Tax News Update    Email this document    Print this document  

October 13, 2020

BREAKING TAX NEWS | IRS and Treasury release final regulations on consolidated net operating loss carryovers and carrybacks under the TCJA and CARES Act

On October 13, 2020, the Treasury and IRS issued final regulations (TD 9927) implementing changes under the Tax Cuts and Jobs Act and CARES Act to IRC Section 172, which governs the carryover and carryback of consolidated net operating losses (CNOLs). The amended regulations under IRC Section 1502 affect affiliated groups of corporations that join in filing (or that are required to join in filing) a consolidated return.

The final regulations implement the changes to IRC Section 172 as they apply to consolidated groups by:

  • Describing how to determine the 80% limitation on NOL usage for a "mixed" group (a consolidated group containing nonlife insurance companies and other members)
  • Addressing the calculation and allocation of farming losses
  • Implementing the 80% limitation to determine the CNOL deduction attributable to losses from a member arising during periods in which that member was not part of that group

The final regulations generally adopt, with few significant changes, proposed regulations published in July 2020 (temporary regulations published in July 2020, addressing "split waiver" elections, will be addressed as part of another package). The final regulations apply to tax years beginning after December 31, 2020, but can be applied to previous tax years as long as they are applied consistently.

A Tax Alert on the final regulations is forthcoming. For discussion of the temporary and proposed regulations, see Tax Alert 2020–1775.