The IRS has issued guidance (Revenue Procedure 2020-24) for taxpayers who may now, under the Coronavirus Aid, Relief, and Economic Security (CARES) Act, carry back net operating losses (NOLs) for five years. Revenue Procedure 2020-24 provides procedures for: (1) waiving the carryback period for an NOL arising in a tax year beginning after December 31, 2017, and before January 1, 2021; (2) excluding IRC Section 965 inclusion years from the carryback period for an NOL arising in a tax year beginning after December 31, 2017, and before January 1, 2021; and (3) waiving or reducing a carryback period or revoking an election to waive a carryback period for tax years that began before January 1, 2018 and ended after December 31, 2017.

The CARES Act added IRC Section 172(b)(1)(D) to the Code to allow NOLs that arose in tax years beginning after December 31, 2017, and before January 1, 2021 to be carried back to the five tax years preceding the tax year in which the loss arose. Since the enactment of the Tax Cuts and Jobs Act 2017, no carryback has generally permitted for NOLs, although they could be carried forward indefinitely.

Further, the IRS has announced (Notice 2020-26) that it will grant a six-month extension to individuals, trusts and estates filing Forms 1045, Application for Tentative Refund, and to corporations filing Form 1139, Corporation Application for Tentative Refund, in relation to NOL carrybacks that arose in a tax year beginning in 2018 and ending by June 30, 2019.

A Tax Alert is forthcoming.