Net operating loss deduction
Deduction allowed
There shall be allowed as a deduction for the taxable year an amount equal to—
in the case of a taxable year beginning before
in the case of a taxable year beginning after
the aggregate amount of net operating losses arising in taxable years beginning before
the lesser of—
the aggregate amount of net operating losses arising in taxable years beginning after
80 percent of the excess (if any) of—
taxable income computed without regard to the deductions under this section and sections 199A and 250, over
the amount determined under subparagraph (A).
For purposes of this subtitle, the term “net operating loss deduction” means the deduction allowed by this subsection.
Net operating loss carrybacks and carryovers
Years to which loss may be carried
General rule
A net operating loss for any taxable year—
shall be a net operating loss carryback to the extent provided in subparagraphs (B), (C)(i), and (D), and
except as provided in subparagraph (C)(ii), shall be a net operating loss carryover—
in the case of a net operating loss arising in a taxable year beginning before
in the case of a net operating loss arising in a taxable year beginning after
Farming losses
In general
Farming loss
For purposes of this section, the term “farming loss” means the lesser of—
the amount which would be the net operating loss for the taxable year if only income and deductions attributable to farming businesses (as defined in section 263A(e)(4)) are taken into account, or
the amount of the net operating loss for such taxable year.
Coordination with paragraph (2)
Election
Insurance companies
In the case of an insurance company (as defined in section 816(a)) other than a life insurance company, the net operating loss for any taxable year—
shall be a net operating loss carryback to each of the 2 taxable years preceding the taxable year of such loss, and
shall be a net operating loss carryover to each of the 20 taxable years following the taxable year of the loss.
Special rule for losses arising in 2018, 2019, and 2020
In general
In the case of any net operating loss arising in a taxable year beginning after
such loss shall be a net operating loss carryback to each of the 5 taxable years preceding the taxable year of such loss, and
subparagraphs (B) and (C)(i) shall not apply.
Special rules for REITs
For purposes of this subparagraph—
In general
Special rule
REIT year
Special rule for life insurance companies
Rule relating to carrybacks to years to which section 965 applies
Special rules for elections under paragraph (3)
Special election to exclude section 965 years
Time of elections
Amount of carrybacks and carryovers
The entire amount of the net operating loss for any taxable year (hereinafter in this section referred to as the “loss year”) shall be carried to the earliest of the taxable years to which (by reason of paragraph (1)) such loss may be carried. The portion of such loss which shall be carried to each of the other taxable years shall be the excess, if any, of the amount of such loss over the sum of the taxable income for each of the prior taxable years to which such loss may be carried. For purposes of the preceding sentence, the taxable income for any such prior taxable year shall—
be computed with the modifications specified in subsection (d) other than paragraphs (1), (4), and (5) thereof, and by determining the amount of the net operating loss deduction without regard to the net operating loss for the loss year or for any taxable year thereafter,
not be considered to be less than zero, and
for taxable years beginning after
Election to waive carryback
Net operating loss defined
Modifications
The modifications referred to in this section are as follows:
Net operating loss deduction
Capital gains and losses of taxpayers other than corporations
In the case of a taxpayer other than a corporation—
the amount deductible on account of losses from sales or exchanges of capital assets shall not exceed the amount includable on account of gains from sales or exchanges of capital assets; and
the exclusion provided by section 1202 shall not be allowed.
Deduction for personal exemptions
Nonbusiness deductions of taxpayers other than corporations
In the case of a taxpayer other than a corporation, the deductions allowable by this chapter which are not attributable to a taxpayer’s trade or business shall be allowed only to the extent of the amount of the gross income not derived from such trade or business. For purposes of the preceding sentence—
any gain or loss from the sale or other disposition of—
property, used in the trade or business, of a character which is subject to the allowance for depreciation provided in section 167, or
real property used in the trade or business,
shall be treated as attributable to the trade or business;
the modifications specified in paragraphs (1), (2)(B), and (3) shall be taken into account;
any deduction for casualty or theft losses allowable under paragraph (2) or (3) of section 165(c) shall be treated as attributable to the trade or business; and
any deduction allowed under section 404 to the extent attributable to contributions which are made on behalf of an individual who is an employee within the meaning of section 401(c)(1) shall not be treated as attributable to the trade or business of such individual.
Computation of deduction for dividends received
Modifications related to real estate investment trusts
In the case of any taxable year for which part II of subchapter M (relating to real estate investment trusts) applies to the taxpayer—
the net operating loss for such taxable year shall be computed by taking into account the adjustments described in section 857(b)(2) (other than the deduction for dividends paid described in section 857(b)(2)(B));
where such taxable year is a “prior taxable year” referred to in paragraph (2) of subsection (b), the term “taxable income” in such paragraph shall mean “real estate investment trust taxable income” (as defined in section 857(b)(2)); and
subsection (a)(2)(B)(ii)(I) shall be applied by substituting “real estate investment trust taxable income (as defined in section 857(b)(2) but without regard to the deduction for dividends paid (as defined in section 561))” for “taxable income”.
Repealed. Pub. L. 115–97, title I, § 13305(b)(3), Dec. 22, 2017, 131 Stat. 2126]
Qualified business income deduction
Deduction for foreign-derived intangible income
Law applicable to computations
Special rule for insurance companies
In the case of an insurance company (as defined in section 816(a)) other than a life insurance company—
the amount of the deduction allowed under subsection (a) shall be the aggregate of the net operating loss carryovers to such year, plus the net operating loss carrybacks to such year, and
subparagraph (C) of subsection (b)(2) shall not apply.
Cross references
For treatment of net operating loss carryovers in certain corporate acquisitions, see section 381.
For special limitation on net operating loss carryovers in case of a corporate change of ownership, see section 382.
Source
(Aug. 16, 1954, ch. 736, 68A Stat. 63; Pub. L. 85–866, title I, §§ 14(a), (b), 64(b), title II, § 203(a), (b),Notes
References in Text
Amendments
Effective Date of 2020 Amendment
Net operating loss limitation.—
The amendments made by subsection (a) [amending this section and section 860E of this title] shall apply—
to taxable years beginning after
to taxable years beginning on or before
Carryovers and carrybacks.—
The amendment made by subsection (b) [amending this section] shall apply to—
net operating losses arising in taxable years beginning after
taxable years beginning before, on, or after such date to which such net operating losses are carried.
Technical amendments.—
The amendments made by subsection (c) [amending this section and provisions set out as a note under this section] shall take effect as if included in the provisions of Public Law 115–97 to which they relate.
Special rule.—
In the case of a net operating loss arising in a taxable year beginning before
an application under section 6411(a) of the Internal Revenue Code of 1986 with respect to the carryback of such net operating loss shall not fail to be treated as timely filed if filed not later than the date which is 120 days after the date of the enactment of this Act [
an election to—
forgo any carryback of such net operating loss,
reduce any period to which such net operating loss may be carried back, or
revoke any election made under section 172(b) to forgo any carryback of such net operating loss,
shall not fail to be treated as timely made if made not later than the date which is 120 days after the date of the enactment of this Act.”
Effective Date of 2018 Amendment
Effective Date of 2017 Amendment
Net operating loss limitation.—
The amendments made by subsections (a) and (d)(2) [amending this section] shall apply to—
taxable years beginning after
taxable years beginning on or before such date to which net operating losses arising in taxable years beginning after such date are carried.
Carryovers and carrybacks.—
The amendments made by subsections (b), (c), and (d)(1) [amending this section and section 537 of this title] shall apply to net operating losses arising in taxable years beginning after
Effective Date of 2014 Amendment
Effective Date of 2009 Amendment
In general.—
Except as otherwise provided in this subsection, the amendments made by this section [amending this section] shall apply to net operating losses arising in taxable years ending after
Transitional rule.—
In the case of a net operating loss for a taxable year ending before the date of the enactment of this Act [
any election made under section 172(b)(3) of the Internal Revenue Code of 1986 with respect to such loss may (notwithstanding such section) be revoked before the applicable date,
any election made under [former] section 172(b)(1)(H) of such Code with respect to such loss shall (notwithstanding such section) be treated as timely made if made before the applicable date, and
any application under section 6411(a) of such Code with respect to such loss shall be treated as timely filed if filed before the applicable date.
For purposes of this paragraph, the term ‘applicable date’ means the date which is 60 days after the date of the enactment of this Act [
Effective Date of 2008 Amendment
Effective Date of 2005 Amendment
Effective Date of 2004 Amendment
Effective Date of 2002 Amendment
Effective Date of 1998 Amendment
Effective Date of 1997 Amendment
Effective Date of 1996 Amendment
Effective Date of 1993 Amendment
Effective Date of 1990 Amendment
In general.—
Except as provided in paragraph (2), the amendment made by subsection (a) [amending this section] shall apply to acquisitions after
Binding contract exception.—
The amendment made by subsection (a) shall not apply to any acquisition pursuant to a written binding contract in effect on
Effective Date of 1989 Amendment
In general.—
Except as provided in this subsection, the amendments made by this section [amending this section] shall apply to corporate equity reduction transactions occurring after
Exceptions.—
In determining whether a corporate equity reduction transaction has occurred after
acquisitions or redemptions of stock, or distributions with respect to stock, occurring on or before
acquisitions or redemptions of stock after
any distribution with respect to stock after
Any distribution to which the preceding sentence applies shall be taken into account under section 172(m)(3)(C)(ii)(I) of the Internal Revenue Code of 1986 (relating to base period for distributions).”
Effective Date of 1988 Amendment
Effective Date of 1986 Amendment
In general.—
Except as provided in paragraph (2), the amendments made by this section [amending this section] shall apply to losses incurred in taxable years beginning after
Additional carryforward period for losses of thrift institutions.—
Subparagraph (M) of section 172(b)(1) of the Internal Revenue Code of 1986 (as added by this section) shall apply to losses incurred in taxable years beginning after
Effective Date of 1984 Amendment
In general.—
The amendments made by this section [amending this section and section 246 of this title and section 1452 of Title 12, Banks and Banking] shall take effect on
Adjusted basis of assets.—
In general.—
Except as otherwise provided in subparagraph (B), the adjusted basis of any asset of the Federal Home Loan Mortgage Corporation held on
for purposes of determining any loss, be equal to the lesser of the adjusted basis of such asset or the fair market value of such asset as of such date, and
for purposes of determining any gain, be equal to the higher of the adjusted basis of such asset or the fair market value of such asset as of such date.
Special rule for tangible depreciable property.—
In the case of any tangible property which—
is of a character subject to the allowance for depreciation provided by section 167 of the Internal Revenue Code of 1986 [formerly I.R.C. 1954], and
is held by the Federal Home Loan Mortgage Corporation on
the adjusted basis of such property shall be equal to the lesser of the basis of such property or the fair market value of such property as of such date.
Treatment of participation certificates.—
In general.—
Paragraph (2) shall not apply to any right to receive income with respect to any mortgage pool participation certificate or other similar interest in any mortgage (not including any mortgage).
Treatment of certain sales after march 15, 1984, and before january 1, 1985.—
If any gain is realized on the sale or exchange of any right described in subparagraph (A) after
Clarification of earnings and profits of federal home loan mortgage corporation.—
Treatment of distribution of preferred stock, etc.—
For purposes of the Internal Revenue Code of 1986, the distribution of preferred stock by the Federal Home Loan Mortgage Corporation during December of 1984, and the other distributions of such stock by Federal Home Loan Banks during January of 1985, shall be treated as if they were distributions of money equal to the fair market value of the stock on the date of the distribution by the Federal Home Loan Banks (and such stock shall be treated as if it were purchased with the money treated as so distributed). No deduction shall be allowed under section 243 of the Internal Revenue Code of 1986 with respect to any dividend paid by the Federal Home Loan Mortgage Corporation out of earnings and profits accumulated before
Section 246(a) not to apply to distributions out of earnings and profits accumulated during 1985.—
Subsection (a) of section 246 of the Internal Revenue Code of 1986 shall not apply to any dividend paid by the Federal Home Loan Mortgage Corporation during 1985 out of earnings and profits accumulated after
Adjusted basis.—
For purposes of this subsection, the adjusted basis of any asset shall be determined under part II of subchapter O of the Internal Revenue Code of 1986.
No carrybacks for years before 1985.—
No net operating loss, capital loss, or excess credit of the Federal Home Loan Mortgage Corporation for any taxable year beginning after
No deduction allowed for interest on replacement obligations.—
In general.—
The Federal Home Loan Mortgage Corporation shall not be allowed any deduction for interest accruing after
Replacement obligation defined.—
For purposes of subparagraph (A), the term ‘replacement obligation’ means any obligation to any person created after
Effective Date of 1982 Amendment
Effective Date of 1981 Amendment
Effective Date of 1980 Amendment
Effective Date of 1978 Amendment
Effective Date of 1977 Amendment
Effective Date of 1976 Amendment
Effective Date of 1971 Amendment
Effective Date of 1967 Amendment
Effective Date of 1964 Amendment
Effective Date of 1962 Amendment
Effective Date of 1958 Amendment
Anti-Abuse Rules
Savings Provision
Net Operating Loss Carryback for Taxable Year Ending During 2001 or 2002
an application under section 6411(a) of the Internal Revenue Code of 1986 with respect to such loss shall not fail to be treated as timely filed if filed before
any election made under section 172(b)(3) of such Code may (notwithstanding such section) be revoked before
any election made under [former] section 172(j) of such Code shall (notwithstanding such section) be treated as timely made if made before
Amtrak Reform Legislation
Elective Carryback of Existing Carryovers of National Railroad Passenger Corporation
Elective Carryback.—
In general.—
If the National Railroad Passenger Corporation (in this section referred to as the ‘Corporation’)—
makes an election under this section for its first taxable year ending after
agrees to the conditions specified in paragraph (2),
then the Corporation shall be treated as having made a payment of the tax imposed by chapter 1 of the Internal Revenue Code of 1986 for such first taxable year and the succeeding taxable year in an amount (for each such taxable year) equal to 50 percent of the amount determined under paragraph (3). Each such payment shall be treated as having been made by the Corporation on the last day prescribed by law (without regard to extensions) for filing its return of tax under chapter 1 of such Code for the taxable year to which such payment relates.
Conditions.—
In general.—
This section shall only apply to the Corporation if it agrees (in such manner as the Secretary of the Treasury or his delegate may prescribe) to—
except as provided in clause (ii), use any refund of the payment described in paragraph (1) (and any interest thereon) solely to finance qualified expenses of the Corporation, and
make the payments to non-Amtrak States as described in subsection (c).
Repayment.—
In general.—
The Corporation shall repay to the United States any amount not used in accordance with this paragraph and any amount remaining unused as of
Special rules.—
For purposes of clause (i)—
no amount shall be treated as remaining unused as of
the Corporation shall not be treated as failing to meet the requirements of clause (i) by reason of investing any amount for a temporary period.
Amount.—
For purposes of paragraph (1)—
In general.—
The amount determined under this paragraph shall be the lesser of—
35 percent of the Corporation’s existing qualified carryovers, or
the Corporation’s net tax liability for the carryback period.
Dollar limit.—
Such amount shall not exceed $2,323,000,000.
Existing Qualified Carryovers; Net Tax Liability.—
For purposes of this section—
Existing qualified carryovers.—
The term ‘existing qualified carryovers’ means the aggregate of the amounts which are net operating loss carryovers under section 172(b) of the Internal Revenue Code of 1986 to the Corporation’s first taxable year ending after
Net tax liability for carryback period.—
In general.—
The Corporation’s net tax liability for the carryback period is the aggregate of the net tax liability of the Corporation’s railroad predecessors for taxable years in the carryback period.
Net tax liability.—
The term ‘net tax liability’ means, with respect to any taxable year, the amount of the tax imposed by chapter 1 of the Internal Revenue Code of 1986 (or any corresponding provision of prior law) for such taxable year, reduced by the sum of the credits allowable against such tax under such Code (or any corresponding provision of prior law).
Carryback period.—
The term ‘carryback period’ means the period—
which begins with the first taxable year of any railroad predecessor beginning before
which ends with the last taxable year of any railroad predecessor beginning before
Railroad predecessor.—
In general.—
The term ‘railroad predecessor’ means—
any railroad which entered into a contract under section 401 or 404(a) of the Rail Passenger Service Act of 1970 [former sections 561 and 564(a) of Title 45, Railroads] relieving the railroad of its entire responsibility for the provision of intercity rail passenger service, and
any predecessor thereof.
Consolidated returns.—
If any railroad described in subparagraph (A) was a member of an affiliated group which filed a consolidated return for any taxable year in the carryback period, each member of such group shall be treated as a railroad predecessor for such year.
Payments to Non-Amtrak States.—
In general.—
Within 30 days after receipt of any refund of any payment described in subsection (a)(1), the Corporation shall pay to each non-Amtrak State an amount equal to 1 percent of the amount of such refund.
Use of payment.—
Each non-Amtrak State shall use the payment described in paragraph (1) (and any interest thereon) solely to finance qualified expenses of the State.
Repayment.—
A non-Amtrak State shall pay to the United States—
any portion of the payment received by the State under paragraph (1) (and any interest thereon) which is used for a purpose other than to finance qualified expenses of the State or which remains unused as of
if such State ceases to be a non-Amtrak State, the portion of such payment (and any interest thereon) remaining as of the date of the cessation.
Rules similar to the rules of subsection (a)(2)(B) shall apply for purposes of this paragraph.
Tax Consequences.—
Reduction in carryovers.—
If the Corporation elects the application of this section, the Corporation’s existing qualified carryovers shall be reduced by an amount equal to the amount determined under subsection (a)(3) divided by 0.35.
Reduction in tax paid by railroad predecessors.—
In general.—
The Secretary of the Treasury or his delegate shall appropriately adjust the tax account of each railroad predecessor to reduce the net tax liability of such predecessor for taxable years beginning in the carryback period which is offset by reason of the application of this section.
FIFO ordering rule.—
The Secretary shall make the adjustments under subparagraph (A) first for the earliest year in the carryback period and then for each subsequent year in such period.
No effect on other taxpayers.—
In no event shall any taxpayer other than the Corporation be allowed a refund or credit by reason of this section.
Waiver of limitations.—
If the adjustment under subparagraph (A) is barred by the operation of any law or rule of law, such law or rule of law shall be waived solely for purposes of making such adjustment.
Tax treatment of expenditures.—
With respect to any payment by the Corporation of qualified expenses described in subsection (e)(1)(A) during any taxable year from the amount of any refund of the payment described in subsection (a)(1)—
no deduction shall be allowed to the Corporation with respect to any amount paid or incurred which is attributable to such amount, and
the basis of any property shall be reduced by the portion of the cost of such property which is attributable to such amount.
Payments to a non-amtrak state.—
No deduction shall be allowed to the Corporation under chapter 1 of the Internal Revenue Code of 1986 for any payment to a non-Amtrak State required under subsection (a)(2)(A)(ii).
Definitions.—
For purposes of this section—
Qualified expenses.—
The term ‘qualified expenses’ means expenses incurred for—
in the case of the Corporation—
the acquisition of equipment, rolling stock, and other capital improvements, the upgrading of maintenance facilities, and the maintenance of existing equipment, in intercity passenger rail service, and
the payment of interest and principal on obligations incurred for such acquisition, upgrading, and maintenance, and
in the case of a non-Amtrak State—
the acquisition of equipment, rolling stock, and other capital improvements, the upgrading of maintenance facilities, and the maintenance of existing equipment, in intercity passenger rail service,
the acquisition of equipment, rolling stock, and other capital improvements, the upgrading of maintenance facilities, and the maintenance of existing equipment, in intercity bus service,
the purchase of intercity passenger rail services from the Corporation,
capital expenditures related to State-owned rail operations in the State,
any project that is eligible to receive funding under section 5309, 5310, or 5311 of title 49, United States Code,
any project that is eligible to receive funding under section 103, 130, 133, 144, 149, or 152 of title 23, United States Code,
the upgrading and maintenance of intercity primary and rural air service facilities, and the purchase of intercity air service between primary and rural airports and regional hubs,
the provision of passenger ferryboat service within the State,
the provision of harbor improvements within the State, and
the payment of interest and principal on obligations incurred for such acquisition, upgrading, maintenance, purchase, expenditures, provision, and projects.
In the case of a non-Amtrak State which provides its own intercity passenger rail service on the date of the enactment of this paragraph [
Non-amtrak state.—
The term ‘non-Amtrak State’ means any State which is not receiving intercity passenger rail service from the Corporation as of the date of the enactment of this Act [
Authorizing Reform Required.—
In general.—
The Secretary of the Treasury shall not make payment of any refund of any payment described in subsection (a)(1) earlier than the date of the enactment of Federal legislation, other than legislation included in this section, which is enacted after
No interest.—
Notwithstanding any other provision of law, if the payment of any refund is delayed by reason of paragraph (1), no interest shall accrue with respect to such payment prior to the 45th day following the date of the enactment of Federal legislation described in paragraph (1).
Estimate of revenue.—
For purposes of estimating revenues under budget reconciliation, the impact of this section on Federal revenues shall be determined without regard to this subsection.”