26 U.S.C. § 172: Net operating loss deduction

in the case of a taxable year beginning before January 1, 2021 , the aggregate of the net operating loss carryovers to such year, plus the net operating loss carrybacks to such year, and the aggregate amount of net operating losses arising in taxable years beginning before January 1, 2018 , carried to such taxable year, plus the aggregate amount of net operating losses arising in taxable years beginning after December 31, 2017 , carried to such taxable year, or taxable income computed without regard to the deductions under this section and sections 199A and 250, over the amount determined under subparagraph (A). shall be a net operating loss carryback to the extent provided in subparagraphs (B), (C)(i), and (D), and in the case of a net operating loss arising in a taxable year beginning before January 1, 2018 , to each of the 20 taxable years following the taxable year of the loss, and in the case of a net operating loss arising in a taxable year beginning after December 31, 2017 , to each taxable year following the taxable year of the loss. In the case of any portion of a net operating loss for the taxable year which is a farming loss with respect to the taxpayer, such loss shall be a net operating loss carryback to each of the 2 taxable years preceding the taxable year of such loss. 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. For purposes of applying paragraph (2), a farming loss for any taxable year shall be treated as a separate net operating loss for such taxable year to be taken into account after the remaining portion of the net operating loss for such taxable year. Any taxpayer entitled to a 2-year carryback under clause (i) from any loss year may elect not to have such clause apply to such loss year. Such election shall be made in such manner as prescribed by the Secretary and shall be made by the due date (including extensions of time) for filing the taxpayer’s return for the taxable year of the net operating loss. Such election, once made for any taxable year, shall be irrevocable for such 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. 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. A net operating loss for a REIT year shall not be a net operating loss carryback to any taxable year preceding the taxable year of such loss. In the case of any net operating loss for a taxable year which is not a REIT year, such loss shall not be carried to any preceding taxable year which is a REIT year. For purposes of this subparagraph, the term “REIT year” means any taxable year for which the provisions of part II of subchapter M (relating to real estate investment trusts) apply to the taxpayer. In the case of a life insurance company, if a net operating loss is carried pursuant to clause (i)(I) to a life insurance company taxable year beginning before January 1, 2018 , such net operating loss carryback shall be treated in the same manner as an operations loss carryback (within the meaning of section 810 as in effect before its repeal) of such company to such taxable year. If a net operating loss of a taxpayer is carried pursuant to clause (i)(I) to any taxable year in which an amount is includible in gross income by reason of section 965(a), the taxpayer shall be treated as having made the election under section 965(n) with respect to each such taxable year. If the 5-year carryback period under clause (i)(I) with respect to any net operating loss of a taxpayer includes 1 or more taxable years in which an amount is includible in gross income by reason of section 965(a), the taxpayer may, in lieu of the election otherwise available under paragraph (3), elect under such paragraph to exclude all such taxable years from such carryback period. An election under paragraph (3) (including an election described in subclause (I)) with respect to a net operating loss arising in a taxable year beginning in 2018 or 2019 shall be made by the due date (including extensions of time) for filing the taxpayer’s return for the first taxable year ending after the date of the enactment of this subparagraph. 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 December 31, 2020 , be reduced by 20 percent of the excess (if any) described in subsection (a)(2)(B)(ii) for such taxable year. Any taxpayer entitled to a carryback period under paragraph (1) may elect to relinquish the entire carryback period with respect to a net operating loss for any taxable year. Such election shall be made in such manner as may be prescribed by the Secretary, and shall be made by the due date (including extensions of time) for filing the taxpayer’s return for the taxable year of the net operating loss for which the election is to be in effect. Such election, once made for any taxable year, shall be irrevocable for such taxable year. For purposes of this section, the term “net operating loss” means the excess of the deductions allowed by this chapter over the gross income. Such excess shall be computed with the modifications specified in subsection (d). No net operating loss deduction shall be allowed. 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. No deduction shall be allowed under section 151 (relating to personal exemptions). No deduction in lieu of any such deduction shall be allowed. 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, 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. The deductions allowed by sections 243 (relating to dividends received by corporations) and 245 (relating to dividends received from certain foreign corporations) shall be computed without regard to section 246(b) (relating to limitation on aggregate amount of deductions). 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”. Any deduction under section 199A shall not be allowed. The deduction under section 250 shall not be allowed. In determining the amount of any net operating loss carryback or carryover to any taxable year, the necessary computations involving any other taxable year shall be made under the law applicable to such other taxable year. 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. 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. to taxable years beginning after December 31, 2017 , and to taxable years beginning on or before December 31, 2017 , to which net operating losses arising in taxable years beginning after December 31, 2017 , are carried. net operating losses arising in taxable years beginning after December 31, 2017 , and taxable years beginning before, on, or after such date to which such net operating losses are carried. 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. 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 [ Mar. 27, 2020 ], and 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, taxable years beginning after December 31, 2017 , and taxable years beginning on or before such date to which net operating losses arising in taxable years beginning after such date are carried. 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 December 31, 2017 .” 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 December 31, 2007 . 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. Except as provided in paragraph (2), the amendment made by subsection (a) [amending this section] shall apply to acquisitions after October 9, 1990 . The amendment made by subsection (a) shall not apply to any acquisition pursuant to a written binding contract in effect on October 9, 1990 , and at all times thereafter before such acquisition.” Except as provided in this subsection, the amendments made by this section [amending this section] shall apply to corporate equity reduction transactions occurring after August 2, 1989 , in taxable years ending after August 2, 1989 . acquisitions or redemptions of stock, or distributions with respect to stock, occurring on or before August 2, 1989 , acquisitions or redemptions of stock after August 2, 1989 , pursuant to a binding written contract (or tender offer filed with the Securities and Exchange Commission) in effect on August 2, 1989 , and at all times thereafter before such acquisition or redemption, or any distribution with respect to stock after August 2, 1989 , which was declared on or before August 2, 1989 . 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 December 31, 1986 . 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 December 31, 1981 .” 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 January 1, 1985 . 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. 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 January 1, 1985 , 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). If any gain is realized on the sale or exchange of any right described in subparagraph (A) after March 15, 1984 , and before January 1, 1985 , the gain shall not be recognized when realized but shall be recognized on January 1, 1985 . 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 January 1, 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 December 31, 1984 . 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 net operating loss, capital loss, or excess credit of the Federal Home Loan Mortgage Corporation for any taxable year beginning after December 31, 1984 , shall be allowed as a carryback to any taxable year beginning before January 1, 1985 . The Federal Home Loan Mortgage Corporation shall not be allowed any deduction for interest accruing after December 31, 1984 , on any replacement obligation. For purposes of subparagraph (A), the term ‘replacement obligation’ means any obligation to any person created after March 15, 1984 , which the Secretary of the Treasury or his delegate determines replaces any equity or debt interest of a Federal Home Loan Bank or any other person in the Federal Home Loan Mortgage Corporation existing on such date. The preceding sentence shall not apply to any obligation with respect to which the Federal Home Loan Mortgage Corporation establishes that there is no tax avoidance effect.” the amendments made by subsection (a) [amending this section and section 860E of this title ] shall not apply to any taxable year beginning in 2018, 2019, or 2020, and the amendments made by subsection (b) [amending this section] shall not apply to any net operating loss arising in any taxable year beginning in 2018, 2019, or 2020. Except as provided in clause (ii)(II), an election under this paragraph shall be made in such manner as may be prescribed by the Secretary. Such election, once made, shall be irrevocable. An election under this paragraph shall be made by the due date (including extensions of time) for filing the taxpayer’s return for the taxpayer’s first taxable year ending after the date of the enactment of the COVID-related Tax Relief Act of 2020 [subtitle B of title II of div. N of Pub. L. 116–260 , approved Dec. 27, 2020 ]. In the case of any taxable year for which the taxpayer has filed a return of Federal income tax before the date of the enactment of the COVID-related Tax Relief Act of 2020 which disregards the amendments made by subsections (a) and (b), such taxpayer shall be treated as having made an election under this paragraph unless the taxpayer amends such return to reflect such amendments by the due date (including extensions of time) for filing the taxpayer’s return for the first taxable year ending after the date of the enactment of the COVID-related Tax Relief Act of 2020. The Secretary of the Treasury (or the Secretary’s delegate) shall issue such regulations and other guidance as may be necessary to carry out the purposes of this paragraph, including regulations and guidance relating to the application of the rules of section 172(a) of the Internal Revenue Code of 1986 (as in effect before the date of the enactment of the CARES Act [ Pub. L. 116–136 , approved Mar. 27, 2020 ]) to taxpayers making an election under this paragraph. which was made before the date of the enactment of the COVID-related Tax Relief Act of 2020, and which relates to the carryback period provided under section 172(b)(1)(B) of such Code with respect to any net operating loss arising in taxable years beginning in 2018 or 2019.” 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 November 1, 2002 , any election made under section 172(b)(3) of such Code may (notwithstanding such section) be revoked before November 1, 2002 , and any election made under [former] section 172(j) of such Code shall (notwithstanding such section) be treated as timely made if made before November 1, 2002 .” makes an election under this section for its first taxable year ending after September 30, 1997 , and agrees to the conditions specified in paragraph (2), 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). The Corporation shall repay to the United States any amount not used in accordance with this paragraph and any amount remaining unused as of January 1, 2010 . no amount shall be treated as remaining unused as of January 1, 2010 , if it is obligated as of such date for a qualified expense, and 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. 35 percent of the Corporation’s existing qualified carryovers, or the Corporation’s net tax liability for the carryback period. Such amount shall not exceed $2,323,000,000. 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 September 30, 1997 . 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. 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). which begins with the first taxable year of any railroad predecessor beginning before January 1, 1971 , for which there is a net tax liability, and which ends with the last taxable year of any railroad predecessor beginning before January 1, 1971 . 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. 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. 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. Each non-Amtrak State shall use the payment described in paragraph (1) (and any interest thereon) solely to finance qualified expenses of the State. 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 January 1, 2010 , or 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. 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. 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. 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. In no event shall any taxpayer other than the Corporation be allowed a refund or credit by reason of this section. 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. 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. 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). 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 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. 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 [ Aug. 5, 1997 ]. 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 July 29, 1997 , and which authorizes reforms of the National Railroad Passenger Corporation. 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). For purposes of estimating revenues under budget reconciliation, the impact of this section on Federal revenues shall be determined without regard to this subsection.”