The Internal Revenue Service and the Treasury Department issued a notice Wednesday saying they intend to issue proposed regulations withdrawing the disregarded payment loss rules for multinational companies.
The DPL rules were released in January in the waning days of the Biden administration and prompted some negative comments. They aimed to prevent multinational companies from “double-dipping” their losses to offset their income in more than a single jurisdiction. However, they could also result in disregarded payments from a company’s disregarded foreign entities being included in a company’s taxable income.
Notice 2025-44 announces that the Treasury and the IRS plan to issue proposed regulations withdrawing the disregarded payment loss rules under Section 1.1503(d)-1(d) of the Tax Code. The DPL rules were finalized on Jan. 14, 2025 and were set to take effect with respect to losses incurred in taxable years starting on or after Jan. 1, 2026.
In addition, the notice announces an extension of the transition relief initially announced in Notice 2023-80 with respect to the interaction of the dual consolidated loss rules and the model rules published by the OECD/G20 Inclusive Framework on BEPS, also known as the “GloBE Model Rules.” The notice extends the transition relief si the DCL rules would generally be applied without respect to the GloBE Model Rules for losses incurred in taxable years beginning before Jan. 1, 2028.
Following the publication of the 2025 final regulations, the Treasury and the IRS heard feedback recommending the removal of the DPL rules, focusing on the complexity, uncertainty and costs of complying with the DPL rules and of unwinding existing structures in response to the DPL rules.
“The Treasury Department and the IRS share these concerns,” said the notice. “In addition, the feedback questioned the authority for the DPL rules, asserting that the DPL rules are a significant departure from longstanding principles of the Code, are inconsistent with the statute, and conflict with congressional intent.”
