through
DE1X), there would be a dual consolidated loss
attributable to USP’s interest in DE1X and a foreign
use of that dual consolidated loss (as a result of the
Country X consolidation regime). For purposes of
determining taxable income under the income tax
laws of Country X, items of income, gain, deduction,
and loss attributable to a permanent establishment
(or similar taxable presence) in another country,
which would include the U.S. business operations,
are not taken into account.
(ii) Result. Because P transferred the U.S. busi-
ness operations to DE1X with a view to avoid the
purposes of section 1503(d), the anti-avoidance rule
in §1.1503(d)-1(f) applies. As a result, the income or
gain that P takes into account from the U.S. business
operations (held through DE1X) will not be taken
into account for purposes of determining the amount
of income or dual consolidated loss attributable to
P’s interest in DE1X under §1.1503(d)-5(c). The
result would be the same if, instead of the income tax
laws of Country X not taking into account the items
of income, gain, deduction, and loss attributable to
a permanent establishment (or similar taxable pres-
ence) in another country for purposes of determining
taxable income, the income tax laws of Country X
took such items into account for this purpose but pro-
vided a foreign tax credit with respect to taxes paid
on such items.
* * * * *
Par. 8. Section 1.1503(d)-8 is amended
by:
1. Revising the section heading.

August 26, 2024 566 Bulletin No. 2024–35
2. In paragraph (b)(6):
a. Removing the language “as well
1.1503(d)-3(e)(1) and (e)(3)” in the first
sentence and adding the language “as well
as 1.1503(d)-3(e)(3)” in its place.
b. Removing the second sentence.
c. Adding a sentence at the end of the
paragraph.
3. Adding paragraphs (b)(9) through
(16).
The revisions and additions read as fol-
lows:
§1.1503(d)-8 Applicability dates.
* * * * *
(b) * * *
(6) * * * The parenthetical in
§1.1503(d)-1(c)(1)(ii) applies to deter-
minations under §§1.1503(d)-1 through
1.1503(d)-7 relating to taxable years end-
ing on or after August 6, 2024.
* * * * *
(9) Attribution of items arising from
ownership of stock. Section 1.1503(d)-5(b)
(2)(iv) and (c)(4)(iv) apply to taxable
years ending on or after August 6, 2024.
(10) Adjustments to conform to U.S. tax
principles. The fourth and fifth sentences
of §1.1503(d)-5(c)(3)(i) apply to taxable
years ending on or after August 6, 2024.
(11) Disregarded payment loss rules.
Section 1.1503(d)-1(d) applies to taxable
years ending on or after August 6, 2024.
See also section 301.7701-3(c)(4)(vi)
(applicability dates for consent to be sub-
ject to disregarded payment loss rules).
(12) Transition rule for QDMTTs and
Top-up Taxes—(i) In general. Except
as provided in paragraph (b)(12)(ii)
of this section, §§1.1503(d)-1 through
1.1503(d)-7 apply without taking into
account QDMTTs or Top-up Taxes with
respect to losses incurred in taxable years
beginning before August 6, 2024. Thus, for
example, a foreign use is not considered to
occur with respect to a dual consolidated
loss incurred in a taxable year beginning
before August 6, 2024 solely because all
or a portion of the deductions or losses
that comprise the dual consolidated loss is
taken into account (including in a taxable
year beginning on or after August 6, 2024)
in determining the Net GloBE Income for
a jurisdiction or whether the Transitional
CbCR Safe Harbour applies for a jurisdic-
tion. As an additional example, an entity
is not treated as a hybrid entity in a tax-
able year beginning before August 6, 2024
solely because it is subject to a QDMTT.
(ii) Anti-abuse rule. Paragraph (b)
(12)(i) of this section does not apply
with respect to a loss that was incurred
or increased with a view to reduce the
amount of tax under a QDMTT or IIR, or
to qualify for the Transitional CbCR Safe
Harbour. For example, a loss may be put
to a foreign use under a QDMTT where a
taxpayer causes the loss to be taken into
account in a taxable year beginning before
August 6, 2024, with a view to reducing
the amount of tax under a QDMTT in a
taxable year beginning after August 6,
2024.
(13) Foreign use exception for qual-
ification for the Transitional CbCR Safe
Harbour. Section 1.1503(d)-3(c)(9)
applies to taxable years beginning on or
after August 6, 2024.
(14) Separate units arising from a
QDMTT or IIR. Sections 1.1503(d)-1(b)
(4)(i)(A)(2), 1.1503(d)-1(b)(4)(i)(B)(2),
and 1.1503(d)-1(b)(4)(ii)(B)(2) apply to
taxable years beginning on or after August
6, 2024.
(15) Anti-avoidance rule. Section
1.1503(d)-1(f) applies to taxable years
ending on or after August 6, 2024.
(16) Minimum taxes and taxes com-
puted by reference to financial accounting
principles. Section 1.1503(d)-1(b)(6)(ii)
applies to taxable years ending on or after
August 6, 2024.
PART 301—PROCEDURE AND
ADMINISTRATION
Par. 9. The authority citation for part
301 continues to read in part as follows:
Authority: 26 U.S.C. 7805. * * *
Par. 10. Section 301.7701-3 is
amended by revising the sixth sentence of
paragraph (a) and adding paragraph (c)(4)
to read as follows:
§301.7701-3 Classification of certain
business entities.
(a) * * * Paragraph (c) of this sec-
tion provides rules for making express
elections, including a rule under which a
domestic eligible entity that elects to be
classified as an association consents to be
subject to the dual consolidated loss rules
of section 1503(d), as well as a rule under
which certain owners of certain eligible
entities that are disregarded as entities
separate from their owners consent to be
subject to the disregarded payment loss
rules of §1.1503(d)-1(d). * * *
* * * * *
(c) * * *
(4) Consent to be subject to disre-
garded payment loss rules―(i) General
rule. If a specified eligible entity elects to
be (or is formed or acquired after August
6, 2024 and classified without an elec-
tion as) disregarded as an entity separate
from its owner, then a domestic corpora-
tion, if any, that on the effective date of
the election (or on the date of formation
or acquisition absent an election) owns
directly or indirectly interests in the spec-
ified eligible entity consents to be subject
to the disregarded payment loss rules of
§1.1503(d)-1(d) of this chapter. For this
purpose, a specified eligible entity means
an eligible entity (regardless of whether
domestic or foreign), provided that the
entity is a foreign tax resident or is owned
by a domestic corporation that has a for-
eign branch.
(ii) Special rule regarding dual resident
corporations. If an eligible entity elects to
be disregarded as an entity separate from
its owner, then a dual resident corporation,
if any, that on the effective date of the elec-
tion directly or indirectly owns interests in
the eligible entity consents to be subject
to the disregarded payment loss rules of
§1.1503(d)-1(d) of this chapter.
(iii) Deemed consent. This paragraph
(c)(4)(iii) applies to a domestic corporation
that directly or indirectly owns interests
in a specified eligible entity disregarded
as an entity separate from its owner, but
that has not pursuant to paragraph (c)(4)
(i) of this section consented to be sub-
ject to the disregarded payment loss rules
of §1.1503(d)-1(d) of this chapter. This
paragraph (c)(4)(iii) also applies to a dual
resident corporation that owns directly or
indirectly interests in an eligible entity
disregarded as an entity separate from its
owner, but that has not pursuant to para-
graph (c)(4)(ii) of this section consented to
be subject to the disregarded payment loss
rules of §1.1503(d)-1(d) of this chapter.
When this paragraph (c)(4)(iii) applies, the
domestic corporation or dual resident cor-
poration, as applicable, is deemed to con-

Bulletin No. 2024–35 567 August 26, 2024
sent to be subject to the disregarded pay-
ment loss rules of §1.1503(d)-1(d) of this
chapter. This deemed consent rule applies,
for example, to a domestic corporation that
directly or indirectly acquires interests in
a pre-existing disregarded entity, and a
domestic corporation that owns interests in
a disregarded entity by reason of a conver-
sion of a partnership to a disregarded entity
(provided that, in each case, the disre-
garded entity is a specified eligible entity).
As additional examples, the deemed con-
sent rule applies to a domestic corporation
that owns interests in a disregarded entity
that defaulted to such status under para-
graph (b)(1)(ii) or (b)(2)(i)(C) of this sec-
tion, as well as a domestic corporation that
owns interests in a disregarded entity that
elected such status before the applicability
date relating to paragraph (c)(4)(i) of this
section (provided that, in each case, the
disregarded entity is a specified eligible
entity).
(iv) Election to avoid deemed consent.
The deemed consent rule of paragraph (c)
(4)(iii) of this section does not apply to
a domestic corporation or dual resident
corporation if the eligible entity elects to
be classified as an association effective
before August 6, 2025. For purposes of
such an election, the sixty-month limita-
tion under paragraph (c)(1)(iv) of this sec-
tion does not apply.
(v) Definitions. For purposes of para-
graph (c)(4) of this section, the following
definitions apply:
(A) The term domestic corporation has
the meaning provided in §1.1503(d)-1(b)
(1) of this chapter.
(B) The term dual resident corpo-
ration has the meaning provided in
§1.1503(d)-1(b)(2) of this chapter.
(C) The term foreign branch means a
branch (within the meaning of §1.267A-
5(a)(2) of this chapter) that gives rise to
a taxable presence under the tax law of
the foreign country where the branch is
located.
(D) The term foreign tax resident
means a tax resident (within the meaning
of §1.267A-5(a)(23)(i) of this chapter) of
a foreign country.
(E) The term indirectly, when used
in reference to ownership, has the same
meaning as provided in §1.1503(d)-1(b)
(19) of this chapter.
(vi) Applicability dates—(A) In gen-
eral. Except as provided in paragraph
(c)(4)(vi)(B) of this section, para-
graph (c)(4) of this section applies as
of August 6, 2024, as well as in regard
to any election of an eligible entity to
be classified as disregarded as an entity
separate from its owner filed on or after
August 6, 2024 (regardless of whether
the election is effective before August
6, 2024).
(B) Special rule regarding deemed
consent. Paragraph (c)(4)(iii) of this sec-
tion applies on or after August 6, 2025.
* * * * *
Douglas W. O’Donnell,
Deputy Commissioner.
(Filed by the Office of the Federal Register August
06, 2024, 8:45 a.m., and published in the issue of the
Federal Register for August 07, 2024, 89 FR 64750)

Bulletin No. 2024–35 i August 26, 2024
Definition of Terms
Revenue rulings and revenue procedures
(hereinafter referred to as “rulings”) that
have an effect on previous rulings use the
following defined terms to describe the
effect:
Amplified describes a situation where
no change is being made in a prior pub-
lished position, but the prior position is
being extended to apply to a variation of
the fact situation set forth therein. Thus,
if an earlier ruling held that a principle
applied to A, and the new ruling holds that
the same principle also applies to B, the
earlier ruling is amplified. (Compare with
modified, below).
Clarified is used in those instances
where the language in a prior ruling is
being made clear because the language
has caused, or may cause, some confu-
sion. It is not used where a position in a
prior ruling is being changed.
Distinguished describes a situation
where a ruling mentions a previously pub-
lished ruling and points out an essential
difference between them.
Modified is used where the substance
of a previously published position is being
changed. Thus, if a prior ruling held that a
principle applied to A but not to B, and the
new ruling holds that it applies to both A
and B, the prior ruling is modified because
it corrects a published position. (Compare
with amplified and clarified, above).
Obsoleted describes a previously pub-
lished ruling that is not considered deter-
minative with respect to future transactions.
This term is most commonly used in a ruling
that lists previously published rulings that
are obsoleted because of changes in laws or
regulations. A ruling may also be obsoleted
because the substance has been included in
regulations subsequently adopted.
Revoked describes situations where the
position in the previously published ruling
is not correct and the correct position is
being stated in a new ruling.
Superseded describes a situation where
the new ruling does nothing more than
restate the substance and situation of a
previously published ruling (or rulings).
Thus, the term is used to republish under
the 1986 Code and regulations the same
position published under the 1939 Code
and regulations. The term is also used
when it is desired to republish in a single
ruling a series of situations, names, etc.,
that were previously published over a
period of time in separate rulings. If the
new ruling does more than restate the sub-
stance of a prior ruling, a combination of
terms is used. For example, modified and
superseded describes a situation where the
substance of a previously published ruling
is being changed in part and is continued
without change in part and it is desired to
restate the valid portion of the previously
published ruling in a new ruling that is
self contained. In this case, the previously
published ruling is first modified and then,
as modified, is superseded.
Supplemented is used in situations in
which a list, such as a list of the names of
countries, is published in a ruling and that
list is expanded by adding further names
in subsequent rulings. After the original
ruling has been supplemented several
times, a new ruling may be published that
includes the list in the original ruling and
the additions, and supersedes all prior rul-
ings in the series.
Suspended is used in rare situations
to show that the previous published rul-
ings will not be applied pending some
future action such as the issuance of new
or amended regulations, the outcome of
cases in litigation, or the outcome of a
Service study.
Abbreviations
The following abbreviations in current
use and formerly used will appear in
material published in the Bulletin.
A—Individual.
Acq.—Acquiescence.
B—Individual.
BE—Beneficiary.
BK—Bank.
B.T.A.—Board of Tax Appeals.
C—Individual.
C.B.—Cumulative Bulletin.
CFR—Code of Federal Regulations.
CI—City.
COOP—Cooperative.
Ct.D.
—Court Decision.
CY—County.
D—Decedent.
DC—Dummy Corporation.
DE—Donee.
Del. Order—Delegation Order.
DISC—Domestic International Sales Corporation.
DR—Donor.
E—Estate.
EE—Employee.
E.O.—Executive Order.
ER—Employer.
ERISA—Employee Retirement Income Security Act.
EX—Executor.
F—Fiduciary.
FC—Foreign Country.
FICA—Federal Insurance Contributions Act.
FISC—Foreign International Sales Company.
FPH—Foreign Personal Holding Company.
F.R.—Federal Register.
FUTA—Federal Unemployment Tax Act.
FX—Foreign corporation.
G.C.M.—Chief Counsel’s Memorandum.
GE—Grantee.
GP—General Partner.
GR—Grantor.
IC—Insurance Company.
I.R.B.—Internal Revenue Bulletin.
LE—Lessee.
LP—Limited Partner.
LR—Lessor.
M—Minor.
Nonacq.—Nonacquiescence.
O—Organization.
P—Parent Corporation.
PHC—Personal Holding Company.
PO—Possession of the U.S.
PR—Partner.
PRS—Partnership.
PTE—Prohibited Transaction Exemption.
Pub. L.—Public Law.
REIT—Real Estate Investment Trust.
Rev. Proc.—Revenue Procedure.
Rev. Rul.—Revenue Ruling.
S—Subsidiary.
S.P.R.—Statement of Procedural Rules.
Stat.—Statutes at Large.
T—Target Corporation.
T.C.—Tax Court.
T.D.—Treasury Decision.
TFE—Transferee.
TFR—Transferor.
T.I.R.—Technical Information Release.
TP—Taxpayer.
TR—Trust.
TT—Trustee.
U.S.C.—United States Code.
X—Corporation.
Y—Corporation.
Z—Corporation.

August 26, 2024 ii Bulletin No. 2024–35
Numerical Finding List
1
Bulletin 2024–35
Announcements:
2024-26, 2024-27 I.R.B. 14
2024-27, 2024-27 I.R.B. 14
2024-28, 2024-28 I.R.B. 39
2024-29, 2024-29 I.R.B. 71
2024-31, 2024-34 I.R.B. 533
2024-32, 2024-35 I.R.B. 535
Notices:
2024-47, 2024-27 I.R.B. 1
2024-52, 2024-27 I.R.B. 2
2024-53, 2024-27 I.R.B. 4
2024-54, 2024-28 I.R.B. 24
2024-55, 2024-28 I.R.B. 31
2024-56, 2024-29 I.R.B. 64
2024-57, 2024-29 I.R.B. 67
2024-58, 2024-30 I.R.B. 120
2024-59, 2024-32 I.R.B. 348
2024-60, 2024-34 I.R.B. 515
2024-61, 2024-34 I.R.B. 520
Proposed Regulations:
REG-124593-23, 2024-28 I.R.B. 40
REG-109032-23, 2024-31 I.R.B. 332
REG-120137-19, 2024-31 I.R.B. 336
REG-119283-23, 2024-32 I.R.B. 351
REG-102161-23 2024-33 I.R.B. 502
REG-103529-23, 2024-33 I.R.B. 512
REG-105128-23, 2024-35 I.R.B. 536
Revenue Procedures:
2024-26, 2024-27 I.R.B. 7
2024-29, 2024-30 I.R.B. 121
2024-30, 2024-30 I.R.B. 183
2024-27, 2024-31 I.R.B. 300
2024-28, 2024-31 I.R.B. 326
2024-32, 2024-34 I.R.B. 523
Revenue Rulings:
2024-13, 2024-28 I.R.B. 18
2024-14, 2024-28 I.R.B. 18
2024-15, 2024-32 I.R.B. 340
2024-16, 2024-35 I.R.B. 534
Treasury Decisions:
10002, 2024-29 I.R.B. 56
9999, 2024-30 I.R.B. 72
10000, 2024-31 I.R.B. 185
10003, 2024-32 I.R.B. 342
10001 2024-33 I.R.B. 412
Treasury Decisions:—Continued
10004 2024-33 I.R.B. 489
9998 2024-34 I.R.B. 412
10005 2024-34 I.R.B. 510
1
A cumulative list of all revenue rulings, revenue procedures, Treasury decisions, etc., published in Internal Revenue Bulletins 2024–27 through 2024–52 is in Internal Revenue Bulletin
2024–52, dated December 30, 2024.

Bulletin No. 2024–35 iii August 26, 2024
Finding List of Current Actions on
Previously Published Items
1
Bulletin 2024–35
1
A cumulative list of all revenue rulings, revenue procedures, Treasury decisions, etc., published in Internal Revenue Bulletins 2024–27 through 2024–52 is in Internal Revenue Bulletin
2024–52, dated December 30, 2024.

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Washington, DC 20224
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