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:
(a) * * * Paragraph (c) of this section 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). * * *
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(c) * * *
(4) Consent to be subject to disregarded 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 election as) disregarded as an entity separate from its owner, then a domestic corporation, 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 specified 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 foreign 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 election 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 subject 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 paragraph (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 corporation, as applicable, is deemed to consent to be subject to the disregarded payment 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 conversion of a partnership to a disregarded entity (provided that, in each case, the disregarded entity is a specified eligible entity). As additional examples, the deemed consent rule applies to a domestic corporation that owns interests in a disregarded entity that defaulted to such status under paragraph (b)(1)(ii) or (b)(2)(i)(C) of this section, 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 limitation under paragraph (c)(1)(iv) of this section does not apply.
(v) Definitions. For purposes of paragraph (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 corporation 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 general. Except as provided in paragraph (c)(4)(vi)(B) of this section, paragraph (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 section applies on or after August 6, 2025.
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