NOL Carryback for Individuals {Judy Gund}

Hot off the presses –

Rev Proc 2009-19 has been published to provide guidance on how to apply Code Sec 172 to Individuals.

This revenue procedure applies to any taxpayer that is an “Eligible Small Business” (ESB), a partner of a partnership that is an ESB, a shareholder in an S corporation that is an ESB, or a sole proprietor of a business that is an ESB, and that incurred an NOL for any taxable year ending in 2008 or beginning in 2008. NOL’s from Farms or Rentals do not qualify.

How to make the election:
01. Eligible small businesses that have not filed a return for the applicable 2008 NOL taxable year.
(1) A taxpayer within the scope of this revenue procedure that has not filed a return for the taxable year in which the applicable 2008 NOL arises makes the election under § 172(b)(1)(H) by attaching a statement to the taxpayer's federal income tax return for the taxable year in which the applicable 2008 NOL arises. The statement must—
(a) Clearly state that the taxpayer is electing to apply §172(b)(1)(H);
(b) Describe the length of the NOL carryback period elected by the taxpayer (3, 4, or 5 years); and
(c) If applicable, state that the taxpayer is electing to apply § 172(b)(1)(H) to the taxpayer's taxable year that begins in 2008.

(2) The taxpayer's return must be filed by the due date (including extensions of time) for filing the taxpayer's return for the taxable year of the applicable 2008 NOL. In the case of a late election, relief may be available under § 301.9100-2(b) of the Procedure and Administration Regulations. Notwithstanding this due date, an election to apply § 172(b)(1)(H) to an applicable 2008 NOL for a taxable year ending before February 17, 2009, will be treated as timely if the election is filed on or before April 17, 2009.

.02. Eligible small businesses that have filed a return for the applicable 2008 NOL taxable year and did not elect to forgo the NOL carryback period.
(1) A taxpayer within the scope of this revenue procedure that previously filed a return for the applicable 2008 NOL taxable year and did not elect to forgo the NOL carryback period under § 172(b)(3) makes the election under § 172(b)(1)(H) as follows:
(a) What to file.
(i) The taxpayer must file the appropriate form including a statement of the carryback period the taxpayer elects (3, 4, or 5 years). The appropriate form is—
(A) For corporations, Form 1139, Corporation Application for Tentative Refund, or Form 1120X, Amended U.S. Corporation Income Tax Return;
(B) For individuals, Form 1045, Application for Tentative Refund, or Form 1040X, Amended U.S. Individual Income Tax Return; and
(C) For estates or trusts, Form 1045, or amended Form 1041, U.S. Income Tax Return for Estates and Trusts.
(ii) A taxpayer that makes the election by filing an amended return must file the return for the earliest taxable year to which the taxpayer is carrying back the applicable 2008 NOL. The taxpayer should not file an amended return for the applicable 2008 NOL taxable year.
(b) Labels. The taxpayer should type or print across the top of the appropriate form “2008 NOL Carryback Election Pursuant to Rev. Proc. 2009-19.” If the taxpayer previously filed an application for a tentative carryback adjustment or an amended return applying an NOL carryback period that did not qualify for the election under § 172(b)(1)(H), the taxpayer also should type or print across the top of the appropriate form “Amended NOL Carryback Election Pursuant to Rev. Proc. 2009-19.” In addition to the labels listed above, a taxpayer that elects pursuant to § 172(b)(1)(H)(ii)(II) to treat its NOL arising in a taxable year beginning in 2008 as the applicable 2008 NOL, must include a statement that the taxpayer is electing to apply § 172(b)(1)(H) to a taxable year that begins in 2008.
(c) When to file. The taxpayer must file the appropriate form by the later of the date that is 6 months after the due date (excluding extensions) for filing the taxpayer's return for the taxable year of the applicable 2008 NOL, or on or before April 17, 2009.

(2) If a taxpayer makes the election under § 172(b)(1)(H) by filing an applicable form that amends a prior refund claim, the amendment also will apply to a carryback of any alternative tax NOL for the same taxable year. In the case of an amended application for a tentative carryback adjustment, the 90-day period described in § 6411(b) will begin on the date the amended application is filed.

The complete Rev Proc 2009-19 is attached for your convenience. Please see myself or Lisa if you have any questions or concerns.