(a) General rule. Except as provided in paragraph (b) of this section, this paragraph (a) provides the dates of applicability of §§1.1503(d)-1 through 1.1503(d)-7. Sections 1.1503(d)-1 through 1.1503(d)-7 shall apply to dual consolidated losses incurred in taxable years beginning on or after April 18, 2007. However, a taxpayer may apply §§1.1503(d)-1 through 1.1503(d)-7, in their entirety, to dual consolidated losses incurred in taxable years beginning on or after January 1, 2007, by filing its return and attaching to such return the domestic use agreements, certifications, or other information in accordance with these regulations. For purposes of this section, the term application date means either April 18, 2007, or, if the taxpayer applies these regulations pursuant to the preceding sentence, January 1, 2007. Section 1.1503-2 applies for dual consolidated losses incurred in taxable years beginning on or after October 1, 1992, and before the application date.

(b) Special rules—(1) Reduction of term of agreements filed under §§1.1503-2A(c)(3), 1.1503-2A(d)(3), 1.1503-2(g)(2)(i), or 1.1503-2T(g)(i). If an agreement is filed in accordance with §§1.1503-2A(c)(3), 1.1503-2A(d)(3), 1.1503-2(g)(2)(i), or 1.1503-2T(g)(2)(i) with respect to a dual consolidated loss incurred in a taxable year beginning prior to the application date and an event requiring recapture with respect to the dual consolidated loss subject to the agreement has not occurred as of the application date, then such agreement will be considered by the Internal Revenue Service to apply only for any taxable year up to and including the fifth taxable year following the year in which the dual consolidated loss that is the subject of the agreement was incurred and thereafter will have no effect.

(2) Reduction of term of agreements filed under §§1.1503-2(g)(2)(iv)(B)(2)(i) (1992), 1.1503-2(g)(2)(iv)(B)(3)(i), or Rev. Proc. 2000-42. Taxpayers subject to the terms of a closing agreement entered into with the Internal Revenue Service pursuant to §§1.1503-2(g)(2)(iv)(B)(2)(i) (1992), 1.1503-2(g)(2)(iv)(B)(3)(i), or Rev. Proc. 2000-42 (2000-2 CB 394), see §601.601(d)(2)(ii)(b) of this chapter, will be deemed to have satisfied the closing agreement's fifteen-year certification period requirement if the five-year certification period specified in §1.1503(d)-1(b)(20) has elapsed, provided such closing agreement is still in effect as of the application date, and provided the dual consolidated losses have not been recaptured. For example, if a calendar year taxpayer that has a January 1, 2007, application date entered into a closing agreement with respect to a dual consolidated loss incurred in 2003 and, as of January 1, 2007, the closing agreement is still in effect and the dual consolidated loss subject to the closing agreement has not been recaptured, then the closing agreement's fifteen-year certification period will be deemed satisfied when the five-year certification period described in §1.1503(d)-1(b)(20) has elapsed. Thus, the dual consolidated loss will be subject to the recapture and certification provisions of the closing agreement in such a case only through December 31, 2008. Alternatively, if a calendar year taxpayer that has a January 1, 2007, application date entered into a closing agreement with respect to a dual consolidated loss incurred in 2000 and, as of January 1, 2007, the closing agreement is still in effect and the dual consolidated loss subject to the closing agreement has not been recaptured, then the certification period is deemed to be satisfied.

(3) Relief for untimely filings. Paragraphs (b)(3)(i) through (iii) of this section set forth the effective dates for rules that provide relief for the failure to make timely filings of an election, agreement, statement, rebuttal, computation, closing agreement, or other information, pursuant to section 1503(d) and these regulations.

(i) General rule. Except as provided in paragraphs (b)(3)(ii) and (iii) of this section, the reasonable cause relief standard of §1.1503(d)-1(d) applies for all untimely filings with respect to dual consolidated losses, including with respect to dual consolidated losses incurred in taxable years beginning before the application date.

(ii) Closing agreements. Solely with respect to closing agreements described in §1.1503-2(g)(2)(iv)(B)(3)(i) and Rev. Proc. 2000-42, taxpayers must request relief for untimely requests through the process provided under §§301.9100-1 through 301.9100-3 of this chapter. See paragraph (b)(4) of this section for rules that permit the multiple-party event exception, rather than closing agreements, for certain triggering events.

(iii) Pending requests for relief. Taxpayers that have letter ruling requests under §§301.9100-1 through 301.9100-3 of this chapter pending as of March 19, 2007 (other than requests under paragraph (b)(3)(ii) of this section) are not required to use the reasonable cause procedure under §1.1503(d)-1(d); however, if such taxpayers have not yet received a determination of their request, they may withdraw their request consistent with the procedures contained in Rev. Proc. 2007-1 (2007-1 IRB 1), see §601.601(d)(2)(ii)(b) of this chapter, (or any succeeding document) and use the reasonable cause procedure set forth in §1.1503(d)-1(d). In that event, the Internal Revenue Service will refund the taxpayer's user fee.

(4) Multiple-party event exception to triggering events. This paragraph (b)(4) applies to events described in §1.1503-2(g)(2)(iv)(B)(1)(i) through (iii) that occur after April 18, 2007 and that are with respect to dual consolidated losses that were incurred in taxable years beginning on or after October 1, 1992, and before the application date. The events described in the previous sentence are not eligible for the exception described in §1.1503-2(g)(2)(iv)(B)(1), but instead are eligible for the multiple-party event exception described in §1.1503(d)-6(f)(2)(i), as modified by this paragraph (b)(4). Thus, such events are not eligible for a closing agreement described in §1.1503-2(g)(2)(iv)(B)(3)(i) and Rev. Proc. 2000-42. For purposes of applying §1.1503(d)-6(f)(2)(i) to transactions covered by this paragraph, agreements described in §1.1503-2(g)(2)(i) (rather than domestic use agreements) shall be filed, and subsequent triggering events and exceptions thereto have the meaning provided in §1.1503-2(g)(2)(iii)(A) and (iv) (other than the exception provided under §1.1503-2(g)(2)(iv)(B)(1)). For example, if a calendar year taxpayer that has a January 1, 2007, application date filed an election under §1.1503-2(g)(2)(i) with respect to a dual consolidated loss that was incurred in 2004, and a triggering event described in §1.1503-2(g)(2)(iv)(B)(1)(ii) occurs with respect to such dual consolidated loss after April 18, 2007, then the event is eligible for the multiple-party event exception under §1.1503(d)-6(f)(2)(i) (and not the exception under §1.1503-2(g)(2)(iv)(B)(1)). However, in order to comply with §1.1503(d)-6(f)(2)(iii)(A), the subsequent elector must file a new agreement described in §1.1503-2(g)(2)(i) (rather than a new domestic use agreement). In addition, for purposes of determining whether there is a subsequent triggering event, and exceptions thereto, pursuant to such new agreement, §1.1503-2(g)(2)(iii)(A) and (iv) (other than the exception provided under §1.1503-2(g)(2)(iv)(B)(1)) shall apply. Notwithstanding the general application of this paragraph (b)(4) to events described in §1.1503-2(g)(2)(iv)(B)(1)(i) through (iii) that occur after April 18, 2007, a taxpayer may choose to apply this paragraph (b)(4) to events described in §1.1503-2(g)(2)(iv)(B)(1)(i) through (iii) that occur after March 19, 2007 and on or before April 18, 2007.

(5) Basis adjustment rules. Taxpayers may apply the basis adjustment rules of §1.1503(d)-5(g) for all open years in which such basis is relevant, even if the basis adjustment is attributable to a dual consolidated loss incurred (or recaptured) in a closed taxable year. Taxpayers applying the provisions of §1.1503(d)-5(g), however, must do so consistently for all open years.

(6) Rules regarding domestic consenting corporations. Section 1.1503(d)-1(b)(2)(iii) and (c), as well §1.1503(d)-3(e)(1) and (3), apply to determinations under §§1.1503(d)-1 through 1.1503(d)-7 relating to taxable years ending on or after December 20, 2018. For taxable years ending before December 20, 2018, see §1.1503(d)-3(e)(1) as contained in 26 CFR part 1 revised as of April 1, 2018.

(7) Compulsory transfer triggering event exception. Section 1.1503(d)-6(f)(5)(i) through (iii) applies to transfers that occur on or after December 20, 2018. For transfers occurring before December 20, 2018, see §1.1503(d)-6(f)(5)(i) through (iii) as contained in 26 CFR part 1 revised as of April 1, 2018. However, taxpayers may consistently apply §1.1503(d)-6(f)(5)(i) through (iii) to transfers occurring before December 20, 2018.

[T.D. 9315, 72 FR 12914, Mar. 19, 2007; 72 FR 20424, Apr. 25, 2007, as amended by T.D. 9896, 85 FR 19856, Apr. 8, 2020]