Election to Forgo Carry Back Period (Pre-2021 NOLs)
The optional taxpayer election to forgo the net operating loss carry back period before 2021 is explained below.
An irrevocable election can be made to forgo the carryback period and carry the loss forward without first carrying it back. This election applies to losses arising in years before 2021 and must be made by the extended due date of the return for the loss year and is advantageous if deductions or credits in carryback years would be lost if the loss were carried back. Another reason to relinquish the carryback period is if the tax rates in the two previous years are lower than the rates expected in the upcoming years. Make the election by attaching a statement to the return for the year of the loss indicating: “Taxpayer elects to forgo the carryback period under IRC Sec 172(b)(3).”
Amended Return Election
If a return was filed timely but did not include the statement electing carry forward, an amended return can be filed for the NOL year through the extended due date of the return whether an extension was filed. Enter “Filed pursuant to section 301.9100-2” at the top of the statement.
Amended Return Creates an NOL
Where an amended return is filed, and the requirements for a late election discussed above cannot be met, the carry forward election cannot be made. (Chief Counsel Advice 2016-16009)
Special Rule for 2018 and 2019 Returns
To waive the carryback period for an NOL arising in 2018 or 2019, the election must be made no later than the due date, including extensions, for filing the taxpayer’s 2020 federal income. The election is made by attaching a separate statement for each of taxable years 2018 or 2019 for which the taxpayer intends to make the election. The election statement must state that the taxpayer is electing to apply Section 172(b)(3) under Rev. Proc. 2020-24 and the taxable year for which the statement applies. Once made, the election is irrevocable. (Rev. Proc. 2020-24)