On April 9, 2020, the IRS issued two key pieces of guidance pertaining to the net operating loss (NOL) provisions of the CARES Act.
Revenue Procedure 2020-24
This revenue procedure provides procedures to follow regarding net operating losses that are carried back under the CARES Act, specifically procedures for:
Waiving the carryback period for an NOL arising in a taxable year beginning after 12/31/2017, and before 1/1/2021;
Disregarding certain amounts of foreign income subject to transition tax (regarding Sec 965); and
Waiving a carryback period, reducing a carryback period, or revoking an election to waive a carryback period for a taxable year that began before 1/1/2018 and ended after 12/31/2017.
This Notice grants a six-month extension of time to file Form 1045 (for individuals, trusts or estates) or Form 1139 (for corporations), as applicable, with respect to the carryback of a net operating loss arising in any taxable year that began during calendar year 2018 and that ended on or before 6/30/2019.
Why is this Notice so advantageous?
Prior to this Notice, calendar year taxpayers that had an NOL arising in 2018 would not have been able to file for the expedited refund via Form 1139 or Form 1045 since such forms would have had to be filed by 12/31/2019 (i.e. within 12 months of the close of the taxable year in which the NOL arose as per IRC section 6411(a); Regs. Section 1.6411-1(c)). Alternatively, such taxpayers would have had to file an amended tax return to carry back the NOL and claim the refund.
When must a Form 1045 or Form 1139 be filed for aN NOL arising in tax year ending 12/31/2018?
Due to this six-month extension provided in Notice 2020-26, such a taxpayer can now file a Form 1045 or Form 1139, as applicable, by 6/30/2020.
Please contact us if you have questions.