The Worker, Homeownership, and Business Assistance Act of 2009 allows taxpayers to elect to carry back an “applicable” net operating loss (NOL) or loss from operations up to 5 years, for a loss for a single taxable year ending after December 31, 2007, and beginning before January 1, 2010. For life insurance companies, this extends the 3-year carryback for losses from operations under I.R.C. § 810(b) to 4 or 5 years, to offset taxable income in those preceding years. An amount carried back 5 years is limited to 50% of the taxpayer’s taxable income for that year, and the excess can be carried forward to later taxable years. Also, an “applicable NOL” includes a consolidated NOL.
Rev. Proc. 2009-52, 2009-49 I.R.B. 744, indicates that the same rules apply to NOL and operations loss elections. The election must be made by the due date (including extensions) for filing the return for the taxpayer’s last taxable year beginning in 2009, either by attaching an election statement to the taxpayer’s return (or amended return) for the taxable year of the applicable loss or by attaching an election statement to an appropriate form (i.e., Form 1139 or Form 1120X). A taxpayer that elected to forgo carrying back a loss for a taxable year ending before the Act’s enactment – November 6, 2009 – may revoke such election before the due date.
Although the IRS guidance answers some questions, it leaves others unanswered. For example, is a life/nonlife consolidated group having both an “applicable” NOL and loss from operations limited to making the election for only one type of loss? If an election can be made for both, must the “applicable” NOL and loss from operations carryback be from the same year? Also, a point for companies to consider is, if the applicable loss would be carried to closed years, whether the carryback could be offset by otherwise-closed issues, thereby negating any carryback benefit.