21.5.9  Carrybacks (Cont. 1)

21.5.9.5 
Carryback Processing

21.5.9.5.14 
Carryback Net Operating Loss (NOL)

21.5.9.5.14.6 
American Recovery and Reinvestment Act of 2009 (PL 111-5, Section 1211) - Net Operating Losses

21.5.9.5.14.6.6 
Requirements for Making the Election(s)

21.5.9.5.14.6.6.1  (10-01-2013)
ARRA 2009, Section 1211 - Applications/Claims Received After the Statutory Period for Making the Election (Understanding the Difference between Making a Timely Election and Filing the Extended Carryback Application/Claim)

  1. Making the Election (Method 1) - The first method a taxpayer can use to make a timely election to claim an extended carryback under ARRA 2009, Section 1211 is to attach a statement, making the irrevocable election, to a timely filed 2008 tax return (filed by the later of the due date, extended due date, or April 17, 2009). If the return was timely filed without making the election, the taxpayer can file an amended 2008 return (which may be filed to amend the 2008 return and make the election or simply to make the election) by the later of April 17, 2009 or within six months of the due date (excluding extensions) per Section 301.9100-2 of the regulations. This constitutes a valid, timely, and irrevocable election. See Rev. Proc. 2009-26.

  2. Making the Election (Method 2) - The second method a taxpayer can use to make a timely election is simply to file the application for tentative refund/amended return (carryback application or claim) using the appropriate form (Form 1045, Form 1139, Form 1040X, Form 1120X etc.) claiming the extended carryback period they elect (three, four, or five years). Taxpayers electing this method must do so by the later of April 17, 2009 or within six months of the due date (excluding extensions) for filing the loss year return.

  3. Election Treated as Timely Under Method 1 or Method 2 - An election under either Method 1 or Method 2 will be treated as timely if filed on or before April 17, 2009, even if filed after the dates prescribed in Paragraph (1).

  4. Time Period for Filing the Application/Claim when the Election is Made using Method 1 - Once a timely election has been made using Method 1, the taxpayer can file the carryback application or claim at any time within the normal statutory period for filing carryback applications and claims.

    Example:

    An individual attaches a statement to his timely filed 200812 Form 1040, making the Section 1211 election. The taxpayer has until Dec. 31, 2009 (12 months from the end of the tax year creating the loss) to file the Form 1045 for the Section 1211 carryback. The taxpayer has until April 15, 2012 (three years from the due date of the timely filed loss year return) to file Form(s) 1040X for the Section 1211 carryback.

  5. Time Period for Filing the Application/Claim when the Election is Made using Method 2 - Since the taxpayer is both making the election and filing the carryback application or claim at the same time when using Method 2, the application/claim must be filed by the prescribed date for making the election, as described in Paragraph (1) (or, if later, April 17, 2009). Applications/claims that are received after the prescribed dates for making the election are not timely.

  6. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    ≡ ≡ ≡
    ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡
    ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡
    1. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    2. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡
    1. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    2. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡
    1. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    2. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

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

    4. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    5. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    6. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡
    1. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    2. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡
    1. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    2. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    ≡ ≡ ≡
  7. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

21.5.9.5.14.6.7  (11-13-2009)
TC 971 Action Codes 633, 634, and 635

  1. Effective April 3, 2009, three TC 971 Action Codes are available for input to tax modules when the taxpayer has elected the three, four, or five-year carryback per ARRA 2009, Section 1211. The new Action Codes are: TC 971 AC 633 (three-year carryback), TC 971 AC 634 (four-year carryback), and TC 971 AC 635 (five-year carryback). Do not input these transaction codes on any cases that are unprocessible, do not meet the $15M gross receipts test, or are otherwise rejected or disallowed.

  2. Input the new TC 971 Action Codes as shown in the table below.

    Caution:

    Do not input these transaction codes on the loss year.

    • Input these transaction codes immediately prior to inputting the carryback adjustments.

    • Use the IRS Received Date of the carryback application/claim as the TC 971 Transaction Date (TRANS-DT).

      Caution:

      The only valid entries are: 1) the transaction code (971), 2) the transaction date, and 3) the TC 971 Code (63X). Data input in any other field will result in an error message.

    If Then
    The taxpayer makes a five-year carryback election for a tax year beginning or ending in 2008 Input TC 971 AC 635 on each of the five prior years.

    Example:

    Taxpayer makes five-year election for 200812. Input TC 971 AC 635 on 200312, 200412, 200512, 200612, and 200712.

    The taxpayer makes a four-year carryback election for a tax year beginning or ending in 2008. Input TC 971 AC 634 on each of the four prior years.

    Example:

    Taxpayer makes four-year election for 200801. Input TC 971 AC 634 on 200401, 200501, 200601, and 200701.

    The taxpayer makes a three-year carryback election for a tax year beginning or ending in 2008 Input TC 971 AC 633 on each of the three prior years.

    Example:

    Taxpayer makes three-year election for 200911. Input TC 971 AC 633 on 200611, 200711, and 200811.

  3. Input the TC 971 Action Codes on each year, as indicated in Paragraph (2), regardless of whether carryback adjustments are made to each of the elected years.

    Example:

    Taxpayer makes a five-year carryback election and adjustments are made to the fifth, fourth, third, and second year. The Net Operating Loss (NOL) is fully absorbed in the second year and no adjustment is input to first year. Input TC 971 AC 635 in all five prior years.

  4. If the taxpayer subsequently files an amended carryback application/claim (increase or decrease), follow the same instructions as above, and input a second set of TC 971 AC 63X's on each year.

  5. If the Service is made aware that these transaction codes were input in error (taxpayer was actually claiming a three-year eligible loss, or a five-year farming loss or IRS made an error inputting on wrong account), reverse the transactions by input of TC 972 AC 63X. Reinput the transactions to the correct TIN/tax periods, if appropriate.

21.5.9.5.14.6.8  (10-01-2013)
ARRA 2009, Section 1211 - Extended Carryback Period and Theft Losses Due to Ponzi Schemes

  1. IRM 21.6.6.3.48.2, Claims due to Ponzi Schemes, provides procedures for processing claims filed after April 1, 2009 for theft losses related to investments in specific Ponzi schemes. Taxpayers may also claim these theft losses on their original tax returns by completing Section B on Form 4684, Casualties and Thefts.

  2. In addition, taxpayers may also file carryback applications/claims to carry back these losses, to the extent they generate a NOL, as Net Operating Losses.

    • IRC § 172(d)(4)(C) treats any casualty or theft loss claimed under IRC § 165(c)(2) or (3) as a business deduction.

    • The normal carryback period for a casualty or theft loss is three years.

  3. However, for 2008 theft losses, if the individual/business entity meets the $15M gross receipts test, these losses can be carried back to the fourth or fifth year under ARRA 2009, Section 1211 (IRC 172(b)(1)(H)). Because these losses are treated as business losses, an individual may make this election per Revenue Ruling 2009-9.

    Note:

    If an individual taxpayer directly invested in a Ponzi scheme and incurred theft losses, the $15M gross receipts test is applied to the individual taxpayer. However, if an individual taxpayer invested in a Ponzi scheme through feeder funds that are partnerships and incurred theft losses, the $15M gross receipts test is applied to the feeder funds and not to the individual taxpayer. AM will not make this determination. All claims citing ARRA 2009, Section 1211 are subject to the $15M gross receipts test. See IRM 21.5.9.5.14.6.1, Eligible Small Business - $15M Gross Receipts Test.

    Caution:

    These taxpayers are not required to claim the extended carryback period under ARRA 2009, Section 1211. If the taxpayer claims the normal three-year carryback period for theft losses, process the carryback per normal procedures.

  4. If the taxpayer claims a four or five-year carryback period, process the claim by applying all the rules/procedures in this subsection, i.e. check for completeness, ensure the taxpayer has made a timely election, apply the $15M gross receipts test. Follow normal CAT-A referral criteria for TENTS and RINTS. See IRM 21.5.9.5.33, Carryback Form 1045 and Form 1139 with Examination Criteria, and IRM Exhibit 21.5.3-2, Examination Criteria (CAT-A) – General.

  5. See IRM 21.5.9.5.47, Carryback Claims (TENTS and RINTS) Filed in Conjunction with Amended Loss Year Returns, for processing instructions when the amended loss year return has not been processed.

    Reminder:

    A RINT cannot be processed until the related amended loss year return has been processed.

    Caution:

    When processing a carryback NOL that is based on Ponzi scheme theft losses reported on a taxpayer's original income tax return (TC 150), follow normal TENT/RINT processing procedures, regardless of whether the original return was filed before or after April 1, 2009. The procedures posted as SERP Alert 90208 and SERP Alert 90180 (see SERP Archives - 2009 Alerts ) only address amended returns/claims claiming Ponzi scheme theft losses that were filed prior to April 1, 2009. They do not address Ponzi scheme theft losses reported on original returns. It is critical that a distinction be made between theft losses claimed on an original return and theft losses claimed on an amended return. The only special processing in the case where the NOL is due to theft losses claimed on an original return, is if the taxpayer is claiming an extended carryback period per ARRA 2009, Section 1211. In that case, the $15M gross receipts test applies. Otherwise, process these carrybacks per normal procedures.

21.5.9.5.14.6.9  (10-01-2013)
Processing ARRA 2009, Section 1211 Carryback Applications/Claims - Steps to Ensure Consistent Processing

  1. Follow the steps in the order shown when processing an ARRA 2009, Section 1211 carryback application/claim.

    Note:

    Following these steps, in order, may result in multiple contacts being made with the taxpayer. For example, you may reject the application initially with a 216C letter to request missing information, such as a missing form or schedule. Once you receive the missing information and run the $15M gross receipts test, you may be required to reject the application because the taxpayer did not meet the $15M test. Generally, we try to make one contact with the taxpayer, but in these cases, multiple contacts may be required.

    1. Ensure the claim is processible. See IRM 21.5.9.4.2, Identifying Processible and Unprocessible Carryback Applications/Claims.

    2. Determine whether or not the taxpayer has made the required election. See IRM 21.5.9.5.14.6.6, Requirements for Making the Elections(s).

    3. Determine whether or not the election is timely. See IRM 21.5.9.5.14.6.2, Calendar Year Filers - Late Filed 200812 Elections, and IRM 21.5.9.5.14.6.3, Fiscal Year Filers - Election for One Year that Begins or Ends in 2008.

    4. Determine whether the Net Operating Loss (NOL) is due to a Ponzi scheme theft loss. See IRM 21.5.9.5.14.6.8, ARRA 2009, Section 1211 - Extended Carryback Period and Theft Losses Due to Ponzi Schemes.

    5. Check the account for any freeze conditions that require coordination before processing the claim. See IRM 21.5.9.4.6, Carryback Freeze Conditions.

    6. Apply the $15M gross receipts test. See IRM 21.5.9.5.14.6.1, Eligible Small Business - $15M Gross Receipts Test, and IRM 21.5.9.5.14.6.1.1., Using the Gross Receipts Average Calculator (GRAC) - Required $15M Gross Receipts Test.

    7. Apply CAT-A criteria for RINTS. See IRM Exhibit 21.5.3-2, Examination Criteria (CAT-A) – General.

    8. Input TC 971 AC 63X on the applicable gain years. See IRM 21.5.9.5.14.6.7, TC 971 Action Codes 633, 634, and 635.

    9. Process the application/claim and ensure any refunds of $5,000 or more are issued when the 45-day interest-free period is in jeopardy. Any refunds $25,000 or more are issued when the 45-day interest-free period has expired. See IRM 21.5.9.5.11, Carryback Manual Refund, for additional information on issuing manual refunds and see the Carryback 45-Day Interest-Free Charts on SERP for additional information on the 45-day interest-free period.

      Note:

      Manual refunds will be issued in all cases where the refund is for $1M or more, regardless of the status of 45-day interest-free period. See IRM 21.5.9.5.12, Carryback Manual Refund.

    10. Apply CAT-A criteria for TENTS. See IRM 21.5.9.5.33, Carryback Form 1045 and Form 1139 with Examination Criteria, or an Open Underreporter (AUR or BUR) Issue (TC 922 or TC 925).

21.5.9.5.14.6.10  (10-01-2010)
ARRA 2009, Section 1211 - 90 Percent Limitation of Alternative Tax Net Operating Loss Deduction (ATNOLD) Does Not Apply

  1. Section 13(b) of the Worker, Homeownership, and Business Assistance Act (WHBAA) of 2009, signed into law on November 6, 2009, amended IRC § 56(d)(1)(A)(ii)(I), removing the 90 percent limitation of Alternative Tax Net Operating Loss Deduction (ATNOLD) for periods ending after Dec. 31, 2002 for Alternative Tax Net Operating Loss (ATNOL) for which taxpayers make an election under IRC § 172(b)(1)(H).

  2. Since IRC §172(b)(1)(H) governs both ARRA and WHBAA elections, taxpayers who previously filed an ARRA claim for a period beginning or ending in 2008, and at the time were subject to the 90 percent limitation of ATNOLD for any or all carryback periods, may file an amended return to take advantage of the amendment to IRC § 56(d)(1)(A)(ii)(I).

  3. Taxpayers who file these amended carryback claims are not making a WHBAA election. Instead, they are simply amending their ARRA carrybacks in order to apply 100 percent of ATNOLD for any periods in which they were limited to 90 percent, prior to the passage of WHBAA legislation.

    Note:

    The 100 percent of ATNOLD also applies to taxpayers who made a timely ARRA election as an attachment to their original or amended 2008 return but have not yet filed their ARRA carryback.

  4. The amendment to IRC § 56(d)(1)(A)(ii)(I) is effective only for taxpayers who made or make an ARRA or WHBAA election.

  5. The 90 percent limitation of ATNOLD also does not apply to ARRA or WHBAA NOL amounts carried forward to subsequent years.

21.5.9.5.14.7  (10-01-2013)
Worker, Homeownership, and Business Assistance Act of 2009 (PL 111-92, Section 13) - Net Operating Losses

  1. The Worker, Homeownership, and Business Assistance Act (WHBAA) of 2009 was signed into law on November 6, 2009 as Public Law 111-92. Section 13 of the Act amends § 172(b)(1)(H) and 810(b) of the Internal Revenue Code to allow almost all businesses to make an irrevocable election to carry back a Net Operating Loss (NOL) for a year that begins or ends in 2008 or 2009 for an extended period (either three, four, or five years). Unlike ARRA 2009, Section 1211, the $15M gross receipts test does not apply to taxpayers making a WHBAA election. The legislation also allows life insurance companies to elect to carry back an applicable loss from operations for four or five taxable years. (The normal carryback period for a loss from operations is three years.) Revenue Procedure (Rev. Proc.) 2009-52, 2009–49 Internal Revenue Bulletin (I.R.B.) 744, was published on Nov. 20, 2009 to provide guidance to taxpayers on when and how to make the irrevocable election under WHBAA 2009, Section 13, and file the applicable carryback applications and claims.

    Exception:

    This legislation does not apply to any taxpayer that received certain benefits (whether or not repaid) under the Emergency Economic Stabilization Act of 2008, Title I of Div. A of Public Law No. 110-343, 122 Stat. 3765 (Troubled Asset Relief Program (TARP) recipients), or to members of the taxpayer’s affiliated group. Rev. Proc. 2009-52 requires all taxpayers making an election under WHBAA, Section 13 to make an affirmative statement that they are not a TARP recipient nor, in 2008 or 2009, an affiliate of a TARP recipient. See IRM 21.5.9.5.14.7.2, Requirement to Attach an Election Statement to the WHBAA Carryback - Statements that Must be Included in the Election Statement, for more information on the election statement requirements.

    Note:

    BMF sites (Cincinnati and Ogden) - Follow the instructions in IRM 21.5.9.5.14.7.7, WHBAA 2009, Section 13 - Instructions for BMF Sites Only (Cincinnati and Ogden) - TARP Test.

    Note:

    While a TARP recipient cannot make a WHBAA 2009, Section 13 election, they can still file a normal two-year carryback.

  2. Tax Years (Loss Years) Available for Making the Election - The law is in effect for tax years ending after Dec. 31, 2007 and beginning before Jan. 1, 2010 (12 month tax years 200801 through 201011).

    • Taxpayers can make the election for one tax year that either begins or ends in 2008 or 2009.

    • For calendar year filers, the election can be made for either 200812 or 200912.

    • A fiscal year filer whose tax year ends in January could choose between three tax years to make the election: 200801, 200901, or 201001.

    • The tax years open for fiscal year filers to make this election are those between 200801 (the first tax year ending in 2008) and 201011 (the last 12 month tax year beginning in 2009).

    • For any short period tax return, the election must be made for a tax period that begins before January 1, 2010.

    Note:

    WHBAA applications/claims filed for tax periods other than described above, are to be rejected using Letter 216C for TENTS and 4734C for RINTS.

  3. Time for Making the Election - The election must be made (whether for a 2008 or 2009 NOL) by the due date (including extensions) of the taxpayer's last taxable year beginning in 2009. Per Treas. Reg. § 301.9100-2, if the taxpayer files a timely return for the taxpayer's last taxable year beginning in 2009, the taxpayer may make the election within six months of the normal due date (excluding extensions). Once made, the election is irrevocable.

    Note:

    The time for making a WHBAA election is governed by statute (IRC §172(b)(1)(H)(iii)II)). For all eligible taxpayers, excluding corporations that join in a consolidated return, this is a statutory election. Treas. Reg.§301.9100-2(b) as stated above, provides a six month extension from the normal return due date to make the election as long as the taxpayer timely filed the 2009 return. Treas. Reg. §301.9100-3 provides relief for taxpayers that do not timely make a regulatory election, but does not apply to late-filed statutory elections. Thus, there is no other relief available if the taxpayer does not timely make the election. However, for corporations that join a consolidated return, pursuant to the regulatory authority provided in §1502, the WHBAA election is a regulatory election. Accordingly, relief for a late-filed election by a consolidated group may be available under Treas. Reg. §301.9100-3.

    Note:

    ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    Caution:

    See IRM 21.5.9.5.14.7.8, WHBAA 2009, Section 13- Applications/Claims (2008 or 2009) Received after the 2009 Return Due Date (Understanding the Difference Between Making a Timely Election and Filing the Extended Carryback Application/Claim), for instructions on determining the timeliness of the election.

    • For most individuals, the election must be made by April 15, 2010 (or Oct. 15, 2010 if an extension was filed). If the taxpayer timely files his 200912 tax return, then the taxpayer has until Oct. 15, 2010 to make the election per Treas. Reg. § 301.9100-2.

    • For a calendar year corporation, the election must be made by March 15, 2010 (or Sept. 15, 2010 if an extension was filed). If the taxpayer timely files the 200912 tax return, then the taxpayer has until Sept. 15, 2010 to make the election per Treas. Reg. § 301.9100-2.

    • A fiscal year corporation whose tax year ends in February must make the election by May 17, 2010 (assuming no extension was filed). If the taxpayer timely files the 201002 return, the taxpayer has until Nov. 15, 2010 to make the election per Treas. Reg. § 301-9100-2. For this taxpayer, the last tax period beginning in 2009 is the period beginning March 1, 2009 and ending Feb. 28, 2010. The normal due date of that return is May 17, 2010.

    Example:

    An individual taxpayer wishes to make a WHBAA election for his 200812 tax year. The taxpayer has until April 15, 2010 to make the WHBAA election for his 200812 tax year (the due date of his 200912 tax return). If the taxpayer timely files his 200912 tax return and makes a Treas. Reg. § 301.9100-2 election, or timely files an extension for his 200912 tax return, then the taxpayer has until Oct. 15, 2010 to make the election for his 200812 tax year. If an extension is filed on the 200912 tax account the taxpayer may make the WHBAA election until Oct. 15, 2010 even if the taxpayer does not file a return by the extended due date.

  4. Methods for Making the Election - The taxpayer can make the election in one of the two ways described below. The time period for making the election is the same, whichever method the taxpayer elects.

    1. The taxpayer can make the election by attaching a statement to the federal income tax return for the taxable year in which the applicable NOL arises. A taxpayer that already filed its federal income tax return for the taxable year of the applicable NOL may make the election by attaching a statement to an amended return for the taxable year of the NOL. The election statement must state that the taxpayer is electing to apply § 172(b)(1)(H) or § 810(b)(4) under Rev. Proc. 2009-52, that the taxpayer is not a TARP recipient nor, in 2008 or 2009, an affiliate of a TARP recipient, and specify the length of the NOL carryback period the taxpayer elects (3, 4, or 5 years). A taxpayer making the election in this manner must attach a copy of the election statement to the taxpayer's carryback application or claim. See IRM 21.5.9.5.14.7.2, Requirement to Attach an Election Statement to the WHBAA Carryback - Statements that Must be Included in the Election Statement, for more information on the election statement requirements.

      Example:

      A calendar year corporation filed its 200812 return on extension on Sept. 15, 2009. The taxpayer can make the WHBAA election for the 200812 tax year by filing a Form 1120X for 200812, and attaching the election statement, by the due date of the corporation's 200912 tax return (by March 15, 2010, if no extension was filed, or by Sept. 15, 2010 if the taxpayer timely files its 200912 return). When the corporation files the carryback application or claim, it must include a copy of the election statement with the carryback application/claim.

      Reminder:

      Once the taxpayer makes the irrevocable election using this method, the actual carryback can be filed at any time during the normal statutory period for filing a carryback application or claim. The taxpayer must include a copy of the election statement when the carryback is filed.

    2. The taxpayer can make the election by simply attaching an election statement to the carryback application or claim (Form 1045, Form 1139, Form 1040X, Form 1120X, etc.) The election statement must state that the taxpayer is electing to apply § 172(b)(1)(H) or § 810(b)(4) under Rev. Proc. 2009-52, that the taxpayer is not a TARP recipient nor, in 2008 or 2009, an affiliate of a TARP recipient, and specify the length of the NOL carryback period the taxpayer elects (3, 4, or 5 years). See IRM 21.5.9.5.14.7.2, Requirement to Attach an Election Statement to the WHBAA Carryback - Statements that Must be Included in the Election Statement, for more information on the election statement requirements.

      Example:

      The same taxpayer, as in the example above, can make the election by simply filing the carryback application or claim and attaching the required election statement by March 15, 2010 (or by Sept. 15, 2010 if the 200912 tax return is timely filed.).

  5. Extension of the Normal Time Period for Filing a Tentative Carryback (Form 1045 or Form 1139) - If the taxpayer's applicable NOL tax year (2008 or 2009) ended before Nov. 6, 2009, the taxpayer may file a tentative application (Form 1045 or Form 1139) on or before the due date (including extension) for filing the return for the taxpayer's last taxable year beginning in 2009. This extension covers loss year tax periods between 200801 and 200910 and only applies to taxpayers making a WHBAA 2009, Section 13 election.

    Note:

    Per Counsel, even though Treas. Reg. § 301.9100-2 does not technically apply to the extension of time to file a tentative carryback, for consistency in administering the WHBAA provision, if the taxpayer files a timely return for the taxpayer's last taxable year beginning in 2009, the taxpayer may make the WHBAA election and also file a tentative carryback application within six months of the normal due date (excluding extensions).

    Example:

    An individual, whose electing tax year ended on Dec. 31, 2008 (200812), has until April 15, 2010 (assuming no extension was filed for 200912) to file a Form 1045. (Normally, the taxpayer would only have until Dec. 31, 2009 to file Form 1045.) Additionally, if the same taxpayer timely files his 200912 federal income tax return by April 15, 2010, he has until Oct. 15, 2010 to file a Form 1045 for the 200812 loss.

    Example:

    A fiscal year corporation, whose electing tax year is Jan. 31, 2008 (200801), has until April 15, 2010 (the due date of the taxpayer's last taxable year beginning in 2009, which is the tax year beginning Feb. 1, 2009) to file Form 1139. (Normally, the taxpayer would only have until Jan. 31, 2009 to file Form 1139.) If the taxpayer makes the election for 200901 instead of 200801, the same extended date for filing Form 1139 would apply. Again, if the corporation timely files its 201001 federal income tax return by April 15, 2010, the corporation has until Oct. 15, 2010 to file Form 1139 for either a 200801 or 200901 loss year.

  6. Revocation of Prior Election to Waive the Carryback Period under Section 172(b)(3) or 810(b)(3) - Taxpayers that previously made an election to waive the carryback period under §172(b)(3) or in the case of a life insurance company, under §810(b)(3) for an applicable NOL tax year (2008 or 2009) ended before November 6, 2009, may revoke that election. The revocation must be made before the due date (including extension) of the taxpayer's last taxable year beginning in 2009. For example, a calendar year corporation that filed an extension must revoke the prior carryback waiver for 2008 by Sept. 14, 2010 (the day before the extended due date for the 200912 tax year). An individual, who did not file an extension, must revoke the prior carryback waiver for 2008 before April 15, 2010. A tentative carryback application (Form 1045 or Form 1139) can also be filed, if done by the same date. The election statement must state that the taxpayer is revoking a NOL (or loss from operations) carryback waiver and electing a new NOL carryback under Rev. Proc. 2009-52 and that the taxpayer is not a TARP recipient nor, in 2008 or 2009, an affiliate of a TARP recipient, and must specify the length of the NOL carryback period the taxpayer elects (3, 4, or 5 years). See IRM 21.5.9.5.14.7.2, Requirement to Attach an Election Statement to the WHBAA Carryback - Statements that Must be Included in the Election Statement, for more information on the required election statement.

    Note:

    Per Treas. Reg. § 301.9100-2, if the taxpayer files a timely return for the taxpayer's last taxable year beginning in 2009, the taxpayer may revoke the prior election to waive the carryback period and make a WHBAA election prior to what the extended due date would have been if the taxpayer had filed a timely extension.

  7. Special Rules for Carryback to the 5th Year - If a taxpayer elects under WHBAA 2009, Section 13 to carryback a 2008 or 2009 loss for five years, the amount of the NOL that can be carried back to the fifth year is limited to 50 percent of the taxpayer's taxable income (TXI) for the carryback taxable year. The taxable income is computed without regard to the NOL for the loss year or any taxable year thereafter.

    Note:

    The TXI is the amount as adjusted by any amended return and also as adjusted by any carrybacks from loss years prior to the WHBAA loss year. So, for example, if the WHBAA loss year is 2008, the fifth carryback year is 2003. If the taxpayer had filed a 1040X or 1120X for tax year 2003 that increased or decreased his TXI, then the limitation would be 50 percent of the 2003 TXI as amended by the 1040X or 1120X. Also, if the taxpayer had a carryback to 2003 from 2004, 2005, 2006, or 2007 that reduced the 2003 TXI, then the limitation would be 50 percent of the TXI as amended by those carrybacks. However, any NOL for 2008 or any year subsequent, would not be considered as reducing the TXI for 2003. See Question 15 in the Questions and Answers for The Worker, Homeownership, and Business Assistance Act of 2009 – Section 13 5-year Net Operating Loss (NOL) Carryback for an example.

    The excess of the amount of the loss over 50 percent of the modified taxable income is carried to each of the other taxable years preceding the loss year. For the carryback of an alternative tax NOL to the fifth year, the 50 percent limitation is applied separately based on the alternative minimum taxable income. Only the fifth carryback year is affected. If the taxpayer does not limit the NOLD in the fifth year to 50 percent of taxable income, reject the carryback, using Letter 216C for TENTS or Letter 4734C for RINTS.

    Exception:

    If the taxpayer incorrectly limits the NOLD in the fifth year to 50 percent of modified taxable income instead of taxable income, notify the taxpayer of the error by using Letter 216C for TENTS and Letter 4734C for RINTS.

  8. Alternative Tax Net Operating Loss Deduction - For taxpayers who make a WHBAA NOL election, the 90 percent limit on the alternative tax NOL deduction (ATNOLD) does not apply. This applies to taxable years ending after Dec. 31, 2002.

    • The 90 percent limit on the alternative tax NOL deduction (ATNOLD) also does not apply to WHBAA NOL amounts carried forward to subsequent years.

    • Taxpayers may make a WHBAA election and claim an extended carryback period, but have no taxable income in the extended carryback years. The taxpayer may simply be making the election to limit the AMT liability in carryback years one and two. Per Counsel, there is nothing in the statute preventing taxpayers from making the election simply to eliminate the 90 percent limit for AMT purposes. Accept the WHBAA election and process the carryback. However, do not accept the WHBAA election if the taxpayer was not in existence for any of the carryback years for which the election applies.

      Example:

      A corporation makes a three-year WHBAA election for a 2009 loss, but the corporation did not begin business until 2007. Since the corporation was not in existence for the preceding three years, a WHBAA election cannot be made.

    • Taxpayers may make a WHBAA election even if there is no taxable income in any of the prior years in order to eliminate the 90 percent limit for AMT purposes in the carryforward years. In this case, the taxpayer is not required to file a carryback application or claim. The taxpayer simply makes the WHBAA election with the loss year return, by the due date or extended due date of the last return beginning in 2009. If there is no alternative minimum taxable income available to absorb the ATNOL in the carryback years, the taxpayer claims 100 percent of the ATNOLD in the subsequent years.

  9. On Dec. 18, 2009, the IRS posted Questions and Answers for The Worker, Homeownership, and Business Assistance Act of 2009 – Section 13 5-year Net Operating Loss (NOL) Carryback on IRS.gov. These Q and As may be useful when responding to questions taxpayers have concerning the WHBAA NOL provision.

  10. In March 2010, Instructions for Form 1139 and Instructions for Form 1045 were published for tax year 2009. Both sets of instructions include information and instructions for taxpayers completing the forms for WHBAA NOLs. The Instructions for Form 1045 include specific instructions for taxpayers on how to complete Schedule B when the taxpayer makes a five-year WHBAA election and the NOL is not fully absorbed in the fifth preceding year.

  11. On August 20, 2010 Notice 2010–58, 2010–37 I.R.B. 326, was published to provide guidance on certain issues that have arisen under §172(b)(1)(H), as amended by the WHBAA. In addition, Treasury Document (T.D.) 9490 added Temp. Treas. Reg §1.1502-21T(b)(3)(ii)(C) to provide guidance on the implementation of §172(b)(1)(H) within a consolidated group.

21.5.9.5.14.7.1  (10-01-2013)
Special Rules for Taxpayers that Previously Filed a Carryback for Loss Year 2008 or 2009

  1. A taxpayer that previously filed a carryback for a tax year beginning or ending in 2008 or 2009 (generally a two-year carryback) can make a WHBAA election using one of the two methods for making the election. See IRM 21.5.9.5.14.7, Worker, Homeownership, and Business Assistance Act of 2009 (PL 111-92, Section 13) - Net Operating Losses, (3) and (4). In addition to the other required election statements, the taxpayer must state that the election amends a previous carryback application or claim. See IRM 21.5.9.5.14.7.2, Requirement to Attach an Election Statement to the WHBAA Carryback - Statements that Must be Included in the Election Statement, for more information on the election statement requirements.

    Exception:

    A taxpayer that made an ARRA 2009, Section 1211 election and filed a three, four, or five year carryback cannot amend their previous carryback in order to make a WHBAA election for the same tax year. Once made, an ARRA 2009, Section 1211 election is irrevocable.

  2. WHBAA amended carrybacks may be filed as amended tentative carryback applications on Form 1139 or Form 1045 or they may be filed as separate carryback claims on Form 1040X or Form 1120X.

  3. WHBAA 2009, Section 13 - Prior Carryback was Filed on Form 1045 or Form 1139 - If the taxpayer filed the prior carryback using a tentative carryback form, any required reassessments to carryback years one and/or two can be made on the basis of the amended carryback application or claim. A tentative carryback can be reassessed, whether or not the taxpayer files an amended application or claim. You must carefully examine the amended carryback to determine whether there is sufficient Net Operating Loss Deduction (NOLD) available, after application to carryback years five, four, and/or three, to also cover the carryback adjustments that were previously made to carryback years one and/or two, and make adjustments to carryback years one and/or two as appropriate. Carefully analyze the taxpayer's statements and attachments to the amended carryback form(s), the remaining NOLD after carryback to the extended tax years, and the prior adjustments to carryback years 1 and 2 to ensure the correct adjustment action is taken on each case.

    Example:

    The taxpayer previously had $500,000 NOLD to carry back from 200812. $100,000 was carried back to 200612 and $100,000 was carried back to 200712. The remaining $300,000 would have been carried forward. The taxpayer now makes a WHBAA 2009, Section 13 election to amend the prior carryback. He submits Form 1139 with the required election statement, and elects a five year carryback. Per the amended Form 1139, $100,000 is carried back to 200312, $100,000 to 200412, and $100,000 to 200512. As you review the Form 1139, you see that there is sufficient NOLD available to cover the $200,000 that was previously carried back - $100,000 to 200612 and $100,000 to 200712. No carryback tax reassessments are needed on 200612 and 200712. In this case, the Form 1139 may not make any reference to 200612 or 200712, since there was no change to those years, but the taxpayer may have included an explanation of the amended adjustments as an attachment to the form. Or, the taxpayer may have included the 200612 and 200712 tax years and entered the same amounts that were previously carried back. An analysis of the 200612 and 200712 modules would show these adjustments were previously made and the taxpayer is simply showing that the revised carrybacks to those years are unchanged. A thorough analysis is always required when working these types of cases.

    Reminder:

    If the taxpayer filed the prior carryback using a tentative carryback application (a TENT), the previously allowed carrybacks can be reversed, to the extent necessary, whether or not an amended tentative carryback application or claim is filed for those years. See IRM 21.5.9.5.34, Reassessing Carryback Form 1045 and Form 1139.

  4. WHBAA 2009 Section 13 - Prior Carryback was Filed on Form 1040X, Form 1120X, Form 1041, Form 1120-C, or Form 990-T - If the taxpayer filed the prior carryback as an amended return (Form 1040X, Form 1120X, Form 1041, Form 1120-C, Form 990-T), the same examiner must work all the amended carryback claim years simultaneously since the amended carrybacks for years one and/or two may be reassessments and years three, four, and/or five may be allowances. Be sure you have amended returns for all affected years. If you are missing years one or two, research IDRS/CIS to see if one or both of the years were assigned to another examiner. If so, have the case(s) reassigned to you. If the taxpayer makes an election to amend a prior two-year carryback, and the taxpayer only files amended returns for the extended tax years (three and/or four and/or five), check to see if the remaining NOLD is sufficient that no carryback reassessment would be required in years one and/or two.

    • If the remaining NOLD is sufficient that no carryback reassessment would be required in either carryback years one or two, then continue processing without amended returns for years one and two.

    • If the remaining NOLD is not sufficient, and a carryback reassessment to the previous carryback adjustments in years one and/or two would be required, then do not process the RINTS for years three, four, or five. Instead, send the taxpayer Letter 4734C to notify the taxpayer the RINT can not be processed. An open paragraph to modify the language for the actual tax periods involved, the amended returns that are missing, and the number of years the taxpayer has elected may be necessary.

    Reminder:

    If the taxpayer filed the prior carryback as a claim (a RINT), the previously allowed carrybacks can not be reversed unless the taxpayer files an amended return, or an IRS error was made when the claim was processed. See IRM 21.5.9.5.43, Reassessing Carryback Form 1040X, Form 1120X, Form 1041, Form 1120-C, and Form 990-T.

  5. We anticipate a significant number of taxpayers will take advantage of this legislation and amend their previously filed carrybacks to claim a longer carryback period. These adjustments can be very complex and require a high level of skill in determining the appropriate adjustment actions to take, including but not limited to;

    • skill in analyzing both the information the taxpayer has provided and the prior carryback adjustments to determine if any reassessments are required in tax years one and/or two,

    • knowledge of hold codes, posting delay codes, priority codes, adjustment posting cycles, and offset routines,

    • knowledge of the correct transaction codes and transaction dates to use when manually offsetting overpayments from years three, four, or five to pay off tax and reversed credit interest (TC 777 or 772) in years one or two,

    • skill in the manual recalculation of any credit interest previously paid in years 1 or 2, which will be reduced or eliminated with the amended carryback,

    • knowledge of the conditions that set the -E freeze on BMF accounts, which prevents normal offset routines from occurring,

    • skill in determining when a manual refund for a partial amount of the overpayment is appropriate, in order to reduce the amount of credit interest paid.

    Note:

    Due to the complexity and the large dollar amounts that may be involved, we recommend these cases be assigned to a highly skilled, specialized group of carryback employees in each campus.

  6. If an adjustment is necessary to carryback years one and/or two, use the following guidelines for making the adjustment(s);

    • If the NOL on the amended carryback is completely used up in years three, four, or five, and there is no NOL to carryback to years one and/or two, then reverse the original carryback adjustments in years one and/or two. Use the overpayment(s) from years three, four, or five to pay off the balance due(s) created in years one and/or two before allowing any money to offset to other debts or refund. If one of the earlier years (three, four, or five) must be brought back from retention, see Paragraph (7) for special processing instructions.

    • If the NOL on the amended carryback reduces the amount previously allowed in years one and/or two, then do a partial reassessment (the difference between what was originally allowed and the revised amount). Again, use the overpayments from years three, four, or five to pay off the balance due(s) created in years one and/or two. If one of the earlier years (three, four, or five) must be brought back from retention, see Paragraph (7) below for special processing instructions.

    • If the amended carryback would require no change to the prior NOL tax decrease in carryback years one and/or two (the TC 295 or TC 299 amount), do not reverse the adjustment. If the only adjustments necessary are to AGI or TXI, this can be done without reversing the related TC 295 or TC 299.

  7. If an overpayment from one of the earlier years (three, four, or five) is needed to pay off balance due(s) created in years one and/or two, and the earlier year tax module(s) must be brought back from retention, the adjustments creating the balance dues in years one and/or two will post two or more weeks before the retention module adjustments post. To prevent a balance due adjustment notice from generating to the taxpayer in tax years one and/or two, input Hold Code 3 with the adjustment(s) creating the balance due(s). Since the taxpayer will not receive an adjustment notice, send the taxpayer Letter 662C, advising him the carryback adjustments are being made to his account, as requested.

  8. Use TC 294 with blocking series 91/ 92 to reassess a previously allowed TC 295 adjustment. If the year to be assessed is statute imminent/expired, use blocking series 95. Use TC 298 with blocking series 91/92 to reassess a previously allowed TC 299 adjustment. If the year to be assessed is statute imminent/expired, use blocking series 95.

21.5.9.5.14.7.2  (10-01-2013)
Requirement to Attach an Election Statement to the WHBAA Carryback - Statements that Must be Included in the Election Statement

  1. Revenue Procedure (Rev. Proc.) 2009-52 provides that taxpayers must include an election statement with the carryback application or claim. Regardless of which method the taxpayer uses to make the election, the election statement must be submitted with the carryback. The election statement must include specific statements, which are covered in paragraphs (2), (3), and (4) below. If the election statement is not included with the carryback, see paragraph (6) below.

  2. Statements required for taxpayers that are filing a WHBAA carryback for one of the applicable years for the first time - The election statement must state that the taxpayer is electing to apply § 172(b)(1)(H) or § 810(b)(4) under Rev. Proc. 2009-52 and that the taxpayer is not a TARP recipient nor, in 2008 or 2009, an affiliate of a TARP recipient, and must specify the length of the Net Operating Loss (NOL) carryback period the taxpayer elects (three, four, or five years).

  3. Statements required for taxpayers that previously elected to waive the carryback period and are now electing a carryback under WHBAA - The election statement must state that the taxpayer is revoking a NOL (or loss from operations) carryback waiver and electing a new NOL carryback under Rev. Proc. 2009-52 and that the taxpayer is not a TARP recipient nor, in 2008 or 2009, an affiliate of a TARP recipient, and must specify the length of the NOL carryback period the taxpayer elects (three, four, or five years).

  4. Statements required for taxpayers that previously filed a carryback (generally for two years) and are now electing a carryback under WHBAA for the same loss year - The election statement must state that the taxpayer is amending a previous carryback application or claim and electing a new NOL carryback under Rev. Proc. 2009-52 and that the taxpayer is not a TARP recipient nor, in 2008 or 2009, an affiliate of a TARP recipient, and must specify the length of the NOL carryback period the taxpayer elects (three, four, or five years).

  5. While the specific statements in the election statements provided in Paragraphs (2), (3), and (4), are required, they do not have to be exact. As long as the election statement is clearly a WHBAA 2009, Section 13 irrevocable election, and the TARP statement is present, process the carryback. Below are examples of acceptable and unacceptable election statements. Use discretion in determining whether the election statement satisfies the requirements of the revenue procedure.

    Exception:

    ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    Example:

    An acceptable election statement - "Per the Workers, Homebuyers, and Business Act of 2009 we elect a 5-year carryback. ABC Corp is not a TARP recipient and was not an affiliate of a TARP recipient in 2008 or 2009." This statement is acceptable because it identifies the specific legislative act and makes the required affirmative TARP statement.

    Example:

    An unacceptable election statement - "5-year carryback under the new law." This statement is unacceptable because it does not identify the specific legislative act and does not include the affirmative TARP statement.

    Example:

    An unacceptable election statement - "We are electing to apply § 172(b)(1)(H) under Rev. Proc. 2009-52 and claim a 4-year carryback." This statement is unacceptable because it is incomplete. The affirmative TARP statement is missing. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

  6. If the election statement is not included with the carryback, and the carryback was filed on or before the due date (or extended due date) of the taxpayer's return for the last taxable year beginning in 2009, follow the procedures below.

    Caution:

    If the election statement is not included with the carryback, and the carryback was filed after the required date for making the election, follow the instructions in IRM 21.5.9.5.14.7.8, WHBAA 2009, Section 13 - Applications/Claims (2008 or 2009) Received after the 2009 Return Due Date (Understanding the Difference Between Making a Timely Election and Filing the Extended Carryback Application/Claim, (15).

    1. Make two attempts to contact the taxpayer by phone and request the taxpayer fax you a copy of the required election statement. (See the paragraphs above for information that must be included in the statement.) Document CIS with the attempts to contact the taxpayer.

    2. If unable to contact the taxpayer by phone, reject the carryback using Letter 216C for TENTS or Letter 4734C for RINTS, advising the taxpayer to resubmit the carryback with the election statement, which includes the required language, as provided in Rev. Proc. 2009-52.

      Note:

      If the taxpayer claimed a five-year carryback and did not limit the fifth year to 50 percent of TXI, notify the taxpayer of the error in the 216C for TENTS and the 4734C for RINTS.

      Exception:

      ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

  7. If the election statement is included with the carryback, and the carryback was filed on or before the due date (or extended due date) of the taxpayer's return for the last taxable year beginning in 2009, but the statements in the election statement are insufficient or incomplete, follow the procedures in the step list below;

    1. Make two attempts to contact the taxpayer by phone and request the taxpayer fax you a copy of a revised election statement that includes the required language. Document CIS with the attempts to contact the taxpayer.

    2. If unable to contact the taxpayer by phone, reject the carryback using Letter 216C for TENTS or Letter 4734C for RINTS, advising the taxpayer to resubmit the carryback with a revised election statement that includes the required language, as provided in Rev. Proc. 2009-52.

      Note:

      If the taxpayer claimed a five-year carryback and did not limit the fifth year to 50 percent of TXI, notify the taxpayer. A separate paragraph for this issue has been included in the 216C for TENTS and the 4734C for TENTS.

  8. If the election statement is included with the carryback but the statements in the election statement are insufficient or incomplete, and the carryback was filed after the required date for making the election, follow the instructions in IRM 21.5.9.5.14.7.8, WHBAA 2009, Section 13 - Applications/Claims (2008 or 2009) Received after the 2009 Return Due Date (Understanding the Difference Between Making a Timely Election and Filing the Extended Carryback Application/Claim, (10) to determine if the taxpayer timely submitted the incomplete statement with his original or amended return. If you find a timely, but incomplete statement, follow the steps in Paragraph (7) above to allow the taxpayer an opportunity to perfect the election statement. If there is no evidence the election statement was timely submitted, reject/disallow using the language in IRM 21.5.9.5.14.7.8, WHBAA 2009, Section 13 - Applications/Claims (2008 or 2009) Received after the 2009 Return Due Date (Understanding the Difference Between Making a Timely Election and Filing the Extended Carryback Application/Claim, (11).

21.5.9.5.14.7.3  (10-01-2013)
Special Rules for Eligible Small Businesses (Elections under ARRA 2009, Section 1211 and WHBAA 2009, Section 13)

  1. An eligible small business (ESB) that made or makes an ARRA 2009, Section 1211 election for a loss year beginning or ending in 2008 can also make a WHBAA 2009, Section 13 election for a loss year in 2009. (An entity that is not an ESB can only make an extended carryback election under WHBAA 2009, Section 13 for one year in either 2008 or 2009.)

    Note:

    A fiscal year filer may have made an ARRA election for a tax year ending in 2008. Since a WHBAA election can be made for one tax year beginning or ending in 2008 or 2009, the same taxpayer could also make a WHBAA election for a tax year beginning in 2008, or for a tax year beginning or ending in 2009. As long as both elections aren't made for the same tax year, and the ARRA election was made for a tax year that began or ended in 2008, the WHBAA election can be made for any other tax year beginning or ending in 2008 or 2009.

  2. An ARRA 2009, Section 1211 election is irrevocable. The taxpayer cannot revoke a prior ARRA 2009 election in order to make a WHBAA 2009 election for the same tax year.

    Exception:

    If a taxpayer makes an ARRA election for a 2008 tax year, but the ARRA carryback is rejected or disallowed because the taxpayer fails the $15M gross receipts test, the taxpayer may make a WHBAA election for the same tax year. Even though the taxpayer made the ARRA election, he did not benefit from it. Per Counsel, allow the WHBAA election in this case.

  3. If the taxpayer has a Net Operating Loss (NOL) for a tax year beginning or ending in 2008 that is partly attributable to a loss from an Eligible Small Business "ESB" and partly attributable to a loss from a non-ESB, and the taxpayer made or makes an ARRA election only for the ESB portion of the NOL, he can also make a WHBAA election for the non-ESB portion of the NOL; even though both the ESB and the non-ESB losses occurred in the same tax year.

    Example:

    A 1040 filer makes an ARRA election for 200812. He files Form 1045 and states that losses from XYZ Partnership are ESB losses and carries those losses back five years. He states that ABC S-Corp losses are non-ESB losses and carries those losses back 2 years. The taxpayer may make a WHBAA election for 200812 for the non-ESB losses he previously carried back two years, and amend the previous Form 1045 to carry those losses back for three, four, or five years.

    Caution:

    A taxpayer who makes a WHBAA election in this manner cannot make a second WHBAA election for another tax year. So, in the example above, once the taxpayer makes the WHBAA election for the non-ESB portion of losses incurred in 2008, he cannot also make a WHBAA election for any losses incurred in 2009.

  4. An ESB that made an ARRA election can be identified by the Transaction Codes 971, Action Codes 633, 634, or 635 that are input on the gain year modules to identify ARRA 2009, Section 1211 elections. See IRM 21.5.9.5.14.6.7, TC 971 Action codes 633, 634, and 635. Searching for these transaction codes will allow you to determine that a taxpayer that made an ARRA election for 2008 would also be entitled to make an election under WHBAA 2009, Section 13 to carry back 2009 losses.

  5. A taxpayer who made an ARRA 2009, Section 1211 election for a 2008 loss year (and so had to meet the $15M gross receipts test for the ARRA election), and then makes a WHBAA 2009, Section 13 election for a 2009 loss year, is not subject to the $15M gross receipts test for the WHBAA election. Do not use the GRAC tool for any taxpayer making a WHBAA 2009, Section 13 election.

  6. ESB's who filed an ARRA 2009, Section 1211 carryback for 2008 and take advantage of the WHBAA legislation for 2009 are subject to all the same election requirements, timeliness requirements, and other limitations as stated in the previous subsections of this IRM. See IRM 21.5.9.5.14.7, Worker, Homeownership, and Business Assistance Act of 2009 (PL 111-92, Section 13) - Net Operating Losses.

21.5.9.5.14.7.4  (10-01-2013)
Distinguishing Between an ARRA 2009, Section 1211 Carryback and a WHBAA 2009, Section 13 Carryback when No Election Statement is Attached

  1. Since ARRA 2009 and WHBAA 2009 both include amendments to IRC § 172(b)(1)(H), governing net operating losses, and include an overlapping period where both legislative acts apply (between 200801 and 200911), it may be difficult at times to determine whether the taxpayer is filing an ARRA carryback or a WHBAA carryback.

    Note:

    This will not be an issue for taxpayers that file a WHBAA carryback with the required election statement attached.

    Note:

    Both ARRA and WHBAA claims can be filed for loss years between 200801 and 200911. Only WHBAA carrybacks can be filed for loss years between 200912 and 201011.

  2. In all cases, review the type of loss being claimed on the carryback to determine if there is any other reason, besides ARRA or WHBAA, that the taxpayer is claiming a carryback period that is longer than the normal two years permitted by law, such as the normal three-year carryback period for eligible losses or the five-year carryback period for farming losses. See IRM 21.5.9.5.3, Special Carryback/Carryforward Periods. Process these carrybacks using normal procedures.

  3. If the carryback loss doesn't meet the conditions in paragraph (2), then check to see if the carryback was prepared and signed before Nov. 6, 2009. If yes, process it as an ARRA carryback. See IRM 21.5.9.5.14.6, American Recovery and Reinvestment Act of 2009 (PL 111-5, Section 1211) - Net Operating Losses. (WHBAA legislation wasn't signed into law until Nov. 6, 2009.)

  4. If the carryback was prepared and signed on or after Nov. 6, 2009, and there is no WHBAA election statement present, follow the research path below;

    1. If a five-year carryback was claimed, did the taxpayer limit the amount of the net operating loss deduction in the fifth year to 50 percent of taxable income in that year? If yes, treat the carryback as a WHBAA. Follow the procedures in IRM 21.5.9.5.14.7.2, Requirement to Attach an Election Statement to the WHBAA Carryback - Statements that Must be Included in the Election Statement (6) to secure the required WHBAA election statement.

    2. Is the carryback filed on a Form 1045 or Form 1139 for a tax year that normally would have expired for a tentative carryback allowance? For example, normally a 200801 tentative carryback election would have to be filed by Jan. 31, 2009 (12 months after the end of the tax year of the loss). WHBAA permits taxpayers to file tentative carrybacks for an extended period of time. See IRM 21.5.9.5.14.7, Worker, Homeownership, and Business Assistance Act of 2009 (PL 111-92), Section 13) - Net Operating Losses (5) If yes, follow the procedures in IRM 21.5.9.5.14.7.2, Requirement to Attach an Election Statement to the WHBAA Carryback - Statements that Must be Included in the Election Statement, (6) to secure the required WHBAA election statement.

  5. If you are still uncertain as to whether the taxpayer has filed an ARRA carryback or a WHBAA carryback, perform the $15M gross receipts test using the GRAC tool, but do not allow any rejection or disallowance letters to generate. See IRM 21.5.9.5.14.6.1, Eligible Small Business - $15M Gross Receipts Test.

    1. If the taxpayer meets the $15M gross receipts test, treat the carryback as an ARRA carryback. See IRM 21.5.9.5.14.6, American Recovery and Reinvestment Act of 2009 (PL 111-5, Section 1211) - Net Operating Losses.

    2. If the taxpayer does not meet the $15M gross receipts test, treat the carryback as a WHBAA carryback and follow the procedures in IRM 21.5.9.5.14.7.2, Requirement to Attach an Election Statement to the WHBAA Carryback - Statements that Must be Included in the Election Statement, (6) to secure the required WHBAA election statement.

21.5.9.5.14.7.5  (02-08-2010)
TC 971 Action Codes 693, 694, and 695 for WHBAA 2009, Section 13 Carrybacks

  1. Effective February 9, 2010, three TC 971 Action Codes are available for input to tax modules when the taxpayer has elected the three, four, or five-year carryback per WHBAA 2009, Section 13. The new Action Codes are: TC 971 AC 693 (three-year carryback), TC 971 AC 694 (four-year carryback), and TC 971 AC 695 (five-year carryback). Do not input these transaction codes on any WHBAA cases that are unprocessible, or are otherwise rejected or disallowed.

  2. Input the new TC 971 Action Codes as shown in the table below.

    Caution:

    Do not input these transaction codes on the loss year.

    • Input these transaction codes immediately prior to inputting the carryback adjustments.

    • Use the IRS Received Date of the carryback application/claim as the TC 971 Transaction Date (TRANS-DT).

      Caution:

      The only valid entries are: 1) the transaction code (971), 2) the transaction date, and 3) the TC 971 Code (69X). Data input in any other field will result in an error message.

    If Then
    The taxpayer makes a five-year WHBAA carryback election for a tax year beginning or ending in 2008 or 2009 Input TC 971 AC 695 on each of the five prior years.

    Example:

    Taxpayer makes five-year election for 200812. Input TC 971 AC 695 on 200312, 200412, 200512, 200612, and 200712.

    The taxpayer makes a four-year WHBAA carryback election for a tax year beginning or ending in 2008 or 2009 Input TC 971 AC 694 on each of the four prior years.

    Example:

    Taxpayer makes four-year election for 200901. Input TC 971 AC 694 on 200501, 200601, 200701, and 200801.

    The taxpayer makes a three-year WHBAA carryback election for a tax year beginning or ending in 2008 or 2009 Input TC 971 AC 693 on each of the three prior years.

    Example:

    Taxpayer makes three-year election for 200911. Input TC 971 AC 693 on 200611, 200711, and 200811.

  3. Input the TC 971 Action Codes on each year, as indicated in Paragraph (2), regardless of whether carryback adjustments are made to each of the elected years.

    Example:

    Taxpayer makes a five-year WHBAA carryback election and adjustments are made to the fifth, fourth, third, and second year. The Net Operating Loss (NOL) is fully absorbed in the second year and no adjustment is input to first year. Input TC 971 AC 695 in all five prior years.

  4. If the taxpayer subsequently files an amended carryback application/claim (increase or decrease), follow the same instructions as above, and input a second set of TC 971 AC 69X's on each year.

  5. If the Service is made aware that these transaction codes were input in error (taxpayer was actually claiming a three-year eligible loss, or a five-year farming loss or IRS made an error inputting on wrong account), reverse the transactions by input of TC 972 AC 69X. Reinput the transactions to the correct TIN/tax periods, if appropriate.

21.5.9.5.14.7.6  (10-01-2013)
Taxpayers Making a WHBAA 2009, Section 13 Election for More than One Year

  1. When processing a WHBAA 2009, Section 13 carryback, research IDRS/CIS to ensure the taxpayer did not previously make a WHBAA 2009, Section 13 election for another tax year. A WHBAA election can be made for only one tax year that either begins or ends in 2008 or 2009 (tax periods 200801 thru 201011).

    Reminder:

    An Eligible Small Business can make an ARRA election for one tax year that begins or ends in 2008 and also make a WHBAA election for another tax year that begins or ends in 2008 or 2009. See IRM 21.5.9.5.14.7.3, Special Rules for Eligible Small Businesses (Elections under ARRA 2009, Section 1211 and WHBAA 2009, Section 13). An ARRA election can be identified by the TC 971 Action Codes 633, 634, or 635 posted to the gain years. See IRM 21.5.9.5.14.6.7, TC 971 Action Codes 633, 634, and 635.

  2. If the taxpayer files a WHBAA 2009, Section 13 carryback application/claim for more than one tax year, reject/disallow the second application/claim using the letter 216C for TENTS and Letter 105C for RINTS. Provide the following language in Letter 105C in an open paragraph: "Our records indicate you previously elected a three, four, or five year carryback period under the Workers, Homeownership, and Business Assistance Act (WHBAA) for your tax year ending ____. You can make an election for only one tax year that begins or ends in 2008 or 2009. You can file an application to claim a normal two year carryback loss. You must file it, however, within 12 months of the year the loss occurred. If you prefer, you can file an amended return on Form ____. You should complete a separate tax adjustment request form for each period if you file an amended return."

21.5.9.5.14.7.7  (02-19-2013)
WHBAA 2009, Section 13 - Instructions for BMF Sites Only (Cincinnati and Ogden) - TARP Test

  1. Beginning on Dec. 7, 2009, and periodically thereafter, an encrypted Excel spreadsheet will be sent to the Cincinnati, and Ogden carryback sites. The listing contains the EINs and business names of entities that have been identified as TARP recipients or affiliates of TARP recipients in 2008 and 2009.

    Note:

    Designated points of contact at each of these sites will receive the monthly listing. Further distribution of the listing to the carryback teams, as well as any local procedures for performing the actions in the subsequent paragraphs, will be determined at the discretion of each BMF carryback site.

  2. On every BMF WHBAA carryback application or claim, check to see if the EIN on the carryback application or claim appears on the TARP listing.

  3. If the EIN does not appear on the listing, continue processing the carryback. Document CIS - TARP PASS.

    Caution:

    It is critical that you use the exact language above (in upper case) to document CIS because a monthly extract is being pulled from CIS. The criterion for the extract is the exact wording, TARP PASS.

  4. If the EIN does appear on the listing, reject/no consider the TENT/RINT. Document CIS - TARP FAIL. Send Letter 216C for TENTS or Letter 4734C for RINTS.

    Caution:

    It is critical that you use the exact language above (in upper case) to document CIS because a monthly extract is being pulled from CIS. The criterion for the extract is the exact wording, TARP FAIL.

  5. When a new listing is received, discard the previous one. The new listing will include all of the entities previously identified as TARP recipients, as well as any additional ones.

21.5.9.5.14.7.8  (10-01-2013)
WHBAA 2009, Section 13 - Applications/Claims (2008 or 2009) Received after the 2009 Return Due Date (Understanding the Difference Between Making a Timely Election and Filing the Extended Carryback Application/Claim)

  1. A WHBAA election must be made [whether for a 2008 or 2009 Net Operating Loss (NOL)] by the return due date (including extensions) of the taxpayer's last taxable year beginning in 2009. If the taxpayer does not make the WHBAA election by the normal return due date, but does file a timely return for the last taxable year beginning in 2009, Treas. Reg. § 301.9100-2 allows the taxpayer an automatic six month extension from the normal return due date to make the WHBAA election. In order to receive an automatic six month extension, the taxpayer must write, "Filed pursuant to section 301.9100-2" on an election statement, amended return, or application/claim.

    Reminder:

    For a fiscal year taxpayer, keep in mind that the last taxable year beginning in 2009 is one that begins between Feb. 2009 and Dec. 2009 and ends between Jan. 2010 and Nov. 2010. For a calendar year taxpayer, the last taxable year ends Dec. 2009.

  2. Definitions - 2009 - For the purpose of this IRM subsection only, a "2009 NOL" means a net operating loss for the last taxable year beginning in 2009. A "2009 tax return" means a tax return for the last taxable year beginning in 2009. (Tax years ending 200912 thru 201011.)

  3. Definitions - 2008 - For the purpose of this IRM subsection only, a "2008 NOL" means a net operating loss for a taxable year ending after Dec. 31, 2007, but before the beginning of the last taxable year beginning in 2009. A "2008 tax return" means a tax return for a taxable year ending after Dec. 31, 2007 but before the beginning of the taxpayer's last taxable year beginning in 2009. (Tax years ending 200801 thru 200911.)

  4. Making the Election for a 2009 NOL - Method 1 - The first method a taxpayer may use to make a timely election to claim an extended carryback Section 13 of the WHBAA 2009 is to attach a statement (making the irrevocable election) to a timely filed 2009 tax return (filed by the due date or extended due date). If the return was timely filed without making the election, the taxpayer may file an amended 2009 tax return (which may be filed to amend the 2009 tax return and make the election or simply to make the election) within six months of the normal due date per Treas. Reg. § 301.9100-2. This constitutes a valid, timely, and irrevocable election. If the taxpayer makes the election using this method, per Rev. Proc. 2009-52, the taxpayer must attach a copy of the election statement to the actual WHBAA carryback, when it is filed.

  5. Time Period for Filing an Application/Claim for 2009 NOL when the Election is Made Using Method 1 - Once a timely election has been made using Method 1, the taxpayer may file the WHBAA carryback application or claim at any time within the normal statutory period for filing carryback applications and claims. The taxpayer must attach a copy of the election statement he filed with his original or amended tax return to the carryback application/claim.

  6. Making the Election for a 2008 NOL - Method 1 - Taxpayers may make a WHBAA election for a 2008 NOL by attaching an election statement to a 2008 tax return. If a taxpayer filed a 2008 tax return without making the election, the taxpayer may make a WHBAA election by filing an amended 2008 tax return to include a WHBAA election statement and make the irrevocable election. The due dates for an election for a 2008 NOL made in this manner are the same as due dates for an election for a 2009 NOL - the due date or extended due date of the 2009 tax return, or within six months of the normal due date per Treas. Reg. § 301.9100-2, as long as the 2009 tax return was timely filed. If the taxpayer makes the election using Method 1, per Rev. Proc. 2009-52, the taxpayer must attach a copy of the election statement to the actual WHBAA carryback, when it is filed.

    Note:

    A taxpayer who had not previously filed a 2008 tax return may still make the election by attaching a WHBAA election statement to the original 2008 tax return, as long as it is filed by the due date, or extended due date of the 2009 tax return.

  7. Time Period for Filing an Application/Claim for a 2008 NOL when the Election is Made Using Method 1 - The due date for filing a WHBAA tentative application (a TENT) is the due date or extended due date of the 2009 tax return, if the taxpayer makes an election using Method 1. The taxpayer may file a WHBAA carryback claim (a RINT) at any time during the normal statutory period for filing a claim for a 2008 NOL. The taxpayer must attach a copy of the election statement he filed with his original or amended tax return to the carryback application/claim.

  8. Making the Election for a 2008 or 2009 NOL (Method 2) - The second method a taxpayer may use to make a timely election is simply to file the application for tentative refund or the carryback claim, and attach a WHBAA election statement. Taxpayers electing this method must do so by the same prescribed dates as in Paragraph (1).

  9. Time Period for Filing a 2008 or 2009 NOL when the Election is Made Using Method 2 - Since the taxpayer is both making the election and filing the carryback at the same time when using Method 2, the application/claim must be filed by the prescribed date for making the election, as described in Paragraph (1). Applications/claims that are received after the prescribed date for making the election are not timely.

  10. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    • ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    • ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

  11. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    Reminder:

    ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    • ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    • ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    • ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡
    ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡
    ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    Note:

    ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    1. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    2. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

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

    4. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    5. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    6. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡
    ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡
    ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡
    ≡ ≡ ≡
  12. The following paragraph has been included in the Letter 216C issued for TENTS and is also used when sending a denial letter.
    "Your ____ (application/claim) to elect an extended carryback period under the Workers, Homeownership, and Business Assistance Act (WHBAA) was too late. Your election had to have been made by the due date (or extended due date) of the tax return for the last taxable year beginning in 2009. We have no record that you made an election with your tax return or your amended return. So, you cannot carry back your net operating loss for a three, four, or five-year period."

  13. If the WHBAA TENT or RINT is for a 2008 NOL (as defined in Paragraph 3) - Remember that a WHBAA carryback for a 2008 NOL, received by the due date or extended due date of the 2009 return (or within six months of a timely filed 2009 return under Treas. Reg. § 301.9100-2) is a timely election. For 2008 WHBAA TENTs and RINTS received after these dates, check for the following to determine if the taxpayer made a timely election using Method 1.

    • Check CIS for an amended 2008 tax return that includes a WHBAA election.

    • Check the date the taxpayer's original 2008 tax return was filed. If the taxpayer's original 2008 tax return was filed on or after Nov. 6, 2009, and by the due date or extended due date of the 2009 tax return, assume the taxpayer made a timely WHBAA election as an attachment to that return.

    • Check for a timely date on the copy of the WHBAA election statement the taxpayer is required to submit with the WHBAA application or claim when an election was made using Method 1. If the date on the election statement is timely, assume it is a true copy and the taxpayer made a timely election.

    • If the 2008 carryback is a tentative application (TENT), received within 45 days after the original due date of the 2009 return, but the 2009 return has not posted yet, and there is not an extension to file posted to the 2009 tax module, continue processing the 2008 WHBAA NOL, except, input push code TC 930 (DLN Code 85) to have the 2009 return sent to you. When the TC 932 posts, verify that either the 2009 return was timely filed, or that an extension to file has since posted. If not, then reassess the TENT (see IRM 21.5.9.5.34, Reassessing Carryback Form 1045 and Form 1139) and notify the taxpayer using the language in Paragraph (13).

    If you are still unable to find evidence that a timely election was made using Method 1, reject/disallow the carryback using the language in Paragraph (13).

    Note:

    An election statement for a 2008 NOL that is attached to a 2009 tax return is not a valid election.

  14. If the taxpayer files an extended carryback for a 2008 NOL after the due date (or extended due date) of the taxpayer’s 2009 return, and includes a WHBAA election statement, but the timely election statement is not located (using the instructions in Paragraph (12)), reject/disallow the carryback. Send Letter 216C for TENTS or Letter 105C (with appeal rights) for RINTS and provide the following language . "Your claim for an extended carryback period filed under the Worker, Homeownership, and Business Assistance Act (WHBAA) was too late. In addition, we have no record that you made an election with your tax return or your amended return. So, you cannot carry back your net operating loss for the three, four, or five-year period. If you did attach an election statement to a tax return or an amended return that you filed within six months of your 2009 return's normal due date, please send us within 30 days of this letter's date: 1. A copy of the election statement, 2. an explanation of how you filed the original election statement (i.e., with the original return or with an amended return), 3. the date you filed the original election statement, 4. the location of the IRS office where you filed the original election statement, 5. a statement that your answers are true and correct."

    Note:

    ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

  15. If the taxpayer files an extended carryback for a 2008 or 2009 NOL after the due date (or extended due date) of the taxpayer's 2009 return, and does not include a copy of the WHBAA election statement with the NOL, check the following to determine if the taxpayer made a timely election;

    • If the 2008 or 2009 tax return was electronically filed, check CC TRDBV (IMF) for a WHBAA election (or check the BMF MeF return via the Employee User Portal (EUP).

    • Check CIS for an amended return that includes a timely WHBAA election statement.

    If a timely election statement is located, capture it in CIS and continue processing the case. If you do not find evidence that a timely election was made, reject/disallow the carryback. Send Letter 216C for TENTS or Letter 105C (with appeal rights) for RINTS and provide the following language in the Letter 105C. "Although your claim shows that you are carrying your net operating loss back for an extended period under the Worker, Homeownership, and Business Assistance Act (WHBAA) we have no record that you made an election to do so with your tax return or your amended return. So, you cannot carry your net operating loss back for a three, four, or five-year period. However, if you did attach an election statement to a tax return or amended return that was filed within six months of your 2009 return's normal due date, please send us within 30 days of this letter's date: 1. a copy of the election statement, 2. an explanation of how you filed the original election statement (i.e., with the original return or with an amended return), 3. the date you filed the original election statement, 4. the location of the IRS office where you filed the original election statement, and 5. a statement that your answers are true and correct."

    Note:

    ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

21.5.9.5.14.8  (03-28-2014)
Affect of Sequestration on the Refundable Amount of the Accelerated Minimum Tax Credit (Form 8827) for RINTS/TENTS - BMF Only

  1. On March 1, 2013, the President issued a sequestration order in accordance with section 251A of the Balanced Budget and Emergency Deficit Control Act, as amended, 2 U.S.C. 901a. The order requires that budgetary resources in each non-exempt budget account be reduced by the amount calculated by the Office of Management and Budget (OMB) in its report to Congress, entitled OMB Report to the Congress on the Joint Committee Sequestration for Fiscal Year 2013. These required reductions (referred to as “Sequestration”) include a reduction to a refundable credit for corporations who are requesting a refund from Form 8827, Credit for Prior Year Minimum Tax – Corporations. Any refundable portion of the credit will be subject to a pre-defined percentage reduction to the credit claimed on the corporate return.

  2. Carryback claims/applications filed on Form 1120 series corporate income tax returns with gain years of 2009 through 2012 processed on or after September 21, 2013 are subject to a sequestration rate of 7.2% of the refundable credit amount for a corporation electing to accelerate the minimum tax credit on Form 8827, Line 8c.

    Note:

    Only returns with an open refund statute date (RSED) at the time the return/amended return is filed are subject to sequestration.

  3. Processing of RINTS/TENTS with Form 8827 credits subject to sequestration is a specialized procedure that is worked only by The Large Corp teams in Cincinnati and Ogden. A RINT/TENT that includes a Form 8827 with an amount on line 8c identified in a Carryback team is to be routed to;

    • Cincinnati – Route to Large Corp., Stop 537G, Team 402 and assign to IDRS number 0231103798

    • Ogden – Cases are scanned into CIS and assigned to IDRS number 0434905511

  4. The refundable portion of the Corp AMT Credit has experienced several changes. For business income tax returns processed in 2013 the refundable portion of the Corp AMT Credit posted as a TC 766 CRN 334 on all original returns, regardless of the tax year. Prior to 2013, all credits that had not been assigned a CRN posted to IDRS as only a TC 766. However, in 2013 a TC766 CRN 334 may also include other refundable credits not previously assigned a CRN. Caution must be exercised when reviewing the account to determine the correct amount of the refundable Corp AMT Credit.

  5. Determine if the application/claim fits the Corporate AMT Sequestration criteria by reviewing the information submitted by the taxpayer to determine if the gain year(s) include a Form 8827, Credit for Prior Year Minimum Tax – Corporations. Review line 8c of the Form 8827 to determine if an amount greater than zero is included. If there is an amount greater than zero on Line 8c, the case may fit sequestration criteria. If no entry is found or the taxpayer entered a zero on line 8c, Corporate AMT Sequestration does not apply. Carryback applications/claims not fitting Corporate AMT Sequestration criteria are processed using normal Carryback procedures.

  6. The refundable amount of the accelerated minimum tax credit reported on Form 8827 Line 8c must exceed the tax on the module regardless of any other credits, credit elect to subsequent tax year, credit elect from a previous tax year, offsets into, or payments on the account.

    Note:

    For TY 2009 through 2011, the accelerated minimum tax credit on Form 8827 is included with the credits on Form 3800, General Business Credit, on Schedule J, Part II - Payments and Refundable Credits, of the corporate income tax return. For TY 2012 and subsequent tax years the accelerated minimum tax credit on Form 8827 is a separate entry on Schedule J of the corporate income tax return.

  7. The accelerated minimum tax credit on Form 8827 must be determined and considered separately from other credits reported on the return. See IRM 21.7.4.4.9.3, Sequestration of Form 8827 Credit – General Information, for additional information.

  8. The general rule for determining the amount subject to sequestration is the lesser of;

    1. the Form 8827 credit in excess of the tax (TC 150), or

    2. the amount of the refund after offsets and credit elect

  9. Additional information and background on the sequestration of the refundable portion of the Form 8827 credit can be found in;

    • IRM 21.7.4.4.9.3, Sequestration of Form 8827 Credit – General Information

    • IRM 21.7.4.4.9.3.1, Original Return Processing (SP) Procedures

    • IRM 21.7.4.4.9.3.2, Determining if Form 8827 Credit is Subject to Sequestration

    • IRM 21.7.4.4.9.3.3, Determining the Sequestration Amount and Inputting Adjustments on the Originally Filed Return

    • IRM 21.7.4.4.9.3.4 , Processing Amended Returns with Form 8827

    • IRM 21.7.4.4.9.3.5, Responding to Taxpayers Concerning Sequestration of Form 8827 Credits



21.5.9.5.14.8.1  (03-28-2014)
Determining When the Accelerated Minimum Tax Credit is Subject to Sequestration on a RINT/TENT

  1. In order for the accelerated minimum tax credit on Form 8827 Line 8c to be subject to sequestration, the accelerated minimum tax credit must exceed the remaining tax on the account after the carryback adjustment regardless of any other credits, credit elect, credit elect from a previous tax year, offsets into, or payments posted to the account.

    Example:

    TC 150 $1,000, TC 766 $2,000 (accelerated minimum tax credit), $1,000 (remaining accelerated minimum tax credit available for refund) is subject to sequestration.

    Example:

    TC 150 $1,000, TC 766 $2,000 (accelerated minimum tax credit), credit elect to the next tax year $500. $500 is the remaining overpayment and is subject to sequestration because it is solely comprised of the accelerated minimum tax credit.

  2. The credit must not be subject to an offset to a balance due on the account, cross-referenced account, or Non-Master File (NMF) account. Offsets to balance due accounts are not subject to sequestration.

    Example:

    TC 150 $1,000, TC 766 $2,000 (accelerated minimum tax credit), $1,000 offset to balance due. No remaining credit subject to sequestration.

    Example:

    TC 150 $1,000, TC 766 $2,000 (Accelerated minimum tax credit), credit elect to the next tax year $200, offset to balance due $100. $700 is the remaining overpayment and is subject to sequestration because it is solely comprised of the accelerated minimum tax credit.

  3. Review the account for cross-referenced accounts identified on ENMOD for balance due issues. In order to determine if a NMF balance due exists, research ENMOD for an unreversed TC 130.

    • If an unreversed TC 130 is located on the account, contact the AM NMF Unit via email to request all balance due account transcripts from Automated Non Master File (ANMF). Attach the NMF balance due transcripts to the CIS case.

  4. If a balance due is located on the account, determine the total credit needed to resolve the balance due(s) including penalties and interest. Transfer the appropriate credit to the balance due accounts. If the entire carryback overpayment is utilized to pay off balance dues, the accelerated minimum tax credit is not subject to sequestration.

    Note:

    If the balance due is a NMF Account, see IRM 3.17.64.10, Credit Transfers, for guidance.

    Note:

    Do not offset to a balance due module that includes a -E freeze. See IRM 21.5.6.4.10, -E Freeze, for additional information.

  5. Any remaining overpayment on the account due to a carryback adjustment on the gain year(s), and the taxpayer has claimed credit for the accelerated minimum tax credit, will be subject to Corporate AMT Sequestration. If the remaining overpayment is more than the credit for the accelerated minimum tax, only the accelerated minimum tax credit portion of the overpayment is subject to Corp AMT Sequestration.

  6. The general rule for determining the amount subject to sequestration is the lesser of;

    1. the credit in excess of the tax (TC 150), or

    2. the amount of the refund after offsets and credit elect

21.5.9.5.14.8.2  (03-28-2014)
Determining the Sequestration Amount and Processing Carryback Applications/Claims

  1. The Fiscal Year 2014 Corporate AMT Sequestration rate applied to Carryback applications/claims is 7.2%.

  2. The chart below provides guidance for making corrections to the accounts when the Form 8827 Line 8c credit is subject to sequestration.

    IF And Then Examples and Additional Information
    There are no offsets to balance due(s) The 45-day interest-free period is not in jeopardy
    • Utilize the Corp AMT Sequester worksheet to calculate the Corp AMT Sequestration amount at 7.2%

    • Reduce the Form 8827 credit by the calculated amount by inputting TC 767 with CRN 334

    Example:

    if $1,000 of the credit is subject to sequestration, $1,000 x 7.2% = $72.

    Example:

    (original returns processed after 12/31/2012)
    •TC 290 $ .00
    CRN 334 $72.00-

    Example:

    (original returns processed 12/31/2012 and prior)
    •TC 290 $.00
    TC 767 $ 72.00
    • Include HC 4 on the adjustment to stop CP210 and hold credits.
    • Notify the taxpayer via Letter 216C for TENTS or 4734C for RINTS utilizing in an open paragraph the verbiage in IRM 21.7.4.4.9.3.5, ,Responding to Taxpayers Concerning Sequestration of Form 8827 Credits, (1) informing the taxpayer that the Form 8827 credit available for refund has been reduced due to the sequestration.
    • Input the Carryback adjustment using normal procedures.

    Reminder:

    If a manual refund for the Carryback adjustment is required as per IRM 21.5.9.5.12, Carryback Manual Refund, (1). Be aware that the Carryback adjustment will post one cycle after the sequestration adjustment.

    There are no offsets to balance due(s) The 45-day interest-free period is in jeopardy
    • Utilize the Corp AMT Sequester worksheet to calculate the Corp AMT Sequestration amount at 7.2%

    • Reduce the Form 8827 credit by the calculated amount by inputting TC 767 with CRN 334

    Example:

    (original returns processed after 12/31/2012)
    •TC 290 $.00
    CRN 334 $72.00-

    Example:

    (original returns processed 12/31/2012 and prior)
    •TC 290 $.00
    TC 767 $72.00
    • Include HC 4 on the adjustment to stop CP210 and hold credits
    • Issue a manual refund per IRM 21.5.9.5.12(1) for the remaining overpayment
    • Notify the taxpayer via Letter 216C for TENT cases or 4734C for RINT cases utilizing the verbiage in IRM 21.7.4.4.9.3.5, Responding to Taxpayers Concerning Sequestration of Form 8827 Credits, (1) informing the taxpayer in an open paragraph that the Form 8827 credit available for refund has been reduced due to the sequestration
    • Input the Carryback adjustment using normal procedures

    Reminder:

    When issuing a manual refund for the Carryback adjustment per IRM 21.5.9.5.12, Carryback Manual Refund, (1). Be aware that the Carryback adjustment will post one cycle after the sequestration adjustment.

    Note:

    If the transaction goes unpostable, follow normal procedures to correct.

    There are offsets to balance dues The 45-day interest-free period is not in jeopardy
    • Determine the amount of offset needed for each balance due account using the appropriate “from” date

    • Transfer the previously determined amount to the balance due and include a TC 570 on the debit side of the credit transfer

    • Utilize the Corp AMT Sequester worksheet to calculate the Corp AMT Sequestration amount at 7.2%

    • Reduce the Form 8827 credit by the calculated amount by inputting TC 767 with CRN 334

    • If the balance due offsets are less than the overpayment, the Form 8827 credit will always be included in the overpayment

    Example:

    (original returns processed after 12/31/2012)
    •TC 290 $.00
    CRN 334 $72.00-

    Example:

    (original returns processed 12/31/2012 and prior)
    •TC 290 $.00
    TC 767 $72.00

    • Include HC 4 on the adjustment to stop CP210 and hold credits

    • Notify the taxpayer via Letter 216C for TENTS or 4734C for RINTS utilizing the verbiage in IRM 21.7.4.4.9.3.5, Responding to Taxpayers Concerning Sequestration of Form 8827 Credits, (1) informing the taxpayer in an open paragraph that the Form 8827 credit available for refund has been reduced based on the sequestration

    • Input the Carryback adjustment using normal procedures

    Reminder:

    If a manual refund for the Carryback adjustment is required as per IRM 21.5.9.5.12, Carryback Manual Refund, (1). Be aware that the Carryback adjustment will post one cycle after the sequestration adjustment.

    There are offsets to balance dues The 45-day interest-free period is in jeopardy
    • Determine the amount of offset needed for each balance due account using the appropriate “from” date

    • Transfer the previously determined amount to the balance due and include a TC 570 on the debit side of the credit transfer

    • Utilize the Corp AMT Sequester worksheet to calculate the Corp AMT Sequestration amount at 7.2%

    • Reduce the Form 8827 credit by the calculated amount by inputting TC 767 with CRN 334

    • If the balance due offsets are less than the overpayment, the Form 8827 credit will always be included in the overpayment

    Example:

    (original returns processed after 12/31/2012
    •TC 290 $.00
    CRN 334 $72.00-

    Example:

    (original returns processed 12/31/2012 and prior)

    • TC 290 $.00
      TC 767 $72.00

    • Include HC 4 on the adjustment to stop CP210 and hold the credit

    • Notify the taxpayer via Letter 216C for TENTS or 4734C for RINTS utilizing the verbiage in IRM 21.7.4.4.9.3.5, Responding to Taxpayers Concerning Sequestration of Form 8827 Credits, (1) informing the taxpayer in an open paragraph that the Form 8827 credit available for refund has been reduced based on the sequestration

    • Input the Carryback adjustment using normal procedures

    Reminder:

    When issuing a manual refund for the Carryback adjustment per IRM 21.5.9.5.12, Carryback Manual Refund, (1). Be aware that the Carryback adjustment will post one cycle after the sequestration adjustment.

    Note:

    If the adjustment goes unpostable, follow normal procedures for correction.

  3. Utilize the Corp AMT Sequestration calculator found on the SERP IRM Supplements page for the calculation of the amount of credit to be sequestered.

21.5.9.5.15  (10-01-2014)
Carryback Net Operating Loss (NOL) Effect on Refundable Credits

  1. A change in AGI (Adjusted Gross Income) can result in the taxpayer being eligible for refundable credits not claimed on the original return or ineligible for refundable credits that were originally claimed. It can also increase or decrease the amount of refundable credit originally claimed. The taxpayer must provide the appropriate forms or schedules to substantiate any such changes. For additional information on refundable credits, see IRM 21.6.3.4.2, Refundable Credits.

  2. The taxpayer applying the NOL may be entitled to Earned Income Tax Credit (EITC), additional EITC, Additional Child Tax Credit (ACTC), Recovery Rebate Credit, Premium Tax Credit or other refundable credits on one or more gain years, due to the decrease in AGI that now qualifies the taxpayer for one or more of these credits. It is important to note that any refundable credit could be affected by a NOL carryback on a gain year.

  3. The taxpayer must provide Schedule EIC for EITC if the taxpayer did not previously qualify for EITC, but now qualifies due to the change in AGI. See IRM 21.6.3.4.2.7.10, EITC Claims. Schedule EIC is not needed if the taxpayer previously claimed EITC and the EITC amount is simply being increased due to the change in AGI. Schedule EIC is also not required if the EITC is for self only with no qualifying children.

    Caution:

    Before making an adjustment to EITC, see IRM 21.6.3.4.2.7.17, EITC and Command Code DDBCK, for instructions on the required use of CC DDBCK. Also see IRM 21.6.3.4.2.7.15,EITC Recertification.

  4. The taxpayer must file Form 8812 for ACTC. Form 8812 is not required if the CSR/TE can "dummy in" the form and arrive at the figure the taxpayer is claiming. If the CSR/TE cannot arrive at the same figure, Form 8812 is required. See IRM 21.6.3.4.2.8.2, ACTC - Adjusting the Account, for additional information.

  5. CREDIT INTEREST ISSUES - If additional refundable credits are allowed;

    1. You must manually compute the credit interest on the gain year using TC 770.

      Exception:

      If issuing a manual refund, it is not necessary to input a TC 770 for zero (.00) with the adjustment. The interest will be manually computed and input with the manual refund as a TC 770, whether for zero or for a money amount.

    2. The EITC, ACTC, and/or other refundable credit is part of the carryback adjustment. Therefore, the credits are available on the loss year due date (determined without regard to extensions). See Note below for rules on computation of credit interest on these refundable credits.

    3. Credit interest should only be allowed if the 45-day period will not be met. See the Carryback 45-Day Interest-Free Charts on SERP and IRM 20.2.9.2, Determining the Overpayment Interest Period.

    4. If the 45-day period will be met, you must input TC 770 for zero (.00); otherwise, interest will be erroneously computed by Master File on the refundable credit from the due date of the gain year return (determined without regard to any extension of time for filing). See exception under (a) above.

    Note:

    Pursuant to IRM 20.2.9.2(1), Determining the Overpayment Interest Period, interest is computed from the later of: 1) the loss year return due date (determined without regard to extensions), 2) the received date of a delinquent loss year return, 3) the date the loss year return is filed in processible form, or 4) the date the overpayment arose.

  6. PENALTIES AND DEBIT INTEREST ISSUES - If an additional refundable credit is allowed, and a gain year module contains any assessed or accrued penalty or interest charges (as shown in the bullets below), you must manually compute and update the penalties and interest as part of the NOL adjustment. Otherwise, Master File will allow the credits from the gain year due date and erroneously recompute previously assessed penalty and interest charges.

    • Debit interest - TC 19X or 34X

      Note:

      If there is a -I freeze due to a TC 34X, the debit interest must be manually computed

    • Failure to pay (FTP) penalty - TC 27X

    • Failure to file (FTF) penalty - TC 16X

      Note:

      Input TC 160 .00 to prevent Failure To File penalty recomputation

    • Estimated tax (ES) penalty - TC 17X

    Note:

    If you are not skilled at manual computation of penalties and interest, request assistance from a restricted interest specialist at your campus (usually located in a restricted interest or technical team) to compute the penalty and interest for the carryback adjustment.

  7. EXAMPLE - Below is the account transcript data of a late filed 201012 individual tax return. The return due date is 04/15/2011 (no extension was filed). The late filed return was received on 09/17/2011. Since the return was filed late and was not full paid by the original return due date, failure to file, failure to pay, and interest charges were assessed when the return posted on 10/02/2011. Additional FTP and interest charges continue to accrue until paid. A NOL application was filed on 05/15/2013 for losses incurred on a timely filed 201212 tax return. The NOL application included EITC in the amount of $500 as part of the 201012 gain year adjustment. The CSR/TE who input the NOL adjustment addressed each of the penalties and the debit interest. Otherwise, Master File would have incorrectly recalculated them by using the gain year due date (04152011) as the available date for the $500 of EITC.

    Form 1040 - 201012
    Transaction Code 23C - Date Posted Amount Remarks
    CARRYBACK ADJUSTMENT - NOL LOSS YEAR 201212
    150 (Original return) 10/02/2011 5,000.00 Return Due 04/15/2011
    806 (Withholding) 04/15/2011 1,000.00- Withholding is always available on the Return Due Date (RDD)
    166 (FTF) 10/02/2011 900.00 Underpayment $4,000 x 5 percent x 5 months (max) less FTP ($4,000 X 1/2 percent X 5 months)

    Note:

    Interest is charged on the FTF penalty from the RDD or extended RDD, whichever is later.

    276 (FTP) 10/02/2011 120.00 Underpayment $4,000 x 1/2 percent x 6 months late as of 10/02/2011
    196 (Debit interest) 10/02/2011 175.42 Interest due as of 10/02/2011
    764 (EITC) 04/15/2011 500.00- EITC posts with gain year return due date (Available for purposes of computing debit interest and penalties on the loss year due date determined without regard to extensions).
    295 (NOL) 06/16/2013 2,000.00- INTCMP-DT>04152013
    TCB-DT>05152013
    160 (FTF) 06/16/2013 .00 Required input; otherwise Master File will reduce the posted FTF based on TC 764 from the gain year due date
    270 (FTP) 06/16/2013 382.50 Requires manual computation and input; otherwise Master File will compute FTP based on TC 764 from the gain year due date.
    340 (Interest) 06/16/2013 694.19 Requires manual computation and input
    COMP-INT-AMT>3,772.11
    DB-INT-TO-DT>06162013

    Note:

    For information on the COMP-INT-AMT, see IRM 20.2.8.11, Non-Restricting TC 340.

  8. Reducing the AGI based on a Carryback adjustment never decreases the taxpayer's previously reported refundable credit(s).

21.5.9.5.16  (11-17-2011)
Allocating Carryback Net Operating Losses (NOLs)

  1. In general, for non-community property states, the taxpayer must file an allocation schedule if he or she changes marital status, filing status or spouses in any carryback gain or loss year. For non-community property states, accept the allocation provided by the taxpayer. See Exhibit 21.5.9-2. For processing procedures on over tolerance claims, see paragraph (4) below.

    Note:

    These instructions do not restrict your ability to reject a claim when appropriate. See Exhibit 21.5.9-2.

  2. An allocation schedule is not required if the income, deductions, and NOL are split 50-50 in the following community property states;

    • Arizona

    • California

    • Idaho

    • Louisiana

    • Nevada

    • New Mexico

    • Texas

    • Washington

    • Wisconsin

  3. The allocation schedule may be provided and deemed appropriate in community property states if the taxpayer has income from separate property that is not treated as community property, or if the taxpayer provides reasonable evidence that the parties must allocate their loss pursuant to stipulation or decree approved by the state court. The allocation schedule must properly show which income, deductions, withholding, tax liability and refund belongs to each spouse. A signed statement that loss belongs to other spouse is needed.

    If Then
    Both taxpayers were married to each other and filed joint returns for all the years involved Treat the NOL deduction as a joint NOL.
    Both taxpayers were not married to each other during the gain year Only the spouse who incurred the NOL in the loss year may take the deduction.
  4. The following rules apply to taxpayers whose marital status has changed between the taxable year they incur an NOL and the taxable year they seek to use the NOL;

    1. A taxpayer cannot use a NOL incurred before or after marriage to offset the income of a spouse. For example, a taxpayer cannot carryback a NOL incurred after a divorce or death of a spouse to offset the spouse's portion of the jointly-reported income.

    2. A taxpayer who incurs a NOL after a divorce or the death of a spouse may use the NOL to offset only the taxpayer's share of income reported on a joint return filed when the taxpayer and the spouse were married. The refund or credit cannot exceed the recomputed joint overpayment after the NOL is applied.

    3. An overpayment attributable to Spouse A from a joint tax return cannot be used to offset the tax liability of Spouse B from a separate return or a joint return with another taxpayer. Each spouse's share of the overpayment from the joint return must be determined. Math verify the allocation worksheet(s) on over-tolerance cases to ensure that each spouse receives the correct refund.

    4. The taxpayer's former spouse may be entitled to a refund of tax due to the carryback of the taxpayer's NOL to a year in which the former spouses filed a joint return, because of the former spouse's "separate interest" in the joint overpayment.

    5. A former spouse may file a "separate interest" claim or application for refund or credit from a tax year in which the former spouse filed a joint return. Both former spouses' signatures are not required on the request. The signature of the former spouse requesting the refund or credit is sufficient.

  5. Use the following steps when a person (the loss year spouse) carries a NOL back to a taxable year, in which that person filed a joint return with a former spouse.

    1. Recompute the joint tax liability for the carryback year, limiting the maximum amount of the NOL deduction to what the loss year spouse's taxable income for the carryback year would have been, if the spouses had filed married filing separately for that tax year.

    2. After applying the NOL, compute what each spouse's separate tax liability for the carryback year would have been, if the spouses had filed married filing separately for that carryback year. Then allocate the recomputed joint tax liability between the spouses based on the following formulas.

      Former Spouse's Separate Tax Liability
      (divided by)
      Total Separate Tax Liabilities
      X Recomputed Joint Tax Liability = Former Spouse's Share of Recomputed Joint Tax Liability
    3. Next, determine each former spouse's contribution toward the payment of the joint tax liability for the carryback year. In a non-community property state, federal income taxes withheld from the wages of a spouse are treated as contributions by that spouse toward the payment of the joint tax liability. In the absence of evidence to the contrary, allocate joint estimated tax payments between former spouses based on the following formula;

      Former Spouse's Separate Tax Liability
      (divided by)
      Total Separate Tax Liabilities
      X Joint Estimated Tax Payment = Former Spouse's Share of Joint Estimated Tax Payment
    4. The refund or credit due each former spouse is the excess of that spouse's contribution to the payment of the recomputed joint tax liability over that spouse's share of the recomputed joint tax liability.

      Note:

      Use joint rate if spouse is deceased.

  6. If the taxpayer's spouse without the NOL is entitled to a refund;

    1. Do not allow a refund to the spouse, not reporting the NOL, without a signed claim or application.

    2. Send a Letter 662C to notify the spouse, not reporting the NOL, he/she may be entitled to a refund of his/her separate interest in the overpayment.

    3. Input TC 971, Action Code 037, to cross-reference the spouse receiving the refund. See IRM 21.4.4.5, Other Manual Refund Requirements.

    4. Issue a manual refund and place a cover sheet on top of the manual refund requesting the Form 1099 be issued at the end of the year (if paying interest), to the taxpayer who is receiving the refund. Use the appropriate Hold Code on the adjustment.

    Note:

    Pub 536 provides taxpayers with allocation instructions.

  7. Any reassessments must be made against the spouse who received the refund;

    1. Freeze the account with TC 470 no CC (closing code).

    2. Assess the appropriate Master File account.

    3. Prepare a C-Letter to advise taxpayer of the separate reassessment.

    4. Prepare Form 3465 to advise Accounting to input TC 400 and the correct account to bill.

    5. Send both the C-Letter and Form 3465 to Accounting for further processing.

21.5.9.5.17  (10-01-2013)
Carryback Net Operating Loss (NOL) Affecting Alternative Minimum Tax (AMT)

  1. The taxpayer calculates Alternative Minimum Tax (AMT) on "Tax Preference Items," or benefits received from deductions, lower tax rates, and exclusions from tax.

  2. A NOL carryback may increase or decrease the amount of AMT owed.

  3. A carryback of most general business credits does not decrease the amount of AMT owed. See IRC § 38(c) for exceptions.

  4. A carryback of foreign tax credit can increase the amount of AMT owed.

  5. Ensure the taxpayer reporting or changing AMT has attached the following, unless the examiner can verify AMT through IDRS, CFOL research, etc.;

    1. Revised Form 6251, Alternative Minimum Tax Computation, for each gain year, to Form 1045/Form 1040X. Verify all figures reported on Form 1045/Form 1040X, for each gain year.

      Note:

      Original Form 6251 information can be viewed on CC TRDBV.

    2. Form 4626, Computation of Alternative Minimum Tax-Corporations and Fiduciaries, to Form 1139/Form 1120X. Verify these figures with Form 1139/Form 1120X for the tax year involved.

      Caution:

      Thorough verification of figures and computations must be made on Form 6251 (Individual Master File) and Form 4626 (Business Master File) and related schedules, to the extent possible, on carryback cases. As an example, for IMF, charitable contributions should be verified on Schedule A, and Alternative Minimum Tax verified on the Form 6251. Employees must verify the accuracy of the Master File figures, to the extent possible, before rejecting a claim when there are differences between Master File and figures on the claim. See IRM 21.5.9.4.5, Master File Verification - Incorrectly Calculated Carryback Applications/Claims.

  6. Various legislative acts over the last several years have allowed for certain NOLs to offset 100 percent (from 90 percent) of the taxpayer's Alternative Minimum Taxable Income (AMTI). Some of these are The Job Creation and Workers Assistance Act of 2002, Gulf Opportunity Zone Act of 2005 (GO Zone), Kansas Disaster Net Operating Losses (2008), Midwest Disaster Net Operating Losses (2008), National Disaster Relief Act of 2008, and The Worker, Homeownership, and Business Assistance Act of 2009 (which also includes elections made under the American Recovery and Reinvestment Act of 2009). Information on these legislative acts can be found in specific subsections of this IRM. See IRM 21.5.9.5.14, Carryback Net Operating Loss (NOL).

21.5.9.5.18  (10-01-2013)
Carrybacks Filed by Estates and Trusts

  1. This Section outlines the procedures for estates and trusts claiming Net Operating Loss (NOL) carrybacks by filing;

    • Form 1045, Application for Tentative Refund, (TENT)

    • Amended Form 1041, U.S. Income Tax Return for Estates and Trusts, (RINT)

  2. The estate, trust, or organization must compute the NOL on a separate schedule and attach it to the claim or application. (Generally on Schedule A, of Form 1045)

  3. See IRM 21.5.9.5.20, Computing the Net Operating Loss (NOL) of Estates and Trusts, for instructions on computing the NOL of estates and trusts.

  4. Taxpayers filing an amended Form 1041 are instructed to check the amended return box and to write "NOL Carryback" on the top of the form.

21.5.9.5.19  (04-08-2011)
Carrybacks Filed by Exempt and Charitable Organizations

  1. Exempt and charitable organizations may claim a net operating loss and net operating loss deduction, subject to the restrictions in IRC § 512(b)(6), using

    • Form 1139 or Form 1120-C, U.S. Income Tax Return for Cooperative Associations

    • Form 1139 or Form 990-T, Exempt Organization Business Income Tax Return. Procedures for processing Form 990-T are located in IRM 21.7.7, Exempt Organization and Tax Exempt Bonds.

  2. Expedite carryback claims and applications involving Exempt Organizations to the Ogden Campus within three days of Accounts Management received date.

  3. See IRM 21.3.6, Forms and Information Requests, and IRM 21.7.7.4.16.10, Form 990-T Employee Plan (EP) Claim Procedures, for more information.

  4. The Ogden Campus processes carrybacks filed by exempt and charitable organizations.

  5. The Ogden Campus processes TENTS in the Accounts Management function to meet the 90-day processing requirement. See IRM 21.7.7.4.16.10.3, Form 1139 Applications for Employee Plans.

21.5.9.5.20  (10-01-2013)
Computing the Net Operating Loss (NOL) of Estates and Trusts

  1. When computing the NOL, the estate or trust will complete Schedule A of Form 1045 and exclude the following;

    • Charitable contribution deduction (Schedule A, Form 1041)

    • Income distribution deduction (Schedule B, Form 1041)

    • Exemption amount

  2. Verify the NOL computation using the Schedule A (Form 1045) line item entries compared to the related line items on Form 1041 (or use CC BRTVU).

  3. The allowable exemptions for estates and trusts are;

    • $600 - Estates

    • $300 - Trusts, required to distribute all their income

    • $100 - Trusts, not required to distribute all their income

    Note:

    The exemption amount, in lieu of a personal exemption, is not deductible for NOL purposes.

  4. Like individuals, estates and trusts cannot include a Net Operating Loss Deduction (NOLD) from another year or use a Net Capital Loss (NCL) to increase a NOL.

  5. Treat the estate or trust as an individual when applying the NOLD to the carryback years and computing the "intervening year modifications." Use Form 1045, Schedule B.

  6. If the NOLD is fully absorbed in the earliest gain year, no intervening year modifications are required;

    1. Subtract the NOLD from the TXI.

    2. Recompute any income or deduction based on or limited to a percentage of the income.

      Note:

      Do not recompute charitable contributions.

    3. Recompute the tax, using the new taxable income.

  7. If the NOLD is not fully absorbed in the earliest gain year, add back "intervening year modifications" to recompute the taxable income in each affected gain year.

    1. Start with the taxable income shown on Master File, rather than income reported on taxpayer's return. Add back charitable contribution and income distribution deductions.

    2. Add back any net capital loss deduction.

    3. Add back the exemption amount.

    4. Recompute income or deductions based on or limited to a percentage of AGI, only if you have entries for 2) or 3) above.

    5. Recompute the NOLD disregarding NOLs for the loss year and succeeding years.

      Note:

      Net Operating Loss deductions are taken on Form 1041 as an itemized deduction not subject to the two percent limitation.

    6. Compute corrected tax liability.

  8. Paragraphs (9), (10), and (11) discuss the effects an estate/trust NOL may have on the individual beneficiaries.

  9. When a NOL carryback occurs, income beneficiaries may be entitled to a refund on their individual return. The income amount previously included in their gross income from the carryback year would be limited to the estates/trusts' distributable net income after application of the NOL carryback. The correction in distributable net income applicable to the beneficiary will be reflected on an amended Schedule K-1 when the estate/trust prepares its Form 1045/Form 1041 to carry back its NOL.

  10. When an income beneficiary receives an amended Schedule K-1, due to the estate/trust NOL carryback discussed in Paragraph (9), the individual must file an amended return within three years of the due date of the return (including extensions) of the taxable year of the NOL. For example, a 2008 refund claim resulting from a 2010 calendar year estate/trust NOL carryback generally must be filed by April 15, 2014 if the 2008 estate/trust return was not extended. Even though the adjustment to the individual's account is not a NOL attributable to the individual taxpayer, use a TC 299 and the trust/estate's loss year due date as the Interest Computation Date when making the adjustment to the individual beneficiary's tax module. Use the amended return received date as the TCB date on the adjustment. See Rev. Rul. 61-20.

    Caution:

    In the example above, the RSED for the individual's timely-filed 2008 return is April 15, 2012. However, because the amended return is the result of a NOL carryback of an estate or trust, of which the individual is a beneficiary, the taxpayer has until April 15, 2014 to file an amended return, based on the amended K-1, and to receive a refund. Use of the TC 299 and the Interest Computation Date of the estate/trust's loss year return allows the adjustment to post and the refund to issue with the correct amount of allowable interest (if any).

  11. On the termination of the estate or trust, any unused NOL carryover that would be allowable to the estate or trust in a later tax year, but for the termination, is allowed to the beneficiaries succeeding to the property of the estate or trust. Beneficiaries claiming the NOL on their individual returns can only carry the NOL forward.

21.5.9.5.21  (11-17-2006)
Carrybacks Filed by Trustee in Bankruptcy

  1. A separate "estate" is created when an individual debtor files for bankruptcy under chapter 7 or 11 of the Bankruptcy Code. After that, the individual debtor and the bankruptcy estate are treated as separate taxable entities, and, either one, or both, may have carrybacks.

  2. An individual debtor with non exempt assets, may choose to end his or her tax year the day before filing the bankruptcy case, using;

    • One Form 1040 on or before the due date for the tax year ending the day before the bankruptcy case commences

    • One Form 1040 for the taxable year beginning the day the bankruptcy case commences

    Note:

    Each short period is considered a "taxable year" for carryback purposes.

  3. A trustee in bankruptcy or the debtor in possession may identify a Net Operating Loss (NOL) or unused credit when filing Form 1041 on behalf of the Bankruptcy Estate. The trustee or debtor must sign Form 1041 and attach a copy of the Form 1040 showing the estate’s income, deductions, credits, etc. The trustee or debtor may file either Form 1045 or Form 1040X (normally with Schedule A of Form 1045 as a worksheet) to claim the carryback. See Publication 536, Net Operating Losses for Individuals, Estates, and Trusts.

    Note:

    A separate carryback from the debtor's activities is carried back by the debtor in the same manner as any other individual.

  4. A bankruptcy estate computes taxable income the same way as an individual;

    • Using one personal exemption; and claiming itemized deductions or the basic standard deduction as married filing separately

    • Computing tax using the married filing separately rate; and

    • Succeeding to, and taking into account certain tax attributes of the debtor under Section 1398 (g), including NOL and credit carryovers

  5. If any gain year of the estate is a taxable year before the estate's first taxable year, the gain year is taken into account for the debtor's taxable year corresponding to the carryback year. See IRC § 1398 (j)(2)(a). Therefore, a carryback from the estate's activities is the only one that can be carried back and used against the debtor's pre-bankruptcy years.

  6. The debtor cannot carry back to a taxable year before the debtor's taxable year in which the case commences any carryback from a taxable year ending after the case commences. Therefore, a separate carryback from the debtor's non-estate activities can only be carried back and used against the debtor's post-bankruptcy income.

  7. Upon "termination" of the estate (termination is not defined in the code or regulations), the debtor succeeds to and takes into account certain tax attributes of the estate under section 1398 (i), including NOL and credit carryovers.

  8. When you process these returns, if an account has a -V and/or -W freeze, and an indicator (TC 520 with closing codes 60-67, 81, 83, or 85-89), contact the Insolvency Unit before making the adjustment.

21.5.9.5.22  (10-01-2013)
Carryback Applying Net Operating Loss Deduction (NOLD)

  1. Net Operating Loss Deduction (NOLD) is the net operating loss deducted against income on other tax years (gain years).

  2. Apply the NOLD as a business deduction, even if taxpayer did not have business income that gain year. The NOLD offsets income from all sources including capital gains, in excess of capital losses.

  3. The NOLD is fully absorbed in a gain year when;

    • It is less than or equal to the adjusted gross income (AGI), with certain modifications, minus the total standard deductions or itemized deductions for IMF (Individual Master File).

    • It is less than or equal to taxable income for BMF (Business Master File).

21.5.9.5.23  (10-01-2013)
Computing the IMF (Individual) Carryback Net Operating Loss Deduction (NOLD)

  1. When recomputing taxable income and tax liability, subtract the NOLD from the Adjusted Gross Income (AGI). Recompute any income or deduction based on, or limited to, a percentage of the adjusted gross income or modified adjusted gross income, after applying the NOLD such as;

    • Passive activity losses from real estate rentals

    • Taxable social security benefits

    • IRA deductions

    • Excludable savings bond interest

    • Medical expenses

    • Personal casualty and theft losses

    • Miscellaneous deductions subject to the 2 percent limit

    • Itemized deduction limitation

    • Phase out of the deduction for personal exemptions

    Note:

    Charitable contribution deductions are not recomputed.

    Note:

    Recompute the tax, using the new taxable income. While it is necessary to refigure the income tax, AMT, and credits, do not refigure self-employment tax.

  2. When the NOL is not fully absorbed, compute modified taxable income for each affected gain year. Modified taxable income determines how much NOL is absorbed in a gain year and how much remains to be carried to a later year.

    1. Start with the correct taxable income shown on the Master File (MF) rather than the income reported on taxpayer's return.

    2. Recompute the NOLD, disregarding NOLs for the loss year and subsequent years.

    3. Add back the section 1202 exclusion.

    4. Add back the section 199 deduction.

    5. Add back the Net Capital Loss deduction from Schedule D, Form 1040.

    6. Recompute any income or deductions based on or limited to a percentage of the AGI.

    7. Add back the deduction for exemptions.

    8. Subtract the modified taxable income from the NOL to determine how much NOL may be carried to the next gain year.

    9. Repeat steps 1 through 8 until the loss is used, or until the carryover period expires.

    Note:

    Verify taxpayer's NOL absorption computation using Form 1045, Schedule B.

21.5.9.5.24  (10-01-2009)
Computing the Carryback BMF Net Operating Loss Deduction (NOLD)

  1. When recomputing taxable income and tax liability;

    1. Make no modification if the NOLD is fully absorbed in the applicable preceding year.

    2. Subtract the NOLD from the taxable income of the gain year.

    3. Recompute deductions, credits, or tax computations based on or limited to a percentage of the taxable income, or tax liability such as dividends paid on Preferred Stock or alternative tax.

    4. Compute the tax using the new taxable income.

  2. When a Net Operating Loss (NOL) is not fully absorbed, compute modified taxable income in each affected gain year. Modified taxable income determines how much NOL is absorbed in each year.

    1. Use the correct taxable income on Master File, rather than taxpayer's reported income.

    2. Add back any NOLDs deducted for the loss year and subsequent years.

    3. Add back the section 199 deduction.

    4. Recompute deductions limited to a percentage of the taxable income.

    5. Subtract modified taxable income from the NOL to determine how much NOL may be carried to the next gain year.

    6. Repeat steps 1 through 5 until loss is used or until the expiration of the applicable carryover period.

      Caution:

      Do not reduce the Personal Holding Tax, Schedule PH, Form 1120 or the Accumulated Earnings Tax assessed by Examination.

      Note:

      Charitable contribution deductions are not recomputed.

  3. If a NOL occurs in more than one year, the earlier loss year is deducted before the later loss.

21.5.9.5.25  (10-01-2013)
Net Capital Loss (NCL) - Individuals - Carryback/Carryforward Limitations

  1. For individuals, capital losses in any year are deductible to the extent of capital gains, plus a limited amount of ordinary income ($3,000 Married Filing Joint, or $1,500 Married Filing Separately). Any excess is a net capital loss (NCL).

  2. Carry the NCL forward only (not back) on an IMF (Individual Master File) return. For an election to carry back losses from IRC § 1256 contracts, see IRM 21.5.9.5.45, Net 1256 Contract Loss Carryback.

  3. A capital loss retains its character as short-term or long-term when it is carried forward. The Schedule D instructions provide a worksheet for computing the amount of the NCL carryforward. The carryforward is combined with other capital gains and losses in the carryforward year. If the combined net losses exceed the deduction limit in that year, there is a NCL carryforward to the following year.

21.5.9.5.26  (10-01-2010)
Net Capital Loss (NCL) - Corporations - Carryback/Carryforward Limitations

  1. A corporation can deduct capital losses only up to the amount of its capital gains. In other words, if a corporation has an excess capital loss, it cannot deduct the loss in the current tax year. Instead, it carries the loss to other tax years and deducts it from any net capital gains that occur in those years.

  2. Unused losses may be carried back three years and forward five years. Losses not deducted in the carryback and carryforward years are forfeited.

    Note:

    The entire amount of any net capital loss must be carried to the earliest of the taxable years to which such net capital loss may be carried. See Treas. Reg. 1.1212-1(a)(3)(ii).

  3. Corporations may carry back a capital loss only to a year with a capital gain, and only to the extent of the gain in that year. This means that a NCL carryback will never reduce the corporation's taxable income below zero since the NCL carryback cannot exceed the capital gain in the carryback year. Combine the loss with all other capital losses in the carryback year until they offset any capital gains for that year.

  4. Carryback the NCL before the Net Operating Loss (NOL). A capital loss carried back cannot cause or increase a NOL in the carryback year.

  5. For tax years beginning after December 31, 2004, the net capital loss for a corporation cannot be carried back to any year the corporation is a;

    • Real Estate Investment Trust (REIT), or

    • Regulated Investment Company (RIC).

  6. For tax years beginning on or before December 31, 2004, the net capital loss for a corporation cannot be carried back to any year the corporation is a;

    • Foreign Personal Holding Company

    • Regulated Investment Company (RIC)

    • Real Estate Investment Trust (REIT)

    • Foreign Investment Company with an IRC 1247 Election

21.5.9.5.27  (05-06-2011)
Carryback "Claim of Right"

  1. A taxpayer may file for a refund based on a "Claim of Right" adjustment on Form 1045 or Form 1139 (whether or not the claim is related to a carryback) in order to be eligible for 90-day processing. The taxpayer only enters;

    • Line 28 on Form 1045, or

    • Line 28 on Form 1139

  2. Follow instructions in IRM 21.6.6.3.12, Repayments of Amounts Reported on Forms 1099C, Cancellation of Debt, Erroneously Included in Income and Claim or Right - Section 1341.

  3. Attach Form 1045 or Form 1139 as the source document.

  4. A Claim of Right adjustment for a year may result in a Net Operating Loss (NOL) for that year or a NOL or Net Capital Loss (NCL) for a prior year. Carrybacks and carryforwards prior to the year of the adjustment are taken into account in determining the amount of the adjustment. Normal rules apply for carrying forward any unused NOL or NCL past the year of the adjustment.

21.5.9.5.28  (10-01-2014)
Form 1138, Extension of Time for Payment of Taxes by a Corporation Expecting a Net Operating Loss (NOL) Carryback

  1. This section provides procedures for processing Form 1138, Extension of Time for Payment of Taxes by a Corporation Expecting a Net Operating Loss Carryback. e

  2. The extension applies to tax required to be paid after the filing of Form 1138. The payment of tax that may be postponed cannot exceed the expected overpayment from the carryback of the NOL.

    Note:

    Form 1138 may be submitted with Form 7004, Application for Automatic Extension of Time To File Certain Business Income Tax, Information, and Other Returns, to allow the taxpayer to defer payment of some or all of the tax due to be paid with the extension request.

  3. In general, the extension for paying the tax expires at the end of the month in which the return for the tax year of the expected NOL is required to be filed (including extensions). The corporation can further extend the time for payment by filing Form 1139, Corporation Application for Tentative Refund, before the period of extension ends. See Example in Paragraph (4).

  4. EXAMPLE;

    • A corporation files Form 7004, Application for Automatic Extension of Time To File Certain Business Income Tax, Information, and Other Returns, for its 201112 tax year. The taxpayer expects to owe $50,000 on the 201112 tax return. The extended return due date is 09/15/2012.

    • At the same time, the corporation files Form 1138 to extend the time to pay the $50,000 tax for 201112 because the corporation expects to have a NOL of $100,000 in 2012.

    • The corporation timely files a balance due return for 201112 on 09/10/2012 with $50,000 of tax due.

    • The extension of time to pay the $50,000 tax for the 201112 tax year expires on 03/31/2013 (the end of the month in which the return for the NOL tax year (201212) is required to be filed (03/15/2013)).

    • If the corporation files a tentative carryback application (Form 1139) on or before 03/31/2013, the extension of time to pay the $50,000 201112 tax is further extended until the Form 1139 is either processed or rejected.

  5. Corporations may also file Form 1138 to defer payment of an amount assessed as a deficiency, interest, or penalty. If Form 1138 is filed after the return due date it must be filed by the 10th day following the initial notice of assessment, regardless of the amount shown in the notice.

  6. For purposes of calculating the Failure to Pay (FTP) penalty, a carryback applied to an earlier gain year is deemed to be a payment that is available on the due date of the loss year return. See IRM 20.1.2.2.5, Carrybacks and Carryovers. However, a Failure to Pay penalty is not imposed for any portion of unpaid tax that is satisfied by a NOL carryback using Form 1138. Under Treas. Reg. 1.6164-1(b) and Treas Reg 1.6164-2(a), the time for payment of the portion of tax satisfied by the carryback is automatically extended when the IRS accepts Form 1138.

  7. Interest is charged on postponed amounts from the date that the payments would normally be due.

  8. Reject Form 1138 if;

    • Deferred tax is not corporate income tax

    • Deferred tax is not due for the prior year (check for balance due on the tax year immediately preceding tax year entered on Line 1, Form 1138)

    • Form 1138 is incomplete and/or is not signed by taxpayer or valid representative

    • The deferred tax is paid

    • The corporation is a Personal Service Corporation (PSC) with a valid Section 444 election for the year to which (or from which) the corporation is seeking a NOL carryback. (If ENMOD shows a TC 054 or TC 055 and the entity's FYM is other than 12, the PSC has a valid Section 444 election.)

  9. Suspend the Form 1138 if the gain year has not been processed. Push code the 1138 to the gain year return, and return to the CSR. When the push code is returned, follow the instructions in Paragraph (10).

  10. Process Form 1138 using the table below.

    If Then
    Form 1138 is accepted
    1. Determine the deferred amount (Form 1138, Line 6c).

    2. Inform the taxpayer by mail, using Letter 2643C, that Form 1138 has been accepted. Request payment for any undeferred amount within 30 days (Form 1138, Line 3 minus Line 6c). See Step 5 below.

    3. Input TC 470 CC 98 on the immediately preceding tax year where there is the balance due. This sets a W- freeze on the module and suspends both collection action and offsets in to the module.

    4. Input TC 930 DLN Code 85 using your tax examiner number on the loss year. When the loss year return posts, follow the instructions in paragraph (12) below.

    5. Monitor for fourth payment of any non-deferred amount. Release the freeze with TC 472 CC 98, if payment not received within 30 days.

    Form 1138 is not accepted
    1. Correspond with taxpayer, using Letter 2643C to explain why Form 1138 was rejected.

    2. Associate Form 1138 with the original gain year return.

  11. A TC 470 CC 98 (W- freeze) is released by any of the following actions.

    • Input of a TC 295

    • Systemically (after 52 cycles)

    • Input of TC 472 CC 98

    • When module becomes zero or credit balance

  12. In order for the taxpayer to get the further extension noted in Paragraph (3), Form 1139 must be filed by the end of the month in which the loss year return is due (including extensions). Otherwise, the extension to pay the prior year tax expires on that date (see paragraph (4) above). Monitor the loss year for receipt of Form 1139 by the required date. Follow the instructions in the table below.

    Example:

    Form 1138 is filed and accepted for an extension to pay taxes for 201112. This grants the taxpayer an extension to pay the prior year taxes until 03/31/2013 (the end of the month in which the loss year return is due). Form 1120 is timely filed for 201212 on 03/15/2013. The taxpayer files Form 1139 on 03/20/2013. This filing allows the taxpayer an extension to pay the prior year taxes until the Form 1139 is either accepted or rejected. If the taxpayer does not file Form 1139 by 03/31/2013, then the extension expires. In that case, input TC 472 CC 98 to release the W- freeze on the prior year module to allow the normal collection and offset routine to resume.

    If Form 1139 Then
    Is filed by the required date
    • On the gain year, abate any assessed Failure to Pay (FTP) penalty (TC 270 or 276) on the portion of tax that is satisfied by the carryback.

    • No further action is required. Input of TC 295 on the gain year releases the TC 470 CC 98 and allows normal collection/offset routine to resume on any amount not paid by the NOL.

    Is not filed by the required date Input TC 472 CC 98 to release TC 470 and allow the normal offset and collection routine to resume. Associate Form 1138 with the original gain year return.

21.5.9.5.29  (10-01-2013)
Carrybacks Filed on Form 1045 and Form 1139 (TENTS)

  1. This section provides procedures for working applications for tentative refunds (TENTS). Taxpayers file carryback TENTS using these forms;

    • Form 1045, Application for Tentative Refund for IMF (Individual Master File)

    • Form 1139, Corporation Application for Tentative Refund for BMF (Business Master File)

  2. When processing Form 1045, consider the following;

    • Net Operating Loss (NOL)

    • Net Operating Loss Deduction (NOLD)

    • Earned Income Tax Credit (EITC)

    • Net Capital Loss (NCL)

    • Allocations for filing status changes

    • Alternative Minimum Tax (AMT)

    • Carryback/carryforward periods

    • Additional Child Tax Credit (ACTC)

    • IDRS/Master File verification of loss year and gain year

    • Statute expiration

  3. When processing Form 1139, consider the following;

    • Special Rules for BMF (Business Master File) NOLs and NOLD

    • BMF (Business Master File) NCL

    • BMF (Business Master File) Carryback/Carryforward Periods

    • Consolidated Corporations

    • Personal Service Corporation

    • Form 1138

21.5.9.5.30  (10-01-2013)
Carryback Form 1045 and Form 1139 Processing and Filing Requirements

  1. Form 1045 and Form 1139 have a 90-day processing requirement. The start of the 90-day statutory processing period begins on the later of;

    • The date the complete application is filed, or

    • The last day of the month that includes the due date (including extensions) for filing the income tax return for the year in which the loss or credit arose.

  2. The 90-day processing period allows the Service an opportunity to review, perfect and process an application. The 90-day period does not allow the taxpayer any additional time, beyond the normal 12-month period, to perfect, modify or refile an application.

  3. Therefore, if any information is missing, it is critical that two telephone attempts be made to contact the taxpayer requesting the missing information be faxed in order to complete the processing of the application. Document CIS with the times and dates of the telephone attempts. See IRM 21.5.9.4.3, Rejecting Unprocessible Carryback Applications/Claims, for additional information.

  4. Otherwise, if an application is not processible and the 12 month period has expired or will expire shortly, the application must be rejected and the taxpayer must be advised to file an amended return to claim the carryback.

  5. To meet the 90 day legal requirement, the adjustment must be input by the time frames below.

    1. Within 70 days of the TENT received date; or

    2. Within 70 days of the last day of the month that includes the due date (or extended due date) for filing the loss year return.

      Reminder:

      Every effort must be made to process the carryback within the 45-day interest-free period mentioned in (7) below. The Carryback 45-Day Interest-Free Charts are located on SERP under the IRM Supplement tab.

  6. IRC § 6411(a) requires that the loss year return must be filed on or before the date a tentative carryback application (Form 1045 or Form 1139) is filed. It is not necessary for the loss year return to be posted to Master File at the time the TENT is processed. If the loss year return has not posted, verify the date on Line 2b of Form 1139 or Form 1045 has been entered and is not a date that is in the future. If blank or a future date was entered, reject the application and advise the taxpayer he/she can resubmit the TENT once the loss year return has been filed. See IRM 21.5.9.4.2, Identifying Processible and Unprocessible Carryback Applications/Claims.

  7. TENTS have a 45-day interest-free period. See IRM 21.5.9.5.32, Carryback Form 1045 and Form 1139 interest Computation Dates.

  8. Taxpayers filing for a TENT must file the application within one year from the end of the loss year (e.g., 200912, on or before Dec. 31, 2010).

    Exception:

    A corporation that becomes a new member of a consolidated group files a separate return for the period up to the date the corporation became a new member of the consolidated group. Regulations under IRC § 1502 (for separate return years of new members that begin on or after January 1, 2001) specify that certain corporations can file their tentative carryback application for the short period, separate return year, within one year from the end of the current taxable year of the "consolidated group" that the new member joins. If such corporations choose to file for a tentative carryback for the separate return year, those corporations must, on Form 1139, check "yes" on line 5a and complete line 5b.

    Example:

    Both Corporation X and Y are calendar year filers. Corporation X is being acquired by the Y consolidated group on June 30, 2007 in a transaction that does not qualify as a reverse acquisition. Corporation X closes its books on June 30, 2007. Corporation X has filed a short period, separate return for January through June. Previously, Corporation X ending its tax year in June would only have until June 30, 2008 to file a Form 1139. However, the regulations under IRC § 1502, allow Corporation X to use the Y consolidated group's tax year end to determine the proper date for filing Form 1139. Therefore, under the regulations, Corporation X will have until Dec. 31, 2008 to file a Form 1139 instead of June 30, 2008.

    Exception:

    Taxpayers that make an irrevocable three, four, or five-year carryback election under the Worker, Homeownership, and Business Assistance Act (WHBAA) of 2009 are permitted an extended period of time to file a tentative carryback application. Taxpayers may make a WHBAA election for one tax year that begins or ends in 2008 or 2009. Taxpayers that make this election for either a 2008 or 2009 tax year have until the due date or extended due date, of the taxpayer's last taxable year that begins in 2009 to file Form 1045 or Form 1139. See IRM 21.5.9.5.14.7, Worker, Homeownership, and Business Assistance Act of 2009 (PL 111-92, Section 13) - Net operating Losses(5).

21.5.9.5.31  (10-12-2010)
Carryback Form 1045 and Form 1139 Transaction Codes, Blocking Series, and CIS Requirements

  1. Unique transaction codes and blocking series are used to adjust TENTS.

  2. Transaction codes which identify TENTS are;

    • 294 - Reverses Tentative Carryback Adjustment/Increase

    • 295 - Tentative Carryback Adjustment /Decrease

  3. Blocking series which identify TENTS are;

    • 91 - Without the original gain year return

    • 92 - With original gain year return

    • 92 - Account manually brought back from retention register

    • 95 - Reassessment on a statute imminent or expired year

  4. When the TENT is a CIS case, for each gain year being adjusted, on the ADJ54 screen input an entry of "1" in the CIS IND> field to indicate the adjustment is based on a CIS digital image. Also input the CIS ID of the TENT (from the loss year) in the Remarks section of ADJ54. This will leave an audit trail for anyone subsequently looking for the loss year document.

21.5.9.5.32  (10-01-2013)
Carryback Form 1045 and Form 1139 Interest Computation Dates

  1. TENT adjustments require input of the interest start date (INT-CMP-DT) and carryback received date (TCB-DT).

    • INTCMP-DT provides the date credit interest on the overpayment begins and the credit availability date for purposes of computing debit interest.

    • TCB-DT determines the expiration date of the 45-day interest-free period.

    Caution:

    Do not include an AMD-CLMS-DT on these adjustments.

  2. When the 45-day interest-free period is missed, the INT-CMP-DT is used by the computer when determining the start date of credit interest on the overpayment.

    Reminder:

    The due date for a timely filed Form 1040NR that includes wages that are not subject to U.S. withholding is six and a half months after the end of the taxable year. For calendar year Form 1040NR filers the date would be June 15.

    If the Application is Received And Then Input the
    Prior to the loss year return due date
    (determined without regard to any extension of time for filling. The loss year return must have been filed on or before the date the TENT was filed.)
    The Net Operating Loss (NOL) adjustment is input prior to the loss year return due date (determined without regard to any extension of time for filing.)
    1. Loss year return due date as the TCB-DT.

    2. Use current date as the INT-CMP-DT.

      Caution:

      For any future debit interest computation, the NOL credit is not available until the due date of the loss year return.

    3. Input Override Code "C."

    Note:

    Credit interest is not paid in this situation. The 45-day count for issuing an interest-free refund does not begin until the loss year return due date.

    Prior to the loss year return due date
    (determined without regard to any extension of time for filing.The loss year return must have been filed on or before the date the TENT was filed.)
    The NOL adjustment is input on or after the loss year return due date
    (determined without regard to any extension of time for filing)
    1. Loss year return due date as the TCB-DT.

    2. Loss year return due date as the INT-CMP-DT.

    3. Adjustment with NO override code.

    Note:

    The 45-day count for issuing an interest-free refund does not begin until the loss year return due date (the TCB date). If the refund is not issued within 45 days of the loss year due date, credit interest is paid beginning on the loss year due date (the INT-CMP-DT).

    On or after the loss year return due date (or extended due date) The loss year return was timely filed (on or before its due date or extended due date)

    Example:

    Taxpayer files extension until 10/15/2010 for his 200912 Form 1040. The loss year return for 2009 is filed on 08/20/2010. The return is processible and timely filed. The taxpayer files a TENT on 08/25/2010.

    1. TENT received date (or TENT processible date, whichever is later) as the TCB-DT.

    2. Loss year return due date as the INTCMP-DT.

    3. Adjustment with NO override code.

    Example:

    In the example, if the taxpayer files a processible TENT on 8/25/2010, the IRS has 45 days from 8/25/2010 (the TCB date) to issue a refund without interest. If the refund is not issued within that 45-day timeframe, interest is paid beginning on the loss year return due date (04/15/2010 - the INT-CMP-DT) because the loss year return was timely filed on or before the extended due date.

    On or after the loss year return due date (or extended due date) The loss year return was not timely filed (received after its due date or extended due date)

    Example:

    Taxpayer filed an extension for his 200912 Form 1120 to 09/15/2010. Taxpayer files the Form 1120 on 09/29/2010. The return is late filed. Taxpayer files a TENT on 10/05/2010.

    1. TENT received date as the TCB-DT.

    2. Loss year return due date as the INT-CMP-DT.

      Note:

      The delinquent return received date is not input in the INT-CMP-DT field because, for any future debit interest computation, the carryback is available on the normal loss year return due date. However, for credit interest purposes, the delinquent return received date is considered when determining the credit interest period. See IRM 20.2.9.2, Determining the Overpayment Interest Period for the appropriate interest start date.

    3. Adjustment with NO override code.

    4. Use TC 770 to manually address/compute credit interest. (Use TC 770 .00 if no interest is due.)

      Exception:

      If issuing a manual refund, it is not necessary to input a TC 770 for zero (.00) with the adjustment. The interest will be manually computed and input as a TC 770 with the manual refund whether for zero or for a money amount.


      Note:

      In the example, if the taxpayer files a TENT on 10/05/2010, the IRS has 45 days from 10/05/2010 (the TCB date) to issue a refund without interest. If the refund is not issued within that 45-day timeframe, interest is paid beginning on 09/29/2010 (the received date of the late-filed loss year return). You must manually compute the interest and input with TC 770. Otherwise, the computer will figure the interest from the normal return due date (the INT-CMP-DT) and the taxpayer will receive more credit interest than he is entitled to.

  3. For additional information, see IRM 20.2.9.2, Determining the Overpayment Interest Period.

    Note:

    Refer to IRM 20.1.2.1.3.3, Taxpayers Abroad, for information regarding individual filers outside of the United States.

21.5.9.5.33  (11-20-2013)
Carryback Form 1045 and Form 1139 with Examination Criteria, or an Open Underreporter (Automated Underreporter (AUR) or Business Underreporter (BUR)) Issue (TC 922 or TC 925)

  1. Process Form 1045 and Form 1139 and allow the refund(s) prior to routing TENTS with the following criteria to Examination;

    Caution:

    Do not input a TC 971 AC 013 on any of the carryback-related tax modules prior to forwarding the TENT to Examination. The TC 971 AC 013 sets the -A freeze and indicates there is an unprocessed claim or amended return being forwarded. This is not the case with a TENT where the carryback application has already been processed and paid prior to referral.

    • Joint Committee Cases (JCC) - Carryback adjustment(s) resulting in a combined refund of ≡ ≡ ≡ ≡ ≡ ≡ or more

    • Claims with an aggregate total tax decrease ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ (Do not send as JCC.)

    • TC 520, TC 576 (-Q Freeze), or TC 420 with a status greater than 08 in the gain or loss year modules

    • Consolidated corporate return loss years for which affected gain years were filed under a different EIN

    • Small Business Jobs Act of 2010 (SBJA) - For the five year carryback of eligible small business credits as described in IRM 21.5.9.5.6.1, Small Business Jobs Act of 2010 (PL 111-240, section 2013) - Five-Year Carryback of Eligible Small Business Credits, if;
      ▸ Form 3800 Line 29h exceeds ≡ ≡ ≡ ≡ ≡ ≡ and
      ▸ the aggregate total of Form 6478 (2005 Line 9, 2006 and 2007 Line 10, 2008 Line 14 or 2009 Line 13) exceeds ≡ ≡ ≡ ≡ ≡ and
      ▸ the aggregate total of the refund on Form 1139 or Form 1045 Line 27 exceeds ≡ ≡ ≡ ≡ ≡ ≡ .

    Reminder:

    In order to refer the case to Examination as CAT-A, the CIS case must remain open after processing the TENT.

    Caution:

    In all cases where a TENT meets the Examination criteria listed above and the loss year return has not yet posted to master file, post-verification must be completed before routing the TENT to Examination. See IRM 21.5.9.4.7, Carryback tolerances - Master File Verification, Math Verification, TENT/RINT Processing, Push Codes, for post-verification procedures.

  2. Always review the TENT for freeze codes to be addressed prior to processing the case as per IRM 21.5.9.4.6, Carryback Freeze Conditions. Exercise caution when working with a Department of Justice (DOJ) case. Do not process a TENT prior to reviewing the account for the following indicators;

    • If an account with any module in status 72 and/or with an unreversed TC 520 with a closing code (cc) of 70, 75, 80 or 82 identified, follow the guidance in IRM 21.5.6.4.46, -W Freeze.

    • If an account with any module that includes a TC 550 and definer 04 (judgement) identified, follow the guidance in IRM 21.5.6.4.44(3), -V Freeze.

      Caution:

      Actions on cases where the DOJ is litigating or has secured a judgement, without DOJ concurrence/approval, may have a negative serious impact on the ongoing litigation or secured judgement.

  3. Process the TENT and forward the case to the campus where the parent corporation filed, if Form 1139 for a subsidiary corporation meets Examination criteria.

  4. If taxpayer checked "yes" to the question, "Have you filed a petition in tax court for the year or years to which the carryback is to be applied?," process the TENT and notify the Appeals Office.

  5. All large dollar and Joint Committee Cases must be expedited due to interest considerations. Refer to IRM 21.4.4.5, Other Manual Refund Requirements, for additional information on million dollar or more refunds.

  6. If there is an open Underreporter or BMF (Business Master File) -Underreporter (AUR or BUR) case on any of the years (loss or gain years), contact the AUR or BUR Coordinator at the campus location (as identified by the first two digits of the TC 922 or TC 925) prior to processing the TENT. A listing of AUR and BUR Coordinators is located on SERP. See AUR Coordinators Contact Information, for IMF (Individual Master File) or BMF-AUR Program Contact Information, for BMF (Business Master File).

    1. Advise the AUR or BUR Coordinator you have a tentative carryback application that involves one of the tax years with an open Underreporter issue.

    2. The AUR or BUR Coordinator will review the case and determine if the case (or a response) is needed in their office.

      Caution:

      A TC 922 (or TC 925 for BMF), by itself, does not mean there is an open AUR (BUR for BMF) case. The last Process Code associated with the TC 922 (TC 925 for BUR) shows the current status of the case. See IRM 21.3.1.4.54, Status of IMF Underreporter Cases, to determine if there is an open AUR case or IRM 21.3.1.4.112 , CP 2030/2531 - BMF Automated Underreporter Program - General Information, to determine if there is an open BUR case.

      Note:

      A TC 925 may or may not be included on the account to assist with the identification of a BMF-AUR case. Therefore, until further notice, any Carryback cases that have a multiple control with IDRS number 048xxxxxxx are not to be processed until contact is made with the BMF-AUR Program Contact as listed on the SERP Who/Where tab. These cases will be one of the following IDRS categories;
      • BUR0
      • BUR1
      • BURS
      • BURC

21.5.9.5.34  (02-15-2012)
Reassessing Carryback Form 1045 and Form 1139

  1. TENTS can be reassessed without Examination deficiency or erroneous refund procedures.

  2. Write (Letter 449C) or call taxpayer for a complete signed copy of any unfiled loss year return. Suspend the case for 40 calendar days (70 calendar days for overseas taxpayers). Forward the received loss year return for processing once received.

  3. If the loss year return is not received, or does not support the application, reassess ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ .

    1. Input TC 294 to assess the difference between the allowed amount and the correct amount.

    2. Input TC 298 if the year to be assessed is statute imminent/expired.

    3. Use the same interest date and blocking series as the TC 295 being reversed, unless the statute is imminent/expired, then you must use blocking series 95.

    4. Attach the application to the most current gain year.

    5. Change all affected tax years. A correction to one module may affect a carryover to another.

    6. Explain the change to taxpayer.

    7. Enclose a copy of the corrected Form 1045 or Form 1139 with your letter, if the change is too complex for a simple explanation.

    Note:

    Mathematical/Clerical Appeal Rights do not apply to the reassessment of TENTS.

21.5.9.5.35  (10-01-2009)
BMF Carrybacks Filed by Consolidated Corporations

  1. In general, the status of the corporation(s) i.e., status as a standalone corporation, a subsidiary member of a consolidated group, or an agent for the consolidated group (which could be either the common parent or a designee, a substitute agent for the group) for the carryback year determines the corporation which is responsible for filing the Form 1139.

  2. Specifically, with regard to a consolidated group filing an application for a tentative carryback adjustment, the appropriate agent to act for the consolidated carryback year is responsible to file the tentative carryback application for any consolidated net operating loss carryback, any consolidated capital loss carryback, or any carryback of an unused consolidated business credit, per IRC § 6411.

  3. For a Net Operating Loss (NOL), capital loss, or business credit carryback arising in a consolidated return year (that is, the loss arises in a consolidated group tax year) where the loss is being carried back to;

    1. A consolidated return year of the same consolidated group - then the common parent of the group (or designated substitute agent) for the carryback year is responsible for filing the application (Form 1139) for a tentative carryback refund to the loss carryback year, and

    2. A separate return year (i.e., not a consolidated return year) of the corporation from which such loss is attributable - then the corporation to which such loss is attributable is responsible for filing the application (Form 1139) with regard to that corporation's apportioned part of the loss.

  4. For a consolidated return year of another consolidated group for the carryback year (i.e., not the consolidated group that generated the loss carryback), then the common parent of the consolidated group for the carryback year is responsible for filing the Form 1139. However, the amount of such refund, via the carryback, may be limited under Treas. Reg. Section 1.1502-21(c). Further, such carryback may be waived by the consolidated group that generated the loss under Treas. Reg. Section 1.1502-21(b)(3)(ii)(B).

  5. When the NOL arises in a separate return year (i.e., not a consolidated return year) and the loss is being carried back to a consolidated return year, the common parent of the group (or the designated substitute agent) for the carryback year is responsible for filing the Form 1139 for the loss.

21.5.9.5.35.1  (10-26-2007)
Corporation Entitled to Receive Refunds

  1. In general, the corporation's status for the tax year of the overpayment determines the corporation which is entitled to receive the refund, i.e., its status as a standalone corporation, a subsidiary member of a consolidated group, or an agent for the consolidated group (which could be either the common parent or a designated substitute agent for the group).

  2. The payment of the refund resulting from an application for a tentative carryback adjustment will be made to, and in the name of, the appropriate entity to act for the carryback year.

  3. If the Net Operating Loss (NOL), capital loss or business credit to be carried back arises in a consolidated return year (i.e., the loss or credit arises in a consolidated tax year), the refund resulting from a tentative carryback adjustment will be made directly to, and in the name of;

    1. The common parent (or the designated substitute agent) for the carryback year, in cases where that carryback year was a consolidated return year for the same consolidated group as was the case for the loss year.

    2. The corporation to which the loss or credit is attributable, in a case where that corporation has filed a separate corporate tax return for the carryback year.

    3. The common parent for the carryback year, in a case where the corporation for the carryback year is a member of another consolidated group (i.e., not the same consolidated group that generated the loss carryback) and the loss is actually deducted from consolidated taxable income in the carryback year or the credit is actually allowed in computing the consolidated tax liability in the carryback year.

    4. The common parent of the consolidated group (or designated, substitute agent for that consolidated group) for the carryback year, where the NOL arises in a separate return year (i.e., not a consolidated return year) and the loss is being carried back to a consolidated return year.

  4. For rules regarding which corporation should file the tentative claim and which entity is entitled to receive the refund for those taxable years to which a loss or credit may be carried back for tax years for which the due date (without extension) of the original return is before June 28, 2002, See Treas. Reg. Section 1.1502-78 version which was in effect for those tax years for which the due date of the original return (without extension) was prior to June 28, 2002.

  5. Refer to IRM 21.4.4, Manual Refunds, when further clarification is required. Verify the receiving entity to receive the refund, document the actions taken to obtain such clarifying information, and if the information was not provided, contact the taxpayer to obtain name(s) and EIN(s).

  6. For further rules with regard to consolidated groups that include financial institutions, refer to Treas. Reg. Section 301.6402-7.

21.5.9.5.36  (06-25-2013)
BMF Carrybacks Filed by Personal Service Corporation (PSC)

  1. A Personal Service Corporation (PSC) with an IRC § 444 election, allowing it to have a tax year other than the required calendar year, is not allowed a Net Operating Loss (NOL) carryback. PSC's that do not have Section 444 elections in effect may carryback their NOL's, but not to a taxable year for which a Section 444 election is in effect.

    Note:

    Although IRC § 444 states that a PSC can not carryback a NOL, they can carryback unused general business credits and/or capital gain losses. For additional information see (4) below.

  2. IRC § 444 PSC filers are identified on ENMOD with TC 054/TC 055, Filing Requirement Code 1120 -19. Contact taxpayer if necessary, to confirm the corporation is not a PSC Section 444 filer, before allowing adjustments.

  3. If taxpayer is not a PSC Section 444 filer;

    1. Document the conversation with name and title of the corporate officer providing the information.

    2. Route information and Form 3465 to Entity, requesting a TC 052 be input to CC ENMOD to change filing requirements.

    3. Delay the TC 295 or TC 299 one cycle.

  4. A PSC may carryback a Net Capital Loss or unused general business credits. However, the Section 444 election must first be temporarily reversed prior to inputting the carryback adjustment. Take the following actions if a PSC with a valid request for a NCL or carryback of unused business credits is received;

    1. Prepare Form 3465 for Entity to change the filing requirements until the adjustment posts and then reestablish the Section 444 Election.

    2. Delay the TC 295 or TC 299 one cycle.

    Caution:

    Only those PSCs eligible for a carryback of a NCL or unused general business credit are to be forwarded to Entity for the temporary reversal of the Section 444 election. Accounts Management is responsible for making this determination.

21.5.9.5.37  (10-06-2006)
Carryback Form 1040X, Form 1120X, Form 1041, Form 1120-C and Form 990-T (RINTS)

  1. This Section outlines procedures for working restricted interest claims. Taxpayers file carryback RINTS using these forms;

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

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

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

    • Amended 1120-C, U.S. Income Tax Return for Cooperative Associations

    • Amended 990-T, Exempt Organization Business Income Tax Return. See IRM 21.7.7.4.16, EO Claim Procedures, for 990-T carryback processing.

  2. Certain conditions and requirements separate RINTS from regular amended returns;

    • Filing and Processing

    • Transaction Codes and Blocking Series

    • Interest Computation Dates

    • RINT Verification

    • Multiple RINT Claims

    • RINTS with CAT-A Criteria

    • Disallowance

    • Reassessment

    • Net 1256 Contract Loss Carryback

21.5.9.5.38  (10-01-2013)
Carryback Form 1040X, Form 1120X, Form 1041, Form 1120-C and Form 990-T Processing and Filing Requirements

  1. The loss year return must be posted to Master File. See IRM 21.5.9.4.2, Identifying Processible and Unprocessible Carryback Applications/Claims.

  2. RINTS have a 45-day interest-free period. See IRM 21.5.9.5.11, Carryback Interest.

21.5.9.5.39  (10-06-2006)
Carryback Form 1040X, Form 1120X, Form 1041, Form 1120-C and Form 990-T Transaction Codes and Blocking Series

  1. RINTS can be identified by unique transaction codes and blocking series.

  2. Unique adjustment transaction codes identify RINTS, which generate interest from the interest computation date. They are;

    • 299 - Abatement of Prior Tax Assessment

    • 298 - Additional Tax Assessment

  3. Unique adjustment blocking series identify RINTS. They are;

    • 91 - without the original return

    • 92 - with original gain year return

    • 92 - a manual transfer from the retention register

    • 95 - reassessment on statute imminent or expired year

21.5.9.5.40  (10-01-2013)
Carryback Form 1040X, Form 1120X, Form 1041, Form 1120-C and Form 990-T Interest Computation Dates

  1. RINT adjustments require an input of the interest start date (INT-CMP-DT) and carryback received date (TCB-DT);

    • INT-CMP-DT provides the date credit interest on the overpayment begins and the credit availability date for purposes of computing debit interest.

    • TCB-DT determines the expiration date of the 45-day interest-free period.

    Caution:

    Do not include an AMD-CLMS-DT on these adjustments.

  2. When the 45-day interest-free period is missed, the INT-CMP-DT is used by the computer when determining the start date of credit interest on the overpayment..

    Reminder:

    The due date for a timely filed Form 1040NR that includes wages that are not subject to U.S. withholding is six and a half months after the end of the taxable year. For calendar year Form 1040NR filers the date would be June 15.

    IF the amended return/claim (RINT) is received And Then Input the
    Prior to the loss year return due date
    (determined without regard to any extension of time for filing. The loss year return must have been filed on or before the date the RINT was filed.)
    The Net Operating Loss (NOL) adjustment is input prior to the loss year return due date
    (determined without regard to any extension of time for filing)
    1. Loss year return due date as the TCB-DT.

    2. Use current date as the INT-CMP-DT.

    3. Use Override Code "C."

      Caution:

      For any future debit interest purposes, the NOL credit is not available until the due date of the loss year return.

    Note:

    Credit interest is not paid in this situation. The 45-day count for issuing an interest-free refund does not begin until the loss year return due date.

    Prior to the loss year return due date
    (determined without regard to any extension of time for filing. The loss year return must have been filed on or before the date the RINT was filed.)
    The NOL adjustment is input on or after the loss year return due date
    (determined without regard to any extension of time for filing)
    1. Loss year return due date as the TCB-DT.

    2. Loss year return due date as the INT-CMP-DT.

    3. Adjustment with NO override code.

    Note:

    The 45-day count for issuing an interest-free refund does not begin until the loss year return due date (the TCB date). If the refund is not issued within 45 days of the loss year due date, credit interest is paid beginning on the loss year due date (the INT-CMP-DT).

    On or after the loss year return due date (or extended due date) The loss year return was timely filed (on or before its due date or extended due date)

    Example:

    Taxpayer files extension until 10/15/2010 for his 200912 Form 1040. The loss year return for 2009 is filed on 08/20/2010. The return is processible and timely filed. Taxpayer files a RINT on 01/14/2011.

    1. RINT received date (or RINT processible date, whichever is later) as the TCB-DT.

    2. Loss year return due date as the INT-CMP-DT.

    3. Adjustment with NO override code.

    Example:

    In the example, if the taxpayer files a processible RINT on 01/14/2011, the IRS has 45 days from 01/14/2011 (the TCB date) to issue a refund without interest. If the refund is not issued within that 45-day timeframe, interest is paid beginning on the loss year due date (04/15/2010 - the INT-CMP-DT) because the loss year return was timely filed.

    On or after the loss year return due date (or extended due date) The loss year return was not timely filed (received after its due date or extended due date)

    Example:

    Taxpayer filed an extension for his/her 200912 Form 1120 to 09/15/2010. Taxpayer files the Form 1120 on 09/29/2010. The loss year return is late filed. Taxpayer files a RINT on 01/14/2011.

    1. RINT received date as the TCB-DT.

    2. Loss year return due date as the INT-CMP-DT.

      Note:

      The delinquent return received date is not input in the INT-CMP-DT field because for any future debit interest computation, the carryback is available on the normal loss year return due date. However, for credit interest purposes, the delinquent return received date is considered when determining the credit interest period.. See IRM 20.2.9.2, Determining the Overpayment Interest Period, for the appropriate interest start date.

    3. Adjustment with NO override code.

    4. Use TC 770 to manually address/compute credit interest. (Use TC 770 .00 if no interest is due.)

      Exception:

      If issuing a manual refund, it is not necessary to input a TC 770 for zero (.00) with the adjustment. The interest will be manually computed and input as a TC 770 with the manual refund whether for zero or for a money amount.


    Note:

    In the example, if the taxpayer files a RINT on 01/14/2011, the IRS has 45 days from 01/14/2011 (the TCB date) to issue a refund without interest. If the refund is not issued within that 45-day timeframe, interest is paid beginning on 09/29/2010 (the received date of the late-filed loss year return). You must manually compute the interest and input with TC 770. Otherwise, the computer will figure the interest from the loss year return due date (the INT-CMP-DT) and the taxpayer will receive more credit interest than he is entitled to.

    Note:

    The loss and gain year returns must be posted before a RINT can be processed.

  3. See IRM 21.5.9.5.11, Carryback Interest , and IRM 20.2.9.2, Determining the Overpayment Interest Period, for additional information.

21.5.9.5.41  (11-20-2013)
Carryback Form 1040X, Form 1120X, Form 1041, Form 1120-C and Form 990-T with Examination Criteria (CAT-A), or an Open Automated Underreporter (AUR) and Business Underreporter (BUR)) Issue (TC 922 or TC 925)

  1. Classify RINTS with CAT-A Examination criteria on the loss/gain year before allowing the claim. See IRM Exhibit 21.5.3-2, Examination Criteria (CAT-A) – General.

  2. Always review the RINT for freeze codes to be addressed as per IRM 21.5.9.4.6, Carryback Freeze Conditions. Exercise caution when working with a Department of Justice (DOJ) case. Do not process the RINT prior to reviewing the account for the following indicators;

    • If an account with any module in status 72 and/or with an unreversed TC 520 with a closing code (cc) of 70, 75, 80 or 82 identified, follow the guidance in IRM 21.5.6.4.46, -W Freeze.

    • If an account with any module that includes a TC 550 and definer 04 (judgement) identified, follow the guidance in IRM 21.5.6.44 (3), -V Freeze.

      Caution:

      Actions on cases where the DOJ is litigating or has secured a judgement, without DOJ concurrence/approval, may have negative serious impact on the ongoing litigation or secured judgement.

  3. Forward all claims that meet CAT-A criteria to Examination, using local routing procedures before adjusting.

  4. Accounts Management must retain control of these cases and monitor for timely return from Examination. See IRM 21.5.3.4.7, Processing Claims and Amended Returns With Examination Involvement . CIS cases are suspended to CAT-A, and the IDRS control is then updated per CIS to Examination.

    Note:

    See IRM 21.7.7.4.16.9, Form 990-T Employee Plan (EP) Claim Procedures, for carryback processing of Form 990-T.

  5. If there is an open Underreporter or BMF-Underreporter (AUR or BUR) case on any of the years (loss or gain years), contact the AUR or BUR Coordinator at the campus location (as identified by the first two digits of the TC 922 or TC 925) prior to processing the RINT. A listing of AUR and BUR Coordinators is located on SERP. See AUR Coordinators Contact Information, for IMF (Individual Master File) or BMF-AUR Program Contact Information, for BMF (Business Master File).

    1. Advise the AUR or BUR Coordinator you have a carryback claim that involves one of the tax years with an open Underreporter issue.

    2. The AUR or BUR Coordinator will review the case and determine if the case (or a response) is needed in their office.

    Caution:

    A TC 922 (or TC 925 for BMF), by itself, does not mean there is an open AUR (BUR for BMF) case. The last Process Code associated with the TC 922 (TC 925 for BUR) shows the current status of the case. See IRM 21.3.1.4.54, Status of IMF Underreporter Cases, to determine if there is an open AUR case or IRM 21.3.1.4.112, CP 2030/2531 - BMF Automated Underreporter Program - General Information, to determine if there is an open BUR case.

    Note:

    A TC 925 may or may not be included on the account to assist with the identification of a BMF-AUR case. Therefore, until further notice, any Carryback cases that have a multiple control with IDRS number 048xxxxxxx are not to be processed until contact is made with the BMF-AUR Program Contact as listed on the SERP Who/Where tab. These cases will be one of the following IDRS categories;
    • BUR0
    • BUR1
    • BURS
    • BURC

21.5.9.5.42  (10-01-2013)
Carryback Form 1040X, Form 1120X, Form 1041, Form 1120-C, and Form 990-T - Claim Disallowance

  1. Fully or partially disallowed carryback claims require detailed explanations. See IRM 21.5.3.4.6, No Consideration and Disallowance of Claims and Amended Returns, for specific requirements. The letter must include appeal rights and the right to file suit, and indicate the loss and gain year.

  2. See IRM 21.5.3.4.6.2, Appeals and Responses to Letters 105C/106C, for specific instructions in handling responses to fully and partially disallowed carryback claims.

  3. Use blocking series 00/blocking series 15 for BMF and 91/blocking series 92 for IMF (Individual Master File) partially disallowed claims. Send Letter 106C.

  4. Use blocking series 98/blocking series 99 for IMF and BMF (Business Master File) fully disallowed claims. Send Letter 105C.

  5. The statute of limitations on a carryback is determined by the loss year. See IRM 25.6.1.10.2.8.1, Net Operating Loss (NOL) Carryback or Capital Loss Carryback, and IRM 25.6.1.10.2.8.2, Business Credit Carryback.

21.5.9.5.43  (10-01-2013)
Reassessing Carryback Form 1040X, Form 1120X, Form 1041, Form 1120-C, and Form 990-T

  1. RINTs, unlike TENTs, cannot be processed prior to the loss year return posting to Master File. Therefore, the reassessment procedures used for TENTs (see IRM 21.5.9.5.34, Reassessing Carryback Form 1045 and Form 1139), when the loss year return posts with different figures than the return copies provided by the taxpayer, or because the loss year return was not filed, do not apply to RINTS. See the paragraphs below for situations where the RINT may need to be addressed after processing.

  2. If the IRS makes an error in processing a RINT, such as a TC 299 input for an incorrect amount (claim is for $500, but input is for $5,000), or the adjustment is made to an incorrect tax period (adjustment is input to 200712 instead of 200812), and a refund is issued, erroneous refund procedures must be followed. See IRM 21.4.5, Erroneous Refunds.

  3. If the IRS makes an error in processing a RINT, such as a TC 299 input for an incorrect amount (claim is for $500, but input is for $5,000) or the adjustment is made to an incorrect tax period (adjustment is input to 200712 instead of 200812), but no refund is issued and the statute for assessment is open (based on the loss year Assessment Statute Date (ASED)), this is considered a "clerical error" and the Service may simply reverse the adjustment without using deficiency procedures. Whether a notice was issued when the incorrect adjustment was made is not a factor. If a notice was issued based on the incorrect adjustment, send the taxpayer a letter when the correction is made, apologizing for the error, and advise the taxpayer that a corrected notice will be issued. See Crompton-Richmond Co. v. United States, 311 F. Supp. 1184, 1187(S.D.N.Y. 1970).

  4. If the taxpayer files a corrected Form 1040X or Form 1120X, input TC 298 to assess tax previously allowed. Use the TC 299 INTCMP-DT.

  5. Use blocking series 95 to reassess statute imminent or expired years.

21.5.9.5.44  (10-01-2014)
Carryback of Foreign Tax Credit (FTC)

  1. Taxpayers must carryback Foreign Tax Credit (FTC) on Form 1040X, Form 1120X, or other amended returns. Reject a Form 1045 or Form 1139 claiming a carryback of unused FTC.

  2. FTC carryback/carryforward limitations are located in Exhibit 21.5.9-1.

    Note:

    A taxpayer can only carry back excess foreign tax credits to a year in which there was foreign income subject to U.S. tax. If the taxpayer is claiming FTC on a tax period without foreign income subject to U.S. tax, disallow the claim and notify the taxpayer of the specific tax period(s) that do not have foreign income subject to U.S. tax.

  3. A carryback claim of FTC has a 10-year statute of limitations from the due date (without regard to any extension of time to file) of the loss year return. For additional information, see IRM 25.6.1.10.2.8.4, Foreign Tax Credit.

  4. For 199808 and subsequent ending periods, the FTC carryback interest rules are identical to other carrybacks, IRC 6611(f). See IRM 21.5.9.5.11, Carryback Interest.

  5. When a FTC carryback reduces an underpayment for a previous tax year, the carryback does not affect the computation of the interest on the underpayment for the period ending with the filing date for the tax year in which the foreign taxes were paid or accrued.

  6. When a FTC carryback attributable to a Net Operating Loss (NOL) or Net Capital Loss (NCL) carryback from a subsequent year reduces an underpayment for an earlier tax year, the carryback does not affect the computation of the interest on the underpayment for the period ending with the filing date for the subsequent tax year in which the NOL or NCL carryback arose.

  7. Computational instructions for carrybacks of FTC can be found in IRM 21.8.1.3.7, Carryback and Carryover - Foreign Tax Credit (Individual Master File), IRM 21.8.2.10.7, Carryback and Carryover - Foreign Tax Credit (Business Master File ), and IRM 20.2.10.2.4, Carrybacks and Carryovers of Excess Foreign Taxes Paid.

    Note:

    Foreign Tax Credit carryback claims are International criteria, filed on Form 1040X or Form 1120X, and can be filed by both International and Domestic taxpayers. Route IMF Foreign Tax Credit (FTC) carryback claims to the Philadelphia Campus, BLN 3–J23.134 and BMF Foreign Tax Credit (FTC) carryback claims to the Ogden Campus. If using CIS, carryback FTC cases must be reassigned through the system after updating the case information, if required. For detailed information on reassigning cases through CIS, refer to the instructions in the 6902-203 CIS CSR Guide.

  8. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    Note:

    ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    Example:

    ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    Example:

    ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    Example:

    ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    Example:

    ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

21.5.9.5.45  (11-20-2013)
Net 1256 Contract Loss Carryback

  1. This section provides procedures for working Form 6781, Gains and Losses from Section 1256 Contracts and Straddles. Taxpayers holding section 1256 contract(s) during the year may file this form. Contracts and straddles not included on Form 6781 are entered on Schedule D, Form 1040.

  2. The Commissioner must approve claims based on revocation of a mixed straddle election. Approval must be attached.

  3. For tax years 2001 and prior, a taxpayer could file only an amended return (1040X) for these losses. For tax years 2002 and later, a taxpayer can file either a tentative (Form 1045) or an amended return (Form 1040X).

  4. Route to Examination for technical advice if;

    • The taxpayer cannot provide approval and insists the claim be processed.

    • Amended return, increasing losses on Form 6781, meets Category A criteria.

  5. An individual taxpayer can carryback section 1256 contract(s) losses three years, but can only apply them to section 1256 contract(s) gains. Assume there were no section 1256 contract(s) if the taxpayer does not carryback to the second or third preceding tax year.

    Caution:

    Section 1256 carrybacks are not available to corporations, partnerships, estates, or trusts. If a loose Form 6781 is received in Accounts Management for a corporation, partnership, estate, or trust, follow the instructions in Paragraph 9 to have the Form 6781 associated with the applicable tax return (Form 1120, Form 1065, Form 1041, etc.).

  6. TENTS and RINTS must have the following documents attached;

    • Pages one and two of the loss year return

    • Form 6781 for the loss year

    • Original and revised Form 6781 for the gain year(s)

    • Original and revised Schedule D for the gain year(s)

  7. Verify that the taxpayer;

    • Has a valid election on Form 6781 to carryback all or part of the loss

    • Did not deduct the loss in both the loss and gain years

    • Completed Box D and Line 6 on Form 6781 for the loss year (Corporations, partnerships, estates and trusts are not eligible to check box D.)

    • Applied section 1256 contract(s) losses only to section 1256 contract(s) gains

    • Did not use section 1256 contract(s) losses from the loss year to create a net operating or capital loss in the carryback year

  8. Input using the same rules as other TENT and RINT adjustments.

    Note:

    Taxpayer must allocate the amount of loss, income, credits, and refunds if there is a Filing Status change.

  9. When Form 6781 is received in Accounts Management, and it is determined no adjustment is necessary, follow the instructions below.

    If Then
    Original return is not posted File the loose Form 6781 with a TC 930 push code.
    Original return has posted Attach to the original return.

21.5.9.5.46  (10-01-2013)
Combination Carrybacks (RINTS and TENTS) Involving Research Credits

  1. This section provides instructions for processing carryback claims for RINTS and TENTS in combination with research credits.

  2. Form 6765, Credit for Increasing Research Activities, is used to claim the credit for increasing the research activities of a trade or business.

  3. For TY 2006 and subsequent, the credit can be claimed only as a general business credit and must be carried to Form 3800, General Business Credit. The allowable credit will then be figured on Form 3800. Any unused portion of this credit remaining, after the tax has been reduced to zero, can be carried back one year to reduce taxes for that year. It can then be carried forward 20 years.

  4. For processing claims only involving the research credit, follow procedures outlined in IRM 21.7.4.4.8.3.4, Credit for Increasing Research Activities, F-6765. This IRM section contains the most comprehensive and up to date information on research credits.

  5. For combination claims involving a carryback (RINT or TENT) and the research credit;

    1. Follow all normal procedures as outlined in IRM 21.5.9 for the carryback portion.

    2. Treat the research credit portion as a separate adjustment, if it is not part of the carryback amount, following procedures in IRM 21.5.9.5.10, Multiple Adjustments.

  6. Special processing instructions were required when the credit expired June 30, 1999 but was reinstated retroactively for the period July 1, 1999 - June 30, 2004, by the Tax Relief Extension Act of 1999. This law created two suspension periods and allowed claims to be filed on Form 1139, Form 1045, Form 1120X, and Form 1040X. The statute has expired for the vast majority of these claims, so the instructions have been removed from both IRM 21.7.4 and IRM 21.5.9. However, if for some reason a statute is still open, the instructions in IRM 21.7.4 and IRM 21.5.9 can be found in prior revisions of the IRMs located in the SERP IRM Archives.

21.5.9.5.47  (10-01-2013)
Carryback Claims (TENTS and RINTS) Filed in Conjunction with Amended Returns Filed for the Loss Year

  1. Taxpayers may file an amended return that creates (or modifies) a net operating loss and submit the carryback application/claim based on that amendment at the same time.

  2. The amended loss year return and the TENT/RINT may be assigned to different CSRs.

  3. In order to ensure consistent treatment and to help meet the Service's commitment to process TENTs/RINTs as quickly as possible, follow the procedures outlined in the following paragraphs when an amended loss year return is received in conjunction with the related carryback claim.

  4. Taxpayers are required to include a copy of any amended return generating or modifying the net operating loss with the carryback application/claim (TENT/RINT). See IRM 21.5.9.4.2, Identifying processible and Unprocessible Carryback Applications/Claims.

    1. Review the copy of the amended return.

    2. Research IDRS/CIS for evidence that the amended return has been received or processed.

      Note:

      Amended returns are generally scanned into CIS within 14 days of the IRS received date.

    3. If no evidence of the amended return is found, reject the TENT/RINT, as there is no basis on which to process the carryback adjustment.

  5. If the amended return is located on IDRS/CIS and has not been processed, the TENT/RINT and the loss year amended return should be worked by the same CSR/TE, if possible. If not possible, coordinate the processing of the amended loss year return and the carryback claim with the other CSR/TE.

  6. Coordination with regard to the amended return must involve the following;

    1. Verify that the starting figures on the TENT/RINT agree with the figures on the amended loss year return. If the figures do not agree, reject the TENT/RINT and include a copy of the unprocessed amended loss year return. See IRM 21.5.9.4.5, Incorrectly Calculated Carryback Applications/Claims.

    2. Ensure the amended return is processible (i.e. includes all required documentation and is signed). If the amended return is not processible and will be rejected back to the taxpayer, reject the TENT/RINT as well, as there is no basis on which to process the carryback adjustment.

    3. Determine if the loss year amended return is based on a specific issue that the Service has identified for automatic disallowance without Examination involvement. If the amended return will be disallowed, the TENT/RINT must also be rejected/disallowed.

      Example:

      See IRM 21.6.6.3.48.1, Claims due to Corporate Misconduct.

    4. Evaluate the loss year amended return for CAT-A criteria and a required referral to Examination. See IRM Exhibit 21.5.3-2, Examination Criteria (CAT-A) – General. See paragraphs (7) and (8) below for additional information for processing these claims.

  7. If the loss year amended return is processible and has not already been processed, ask the employee assigned the amended loss year return to input the adjustment so that the TENT/RINT application can be processed and closed within the 45-day interest-free period. See IRM 21.5.9.5.12, Carryback Manual Refund, if the 45-day interest-free period is in jeopardy.

  8. If the loss year amended return adjustment cannot be input for any reason, and the amended return cannot be reassigned to the carryback employee, follow the instructions in the table below. How the carryback is resolved is determined by whether it is a TENT or a RINT.

    If And Then
    The carryback is a TENT (1045 or 1139) The TENT figures match the loss year amended return figures

    Note:

    Do not consider CAT-A criteria prior to processing the TENT.

    Reminder:

    If the TENT figures do not match the loss year amended return figures, follow the instructions in Paragraph (6) above.

    1. Process the TENT and issue the refund.

      Note:

      Do not wait for the loss year amended return adjustment to be input.

    2. Monitor the loss year until either the amended return adjustment has been input or the loss year amended return is selected for examination.

    3. If the loss year amended return adjustment is made, verify the adjustment matches the figures that were used for the TENT adjustment. If not, follow reassessment procedures for TENTS. See IRM 21.5.9.5.34, Reassessing Carryback Form 1045 and Form 1139.

    4. If the loss year amended return is selected for examination, then refer the TENT to Examination. See IRM 21.5.9.5.33, Carryback Form 1045 and Form 1139 with Examination Criteria, or an Open Underreporter (AUR or BUR) Issue (TC 922 or TC 925).

    The carryback is a RINT

    Reminder:

    A RINT cannot be processed until the loss year adjustment has been input.

    The loss year amended return is selected for examination Send the RINT to the Examination area working the amended loss year return.
    Otherwise, if the amended loss year return cannot be processed for any other reason;
    • Reject the RINT.

    • Advise the taxpayer he/she can refile the carryback claim once he has received a notice from the IRS for the loss year amended return adjustment.

      Caution:

      If the claim or amended return is received within 180 days of the Refund Statute Expiration Date (RSED), follow IRM 21.5.3.4.3, Tax Decrease and Statute Consideration .

21.5.9.5.48  (10-01-2013)
Processing Carryback Claims and Applications (RINTS and TENTS) with ID (Identity)Theft/Scrambled SSN (Social Security Number)/Mixed Entity/ IVO (Integrity and Verification Operations) Involvement

  1. If a tentative application (TENT) is received with ID theft/Scrambled SSN/Mixed Entity/IVO issues on the loss year;

    • Verify the application as per the instructions in IRM 21.5.9.4, Carryback Verification.

    • Process the carryback on the gain year(s).

    • If there is an open control on the loss year and the account has not been corrected, contact the IDT Carryback Liaison at the site with the open IDT control and provide a copy of pages one and two of the loss year. A listing of IDT Carryback Liaisons can be found on SERP under the Who/Where tab at IDT Carryback Liaisons.

    • If there is no open control on the loss year and the account has not been corrected, call or write the taxpayer for a newly-signed copy of the loss year return, per the procedures in IRM 21.5.9.5.34, Reassessing Carryback Form 1045 and Form 1139.

    • If there are issues not discussed above, contact the IDT (Identity Theft) Carryback Liaison at the site with the open IDT control for assistance.

    Caution:

    If a manual refund is issued, make every effort to ensure that the refund is being issued to the correct taxpayer at the correct address. This also applies to any correspondence requesting additional information for processing the application.

    Reminder:

    For additional information on Scrambled SSN procedures, see IRM 21.6.2.4.4, for No Merge Procedures, see IRM 21.6.2.4.3, Scrambled SSN Case Procedures, or for general procedures for Identify Theft see IRM 21.9.2.1, Identify Theft - General Information.

  2. If a TENT is received with ID theft/Scrambled SSN/Mixed Entity/IVO issues on the gain year, contact one of the IDT Carryback Liaisons prior to processing the TENT.

  3. If a RINT is received with ID theft/Scrambled SSN/Mixed Entity/IVO issues, contact one of the IDT Carryback Liaisons prior to processing the carryback claim.

  4. If a carryback claim (RINT) was processed in error on an ID theft/scrambled SSN/Mixed Entity/IVO account, see IRM 21.5.9.5.43, Reassessing Carryback Form 1040X, Form 1120X, Form 1041, Form 1120-C and Form 990-T, for processing instructions.

Exhibit 21.5.9-1 
General Business Credits, Foreign Tax Credit, and Other Non-Refundable Credits - Availability for Carryback/Carryforward

The TPRA of 1997 reduced the carryback period for the general business credits reported on Form 3800 to one year and extended the carryforward period to 20 years. This applies to credits arising in taxable years beginning after December 31, 1997. For a complete listing of general business credits, and additional information, see Form 3800, General Business Credit, and Instructions for Form 3800. Also, see IRM 21.6.3.4.1 , Non-Refundable Credits Procedures (Individual Master File)), and IRM 21.7.4.4.8.3, Information on Specific Non-Refundable Credits, for information on specific credits.

Note:

For tax years beginning prior to December 31, 1997, the carryback period was 3 years and the carryforward period was 15 years.

The table below lists the availability of non-refundable credits, other than general business credits, for carryback/carryforward.

Other Credits Carry Back Carry Forward
Child and Dependent Care Credit
Form 2441
No No
Credit for the Elderly or Permanently and Totally Disabled
Schedule R
No No
Child Tax Credit No No
Education Credits
Form 8863
No No
Mortgage Interest
Form 8396
No three Years
Adoption Credit
Form 8839
No five Years
District of Columbia First-Time Homebuyer Credit (DC Residents Only)
Form 8859
No Unlimited (until used)
FOREIGN TAX CREDIT - Individuals, Estates, and Trusts
Form 1116
Carryback of excess taxes arising in tax years beginning prior to 10/23/2004; carryover of excess taxes carried to tax years ending prior to 10-23-2004

Note:

Excess Foreign Tax Credits can only be carried to a year in which there was foreign income subject to U.S. tax.

two Years five Years
FOREIGN TAX CREDIT - Individuals, Estates, and Trusts
Form 1116
Carryback of excess taxes arising in tax years beginning after 10-22-2004; carryover of excess taxes carried to tax years ending after 10-22-2004

Note:

Excess Foreign Tax Credits can only be carried to a year in which there was foreign income subject to U.S. tax.

one Year 10 Years
FOREIGN TAX CREDIT - Corporations
Form 1118
Carryback of excess taxes arising in tax years beginning prior to 10-23-2004; carryover of excess taxes carried to tax years ending prior to 10-23-2004

Note:

Excess Foreign Tax Credits can only be carried to a year in which there was foreign income subject to U.S. tax.

two Years five Years
FOREIGN TAX CREDIT - Corporations
Form 1118
Carryback of excess taxes arising in tax years beginning after 10-22-2004; carryover of excess taxes carried to tax years ending after 10-22-2004

Note:

Excess Foreign Tax Credits can only be carried to a year in which there was foreign income subject to U.S. tax.

one Year 10 Years

Exhibit 21.5.9-2 
ALLOCATION REQUIREMENTS FOR NON COMMUNITY PROPERTY STATES

FILING STATUS ALLOCATION REQUIREMENTS
Loss Year Gain Year None Yes Loss Year Gain Year
Single Separate X      
Single Single X      
Single
(Single Spouse)
Joint
(Dec'd Spouse)
  X   X
Single Joint   X   X
Joint Joint
(Same Spouse)
X      
Joint
(Surviving Spouse)
Joint
(Year of Death)
X      
Joint
(New Spouse)
Joint
(Dec'd Spouse)
  X X X
Joint
(New Spouse)
Joint
(Former Spouse)
  X X X
Joint Single   X X  
Joint Separate   X X  
Joint New Spouse) Head of Household   X X  
Separate Single X      
Separate Separate X      
Separate Joint (and both spouses have signed for a joint refund) X      
Separate Joint (but only spouse with Net Operating Loss (NOL) has signed carryback form)   X   X
Head of Household
(Surviving Spouse)
Joint
(Dec'd Spouse)
  X   X
Head of Household Joint
(Former Spouse)
  X   X
Qualifying Widow(er) Joint   X   X

More Internal Revenue Manual