The US Department of Treasury and the Internal Revenue Service (IRS) have released the final Rules on Dual Consolidated Losses and the Treatment of Certain Disregarded Payments, which were officially published in the Federal Register on 14 January 2025.

The document contains final regulations regarding certain disregarded payments that give rise to deductions for foreign tax purposes and avoid the application of the dual consolidated loss (“DCL”) rules.

The final regulations affect domestic corporate owners that make or receive such payments. This document also announces additional transition relief for the application of the DCL rules to certain foreign taxes that are intended to ensure that multinational enterprises pay a minimum level of tax.

This document finalises the rules from the 2024 proposed regulations that relate to DPLs, including portions that are also relevant for DCLs, such as the anti-avoidance rule and the deemed ordering rule. It retains the basic approach and structure of these rules, with certain revisions.

Part II of the Summary of Comments and Explanation of Revisions summarises the DPL rules, including the purposes and general approach of the rules under the 2024 proposed regulations, and discusses related comments and revisions. Part III discusses comments and revisions on rules applicable to both DCLs and DPLs. Part IV discusses the applicability dates of the final regulations.

Some aspects of the proposed rules, such as the interaction between the DCL rules and GloBE Model Rules, were not finalised. However, transitional relief is included. The final regulations will specify that the DCL rules will not consider QDMTTs or Top-up Taxes collected under an IIR or UTPR for taxable years beginning before 31 August 2025.