AICPA asks Treasury, IRS to change approach to dual consolidated losses

An AICPA letter in response to a Treasury and IRS call for recommendations related to the “all or nothing” approach to dual consolidated losses (DCLs) asked Treasury and the IRS to consider allowing an exception so companies aren’t unnecessarily penalized.

According to a news release, the AICPA letter in response to a request for comments in Notice 2025-44 pointed out that the current approach to DCLs means that if even a portion of the DCL is used in a foreign country, the entire loss cannot be deducted in the United States. The concern of “double dipping” cannot occur if the items of deduction or loss that represent a permanent difference between the U.S. federal income tax law and foreign law are excluded from the DCL calculation.

The AICPA recommended Treasury and the IRS issue guidance stating that if the “all or nothing” approach is retained, any expenses that can never be used under foreign tax law should be left out of the U.S. loss calculation. This ensures companies aren’t penalized for deductions that don’t create a risk of double use.

Additionally, the AICPA letter provided language that would address the issue as an exception to the existing general rule. The language employs a narrower provision in the computation of a DCL under Regs. Sec. 1.1503(d)-5 and would fill a gap in the existing regulations and ensure that the “blunt” nature of the “all or nothing” approach does not inappropriately disallow deductions that do not give rise to a “double dipping” concern.

“The AICPA’s recommended language would not require complex stacking or ordering rules and would not increase the administrative complexity and burden,” Reema Patel, CPA, senior manager–Tax Policy & Advocacy for the AICPA, said in the news release. “Rather, we believe that the framework for the documentation required to substantiate the permanent disallowance already exists in the current regulations, and a narrow exception can be included without altering the overall architecture of the regulations.”

— To comment on this article or to suggest an idea for another article, contact Bryan Strickland at Bryan.Strickland@aicpa-cima.com.