As reported, the relief is only for U.S. / Canadian dual citizens living in Canada. I can understand why such dual citizens living in the U.S. would be excluded, but what about such dual citizens whose center of gravity was in Canada but they resided outside both the U.S. and Canada?
The second test they must past is that they owe no U.S. taxes. Under the two initiatives to date, U.S. persons (regardless of dual nationality) could be penalized even if they owed no U.S. tax (usually because of foreign tax credits or related deductions that might have offset any offshore income); if they failed to report the income even though owing no additional tax, they were subject to penalty. So this is some relief that would be available.
Finally, this is from an article published to on Tax Notes Today (Kristen A. Parillo, IRS to Minimize Penalties on Dual U.S.-Canadian Citizens Unaware of U.S. Tax Filing Obligations, 2011 TNT 233-9)):
While the IRS spokesperson didn't provide any details on what that guidance will provide, Jacobson said in the Globe and Mail interview that the IRS will make it clear that if a dual citizen living in Canada files a U.S. tax return late and owes no taxes, there will be no penalties for failure to file. The guidance also will provide that those who were unaware of the FBAR filing requirement will be able to file previous reports now, along with a statement explaining why they're filing late, and that no penalty will be imposed if the IRS determines that there is reasonable cause. Finally, individuals who took part in the IRS's 2011 offshore voluntary disclosure initiative or in the 2009 special offshore voluntary disclosure program will be able to get back penalties already paid, according to Jacobson.
Jacobson said in the interview that it is unclear how many years of back taxes will be covered or what would happen to people who owe relatively small amounts of tax to the IRS.The news items are:
Barrie McKenna, U.S. taxman to go easy on American residents in Canada (The Globe and Mail 12/2/11), here.
Kristen A. Parillo, IRS to Minimize Penalties on Dual U.S.-Canadian Citizens Unaware of U.S. Tax Filing Obligations, 2011 TNT 233-9)