Todd B. Reinstein, a tax partner with Pepper Hamilton, was quoted in the January 17, 2019 Tax Notes Today article, "New Explanation on Computing NOLs for Carryovers Finally Adds Up."
An accompanying footnote to the NOL example in the blue book states that “a technical correction may be necessary to reflect this intent,” although that likely refers to the effective date error, Todd B. Reinstein of Pepper Hamilton LLP told Tax Notes. That issue stems from the TCJA stating that the rules allowing indefinite carryforward and repealing loss carrybacks are effective for tax years ending after December 31, 2017, rather than for tax years beginning after that date.
Along with limiting NOL deductions, the TCJA repealed carryback losses with exceptions for some farming and nonlife insurance businesses. That has caused some consternation in determining allowable carryback losses for companies with multiple unrelated businesses — for example, a farming business and a real estate business, Reinstein said.
Although the blue book includes an example illustrating how to apply the two-year carryback and the 80 percent limitation rules for farming losses, it doesn't address the question of whether a company with an NOL that operates a farming business and other businesses can carry back the losses and offset non-farming income in earlier years, Reinstein said.
Also, what if the company’s books and records don’t track NOLs for each business — how would they determine the NOLs? Reinstein asked. There’s nothing in the TCJA legislative history or elsewhere requiring companies to track NOLs by each business for purposes of loss carrybacks, he said.
The carryback issues are tough ones that need to be resolved and don’t require a technical correction, Reinstein added.
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