Tax Law

Temp Regs Clarify NOL Carryback for Consolidated Groups

In response to the issues left unresolved by Rev. Proc. 2009-52, on June 23, 2010, the Treasury Department issued T.D. 9490 which promulgated new temporary regulations under IRC § 1502 to provide consolidated return filers with guidance in applying the five-year extended net operating loss carryback provision of IRC § 172(b)(1)(H).

The new temporary regulations contain additional rules for implementing the extended five year NOL carryback provision within a consolidated group. Several key issues are definitively addressed in the new regulations.

Consolidated groups:

  • May waive all or a portion of the pre-acquisition carryback period for 2008 and 2009 losses attributable to a member acquired from another consolidated group in which the member previously was included;
  • That did not make a waiver in the year the member was acquired may waive the carryback period for a 2008 or 2009 consolidated NOL that would be carried to a different consolidated group;
  • May revoke certain previous carryback waivers to utilize the extended NOL carryback period. The temporary regulations clarify that a consolidated group may calculate the fifth-year, 50 percent "haircut" using the consolidated group's taxable income rather than a separate member's income during that year; and
  • With a new member that has elected the extended carryback prior to joining the group does not disqualify the acquiring group from making an otherwise available election for an applicable consolidated NOL for a consolidated return year that includes such member.

See LexisNexis Tax Advisor -- Federal Topical § 1D:15.03 on LexisNexis® Tax Center for complete analysis and discussion of Net Operating Loss Carrybacks and Carryovers.