The IRS has released guidance (Revenue Procedure 2021-14) on applicable elections for farming loss net operating losses (NOLs) within the meaning of Section 172(b)(1)(B)(ii).
The NOLs addressed by the guidance arise under the rules in the Tax Cuts and Jobs Act (TCJA), which generally repealed NOL carrybacks and provided for indefinite carryover. Farming loss NOLs, however, retained the two-year carryback period under prior law with an election to available to waive the carryback. The Coronavirus Aid, Relief, and Economic Security (CARES) Act then modified the general treatment of NOLs for tax years 2018, 2019 and 2020, to provide for a five-year carryback and repeal of the 80% limitation of usage against taxable income for all NOLs, including farming loss NOLs. The regular NOL carryback waiver provisions under Section 172 remained for such CARES years.
The COVID-Related Tax Relief Act subsequently amended the CARES Act for farming loss NOLs to provide an election whereby taxpayers with farming loss NOLs could elect to not have the terms under the CARES Act applied. Revenue Procedure 2021-14 provides guidance on the time and manner of such elections, as well as guidance on the ability to revoke a waiver of carryback made under the TCJA given the later changes made by the CARES Act.
Greg Fairbanks is a Managing Director with the Corporate Tax group at Grant Thornton’s Washington National Tax Office. Within this group, Greg provides consultation on corporate and transaction matters including section 382 analyses, cancellation of debt/section 108 analyses, stock basis analyses, e&p analyses, corporate formations, liquidations, mergers, acquisitions, distributions, redemptions and other general corporate tax matters.
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