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Part 21. Customer Account Services

Chapter 5. Account Resolution

Section 9. Carrybacks

21.5.9  Carrybacks

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21.5.9.1  (10-06-2006)
Carryback Overview

  1. This section provides carryback procedures for all personnel authorized to process carrybacks, regardless of their location. This section is divided into four major categories:

    • General Carryback rules and procedures

    • Tentative (TENT) Carryback Refunds

    • Restricted Interest (RINT) Claims

    • Follow-up

  2. Taxpayers eligible for carrybacks are:

    • Individuals

    • Estates

    • Trusts

    • Corporations (including certain insurance companies)

    • Charitable and Exempt Organizations

  3. Carrybacks are filed on:

    • Form 1045, Application for Tentative Refund (Individuals, Estates, and Trusts)

    • Form 1139, Corporation Application for Tentative Refund

    • Form 1040X, Amended U.S. Individual Income Tax Return

    • Form 1120X, Amended U.S. Corporation Income Tax Return

    • Form 1041, U.S. Income Tax Return for Estates and Trusts

    • Form 1120–C, U.S. Income Tax Return for Cooperative Associations. Effective 1/1/02, the owner of Form 1120-C is Large Mid-Size Business (LMSB). Form 1120-C is processed at the Ogden Campus. LMSB uses IRM 21.5.9 for carryback processing

    • Form 990-T, Exempt Organization Business Income Tax Return. Carrybacks are processed at the Ogden Campus. See IRM 21.7.7 for 990-T carryback processing.

    Note:

    Forms 1045 and 1139 are referred to as TENTs. Forms 1040X, 1120X, 1041, and other amended returns requesting carryback adjustments are referred to as RINTs. The tax year the loss occurred is the loss year. The tax year the loss is applied to is the gain year.

    Caution:

    Joint Committee Cases (JCC)must be expedited to Examination due to interest consideration, if over $2,000,000 or more (aggregate).

  4. Carryback extensions are filed on Form 1138, Extension of Time for Payment of Taxes by a Corporation Expecting a Net Operating Loss Carryback. See IRM 21.5.9.5.28.

  5. Carryback instructions are in the following Publications:

    • Pub 514 - Foreign Tax Credit for Individuals

    • Pub 536 - Net Operating Losses (Individuals, Estates, and Trusts)

    • Pub 542 - Corporations

    • Pub 547 - Disasters, Casualties, and Thefts

    • Pub 550 - Investment Income and Expenses

    • Pub 925 - Passive Activity and At-Risk Rules

  6. In addition to IRM 21.5.9, carryback processing is also located in the following IRMs:

    • IRM 21.8.1, IMF International DP Adjustments, Forms 1040NR, processed at the PAMC

    • IRM 21.8.2,BMF International DP Adjustments, Forms 1120-F and 1120-FSC are processed at the PAMC

    • IRM 21.7.7, Exempt Organizations and Tax Exempt Bonds, Forms 990-T, filed at the OAMC

  7. See IRM 25.6, (Statute of Limitations), for statute procedures.

21.5.9.2  (10-01-2005)
What Is a Carryback?

  1. A taxpayer who has an overpayment of tax as a result of a Net Operating Loss (NOL), Net Capital Loss (NCL), Unused Credits, or a Claim-of-Right adjustment can file an application or claim, also referred to as a TENT or RINT for adjustment or refund. The tax year the loss occurred is the loss year. The tax year the loss is applied to is the gain year. If the carryback overpayment is not processed within 45 days, IRS must pay interest. See IRM 20.2.9, Interest on Carryback of Net Operating Loss. For more detailed procedures see:

    • Net Operating Loss (NOL) - See IRM 21.5.9.5.14.

    • Unused credits - See IRM 21.5.9.5.6.

    • Net Capital Loss (NCL) - See IRM 21.5.9.5.25and IRM 21.5.9.5.26

    • Claim of Right - See IRM 21.5.9.5.27

21.5.9.3  (10-01-2005)
Carryback Inquiries

  1. This subsection provides procedures for answering taxpayer carryback inquiries.

  2. Before disclosing any tax information, you must be sure you are speaking with the taxpayer or authorized representative. See the Taxpayer Authentication guidelines in IRM 21.1.3.Also, before leaving any messages on a taxpayer's answering machine, review IRM 11.3.2.6. Fax procedures contained in IRM 11.3.1.10must be reviewed prior to faxing confidential information to the taxpayer.

21.5.9.3.1  (10-01-2005)
How to Claim a Carryback

  1. If the taxpayer asks how to file a carryback or needs additional information about carrybacks:

    1. Advise taxpayer to contact the tax help line. For individuals, contact 1-800-829-1040. For businesses, contact 1-800-829-4933.

    2. The toll-free area will forward the appropriate form(s) and publication(s) to the taxpayer, if requested.

21.5.9.3.2  (10-01-2007)
Status of a Carryback Application/Claim

  1. If the taxpayer asks about the status of an application/claim:

    1. Ask for the date the application/claim was filed.

    2. If application/claim was filed within less than two weeks of inquiry, advise taxpayer to allow 90 days for processing.

    3. If application/claim was filed four weeks or more prior to inquiry, research the Integrated Data Retrieval System (IDRS) or the Corporate Files Online (CFOL):

    IF THEN
    Case has a control on IDRS Advise taxpayer the claim is being processed, and that refund/adjustment will be processed within 90 days from the application/claim filing date.
    No control base exists on IDRS and no information is on CFOL Advise taxpayer to submit signed duplicate application/claim, writing "duplicate" across the top, include all back-up documentation with the file, and to submit it to the campus where original was filed.
    Research shows the refund was issued Refer to applicable IRM for resolution (e.g., IRM 21.4.1.3, Refund Inquiry Response Procedures, IRM 21.5.6, Freeze Codes).

    Note:

    If the carryback has not been worked in the given time frames, prepare F-911 to refer the case to the Taxpayer Advocate Service (TAS).

21.5.9.4  (10-01-2004)
Carryback Verification

  1. This subsection provides procedures for campuses to determine if an application/claim can be processed.

21.5.9.4.1  (10-03-2005)
Carryback Research

  1. If taxpayer files a carryback application/claim, follow these research procedures:

    1. Verify that all necessary information is on the forms completed and attached.

    2. Review CFOL/IDRS to validate data on the form.

    3. Math verify the carryback amount (NOL), (NCL), Unused Credits, Claim of Right

    4. Determine if the loss year is within statute of limitations. The adjusting year (gain year) does not have to be within the normal statute of limitations period. The statute for carryback purposes is determined by the loss year return. For more information on researching carryback statute processing, see IRM 25.6.6.7.1for NOL's/NCL's, and IRM 25.6.6.7.2for Business Credit Carrybacks.

    5. If on CIS, search prior claims, applications or responses.

      Note:

      Refer to Command Codes Job Aid, Job Aid for IRM Part 21, Document 6209, IRM 2.3, IDRS Terminal Responses, or IRM 2.4, IDRS Terminal Input, for additional information.

21.5.9.4.2  (05-24-2006)
Identifying Processable and Unprocessable Carryback Applications/Claims

  1. To ensure carryback cases were prioritized accurately on CIS, refer to IRM 21.5.1.4.2.3. For those sites that do not have CIS, you must control the cases on IDRS.

  2. Processable applications/claims must include the following information:

    • Posting of the loss and gain year returns for RINTS

    • Posting or filing of the loss year return for TENTS, and posting of the gain year return

      Note:

      For 1120F (foreign) filers, pages 1 and 3 of the loss year. Also, since Taxable Income (TXI) is not shown on CC TXMOD, for an 1120F, you can verify the income/loss from CC BRTVU.

    • Authorized signature(s)

    • Copies of pages 1 and 2 of the original and any amended or related return from the year creating the loss (loss year), unless this information is available on CFOL/IDRS

    • The NOL computation or NCL, and/or any forms supporting the credit computation for the loss year and the year to which the loss is applied (gain year), unless this information is available on CFOL/IDRS. See Forms 1045/1139 or Forms 1040X/1120X for instructions.

    • Any forms supporting the tax calculation for the gain years, including, but not limited to Schedule D and Alternative Minimum Tax, unless this information is easily computed by the employee assigned to process the case

      Note:

      A "loss" can be a net operating loss (NOL) or a net capital loss (NCL). Taxpayer can also claim unused credits in a gain year.

    • Correct name, address, and Taxpayer Identification Number (TIN), (check Command Code (CC) ENMOD)

    • Correct gain year (Check CFOL/IDRS)

    • Allocation Schedule if there is a filing status change between a gain year and a loss year. See Exhibit 21.5.9-2.

  3. All other applications/claims are unprocessable, and must be returned to the taxpayer as specified in IRM 21.5.9.4.3, Rejecting Unprocessable Carryback Applications/Claims.

21.5.9.4.3  (10-01-2007)
Rejecting Unprocessable Carryback Applications/Claims

  1. Do not formally disallow an incomplete application or claim. Request all the missing information using:

    • Telephone - Whenever possible, requesting missing information be faxed/mailed (two telephone attempts)

    • Tentative Refunds (TENTS) - Letter 216C requesting missing information to complete Tentative Refund Application

    • Restricted Interest Claims (RINTS) - Letter 178C, Letter 324C, Letter 916C, or Form 8009, Request for Missing Information or Papers to Complete Amended Return

    Note:

    Include your employee number, employee phone number, date, CIS casefile number (if applicable) and employee tour of duty, on letters sent to taxpayers for additional information. Close the control on CIS/IDRS.

    Note:

    Have taxpayer contact the toll-free numbers when they require additional information and/or have questions.

  2. Request all information needed and/or instructions for completion, the first time you return forms to the taxpayer. "X" through the received date(s) and return the forms to the taxpayer and close the control base on CIS/IDRS.

  3. When Forms 1045/1139 and Forms 1040X/1120X are received back from the taxpayer, route them to the employee who rejected the unprocessable tentative/claim, whenever possible.

  4. Refer to IRM 21.5.3.4.2 and 21.5.1.5.6 for additional information on claim rejects.

21.5.9.4.4  (10-01-2005)
Mixed Multiple Processable/Unprocessable Carrybacks

  1. When RINTs and TENTs are filed simultaneously:

    IF THEN
    Both TENT and RINT are processable Process the TENT. Staple the RINT behind the TENT.
    Only the RINT is processable Process the RINT. Staple the TENT 7behind the RINT.
    Both TENT and RINT are incomplete Reject both. Request all the information needed to allow the carryback. Advise taxpayer only one of the forms can be processed for the loss and gain year. If TENT cannot be filed by December 31st of the processing year, have taxpayer file a RINT.
    The TENT is incorrect after post verification Reassess the TENT. Disallow the RINT with a Letter 105C. See IRM 21.5.9.5.34 for reassessment procedures.

    Note:

    Include appeal rights with letter 105C as appropriate.

21.5.9.4.5  (10-01-2005)
Incorrectly Calculated Carryback Applications/Claims

  1. If the figures on the claim or application do not match Master File and the module contains adjustments, math errors, or Examination assessments, perfect the taxpayer’s figures to agree with Master File. Inform taxpayer of changes with Letter 662C.

  2. If the claim or application does not match Master File, and the module doesn't contain adjustments, math errors or Examination assessments, reject the claim to the taxpayer. Inform him/her what our figures show, and let the taxpayer explain the difference. See IRM 21.5.9.4.3.

21.5.9.4.6  (10-01-2005)
Carryback Freeze Conditions

  1. Freeze conditions that require special processing are:

    Freeze Indicators/Instructions
    -Y TC480/780 on any module indicates an Offer in Compromise (OIC). Taxpayer is not allowed a refund. Contact the OIC Unit before taking any action.
    -Z Indicates taxpayer’s account is assigned to the Criminal Investigation (CI) function. Contact CI before taking any action.
    V- Do not take action that results in the freeze being released. Follow IRM 21.5.6, Freeze Codes.
    -V Indicates bankruptcy. Contact the local Insolvency Unit for processing instructions.
    D- Indicates failed savings and loans, institutions and banks. Such an account is identified with a Large Corporation Indicator (LCI) – see CC TXMOD. Contact Examination Classification Specialist before taking any action. The specialist must approve any abatement of tax or refund.
    -W Indicates Litigation - Contact the local Insolvency Unit for processing instructions.
    -A Indicates duplicate/amended return freeze on the loss or gain year. Duplicate/amended return must be secured and worked with the carryback case.
    -L See IRM 21.5.9.5.33 for TENTS, 21.5.9.5.41 for RINTS.. (Carryback with Examination Criteria) for processing.

21.5.9.4.7  (01-24-2006)
Carryback Tolerances

  1. There is no tolerance for Master File verification. Verify the loss, NOL, NCL, credit carryback and gain year returns against posted data on Master File.

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  2. If the tax decrease is greater than tolerance, you must math verify the carryback amount. The tolerance for math verification of a carryback adjustment, is applied to the combination of all tax decreases requested on TENTs and RINTs.

  3. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

  4. Process under-tolerance TENT applications based on the following:

    IF AND THEN
    Loss Year has posted The combined tax decrease is under tolerance Input TC295, blocking series 91/92 on each applicable gain year. Input TC290 for .00 on the loss year return:

    1. Use blocking series 05 for IMF tax class 2, and 15 for BMF.

    2. Use blocking series 17 for Form 1041.

    3. Mark the application as VERIFIED.

    4. No post verification is necessary.
    Loss year has posted The combined tax decrease is over tolerance and TENT application can be verified from attached forms Input TC295, blocking series 91/92 on each applicable gain year. Input TC290 for .00 on the loss year return.

    1. Use blocking series 05 for IMF tax class 2, and 15 for BMF, except Form 1041.

    2. Use blocking series 17 for Form 1041.

    3. Mark the application "verified" .

    Loss Year has not posted The combined tax decrease is under tolerance, and the carryback application can be verified from attached forms

    1. Input TC 295, blocking series 91/92 on each applicable gain year.

    2. Input TC930, DLN Code 85 on the loss year return and attach the push code document to the return.

    3. No post verification is needed.
    Loss year has not posted The combined tax decrease is over tolerance, and the carryback application can be verified from attached forms

    1. Input TC295, blocking series 91/92 on each applicable gain year.

    2. Input TC930, DLN code 85 on the loss year return and have the push code document returned to you for post verification.

    Note:

    When a RINT case (doc type is carryback) is created in ICT as part of the CIS case control process, transaction code 971 action code 010 is automatically generated on the tax period for which the return is filed. This eliminates the need for the manual input of this transaction.

    Example:

    A 2004 1040X RINT with a 2006 loss year will only have a systemic transaction code 971 action code 010 input on 2004. It is still the responsibility of the CSR to input any other transactions required, such as the transaction code 971 action code 091 on the loss year.

  5. For over tolerance TENTS, verify the carryback application from attached forms and Master File (CFOL) information, if possible.

  6. When unable to verify over-tolerance TENT applications from attached Forms and Master File (CFOL), input TC930 and DLN code 85 using your IDRS identification number or open control base on loss year for monitoring.

  7. To process a RINT claim, the loss year return must be posted on Master File or CFOL. Process the RINT claim based on the following:

    IF AND THEN
    Loss year has posted and the claim can be verified from posted data The combined tax decrease is under tolerance

    1. Input TC299, blocking series, 91/92 on each applicable gain year for which a claim is filed.

    2. Input TC971, Action Code 091 on the loss year. Use the earliest gain year as (XREF-TX-PRD). Use the received date as the transaction date.

    Loss year has posted and the claim can be verified from posted data The combined tax decrease is over tolerance

    1. Input TC299, blocking series 91/92 on each applicable gain year.

    2. Input TC971, Action Code 091 on the loss year. Use the earliest gain year as (XREF-TX-PRD). Use the received date as the transaction date.

    Loss year has posted and the claim cannot be verified The combined tax decrease is under or over tolerance Pursuant to IRM 21.5.9.4.2, the claim is not processable. Follow IRM 21.5.9.4.3 and reject the claim.

  8. When verifying push code carryback documents use the following table:

    IF AND THEN
    Push code documents are received with the original return The information supports the figures on the application Refile the documents using TC290 .00 blocking series 00.
    Push code documents are received without the original return The information can be verified from CFOL or pages one and two attached Refile the application using TC290 .00. Use blocking series 05 for IMF and 15 for BMF and blocking series 17 for Form 1041.
    Push code documents are received with or without the original return Information cannot be verified from CFOL See IRM 21.5.9.5.34 for reassessment procedures.
    Push code documents are received The loss year return has not been received See IRM 21.5.9.5.34.

21.5.9.5  (10-06-2006)
Carryback Processing

  1. See IRM 21.5.9.4 for verification and certain general processing procedures.

  2. This Section provides specific processing procedures for both TENTs and RINTs, including:

    • Controlling and Monitoring Cases

    • Carryforward Election

    • Special BMF Carryback/Carryforward

    • Rules concerning credits

    • Inputting adjustments on IDRS

    • Multiple Adjustments

    • Interest

    • Manual Refunds

    • Accounts on Retention Register

    • NOL and NOLD

    • NCL

    • Claim of Right

    • Foreign Tax Credit

    • Net 1256 Contract Loss Carryback

  3. IRS has 90 days to process a carryback application (Form 1045 or Form 1139) when the application is filed within the 12 month time period for filing. However, if the carryback application is filed after the 12 month time limit, the application must be rejected. Carryback applications are tentative. If the application is rejected because the 12 months has ended for filing a tentative, the taxpayer cannot pursue, but must file a standard refund claim (Form 1040X or Form 1120X).

    Caution:

    You must expedite Joint Committee Cases (JCC) (TENTS) to Examination as required. See IRM 21.5.9.1 (3) CAUTION.

21.5.9.5.1  (10-01-2004)
Controlling and Monitoring Carryback Cases

  1. Monitor carryback cases to ensure the 45-day interest free period is met. See Exhibit 21.5.9-3 for IMF carrybacks, or See Exhibit 21.5.9-4, for BMF.

  2. Control all modules directly affected by the carryback on IDRS to establish an audit trail. The control base can assist in responding to any subsequent inquiries.

  3. Control simultaneously filed TENTs and RINTs to the same tax examiner.

21.5.9.5.2  (05-15-2007)
Carryback/Carryforward Election

  1. Taxpayer may elect to forego the carryback period for any tax year and carry the entire NOL forward 15 years (or 20 years for NOLs arising in tax years beginning after August 5, 1997, under Taxpayer Relief Act (TPRA) 97).

    1. The election must be made in writing and attached to the loss year return.

    2. The election must be made by the due date or extended due date of the loss year return.

      Note:

      The election may be made on an "amended" return if it is filed within six months of the due date of the original return (determined WITHOUT extensions) provided the taxpayer timely files the loss year return by its due date or extended due date. For example, a 2005 Form 1040 loss year return is filed (with extension) on August 15, 2006. An amended 1040 return claiming the election is timely if filed by October 15, 2006, but if filed on or after October 16, 2006, the election is not timely. For taxpayers affected by a Presidentially declared disaster, the due date of the original return (determined WITHOUT extension) is the postponed due date allowed for the disaster.

      Note:

      For taxpayers affected by both Hurricane Katrina and Rita, if the taxpayer has not self identified to receive the additional postponement for Hurricane Katrina but will otherwise qualify based on their zip code, allow the election if timely filed based on the additional postponements.

    3. The election is irrevocable except for the provision under IRM 21.5.9.5.14.1.

    4. An election made by a parent in a consolidated return is binding for all members of the group.

    5. If an election statement is timely filed on an amended tax return, allow and process with a TC290 .00. Use blocking series 18.

      Note:

      If a return is electronically filed, a blocking series 05 must be used. See IRM 21.6.6.4.21for further information.

    IF AND THEN
    Carryforward claim is filed Taxpayer mentions the election and loss year return was timely filed by its due date or extended due date Request CFOL information to verify the loss and accept the NOL carryforward.
    Carryforward claim is filed Taxpayer does not mention the election and there is no modified taxable income in any of the applicable gain years and loss year return was timely filed by its due date or extended due date Request CFOL information to verify the loss and accept the NOL carryforward. If the original return was e-filed, then check CC TRDBV.
    Carryforward claim is filed Taxpayer does not mention the election and there is modified taxable income in any of the applicable gain years Request the original loss year return to verify the election and the loss. If the original return was e-filed, then check CC TRDBV. If there is no election, inform the taxpayer that the NOL must be carried back to any applicable gain year before it can be carried forward. If the taxpayer filed an election, accept the carryforward.
    Carryforward claim is filed Taxpayer's loss year return was not filed by the due date (including extensions) and there is no modified taxable income in any of the applicable gain years Request CFOL information to verify the loss and accept the NOL carryforward.
    Carryforward claim is filed Taxpayer's loss year return was not filed by the due date (including extensions) and there is modified taxable income in any of the applicable gain years Disallow claim with 105C and inform the taxpayer that the election to waive the carryback period was not timely filed; therefore, the NOL must be carried back to any applicable gain year before it can be carried forward.

    Reminder:

    The election to forgo the carryback period is only for an NOL.

21.5.9.5.3  (10-01-2005)
Special BMF Carryback - Carryforward Periods

  1. Types of taxpayer losses determine the carryback periods. The following cases use special carryback-carryforward rules:

    Type of Loss Carryback or Carryforward Options Special rules
    Foreign Expropriation Losses (must equal or exceed 50% NOL) Portion of NOL Attributable to Foreign Expropriation Losses Election Required Carryforward only
    REIT (Real Estate Investment Trust) NOL sustained by a REIT Not Available for Carryback
    Commercial Banks Portion of NOL attributable to bad debt deduction Carryback 10 years, 5 years Carryforward (For taxable years beginning after December 31, 1986 and before January 1, 1994)
    Thrift Institutions NOLs Carryback 10 years, 8 years Carryforward (For tax years beginning after December 31, 1981 and before January 1, 1986)
    Specified Liability Losses (Product Liability) NOLs Carryback 10 years
    Specified Liability Losses (Portion attributable to decommissioning of a nuclear powerplant) NOLs Carryback to each taxable year beginning with the taxable year in which such plant was placed in service
    Life Insurance Company Operations Loss Deduction Carryback 3 years

21.5.9.5.4  (10-01-2005)
BMF Carryback Short Year Returns

  1. A short gain year return is treated as a carryback or carryforward return, just like a 12 month gain year. The first preceding year can have the same tax year ending date, but a different month. For limitations on the carryback of NOLs from short taxable years, see IRC 442.

    Note:

    When making an adjustment for the year within that 12 month period, 200708 to 200703, you must use an Override Code, "C" or the adjustment will not take.

    Fiscal year March filer files a short period loss year return, August 2007
    Loss Year - 200708
    Gain Years 200603 200703

21.5.9.5.5  (10-01-2004)
Carryback Credit Availability

  1. Apply credit carryback to any tax year on a first-in, first-out basis, by offsetting the earlier earned business credits first. Apply credits in this order:

    1. Earliest carryforward

    2. Actual credits earned

    3. Earliest carrybacks

21.5.9.5.6  (10-01-2005)
Carryback Unused Credits

  1. Under TPRA of 1997, both business and individual credits can generally be carried back one year and forward 20 years (credits arising in taxable years beginning after December 31, 1997). Unused credits are the sum of certain credits exceeding tax liability in a year.

  2. Taxpayers can carryback unused credits three years for credits arising in taxable years beginning prior to December 31, 1997 and carry them forward 15 years.

  3. In a community property state, there can only be a 50/50 split, unless the taxpayer provides reasonable evidence of a division sanctioned by the state court. A return indicating a change to marital status in a non community property state, or a consolidated corporation, requires an allocation schedule.

  4. When determining a credit carryback, consider the following items:

    • The availability of credits for carryback and carryover

    • NOL carrybacks that release credits

    • Recapture of Investment Tax and Low Income Housing Credits

    • Foreign Tax Credit

    • Alternative Minimum Tax (AMT)

  5. Certain insurance companies are allowed carryback credits per IRC 847(8). These credits are verified from the 4610 Account, maintained in the Accounting Function.

21.5.9.5.7  (11-17-2006)
Released Credits Available for Carryback

  1. An NOL or NCL carryback reduces taxable income and tax liability. Credits no longer needed after application of the carryback to reduce the liability for a tax year are "released." The released credits are now available to carryback/carryforward.

  2. Taxpayer can carryback the released credit on the same application showing the NOL or NCL which created the released credit, with one exception. The taxpayer must use Form 1040X or Form 1120X when foreign tax credits are released. Taxpayer can also file a separate application or claim carrying back the released credits.

  3. Correspond with taxpayer concerning released credits not carried back. Letter 662C can be used. Advise taxpayer to file a separate claim or application to carryback the released credits, if statutory filing time permits. The statutory filing time is the same as for NOL or NCL that released the credit.

    Note:

    The credit for prior year minimum tax is carried forward only. Refer to Exhibit 21.5.9-1 for carryback and carryforward periods.

  4. If the released credit is from a previous carryback or carryover, carry it forward according to the original credit year, since the statute is governed by the original carryback credit year.

21.5.9.5.8  (10-01-2004)
Carryback Related to Recaptured Investment Tax and Low Income Housing Credits

  1. Taxpayers claim the Investment Tax Credit (ITC) based on the useful life of the asset. Taxpayers claim the Low-Income Housing Credit based on the formula that includes the basis of the building and number of low income units occupied in the building. If taxpayer claimed more credit than the recomputed credit, the difference is "recaptured" .

  2. Taxpayers compute the recapture tax on:

    • Form 4255for investment tax credit

    • Form 8611 for low-income housing credit

  3. Taxpayers attach Form 4255 or Form 8611 to the original or amended return, claim, or application.

  4. The ITC recapture tax can only be offset by other credits when:

    1. An NOL, NCL, or unused credit carryback releases the original ITC used in the last year; or

    2. The recapture tax amount decreases the original ITC amount in the initial claim year.

21.5.9.5.9  (05-10-2007)
IDRS Input of a Carryback Adjustment

  1. Follow these guidelines for your TC295/299 adjustment:

    IF THEN
    Change to TXI is different from the change to Adjusted Gross Income (AGI) Input both Reference Numbers 886 and 888.
    Change to the TXI and AGI are the same Input Reference Number 888 only.
    Change only affects the AGI Input Reference Number 888, and if needed, reference number 886 for zero.

    NOL is not fully absorbed Reduce AGI and TXI by the entire amount of NOL available for that gain/carryback year, and recompute any income or deduction based on, or limited to, a percentage of the AGI. The appropriate amount should be shown on line 1 of the Form 1045, Schedule B per IRC 172.
    NOL is fully absorbed Subtract the NOL deduction from the