News

The Internal Revenue Service and the Treasury Department released proposed regulations and temporary regulations to offer guidance for consolidated groups on net operating losses in the wake of changes under both the Tax Cuts and Jobs Act of 2017 and the CARES Act from this year.

Both pieces of legislation amended the rules for NOLs, with the CARES Act undoing some of the changes in the TCJA, allowing businesses to claim NOLs that had been restricted under the TCJA.

The TCJA generally eliminated NOL carrybacks, but allowed NOLs to be carried forward indefinitely. The TCJA also provides special rules for nonlife insurance companies and farming losses. Nonlife insurance companies are allowed to carry back NOLs two years and forward 20 years, and the 80 percent limitation doesn’t apply. Farming losses are permitted to be carried back two years and carried forward indefinitely, subject to the 80 percent limitation.

The CARES Act effectively delays the application of the TCJA amendments until Jan. 1, 2021. On top of that, the CARES Act allows a five-year carryback period for NOLs, including farming losses and NOLs of nonlife insurance companies, for taxable years starting after Dec. 31, 2017 and before Jan. 1, 2021.