The IRS issued guidance on how eligible small businesses may take advantage of the enhanced net operating loss (NOL) carryback provisions of the American Recovery and Reinvestment Act of 2009, PL 111-5 (ARRA). Under those provisions, eligible small businesses may carry back a 2008 NOL up to five years instead of the otherwise available two-year limit. Eligible small businesses are those with average gross receipts of $15 million or less for the three-year period ending in 2008.
In Revenue Procedure 2009-19, 2009-14 IRB, issued Monday, the Service prescribed how businesses may elect the longer carryback period under IRC § 172(b)(1)(H). A business may make the election for an NOL occurring in a tax year either beginning or ending in calendar 2008; the choice is irrevocable. Businesses that have not yet filed a return for the NOL year may make the election by attaching a statement to their return. For an NOL year beginning in 2008, the business must file the return with the statement by the return’s due date including any extensions. However, for an NOL year ending in 2008 or before Feb. 17, 2009 (the date of ARRA’s enactment), the return with statement must be filed on or before April 17, 2009.
Businesses that have already filed a return for the 2008 NOL tax year with a carryback election under prior law may file an amended return with a statement of the new carryback period before April 17, 2009, or the date that is six months after the due date for that return (not including extensions), whichever is later. Businesses that elected to forgo the prior-law carryback in a return filed for the 2008 NOL year may revoke that election and file a new election on or before April 17, 2009. The revenue procedure also provides specifics pertaining to partners of a partnership, shareholders in S corporations and sole proprietors.
In an accompanying news release (IR 2009-26, see also IRS FAQs), the Service said it will closely monitor related filings of Forms 1045 and 1139, Application for Tentative Refund, for sole proprietorships and corporations, respectively, and work to issue refunds within 45 days or sooner. The provisions should help struggling businesses receive a quick cash infusion, IRS Commissioner Doug Shulman said in the release.